Tuesday, 31 August 2010
The LNG industry is being buffeted by forces in other energy markets that could determine whether proposed projects are built and how LNG sales are priced, an industry observer said late Monday at an LNG conference in Perth, Australia In the short term, prospects for the Asia-Pacific market appear bullish, Brian Johnson of Pricewaterhouse Coopers Australia said in a talk at the 5th Annual LNG World conference.Annual capex for energy development in the Asia-Pacific region, he said, "is expected to grow strongly, fueled by giant LNG projects competing to supply growing Asian energy requirements."Gas and LNG "is where the big investment is going forward," with multiple projects aiming to fill a looming supply gap in regional gas demand in 2013-14, he said.Along with growing energy demand in Asia, LNG also stands to gain from public concern about the environmental impacts of energy use. Concerns about climate change are less of a driver for low-carbon energy sources than a few years ago, Johnson said, but pollution abatement -- reducing SO2, NOx and particulate emissions -- remains an important consideration.But in North America, shale gas development has weakened gas prices, though President Barack Obama's moratorium on deepwater offshore drilling could help gas prices in the medium term, Johnson said. He voiced doubts, though, as to whether shale gas offers an attractive long-run investment."In the US, $4/Mcf [price for gas] isn't sustainable at funding costs [for shale gas] of $3.8/Mcf on average and operating costs of $1.7/Mcf," he told conference attendees. Energy companies are cutting their budgets for developing shale gas, he said, while shifting their focus to extracting shale oil.In global LNG export markets, a significant number of contracts are being underwritten for shorter durations. Many contracts since 2002 run for less than 10 years, Johnson said, "with several recently for one year or less...major Asian buyers are taking smaller volumes of gas for shorter periods."Still, though the number of short-term contracts has grown over the past eight years, he said, most LNG contracts feature longer-term sale agreements.Pricing trends remain murky. Index formulas are not standardized and in Asia pricing is largely indexed to oil, Johnson noted. Further, large disparities can be seen in global markets for conventional fuels."European and Asian gas markets are diverging from the Americas in their forward price outlook based on the fundamentals of their respective markets," he said. "Crude oil and gas prices are beginning to diverge in the Americas, while in Europe and Asia the ratio of crude oil prices to gas has decreased."Johnson said he saw several market developments that could determine how pricing indices are fashioned in the future, including greater price-averaging periods to reduce pricing volatility and price moderation produced by eliminating the so-called S-Curve from formulas."The degree of support for transparency in global LNG pricing through a standardized index is mixed," he said. "Support will grow with increasing flexibility in the market, and additional facilities and market participants."
Source: Platts
Tuesday, 31 August 2010
Congestion at Indonesian ports worsen
Tuesday, 31 August 2010
Congestion at three international seaports in Indonesia have become worse following a surge in goods shipment ahead of Idul Fitri 2010 and an increase in import flow, reported Bisnis Indonesia The container capacity has been unable to accommodate surging flow of goods at the ports of Pontianak, Banjarmasin and Belawan."Congestion at the three ports is getting worse," said co-chairperson for container transportation at the Indonesian National Shipowners' Association (INSA) Asmari Herry.According to him, ships at the three ports had to wait for five to seven days to get docking services. In Belawan, the congestion was attributable to damaged equipment and surging flow of imported goods.He explained the frequency of ships serving Banjarmasin port surged significantly since demand for goods shipment jumped by 15 to 20 percent, ahead of Idul Fitri.The same situation also happened in Pontianak. "Damaged equipment and poor piling yard capacity exacerbate the situation, creating high-cost economy." The INSA suggested Pelindo take swift actions by bolstering the piling capacity at the three seaports. "Otherwise, the cost will be higher, affecting goods prices."Last week, at least six container vessels carrying staple goods had been queuing for seven days, waiting for docking services at Pontianak port. However, state port operator Pelindo II early this week said it would relocate empty containers massively.Solikhin, general manager of Pontianak-branch PT Pelindo II, stated the company had to rent one hectare of area located around 500m from the port to accommodate empty containers, which took up more than 50 percent of the total capacity.According to him, the congestion was attributable to an increase in container flow and to project works.On the other hand, the volume of imported containers that have to undergo physical inspections by the local Custom and Excise office at Tanjung Priok Port is still high due to a surge in import activities since the fasting month.
Source: CargonewsAsia
Congestion at three international seaports in Indonesia have become worse following a surge in goods shipment ahead of Idul Fitri 2010 and an increase in import flow, reported Bisnis Indonesia The container capacity has been unable to accommodate surging flow of goods at the ports of Pontianak, Banjarmasin and Belawan."Congestion at the three ports is getting worse," said co-chairperson for container transportation at the Indonesian National Shipowners' Association (INSA) Asmari Herry.According to him, ships at the three ports had to wait for five to seven days to get docking services. In Belawan, the congestion was attributable to damaged equipment and surging flow of imported goods.He explained the frequency of ships serving Banjarmasin port surged significantly since demand for goods shipment jumped by 15 to 20 percent, ahead of Idul Fitri.The same situation also happened in Pontianak. "Damaged equipment and poor piling yard capacity exacerbate the situation, creating high-cost economy." The INSA suggested Pelindo take swift actions by bolstering the piling capacity at the three seaports. "Otherwise, the cost will be higher, affecting goods prices."Last week, at least six container vessels carrying staple goods had been queuing for seven days, waiting for docking services at Pontianak port. However, state port operator Pelindo II early this week said it would relocate empty containers massively.Solikhin, general manager of Pontianak-branch PT Pelindo II, stated the company had to rent one hectare of area located around 500m from the port to accommodate empty containers, which took up more than 50 percent of the total capacity.According to him, the congestion was attributable to an increase in container flow and to project works.On the other hand, the volume of imported containers that have to undergo physical inspections by the local Custom and Excise office at Tanjung Priok Port is still high due to a surge in import activities since the fasting month.
Source: CargonewsAsia
Monday, 9 August 2010
Indonesia and Turkey Beat Investors’ Expectations by Outperforming BRICs
Jakarta. Indonesia and Turkey are outpacing the biggest emerging markets by almost any financial measure, even while they may be too small to join the BRICs. Indonesia’s equity index has climbed 21 percent this year and Turkey’s rose 13 percent, both hitting all-time highs on July 29. Credit-market rallies sent yields on the nations’ foreign-currency debt to the lowest levels on record, JPMorgan Chase’s EMBI Global gauges show.
The MSCI BRIC Index of shares in Brazil, Russia, India and China is still 42 percent below its peak after losing 1.2 percent this year. Less than two years after the global financial crisis prompted concern Indonesia and Turkey would default, investors are betting lower debt, growing populations and rising profit will spur economic expansions that led Goldman Sachs Group’s Jim O’Neill to promote the BRIC nations in 2001.
While China’s gross domestic product is about 4.2 times Turkey and Indonesia’s combined, they lead the “Next 11” smaller emerging nations with the most potential to affect world growth, O’Neill says. “There’s a paradigm shift in the way both countries have been governed and in terms of economic performance,” said Amer Bisat, a former International Monetary Fund economist who helps oversee more than $1 billion at hedge-fund Traxis Partners in New York. Indonesia and Turkey are “large, extremely systemically important and stable,” he said. “The market is looking at them in a very different light.”
The largest emerging-market stock mutual fund managers, which oversee about $250 billion, boosted their holdings in Indonesia and Turkey to the top “overweight” positions among 21 markets in June on expectations the gains will continue, data compiled by Cambridge, Massachusetts-based EPFR Global and JPMorgan of New York show. The fund managers are increasingly optimistic as profit growth outpaces share prices in both countries, leaving the Jakarta Composite Index and ISE National 100 Index trading at price-earnings ratios about 20 percent below their pre-crisis peaks, according to Bloomberg.
Mark Mobius, who oversees about $34 billion as the Singapore-based chairman of Templeton Asset Management, said last month by e-mail that he planned to increase holdings of stocks in Turkey, where the firm already has more than $1 billion invested. In June, he blogged that Templeton has a “positive take on investment opportunities” in Indonesia, while Antoine van Agtmael, chairman and chief investment officer of Emerging Markets Management in Arlington, Virginia, said on Bloomberg Television that the country was the most attractive among Southeast Asian markets.
The bullish bets are a turnaround from 2008, when investors shunned Indonesia and Turkey as the global economy fell into the worst recession since World War II. The JCI and ISE both sank more than 50 percent, the nations’ currencies weakened at least 15 percent against the dollar and credit-default swap prices suggested a 66 percent chance of default for Indonesia and 52 percent odds for Turkey, Bloomberg data show. Indonesian stocks are becoming more expensive relative to other developing markets. The Jakarta gauge trades at 13.5 times analysts’ estimates for earnings over the next 12 months, near the highest on record relative to the MSCI Emerging Markets Index, which is valued at 11.2 times, according to data compiled by Bloomberg since 2006.
The MSCI BRIC gauge has a ratio of 11. Turkish stock valuations factor in the nation’s political risks, while Indonesian companies have shown they can surpass analysts’ earnings projections, according to Martial Godet, who helps oversee more than $60 billion as the Paris-based head of emerging markets at BNP Paribas Investment Partners. The ISE is valued at 9.6 times analysts’ profit forecasts for the next 12 months, a 14 percent discount to the MSCI emerging index, and companies in the JCI have beat analysts’ profit projections during the past five quarters, data compiled by Bloomberg show. “The momentum is good for both markets,” Godet said. “They are not mainstream investments so people will continue to add money.
In both cases we have populated countries that are growing very well.” President Susilo Bambang Yudhoyono oversaw economic expansion of at least 4 percent throughout the global recession. That helped the JCI jump 175 percent from its 2008 low to 3,060.59 on Aug. 6, about 1.2 percent below the all-time closing high of 3,096.82. The stock benchmark closed up 0.7 percent on Monday, while the MSCI Emerging Markets Index climbed 0.4 percent to its highest in more than three months. Indonesia’s $540 billion economy is expected to grow 6 percent this year, fueled in part by rising consumer spending among the nation’s 237 million people as well as rising commodity prices, according to estimates from the Washington-based IMF. The rupiah has surged 41 percent from its 2008 low and is trading at the strongest level versus the dollar since June 2007.
Bloomberg
The MSCI BRIC Index of shares in Brazil, Russia, India and China is still 42 percent below its peak after losing 1.2 percent this year. Less than two years after the global financial crisis prompted concern Indonesia and Turkey would default, investors are betting lower debt, growing populations and rising profit will spur economic expansions that led Goldman Sachs Group’s Jim O’Neill to promote the BRIC nations in 2001.
While China’s gross domestic product is about 4.2 times Turkey and Indonesia’s combined, they lead the “Next 11” smaller emerging nations with the most potential to affect world growth, O’Neill says. “There’s a paradigm shift in the way both countries have been governed and in terms of economic performance,” said Amer Bisat, a former International Monetary Fund economist who helps oversee more than $1 billion at hedge-fund Traxis Partners in New York. Indonesia and Turkey are “large, extremely systemically important and stable,” he said. “The market is looking at them in a very different light.”
The largest emerging-market stock mutual fund managers, which oversee about $250 billion, boosted their holdings in Indonesia and Turkey to the top “overweight” positions among 21 markets in June on expectations the gains will continue, data compiled by Cambridge, Massachusetts-based EPFR Global and JPMorgan of New York show. The fund managers are increasingly optimistic as profit growth outpaces share prices in both countries, leaving the Jakarta Composite Index and ISE National 100 Index trading at price-earnings ratios about 20 percent below their pre-crisis peaks, according to Bloomberg.
Mark Mobius, who oversees about $34 billion as the Singapore-based chairman of Templeton Asset Management, said last month by e-mail that he planned to increase holdings of stocks in Turkey, where the firm already has more than $1 billion invested. In June, he blogged that Templeton has a “positive take on investment opportunities” in Indonesia, while Antoine van Agtmael, chairman and chief investment officer of Emerging Markets Management in Arlington, Virginia, said on Bloomberg Television that the country was the most attractive among Southeast Asian markets.
The bullish bets are a turnaround from 2008, when investors shunned Indonesia and Turkey as the global economy fell into the worst recession since World War II. The JCI and ISE both sank more than 50 percent, the nations’ currencies weakened at least 15 percent against the dollar and credit-default swap prices suggested a 66 percent chance of default for Indonesia and 52 percent odds for Turkey, Bloomberg data show. Indonesian stocks are becoming more expensive relative to other developing markets. The Jakarta gauge trades at 13.5 times analysts’ estimates for earnings over the next 12 months, near the highest on record relative to the MSCI Emerging Markets Index, which is valued at 11.2 times, according to data compiled by Bloomberg since 2006.
The MSCI BRIC gauge has a ratio of 11. Turkish stock valuations factor in the nation’s political risks, while Indonesian companies have shown they can surpass analysts’ earnings projections, according to Martial Godet, who helps oversee more than $60 billion as the Paris-based head of emerging markets at BNP Paribas Investment Partners. The ISE is valued at 9.6 times analysts’ profit forecasts for the next 12 months, a 14 percent discount to the MSCI emerging index, and companies in the JCI have beat analysts’ profit projections during the past five quarters, data compiled by Bloomberg show. “The momentum is good for both markets,” Godet said. “They are not mainstream investments so people will continue to add money.
In both cases we have populated countries that are growing very well.” President Susilo Bambang Yudhoyono oversaw economic expansion of at least 4 percent throughout the global recession. That helped the JCI jump 175 percent from its 2008 low to 3,060.59 on Aug. 6, about 1.2 percent below the all-time closing high of 3,096.82. The stock benchmark closed up 0.7 percent on Monday, while the MSCI Emerging Markets Index climbed 0.4 percent to its highest in more than three months. Indonesia’s $540 billion economy is expected to grow 6 percent this year, fueled in part by rising consumer spending among the nation’s 237 million people as well as rising commodity prices, according to estimates from the Washington-based IMF. The rupiah has surged 41 percent from its 2008 low and is trading at the strongest level versus the dollar since June 2007.
Bloomberg
Tuesday, 20 July 2010
Knutsen tanker agound off Houston
(July 16 2010)
The US Coast Guard (USCG) was continuing its attempt to free a tanker that ran aground at the intersection of the Houston Ship Channel and the intracoastal waterway on Thursday.
The 22,100 dwt chemical tanker ‘Isabel Knutsen’ became stuck at about 6 am local time Tuesday after losing its steering control, USCG officials said.
Tugs were unable to free the vessel, which was loaded with about 17,000 tonnes of chemicals and 700 tonnes of fuel oil.
USCG officials said a lightering operation would now take place to remove enough of the cargo to enable the vessel to float free.
The ship is structurally sound and is not discharging any liquids into the water, USCG said.
The refloating operation was not causing interruption to other ships using the channel, officials said.
Cmdr Jim Elliott, commanding officer of USCG’s marine safety unit Galveston, said in a statement. “Attempts to refloat the vessel have been unsuccessful. We will now oversee the lightering of the ship’s cargo to refloat the vessel, ensure the safety of the crew and prevent any environmental impacts.”
“The Coast Guard and Texas General Land Office will oversee the process,” Elliott said.
Source: Tanker Operator
The US Coast Guard (USCG) was continuing its attempt to free a tanker that ran aground at the intersection of the Houston Ship Channel and the intracoastal waterway on Thursday.
The 22,100 dwt chemical tanker ‘Isabel Knutsen’ became stuck at about 6 am local time Tuesday after losing its steering control, USCG officials said.
Tugs were unable to free the vessel, which was loaded with about 17,000 tonnes of chemicals and 700 tonnes of fuel oil.
USCG officials said a lightering operation would now take place to remove enough of the cargo to enable the vessel to float free.
The ship is structurally sound and is not discharging any liquids into the water, USCG said.
The refloating operation was not causing interruption to other ships using the channel, officials said.
Cmdr Jim Elliott, commanding officer of USCG’s marine safety unit Galveston, said in a statement. “Attempts to refloat the vessel have been unsuccessful. We will now oversee the lightering of the ship’s cargo to refloat the vessel, ensure the safety of the crew and prevent any environmental impacts.”
“The Coast Guard and Texas General Land Office will oversee the process,” Elliott said.
Source: Tanker Operator
Tanker sector to benefit from US offshore production moratorium
Saturday, 17 July 2010
The US offshore production moratorium, implemented on 13th July, could have a beneficial effect on the tanker market. This moratorium will expire on 30th November as it stands. It was pushed through in the wake of the ‘Deepwater Horizon’ spill despite several legal challenges. Deepwater production will be allowed to continue and new exploratory drilling suspensions could be modified if the oil industry can prove that the operations are safe. Shallow water drilling will also be allowed to continue if companies can meet new safety and environmental requirements. However, it could take some considerable time for companies to meet the new more stringent conditions. As a result of the production moratorium, the International Energy agency (IEA) recently identified between 100,000 and 300,000 barrels per day of new projects that could be delayed by 2015. Leading tanker consultancy McQuilling said that although 300,000 barrels per day only amounts to 1.5% of the total US liquid fuels consumption, the potential impact on tankers adds up to an additional five VLCC cargoes per month. If these cargoes were sourced from the Middle East Gulf, this would create an extra 17.3 bill tonne/miles of demand for tankers. Any delays to projects will hamper US domestic output in a period of increasing demand and the liquids will have to sourced from elsewhere. Despite the aim of the US administration to reduce its dependence on foreign oil, it is likely that the oil tanker sector will fill the void on the back of increased imports. McQuilling said that this situation was likely to continue while the moratorium persists and domestic production becomes more cumbersome to industry participants due to the increase in stringent regulations.
Source: Tanker Operator
The US offshore production moratorium, implemented on 13th July, could have a beneficial effect on the tanker market. This moratorium will expire on 30th November as it stands. It was pushed through in the wake of the ‘Deepwater Horizon’ spill despite several legal challenges. Deepwater production will be allowed to continue and new exploratory drilling suspensions could be modified if the oil industry can prove that the operations are safe. Shallow water drilling will also be allowed to continue if companies can meet new safety and environmental requirements. However, it could take some considerable time for companies to meet the new more stringent conditions. As a result of the production moratorium, the International Energy agency (IEA) recently identified between 100,000 and 300,000 barrels per day of new projects that could be delayed by 2015. Leading tanker consultancy McQuilling said that although 300,000 barrels per day only amounts to 1.5% of the total US liquid fuels consumption, the potential impact on tankers adds up to an additional five VLCC cargoes per month. If these cargoes were sourced from the Middle East Gulf, this would create an extra 17.3 bill tonne/miles of demand for tankers. Any delays to projects will hamper US domestic output in a period of increasing demand and the liquids will have to sourced from elsewhere. Despite the aim of the US administration to reduce its dependence on foreign oil, it is likely that the oil tanker sector will fill the void on the back of increased imports. McQuilling said that this situation was likely to continue while the moratorium persists and domestic production becomes more cumbersome to industry participants due to the increase in stringent regulations.
Source: Tanker Operator
Stolt-Nielsen to move to Bermuda
(July 16 2010)
Stolt-Nielsen (SNSA) is to move its parent company from Luxembourg to Bermuda, subject to shareholders’ agreement.
Luxembourg's special holding company regime will end on 31st December, 2010, as part of ongoing initiatives to harmonise laws and regulations among the EU member states.
The proposed move is intended to enable the company and its shareholders to continue to benefit from a legal structure similar to that which SNSA has experienced as a holding company in Luxembourg since 1974.
It is still subject to SNSA shareholders’ approval and will be voted upon at an extraordinary general meeting to be held in Luxembourg at a date still to be determined.
If approved, the move is expected to be completed by the close of SNSA's fiscal year on 30th November, 2010.
The migration is not expected to result in any significant practical changes, from either a shareholder perspective, or in terms of the company's functional structure, locations or operations, SNSA said.
Shares would continue to be traded on the Oslo Børs.
Commenting on the announcement, Niels Stolt-Nielsen, SNSA CEO, said: "The board of directors of SNSA and the company's management are confident that this proposal, if approved, will enable the company to continue to optimise the benefits of its current structure."
Stolt-Nielsen (SNSA) is to move its parent company from Luxembourg to Bermuda, subject to shareholders’ agreement.
Luxembourg's special holding company regime will end on 31st December, 2010, as part of ongoing initiatives to harmonise laws and regulations among the EU member states.
The proposed move is intended to enable the company and its shareholders to continue to benefit from a legal structure similar to that which SNSA has experienced as a holding company in Luxembourg since 1974.
It is still subject to SNSA shareholders’ approval and will be voted upon at an extraordinary general meeting to be held in Luxembourg at a date still to be determined.
If approved, the move is expected to be completed by the close of SNSA's fiscal year on 30th November, 2010.
The migration is not expected to result in any significant practical changes, from either a shareholder perspective, or in terms of the company's functional structure, locations or operations, SNSA said.
Shares would continue to be traded on the Oslo Børs.
Commenting on the announcement, Niels Stolt-Nielsen, SNSA CEO, said: "The board of directors of SNSA and the company's management are confident that this proposal, if approved, will enable the company to continue to optimise the benefits of its current structure."
Thursday, 15 July 2010
Industrial Production in U.S. Increased 0.1% in June
Friday, 16 July 2010
Industrial production in the U.S. unexpectedly rose in June as higher temperatures across the nation led to increased utility use. Factory output, which makes up 75 percent of the total, declined the most in a year Production at factories, mines and utilities increased 0.1 percent after a 1.3 percent gain in May, figures from the Federal Reserve showed today. Economists had forecast a 0.1 percent drop in June, according to the median estimate in a Bloomberg News survey. Utility output rose 2.7 percent, while production at manufacturers declined 0.4 percent.Factories, which led the economy out of the worst recession since the 1930s, are facing less pressure to boost production to rebuild inventories as consumer spending cools. Manufacturers will instead be able to count on gains in business investment that have spurred sales and earnings at companies such as Intel Corp.“The manufacturing recovery is looking a bit more mixed than it was a few months ago when it was hard to find any signs of weakness in the data,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “Ultimately, businesses aren’t going to be investing at a rapid pace if consumers are going to be more moderate.”Estimates of the 76 economists surveyed by Bloomberg for June production ranged from a drop of 0.8 percent to an increase of 0.8 percent.Stocks fell on the manufacturing data and after a report showing China’s economic growth is moderating. The Standard & Poor’s 500 Index fell 0.7 percent to 1,087.23 at 10:05 a.m. in New York. The 10-year Treasury note was yielding 3 percent, down from 3.04 percent late yesterday.Empire ManufacturingManufacturing in the New York and Philadelphia regions grew at slower paces this month, an earlier report showed. The New York Fed’s Empire State Index that covers manufacturing in New York, northern New Jersey and southern Connecticut fell to 5.1 in July, the lowest level this year. The Philadelphia Fed’s general economic index dropped to 5.1 in July, the lowest since August 2009, from 8 the prior month. Readings above zero indicate expansion.Other reports showed initial jobless claims declined, reflecting a smaller number of factory closings for this time of year, and producer prices dropped more than forecast.The Fed’s report showed U.S. capacity utilization, which measures the amount of a plant that is in use, held at 74.1 percent last month. The gauge averaged 80 over the past 20 years and suggests inflation remains low.Utility OutputUtility output increased after a 5.6 percent jump in May. Helping to boost utility demand, last month was the eighth- warmest June in 116 years, according to the National Climatic Data Center. Mining production, which includes oil drilling, rose 0.4 percent.Manufacturing was restrained by a decline in automobile production. Output of motor vehicles and parts dropped 1.9 percent in June after a 5.6 percent jump a month earlier. Excluding autos and parts, manufacturing was down 0.3 percent.Consumer goods production fell 0.6 percent. The output of appliances, furniture and carpeting dropped 1.7 percent after a 1.2 percent decrease.Production of business equipment increased 0.9 percent after a 1.4 percent rise in May. Output of computers and semiconductors led the gain last month.Business SpendingWhile limited job creation has restrained consumer spending, manufacturers are enjoying a pickup in business investment in new equipment. Manufacturing shares have also outperformed the market. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies has increased 8.2 percent this year through yesterday compared with a 1.8 percent decline in the broader S&P 500.“Capacity still needs to be increased in order to meet demand,” Richard Hill, chief executive officer of Novellus Systems Inc., said in an interview July 13. “There’s a major overhaul of pc’s throughout the corporate world.”Novellus, which makes semiconductor equipment, said July 12 bookings rose 20 in the second quarter compared with a year earlier and shipments increased 17 percent. “Challenges” in North America “are not as bad as people might report” and consumers are “reasonably confident that the economy is going to rebound,” Hill said in the interview.Intel, the world’s biggest chipmaker, said on July 13 that sales will be $11.6 billion this quarter, plus or minus $400 million. Analysts estimated $10.9 billion on average, according to a Bloomberg survey.Companies have resumed spending on PCs and servers, fueling demand for chips, said Chief Financial Officer Stacy Smith. “We saw a resurgence of the enterprise market” Smith said in an interview. “We see inventory levels that are healthy.”
Source: Bloomberg
Industrial production in the U.S. unexpectedly rose in June as higher temperatures across the nation led to increased utility use. Factory output, which makes up 75 percent of the total, declined the most in a year Production at factories, mines and utilities increased 0.1 percent after a 1.3 percent gain in May, figures from the Federal Reserve showed today. Economists had forecast a 0.1 percent drop in June, according to the median estimate in a Bloomberg News survey. Utility output rose 2.7 percent, while production at manufacturers declined 0.4 percent.Factories, which led the economy out of the worst recession since the 1930s, are facing less pressure to boost production to rebuild inventories as consumer spending cools. Manufacturers will instead be able to count on gains in business investment that have spurred sales and earnings at companies such as Intel Corp.“The manufacturing recovery is looking a bit more mixed than it was a few months ago when it was hard to find any signs of weakness in the data,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “Ultimately, businesses aren’t going to be investing at a rapid pace if consumers are going to be more moderate.”Estimates of the 76 economists surveyed by Bloomberg for June production ranged from a drop of 0.8 percent to an increase of 0.8 percent.Stocks fell on the manufacturing data and after a report showing China’s economic growth is moderating. The Standard & Poor’s 500 Index fell 0.7 percent to 1,087.23 at 10:05 a.m. in New York. The 10-year Treasury note was yielding 3 percent, down from 3.04 percent late yesterday.Empire ManufacturingManufacturing in the New York and Philadelphia regions grew at slower paces this month, an earlier report showed. The New York Fed’s Empire State Index that covers manufacturing in New York, northern New Jersey and southern Connecticut fell to 5.1 in July, the lowest level this year. The Philadelphia Fed’s general economic index dropped to 5.1 in July, the lowest since August 2009, from 8 the prior month. Readings above zero indicate expansion.Other reports showed initial jobless claims declined, reflecting a smaller number of factory closings for this time of year, and producer prices dropped more than forecast.The Fed’s report showed U.S. capacity utilization, which measures the amount of a plant that is in use, held at 74.1 percent last month. The gauge averaged 80 over the past 20 years and suggests inflation remains low.Utility OutputUtility output increased after a 5.6 percent jump in May. Helping to boost utility demand, last month was the eighth- warmest June in 116 years, according to the National Climatic Data Center. Mining production, which includes oil drilling, rose 0.4 percent.Manufacturing was restrained by a decline in automobile production. Output of motor vehicles and parts dropped 1.9 percent in June after a 5.6 percent jump a month earlier. Excluding autos and parts, manufacturing was down 0.3 percent.Consumer goods production fell 0.6 percent. The output of appliances, furniture and carpeting dropped 1.7 percent after a 1.2 percent decrease.Production of business equipment increased 0.9 percent after a 1.4 percent rise in May. Output of computers and semiconductors led the gain last month.Business SpendingWhile limited job creation has restrained consumer spending, manufacturers are enjoying a pickup in business investment in new equipment. Manufacturing shares have also outperformed the market. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies has increased 8.2 percent this year through yesterday compared with a 1.8 percent decline in the broader S&P 500.“Capacity still needs to be increased in order to meet demand,” Richard Hill, chief executive officer of Novellus Systems Inc., said in an interview July 13. “There’s a major overhaul of pc’s throughout the corporate world.”Novellus, which makes semiconductor equipment, said July 12 bookings rose 20 in the second quarter compared with a year earlier and shipments increased 17 percent. “Challenges” in North America “are not as bad as people might report” and consumers are “reasonably confident that the economy is going to rebound,” Hill said in the interview.Intel, the world’s biggest chipmaker, said on July 13 that sales will be $11.6 billion this quarter, plus or minus $400 million. Analysts estimated $10.9 billion on average, according to a Bloomberg survey.Companies have resumed spending on PCs and servers, fueling demand for chips, said Chief Financial Officer Stacy Smith. “We saw a resurgence of the enterprise market” Smith said in an interview. “We see inventory levels that are healthy.”
Source: Bloomberg
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