Saturday, May 29, 2010

Aftermath if BP (NYSE:BP) "Top Kill" Doesn't Work

An important question emerges as BP (NYSE:BP) continues its attempt to "Top Kill" the leak in the Gulf of Mexico, and that is if the effort does fail overall, has it done something to slow down the flow of oil in the Gulf, or are we back where we started from before the Wednesday attempt?

The answer is vital if the effort does indeed prove to be a failure, because if there is at least a partial win by slowing down the flow of oil in a significant manner, it could give some relief all around as public and media pressure mounts concerning the situation.

If nothing else, there'll at least be a pop in the bubble of public perception and opinion if it does some good, and hope that the damage won't be as bad as it could and will be if the oil flow is as strong as it was before the try.

What will determine the next phase of media coverage and public concern is whether the oil leak becomes more of a trickle than a gusher.

Any significant slowdown will be considered a win by BP, and will ease things up a bit for them. If not, it's hard to tell where it'll all end up, as there's not much more anger and outcry that will grow than it is now, as it's reached a feverish pitch.

You also have the fatigue factor which could settle in, as people get tired of this type of negative story after prolonged exposure to it, and it'll slow down some no matter which way it goes.

Now that most people are aware of the circumstances and the stake involved, it's hard to tell what will happen after the Memorial Day weekend either way, as their minds drift to lost loved ones and enjoying the holiday.

People will be back to work and looking at their own challenges and problems with the concerns over the economy and jobs. That could mean the legs of this story are at their highest level now, and it could deflate going forward.

This doesn't change what needs to be done, but just an observation as to how long people can take in the catastrophe before they weary of it. I think that time is approaching, and hopefully we can get rid of the circus atmosphere and let BP and others do the work of stopping it, if they indeed fail this weekend.

BP (NYSE:BP) "Top Kill" a Failure?

Hope is dimming for the attempt by BP (NYSE:BP) to quickly plug the oil leak at the bottom of the Gulf of Mexico through Top Kill, as BP Chief Operating Officer Doug Suttles confirms they haven't been able to stop the oil spill yet.

With maybe 24 hours left to determine whether it will succeed or not, Suttles added BP is already looking toward their contingency plan of attempting to put a cap over the well, something that has already failed once, but obviously is worth the attempt, as the only sure way to stop it will take probably till August before it's in place, which would be a disaster for everyone involved, and would bring incredible political pressure on Obama and the oil industry in general.

This isn't to say the Top Kill or Junk Shot has failed, but the longer they go on the less likely it'll be they will be successful.

BP (NYSE:BP) Top Kill and Live Feed of Oil Spill

As many people watch with hope the live video feed of the Gulf of Mexico oil spill, BP (NYSE:BP) says it has yet to stop the flow of oil into the Gulf, and are looking at alternative measures if it doesn't plug up soon.

BP has said from the beginning that the "Top Kill" has a 60 percent to 70 percent chance of succeeding, and the longer time goes on, the more it seems they aren't going to be successful with the attempt.

COO Doug Suttles said that at this time the "Top Kill" and "Junk Shot" haven't stopped the oil flow yet, and the company is preparing its next option of attempting to cap the well if that doesn't work.

While there is still an outside chance the Top Kill could still work, it's beginning to look like it's only a remote possibility at this time.

Dow in Worst May in 70 Years

The Dow Jones Industrial Average is sure to glad May is almost over, as its performance in the Month before summer was the worst in 70 years.

You have to go back to 1940 to find a worst performance for the month.

In its final trading day of May, the Dow fell 122.36 points to 10,136.63, a 1.2 percent decline. The Dow finished down 7.9 percent for the month.

The Standard & Poor’s 500 Index dropped another 1.2 percent on Friday to 1,089.41, as financial shares took a hit after the downgrade of Spain by Fitch Ratings.

Exxon Mobil (NYSE:XOM) CEO Heads Boy Scouts

The Boy Scouts of America has named Exxon Mobil (NYSE:XOM) Rex Tillerson as their new president.

Tillerson will become the 33rd president of the organization, which is 100 years old. Tillerson himself was once an Eagle Scout.

Now that he has officially stepped into his new role, one of his goals is to generate excitement about the 100th anniversary of the Scouts this year.

Tillerson said, “The investment with the greatest return is the one we make in our country’s youth. Scouting provides opportunities for young people to experience and understand the world around them — not only making them better citizens, but more successful contributors to the workforce. I can speak to the power of those lessons — I am a product of the Scouting program. I apply the values and principles I learned as a Scout on a daily basis.”

BP (NYSE:BP) Fined for Safety Violations

BP (NYSE:BP) didn't need any more bad news, but they unfortunately got it, as they have agreed to pay a fine of $69,200 for safety violations at its Cherry Point refinery in Washington.

The plant, located in Blaine, Washington, produces 225,000 barrels a day, and BP received 13 serious safety violations for it recently.

While BP could have appealed the citations, they wisely decided to let it go and pay them, as the increased and prolonged process would have done little to help their reputation.

Twelve of the thirteen violations related to the management of hazardous chemicals.

Alcoa (NYSE:AA), United Steelworkers Union Contract Talks Continue

Alcoa (NYSE:AA) and the United Steelworkers Union are hoping to hammer out an agreement by the end of Memorial Day weekend, and have a contract in place starting Tuesday. Their currenct contract ends on Monday.

According to Alcoa, the major issues being discussed are health care, compensation and more flexibility in the workplace.

The healthcare discussions may be the most intense and difficult to navigate, as the proposed changes would make it more expensive for workers, who now pay only $87 a month.

Concerning the compensation package, Alcoa asked for changes for new employees in relationship to retiree medical benefits. Wages for new employees would remain the same.

Close to 5,400 employees in the U.S. are covered by the contract.

BP (NYSE:BP): "Top Kill" Taking Longer Than Expected

The attempt by BP (NYSE:BP) to stop the oil flow in the Gulf of Mexico using what is called "Top Kill" looks like it'll take longer than expected, as far as operationally and in finding out if it'll work.

Much of that comes from the heavy fluid being used to attempt to plug the oil well isn't filling it at the percentage hoped, and so a secondary method of injecting various materials called “junk shot,” which attempts to fill in holes which would help the original fluid fill it in better.

Each time a "junk Shot" is taken, BP has to stop the operations and wait. That is the major cause of it taking longer than usual, as they're evidently trying more of these than we know of.

Original estimates of knowing whether it would work or not was up to two days, now that has been extended to up to another two days.

BP (NYSE:BP) Cleanup Costs Approaching $1 Billion

Costs to clean up the Gulf leak is approaching $1 billion for BP (NYSE:BP), which so far has spent about $930 million in the effort.

The estimated figures come from a regulatory filing made by the company on Friday.

Included in the figures are damage claims, federal costs, spill response and grants made to states bordering the Gulf.

Focusing on plugging the leaking oil well, BP said at this stage of the process, estimates for all costs are impossible to come to in light of all potential liabilities and cleanup measures.

Friday, May 28, 2010

BP (NYSE:BP) Worker Safety Issues?

It's hard to tell if the issues allegedly emerging concerning BP (NYSE:BP) and their handling of worker safety are fair or not.

How can a true measurement be made as to whether or not they are handling it correctly or not? What's the precedent and road-map they are to follow?

Suddenly they have about 22,000 people they enlist to battle the tragedy as quickly as they can, and they're under fire for supposedly not taking the time to have them trained properly.

Assistant secretary of labor for occupational safety and health, David Michaels, wrote this in a memo to Coast Guard Adm. Thad Allen, “The organizational systems that BP currently has in place, particularly those related to worker safety and health training, protective equipment, and site monitoring, are not adequate for the current situation or the projected increase in clean-up operations.”

My question is what could be adequate in a situation like this? Do they shut down operations and go through a two-week training session? We all know what would happen there.

This is a work as you go and learn as you go operation. To imply they aren't doing enough is a CYA move by Michaels and the government.

The agency is under pressure from outside elements, and are pressuring the Coast Guard to then pressure BP to take care of their supposed "litany of concerns."

As BP spokesman Graham MacEwen rightly noted, the company is ready to respond to developing problems, and “We consider safety a number one priority. We will continue to try to improve our safety record.”

In other words, this is an on-the-fly operation, and things must be responded to as they happen, and not attempt to cover ever eventuality.

What do they want BP to do, shut down all operations and have training sessions?

BP may be guilty of a lot of infractions in this mess, but to include this type of lunacy because the federal bureaucrats are trying to cover their rear-ends is ridiculous.

Jindal and BP (NYSE:BP) Excuses from Obama

Louisiana Governor Bobby Jindal is putting pressure on Barack Obama concerning BP (NYSE:BP) and their responsibility in helping pay for 24 barrier islands which would be used to protect the coastline of Louisiana from leaking Gulf oil.

The problem for Obama is he has said a lot of talk and rhetoric concerning BP in an attempt to protect himself and his administration politically, which is somewhat understandable, but the problem is his rhetoric and tough talk may not be legally backed up as to what BP should and should not pay for.

For example, building these barrier islands would seem to be under the blanket statement made by Obama that the responsibility for paying for the disaster belongs to BP. The problem is there is no determination yet as to the cause of the disaster and how far and wide the payments from BP will be allowed to go.

Jindal is rightly frustraed by this, as it seemed Obama had said whatever is legitimately needed to be done to take care of the consequences of the spill are on BP, yet the talk has continued but action hasn't.

"We don't understand why our federal government would be making excuses for BP." Said Jindal. "They're the responsible party. They're the ones that caused this oil spill... it is their oil that is showing up in our coast and our wetlands and our marshes. It just makes sense that they pay to clean up this damage."

Of the 24 barrier islands Jindal wants built, the federal government has only agreed to pay for a small portion of the cost, adding to the frustration and lack of decision.

Marathon (NYSE:MRO), Anadarko (NYSE:APC), Shell (NYSE:RDS-A), Most Exposed to Gulf Ban

As the market digests the move by Barack Obama to ban drilling at 33 locations in the Gulf of Mexico, those companies most affected by the ban are Marathon (NYSE:MRO), Anadarko (NYSE:APC), Shell (NYSE:RDS-A), along with Eni SpA, which are based in Rome.

Shell leads the way of those with most exposure to the drilling ban, with five wells affected, while Marathon, Anadarko, and Eni SpA each have three. That's according to an official at the Minerals Management Service who asked not to be named.

Shell, Marathon and Anadarko were all hit hard as the market found out about their exposure, with Anadarko taking the brunt of it with a drop of $3.24 a share, or 5.83 percent, ending the session at $52.33; Marathon lost $0.55 a share, or 1.74 percent, falling to $31.09 on the day; and Shell wasn't far behind them, losing $0.61 a share, or 1.15 percent, closing at $52.40.

Anadarko has more exposure through it 25 percent non-operating ownership in the Deepwater Horizon, which is lying at the bottom of the ocean.

Does Monsanto (NYSE:MON) Deserve More Love?

Over the last couple of months, it has seemed there has been no good news for Monsanto (NYSE:MON), largely based on the focus on Roundup.

The problem with that scenario, is Roundup isn't what has made Monsanto what it has been, and regardless of its performance going forward, Monsanto still solid growth potential.

When you consider Monsanto is still projecting earnings to grow at a rate in the mid-teens even with the Roundup challenges, and you see the long-term potential and quality product lineup they have.

The company is hated by some of the purists who don't believe in the products they provide, so they have had some influence in pushing only the negative aspects of how they view the company, to the detriment of their strong aspects.

For investors, we need to throw the negative out that is only based on emotion and activists, and look at the product line of the company as it is, and the earnings potential they represent.

The much larger segment of the company is in "seeds-and-traits," and that will be more indicative of their future performance than Roundup is, even if it was still protected.

Trading at its lowest levels in about three years, the stock could be a real bargain now.

Citigroup (NYSE:C) Maintains Newmont (NYSE:NEM) "Hold" Rating

While news coming out of the Newmont Mining (NYSE:NEM) Investor Day Thursday has been positive, Citigroup (NYSE:C) kept its rating on the gold miner at "Hold."

A Citigroup analyst said, "Newmont hosted an upbeat Investor Day with detailed presentations fom all the regions. The conclusions were mostly positive: 1. reiterated focus on shareholder value vs. adding near term production, 2. strong possibility of higher dividends, 3. clear advances in the project pipeline since last year. Reiterate Hold rating – our top pick in gold is Barrick (NYSE:ABX)."

National Bank analyst Tanya Jakusconek, was a little more impressed, increasing her target price on the gold miner to $66 a share, a 10 percent hike over the prior target share price of $60 a share.

Constellation Energy (NYSE:CEG) Declares Quarterly Dividend

The board of directors of Constellation Energy (NYSE:CEG) have declared a quarterly dividend of $0.24 a share, or $0.96 a share annualized.

Yield for the dividend, which is payable to shareholders of record at the close of business on June 10, 2010, on July 1, 2010, is 2.7 percent.

A motion to separate the roles of chairman and CEO Mayo A. Shattuck III was rejected at Friday's annual shareholder meeting,

Norges Bank, the central bank of Norway, had initiated the motion, which Constellation had advised their shareholders to reject.

Two-thirds of shareholders would have had to vote for the change in order for it to be enacted.

Citigroup (NYSE:C) Upgrades SunPower (Nasdaq:SPWRA)

SunPower (Nasdaq:SPWRA) enjoyed another upgrade today, this time from Citigroup (NYSE:C), as an analyst from the giant bank now rates SunPower a "Hold" from a "Sell."

This comes on the heels of an upgrade from Macquarie yesterday, which drove the stock up by 22 percent on Thursday.

Even so, traders couldn't resist taking profits, and even with the additional upgrade has fallen by $0.35 or 2.65% to $12.85 a share as of 2:52 p.m. EDT.

The price target for SunPower was also raised by Citigroup to $15 over the next 12 months.

Recent financing for its Montalto di Castro Solar park to the tune of €44.5 is the main impetus behind the upgrades.

Bank of America (NYSE:BAC) Downgrades Monsanto (NYSE:MON)

The overall Roundup business of Monsanto (NYSE:MON) has been under pressure and that has caused the company to be downgraded by Bank of America (NYSE:BAC) from "Buy" to "Neutral."

Near term the company doesn't have a good outlook, and they've acknowledged that from their lowering their guidance for 2010.

Monsanto plunged yesterday and earlier in Friday's session, but rebounded some in the latter part of the day.

Shares of Monsanto over the last 52 weeks has ranged from 48.16 - 87.40, and stand at $50.60 as of 2:43 p.m. EDT.

The company will have to lower prices of Roundup to compete against generic versions, which will put pressure on revenue and earnings.

Shell (NYSE:RDS-A) Spends $4.7 Billion for East Resources

Royal Dutch Shell PLC (NYSE:RDS-A) has laid out $4.7 billion to acquire privately held East Resources in order to get their hands on the 1.25 million acres in Marcellus Shale controlled by East Resources

"We are enhancing our world-wide Upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions,” Shell's CEO Peter Voser said. “These acreage additions form part of an on-going strategy, which also includes divestments, with an objective to grow and to upgrade the quality of Shell's North America tight gas portfolio."

"East Resources' management have built an excellent organization, with high quality assets in the Marcellus, which we are pleased to have as our centrepiece as we enter the premier shale gas play in the north east US,” Voser added. “The opportunity now is to consolidate our tight gas portfolio, divest from non-core positions across North America, and to invest for profitable growth, by deploying Shell's technology and capabilities on a large scale."

An additional 1.3 million tight gas acreage will in their North American portfolio, which now stands at an estimated 2.7 billion barrels of oil and equivalents.

As part of the deal, Shell will also get investment companies Kohlberg Kravis Roberts & Co. and Jefferies & Company.

Regulators will have to approve of the all-cash deal before it is finalized.

BP (NYSE:BP) "Top Kill" to Use "Junk Shot"

The next phase by BP (NYSE:BP) at their attempt to "Top Kill" the oil leak in the Gulf will be to us what is called a "Junk Shot."

A "junk shot" refers to using materials like golf balls, shredded rubber tires and pieces of rope and injecting them into the broken blowout preventer. This would hopefully clog it all up and stop the oil flow.

BP said injecting the material into the preventer would fill in gaps now open, which would help the fluid and mud end up in the well, something that they've had difficulty doing to this point.

While the leak will eventually be plugged, this is the best chance by BP to do it quickly, as pressure continues to mount stop the oil flow.

Exxon Mobil (NYSE:XOM) Suspends Drilling at Hoover Diana Well

As a result of the ban on drilling in the Gulf of Mexico, Exxon Mobil (NYSE:XOM) has suspended operations at its Hoover Diana well in the area.

Barack Obama ordered a moratorium on drilling in the region.

According to Exxon Mobil spokeswoman Cynthia Bergman, this is the second well in the area affected by the order.

The other was an exploratory well at their Hadrian project in the Gulf, which is delayed till further notice.

New drilling in the Gulf has been halted for those in deep waters, and that has been extended to six months.

The ban will remain until it is discovered what caused the Deepwater Horizon oil rig to explode and spew oil into the area.

BP (NYSE:BP) had leased the oil rig from Transocean (NYSE:RIG).

Teck (TSE:-TCK-B) CEO Presenting at Goldman Sachs (NYSE:GS) Conference

Teck Resources (TSE:TCK-B) President and CEO Don Lindsay will be presenting at the Basic Materials Conference hosted by Goldman Sachs (NYSE:GS), on Thursday, June 3, 2010.

The time the presentation will begin is 12:20pm Eastern/9:20am Pacific time.

Included in the investor presentation will be the outlook for the various business units of Teck, financial performance, and the strategy of the company going forward.

Teck is a diversified resource company committed to responsible mining and mineral development with major business units focused on copper, steelmaking coal, zinc and energy.

You can view a webcast of the presentation at the link below:

Supporting slides will also be provided at the company homepage of their website at:

Alcoa (NYSE:AA) Not Expected to Rebound in 2010

Based largely on costs, Alcoa (NYSE:AA) is expected to continue to underperform their peers for the remainder of 2010.

A number of analysts agree with this, as those at JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB) and UBS (NYSE:UBS) downgraded them in April.

Jim Cramer concurs with that as well, saying recently, "I've given up on Alcoa. I'd go with Dupont (NYSE:DD) or Dow Chemical (NYSE:DOW), where costs are also going down. I will not recommend Alcoa."

China imports are down while aluminum inventory levels at the Shanghai Futures Exchange have soared 64.4 percent, to 489,495 tons, up from 297,722 as of January 7.

With aluminum imports way down in China, with domestic production rising, and costs not under control at Alcoa, there's little in the near term to suggest they can do anything to change their current scenario.

Aluminum ETFs expected to launch later in 2010 are one glimmer of hope they have as far as demand goes, but Rusal is carrying the bulk of that load, and Alcoa would probably take up any slack Rusal can't provide, which I've heard they're having a hard time meeting expected demand from that new aluminum market.

Thursday, May 27, 2010

Obama's Overreaction to BP (NYSE:BP), Oil Accident

It's incredible to see people so worked up over the oil spill, BP (NYSE:BP), oil industry, and even Obama, who has finally taken some criticism during his administration, and it of course would come from radical environmentalists and earth worshippers.

Just a few days ago an airplane went down with over 200 people losing their lives, and yet you didn't get a call to shut down the airline industry. But one large mistake and there's hysteria as these people who ignorantly believe the earth is their mother gnash their teeth and gleefully attack the oil industry and Obama over oil leaking into the Gulf of Mexico, which just happens to have a ton of oil seep into it year after year; about four times in one year what the Exxon Valdez did years ago.

Now after getting some criticism from his base, and others, Obama now responds in a manner that is only politically motivated, and not based on what he really believes in.

Unfortunately, it's more important to mainstream media to hype and keep this story going, than it is for the lost lives of the workers on the Deepwater Horizon, or those on the recent airline crash.

Now the banning and stoppage of work on offshore wells and deepwater drilling will crush the oil industry, something the radical environmentalists have been waiting for for a long time.

It will also end with shortages and competitors from other countries grabbing the oil drilling ball and running with it.

Too bad at a time when Obama could have used his stubbornness for some good, he instead caved to the radicals and took steps to placate them rather than show some leadership by bringing balance to the situation, and not shut down everything in a world that can never be perfect.

Citigroup (NYSE:C): BHP (NYSE:BHP), Rio Tinto (NYSE:RTP) Projects May be Delayed because of Australia Super Tax

Citigroup (NYSE:C) says the proposed super tax on mining companies in Australia could result in mining projects of BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) being delayed for about a year, countering the purpose of the destructive tax in the first place.

“The iron ore market is in deficit until 2012, but tips into growing surpluses in 2013 onwards as supply growth accelerates,” Citigroup analysts Clarke Wilkins, Craig Sainsbury and Daniel Seeney said in a note to clients. "Delaying Australian unapproved projects by 12 months would dramatically reduce the surplus in 2013-14.”

Also affected would be Fortescue Metals Group (ASE:FMG), which is the third-largest iron ore exporter in Australia.

All of this could also have a negative impact on the global steel market, where steelmakers would bear the brunt of the tax, and whatever they end up passing on to the enduser will result in inflation.

I have a better idea, like all governments, the Australian government needs to become smaller, and that way they don't have to have such a negative impact on the rest of the world, as all governments do.

The oppressive tax is scheduled to start in 2012.

GE (NYSE:GE) Deal with King Fahd University of Petroleum and Minerals

GE (NYSE:GE) announced they've made a deal with King Fahd University of Petroleum and Minerals to develop a fuel research center in Dhahran, Saudi Arabia, on the grounds of the university.

Dubbed the GE Energy Fuel Research Center, it'll work on teaching about alternative fuels produced in Saudi Arabia, and to search out ways to deal with technical challenges related to them, as well as market and distribute them.

Other projects would help the existing refinery and power plants increase fuel efficiency.

Increasing efficiency while decreasing fuel consumption is one of the goals of the partnership in the energy strategy of Saudi Arabia.

Siemens Energy (NYSE:SI) Lands Abu Dhabi Order

Siemens Energy (NYSE:SI) got an order from Abu Dhabi Transmission & Dispatch Company, the operator of Abu Dhabi’s national electricity grid.

The project Siemens landed will help expand the distribution network of the country.

Along with their partner Electromechanical LLC, Siemens will supply switchgear and transformer substations for the project, which is valued at about €150 million.

“We’re proud that Transco has again opted for field-proven, first-class equipment from Siemens for the expansion of Abu Dhabi’s electricity grid,” said Peter Loescher, CEO of Siemens AG.

Goldman Sachs (NYSE:GS) Adds Arcelor Mittal (NYSE:MT) to Conviction Buy List

Arcelor Mittal (NYSE:MT) was added to the European Conviction Buy List by Goldman Sachs (NYSE:GS), with Goldman saying the ongoing fears related to the sovereign debt crisis in Europe is the major cause of their recent decline.

The shares of Arcelor are down over 28 percent in the last 30 days, against the 12 percent drop in FTSE World Europe.

In the mid-term, Goldman sees Arcelor's fundamentals as remaining strong, and they're in good position to experience future growth "across a wide geographic footprint."

The price target is EUR 48, which is over double the EUR 23.15 it closed at on Wednesday.

Bunge (NYSE:BG), Vale (NYSE:VALE) Deal Completed

The deal between Bunge Limited (NYSE:BG) and Vale (NYSE:VALE) has been completed, according to Bunge, where it sold its sold its Brazilian fertilizer nutrients assets in Brazil to Vale S.A.

Included in the deal was Bunge's stake in Fertilizantes Fosfatados S.A. (Fosfertil) of 42.3 percent.

Bunge's Chairman and CEO, Alberto Weisser, said, "We're pleased to have successfully concluded the sale of our Brazilian nutrients assets, allowing us to realize the significant value we built in this business over the years. Proceeds from the transaction provide us with the financial flexibility to redeploy capital for growth and improve our financial profile. In the near term, we'll use approximately $1.5 billion to pay down a portion of our debt and will continue to focus on other opportunities to enhance shareholder value."

The deal was worth approximately $3.5 billion.

Goldman Sachs (NYSE:GS) Likes American Electric Power (NYSE:AEP)

Goldman Sachs (NYSE:GS) said they continue to like American Electric Power (NYSE:AEP), citing they are trading at a strong discount to their peers, one of the few regulated large cap companies to do so.

The dividend yield continues to be attractive as well, standing at 5 percent.

Consequently, the giant financial institution retains their "Buy" rating on American Electric Power Company, and a $38 price target.

Goldman analysts did however lower their earnings per share estimate from $3.05 to $2.88 for 2010.

ATP Oil & Gas (Nasdaq:ATPG) Down on Obama Drilling Ban

ATP Oil & Gas (Nasdaq:ATPG) is being crushed today on the news of Obama stopping drilling operations at 33 deep-water rigs in the Gulf of Mexico.

The stock finished down by almost 4 percent, to $12.05, a 49 cent decline.

Obama has also halted the sale of leases in the Gulf of Mexico, obviously a move of political expediency.

Natixis Bleichroeder analyst, Curtis Trimble, said ATP isn't on the group of rigs being stopped, but the 6-month moratorium on permits could have a significant impact on the Telemark well, which could extend it to 2011, rather than in 2010.

Trimble rightly noted that selling off ATP was overreactive, and he maintains a buy rating on the company and a price target of $23.

BP (NYSE:BP) Stops "Top Kill"

BP (NYSE:BP) has temporarily halted their attempt to "Top Kill" or plug the oil leak in the Gulf of Mexico, saying there was far too much drilling fluid escaping while being injected into the well.

The assumption is they are revamping their techniques and will continue on once they're satisfied.

A technician stated it wasn't a major challenge, and "We're still quite optimistic. It is not assured and its not a done deal yet. All of this will require some time."

Plans are to continue pumping the fluid around midnight local time.

BP (NYSE:BP): 24-48 Hours Before "Top Kill" Results Known

Contrary to some reports, there is no conclusive evidence that the "Top Kill" effort by BP (NYSE:BP) has been successful, and according to a company spokesman, it could take from 24-48 hours before they know for sure whether or not it succeeded.

The company is pouring heavy fluids into the oil leak in order to stop the flow. As it has never been attempted before, the chances of success are about 60 to 70 percent form the point of view of BP.

Some media outlets had reported it was successful, but that's unfair and irresponsible reporting, as it generates expectations which could cause more harm to BP because those assertions are out of control, but they would have to pay for them.

Either way, it seems that at least part of the leak has been plugged, and a minimum, it could stem the flow of oil from coming out at the levels they have been coming out.

Teck Resources (TSE:TCK-B) Rises with Metal Prices

Teck Resources (TSE:TCK-B) (NYSE:TCK) was up in Toronto and New York today as copper and other industrial metals all rose on news the U.S. economy may possibly continue growing, based on industrial demand.

Along with copper surging, other base metals increasing in price were aluminum, tin, lead, zinc and nickel.

All of this if fine, but I am still sceptical on the sustainability of all of this, and whether or not some temporary data comes out positive, like it just has, to massage those numbers of confirmation of a sustainable recovery is suspect at best.

Anyone announcing a sustainable recovery at this early stage is either incompetent or dishonest.

We have a long way to go with the European sovereign debt crisis and potential fallout from China fighting inflation before we can announce there is a recovery at all, let alone a sustainable one.

Alcoa (NYSE:AA) Upgraded by Macquarie, Aluminum Prices Should Rise

In case you missed it yesterday, Alcoa (NYSE:AA) was upgraded by Macquarie Research from "neutral" to "outperform." Alcoa has been hit hard since the beginning of the year, dropping by about 30 percent. Much of that based on falling demand and falling aluminum prices.

Macquarie analyst Curt Woodworth believes the aluminum sector was over-corrected. He said, "We believe the aluminum market is more healthy than most investors realize as physical premiums continue to move higher and demand growth is accelerating."

Woodworth raised his price target for Alcoa from $17 to $18 also, saying they specifically have been oversold, as has much of the entire aluminum industry.

Physical premiums for aluminium in Europe are at their highest in decades, and in Japan and the U.S. they have climbed to their highest levels in five years.

If you add in the increased demand expected to rise because of several aluminum ETFs which are scheduled to launch in the latter part of 2010, and you have pretty good conditions for the aluminum industry to rebound nicely.

We have to of course keep in mind the conditions in Europe and China, but if things go relatively okay there, it could be a good several years for aluminum, although in regards to Europe, that is a big "if."

Aluminum Corp of China (NYSE:ACH), Alumina (NYSE:AWC), and Reliance Steel and Aluminum (NYSE:RS) Soaring Today

Alumina (NYSE:AWC), Reliance Steel Aluminum (NYSE:RS) Aluminum Corp of China (NYSE:ACH) and Alcoa (NYSE:AA) are all soaring today, especially the first three, as a durable goods report implying the industrial sector of the U.S. is continuing to recover, even with the economic concerns over the European sovereign debt crisis and possibility China may cut some imports in an effort to battle inflation.

The aluminum sector has been getting crushed recently, and all the right elements seem to have come together to at least give it a temporary reprieve.

Even without the guarded news, aluminum producers would probably have still did well, as they were due for a rebound, but the data points to at least a neutral situation, which means things could be level for demand, and possible grow a little in the near term.

Alcoa (NYSE:AA) Says Norway Needs Competitive Global Power Contracts

Alcoa (NYSE:AA) stated today there needs to be better "globally competitive" power contracts in order for them and others, to continue to invest in the aluminum industry in Norway.

Alcoa Executive Vice President Bernt Reitan said the company would probably consider building smelter in Norway, similar to the one they recently completed in Iceland if the government supported power.

Spokesman Kevin Lowery said their top priority would be for the two aluminum smelters already in the country, where improved power agreements would help them. They contracts are due to expire in 2020.

Lowery said, “First things first, we need to repower our existing plants. If we do that, then we would consider investment in additional assets.”

Wednesday, May 26, 2010

Massey Energy (NYSE:MEE): More Citations

Massey Energy (NYSE:MEE) received 23 citations from federal mining inspectors since May 14 at the Upper Big Branch mine, where 29 miners were killed in April.

While many of them were related to electrical problems, three were labeled as "significant and substantial," although it wasn't clear as to whether they played any role in the explosions and deaths at the mine.

The citations were issued by the Mine Safety and Health Administration, which oversees the industry.

Those violations considered as more serious were related to what are called escapeways, which must be taken care of very well to ensure workers can leave the area unobstructed in case of emergency situations.

Also cited were travelways, which are exactly what they sound like, means of moving from one working area to another.

The mine is still filled with high levels carbon monoxide, so inspectors haven't been able to go underground yet. Expectations are they may be able to enter the mine by June 2.

BP (NYSE:BP), Oil Industry, Battling New Drilling Restrictions

BP (NYSE:BP) is targeting its Democratic friends and connections in order to minimize the fallout from the oil leak resulting from the explosion on the Deepwater Horizon oil rig.

While the oil industry outraged by BP's accident, as it will cause them many problems and public relations issues in the future, they still backup and agree with BP concerning not having drilling limits imposed on the industry.

BP is using its Democratic connections particularly to attempt to influence the outcomes, specifically Hilary Rosen and Tony Podesta, who are working behind the scenes on BP's behalf.

Rosen was a former Democratic congressional staffer, while currently an editor-at-large for the highly controversial Rosen refused to respond to the story.

Tony Podesta is the brother of former Clinton chief of staff John Podesta, who is now the head of a liberal think tank, and led the transition team for Barack Obama.

BP has also gone to bed with Democrats and radical environmentalists connected to the climate-change hoax and its legislative goals, which it has backed up in a manner which raises a lot of questions as to their motives.

Chevron (NYSE:CVX) Increases Production 7 Percent

At their annual shareholder meeting, Chevron (NYSE:CVX) CEO John Watson told investors that production for the company in the last year rose by 7 percent, and the company will continue to increase production over the next several years.

The primary engine of growth will be the Wheatstone and Gorgon natural gas projects based in Australia.

Liquid natural gas at the Gorgon project is expected to produce gas by 2014. So far they've plowed $37 billion into Gorgon. Wheatstone is at the front-end engineering and design stage, and investments decisions on that are expected to come in 2011.

Over the next three years plans are in place to launch oil and gas production in 10 capital projects estimated to cost over $1 billion each.

Another seven multibillion-dollar startups are also scheduled for 2011 and 2012.

Janet Napolitano Admits Only BP (NYSE:BP) Can Stop Oil Spill

Only BP (NYSE:BP) can stop the oil spill in the Gulf of Mexico, admitted Homeland Security Secretary Janet Napolitano, saying, "The government doesn’t have that capacity.” Napolitano added in a news conference that “They have the technology, they have the personnel and experience."

It's nice to see a government official admit they aren't competent to do the job, something most of us already new.

Yet even in the wake of this, those like the pathetic Democratic James Carville was whining about, and almost fainting over the government not interfering in the crisis. Carville said, “I have no idea of why their attitude is so hands-off here. It’s just unbelievable.”

Sad to see someone view the government as if they're god like Carville and others who actually put their faith in it.

Then trying to defend the Obama administration, Napolitano makes them even look worse. She said, “This is the largest federal response ever to an environmental disaster of this sort. We have right now over 22,000 federal personnel on that aspect of it.”

Supposedly 22,000 government people are completely clueless on this matter. What are they doing? BP, by Napolitano's admission, is the only one that can handle the problem, yet somewhere supposedly running around are 22,000 government employees in the "largest federal response ever to an environmental disaster."

Those 22,000 government employees sure hide good.

These clowns won't even allow the Louisiana governor to build sand bars to protect the state from the oil spill. These nuts say they'll have to perform an ecological “study” of what the impact of those sand bars will be before giving the okay. This is the Army Corps of Engineers making that intelligent comment. They should be put on trial for that outrage.

I guess that's part of the 22,000 mentioned by Napolitano. No wonder she backs up BP so strongly against using the government Keystone Cops.

BP (NYSE:BP) LA Refinery Closed for Unscheduled Maintenance

A major BP (NYSE:BP) (LON:BP) refinery was closed in the area of Los Angeles today, with the oil company shutting it down for unscheduled maintenance.

The Carson refinery, which produces as high as 6.3 millio gallons for the three-state area of California, Nevada and Arizona, is an fluid catalytic cracking unit, or FCCU, providing gasoline grades required in the area.

A Planned Flaring Event Notification was filed by BP to state regulators in California in reference to an unidentified breakdown at the refinery.

Someone familiar with the matter said the refinery will probably be out of service for 10 days.

Carson has the ability to process as high as 265,000 barrels of oil a day.

We'll probably hear a lot of these types of actions by BP going forward, as they can't afford any type of additional accident in light of the current crisis in the Gulf, and so will probably be cautious to a fault for a long time into the future.

Rio Tinto (NYSE:RTP) Sees Some Metal Demand Doubling in 15 Years

Rio Tinto (NYSE:RTP) CEO Tom Albanese commented at an annual meeting for the company that metals like aluminum, copper and iron ore will increase in demand by twice what they are today in the next 15 years.

Primary drivers of demand, according to Albanese, will be urbanization and industrialization. Those two trends obviously relate to emerging markets, especially China and India, which will continue to grow exponentially during that time, although probably at a couple percentage points down from their growth today.

Albanese also likes the energy sector, where coal and uranium will continue to be in high demand.

“These trends will require a significant response from producers,” Albanese said.

Rio Tinto is positioned strongly to be a major player in these important natural resources, with the major caveat being the macro-economic picture emerging and Europe and inflation in China. These could lower demand for raw materials, and the European sovereign debt crisis could drag us into an even worse recession than we're just starting to recover from.

Even so, it's not a matter of if these raw materials will increase in demand, but when. The 15-year estimate is a good one to me, as it takes into accounts the inevitable swing in demand that accompanies slow economic times, and even if things to get much worse for several years, ultimately they're recover, and mining companies like Rio Tinto should participate in the resultant rise in prices from the growing demand.

Massey Energy (NYSE:MEE) Not for Sale

Massey Energy (NYSE:MEE) said the rumors and reports stating they're for sale are false, and there is not truth to them whatsoever.

Some of this is evidently being circulated because of moves by the company to sell some assets or enter into some joint ventures with other companies.

Regions where Massey is looking at doing deals in are the United States, Australia, Mongolia and India.

Massey is looking to partner with Jindal Steel & Power (JNSP.BO), based in India, to develop and operate underground coal mines in that country.

UBS (NYSE:UBS) Raises Petrohawk (NYSE:HK) Estimate

Shares of Petrohawk Energy (NYSE:HK) rose after UBS AG (NYSE:UBS) raised their estimates for the oil and gas company. UBS has a buy rating on the company and a price target of $28 through 2011.

Petrohawk is primarily a natural gas exploration, development and production company, although they do engage in oil production to a lesser degree.

The traded as high as $18.50 a share today, but has dropped back to near its opening of $17.87 a share as I write.

UBS said volume next year should increase for Petrohawk.

BP (NYSE:BP) Dividend Should Remain Where it's at

Even though the costs of cleaning up the oil spill could rise into billions, possibly as high as $6 billion, for BP (NYSE:BP), that shouldn't be problem for the oil giant, and those following the company say they'll probably keep the dividend where it's at.

When spread over a period of three or four years, $6 billion isn't that big of a deal for BP, and they could handle it fairly easily.

So far cleanup costs are estimated to be at about $760 million, but that will gradually recede as the cleanup goes on and the leak is finally stopped.

As far as payouts go, much of that is insured, and it's the insurance companies that will eat that cost, and not BP.

Of course you have the inevitable lawsuits, but they could go on for years, and some will be strategically settled at lesser costs, especially those which could harm the reputation of BP even further, and keep the accident and incident in the public mind.

Potential overall damage estimates are far and wide, with some saying they could range anywhere from $220 million to $60 billion, taking into consideration the best- and worst-case outlook.

Analysts think the company could take a hit up to $25 billion for their balance sheet before the dividend would be affected.

BP (NYSE:BP) "Top Kill" Begins

In an attempt to finally stop the oil spill in the Gulf of Mexico, BP (NYSE:BP) said they've started the "Top Kill" procedure which they conclude has about a 60 percent to 70 percent chance of success.

As of about 1 p.m. local time, BP started their attempt to fill the well with heavy drilling fluids through the blowout preventer.

Uncertainty surrounds the operations because there is no road map for the company, as it has never been attempted at ocean depths like this. This would be a huge win for BP, and relief, as frustration all around has accompanied the consequences of the accident, which claimed 11 lives.

There are several alternatives if this fails, one of which would involve placing a containment system over the well in order to attempt to capture the oil and direct it to a surface ship.

Although there is one method that is guaranteed to work, it could take a couple of months to implement, which is to drill a relief well. The obvious pressure from the media coverage and public response would be enormous if that's what eventually happens.

Shorting Freeport (NYSE:FCX), Teck (NYSE:TCK)?

With both Freeport-McMoRan (NYSE:FCX) and Teck Resources (NYSE:TCK) down over 20 percent, it generates the question on whether shorting them is the best strategy in the near term, as there's little happening in the commodity sector to go long with them at this time.

This of course assumes you're a trader. Obviously this doesn't apply if you want to play everything safe, which isn't necessarily bad in this volatile market. But for those who do trade or want to, volatility is always opportunity, and opportunity is here with the mining stocks.

I bring up Freeport-McMoRan and Teck Resources because of their heavy exposure to copper, which should remain under downward price pressure for some time.

Other than gold miners, mining companies will be under pressure in the near-term, and while we must know the company and what they are exposed to as far as specific commodities, the general sector will continue to struggle because of the expected fall in demand for raw materials from Europe and China, and possibly other regions of the world who are concerned over the unknown ramifications of the sovereign debt crisis and depth of the impact of China battling its inflation problem.

With copper being so tied into the housing market, it should struggle until the economic situation stabilizes, which could be some time to come. Freeport and Teck Resources obviously have strong exposure there, and any other miner that does we should keep that in mind about.

Potash (NYSE:POT) Names New COO

Potash Corporation of Saskatchewan (NYSE:POT) has named a new Chief Operating Officer to replace James Dietz, who will retire at the end of June.

The new COO will be David Delaney, who is president of sales at this time.

Dietz has been COO since 2000, and has worked over 41 years for Potash.

Replacing Delaney as president of sales will be Stephen Dowdle, who is senior vice-president of fertiliser sales for the company.

Potash Corp CEO Bill Doyle said this about the appointment, "David has strong, natural leadership skills and is held in high regard by all who know him. He will bring the same level of energy that he exhibited with the sales organization to our operating divisions."

Alcoa (NYSE:AA) May Have First Strike in 24 Years

Health care costs could result in the first strike at Alcoa (NYSE:AA) in 24 years, in response to proposed price increases for employees at the company, which would triple costs for some workers if implemented.

A labor contract is set to end on May 31, and the proposal to increase health care costs for workers is part of what Alcoa is asking for.

If an agreement isn't reached, it could result in the first strike at the company since 1986. There are about 6,000 workers covered by this particular contract.

Another part of the changes Alcoa is asking for is in reference to benefits offered for new employees, where they are seeking elimination of retiree medical benefits, defined-benefit pension plans, and a reduction in overtime pay.

Alcoa said concerning the health care plan that it costs close to 45 percent more for each employee than their salaried workers get. The coverage is said to be excellent, and the same as other hourly and salaried workers in the U.S. get.

Costs for family coverage, which seems to be the main sticking point, would increase to around $315 a month, a major increase from the $87 a month it costs now, which is very cheap.

The economic conditions and low price of aluminum doesn't favor the union in this battle, and with prices down 10 percent in May, it's hard to see where they think they have leverage.

If the union gets to aggressive and cute, it probably wouldn't be hard to Alcoa to close the plants and benefit from it by aluminum prices probably going up.

The plants operating under the current contract account for approximately 27 percent of the aluminum smelting capacity of the company.

Transocean (NYSE:RIG) Seeking to Limit Liability

For some reason, the Obama administration is attacking Transocean (NYSE:RIG) for trying to limit its liability from the aftermath of the explosion on the Deepwater Horizon oil rig.

Transocean is saying they're only liable for $27 million, actually citing an 1851 law.

I'll leave the legal discussion for others. What troubles me is that the Democrats and Obama are outraged that Transocean is even attempting to seek limited liability.

It's like they're being judged for a crime there is no proof they had a part in (yet), and because it's on national television and making the Obama administration look bad, that's more of a crime than the actual crime itself. otherwise why would they be furious over their legal rights?

This is an old legal, bullying tactic used by law enforcement and authorities in order to intimidate those being accused.

How many times has someone in legal authority said something like this: If you've got nothing to hide you'll... fill in the blank. That's an old but highly effective tool, and that's what's being used in this case.

How dare Transocean use their legal rights to battle this thing. Just cave in. Accept your punishment. That's what many of the Democrats and Obama are pushing for.

Read this quote from Democratic Senator Ron Wyden to see what I mean: "For a company that said it did nothing wrong, this company is working pretty hard to insulate itself from being held responsible for an accident involving its own drill rig and crew."

See the tactic I just described? Just because you say you've done nothing wrong doesn't mean you surrender your rights and allow someone to change the rules in the middle of the game. If I were BP (NYSE:BP), I would have waited before saying they'll pay for all legitimate claims against them. No one knows what caused the accident yet, and just because a company had a stake in the operations doesn't mean they're liable for anything at all.

This is why you hear very little about the tragic loss of human life from the ordeal, but rather the outrage that the ocean has some oil floating around in it. That's the ultimate sin in the eyes of an radical environmentalist, and the Democrats are playing to that crowd and don't like it that these companies aren't just caving in to the pressure. They shouldn't. And they have the absolute right not to.

Another Democratic idiot made a big deal about the possibility that they couldn't watch the attempt at plugging the oil leak on TV. Oh, that's a priority.

Transocean has every right to seek to limit liability in something that is far from conclusive on what has caused it in the first place. Once the evidence is in, then the process can go forward without the hysteria and attempt to demonize these companies for making a mistake.

Tuesday, May 25, 2010

Democrats Mad at BP (NYSE:BP) Because they Can't Watch Them Work on TV

The Democrats and their response to the accident in the Gulf of Mexico are starting to sound ludicrous, as their latest worry is over whether or not they can watch BP (NYSE:BP) attempt to plug the leaking oil well on TV.

Pathetic Democratic Rep. Edward J. Markey of Massachusetts said this clownish statement: "It is outrageous that BP would kill the video feed for the top kill."

Hopefully Massachusetts will send this Democrat chump to a permanent political retirement, like they did for a colleague in the last election.

Markey is concerned over something as irrelevant as watching the attempt to fix the problem on TV, when the important issue of stopping it is evidently irrelevant to the nut. And he's the chair of the Select Committee on Energy Independence and Global Warming and the Energy and Environment Subcommittee in the Energy and Commerce Committee.

Of course the fact that he's chair of something related to the global warming hoax already tells you a lot about him. It also explains why he would be worried about a live feed of the attempted "Top Kill" than whether it would actually be successful or not.

As far as the attempt itself, BP has said after tests which could take up to 12 hours, they will pump about 50,000 pounds of fluid into where the leak is in hopes of plugging it. There's up to a 60 percent chance it'll work.

Because this is something never tried at these depths, there is uncertainty as to how successful it will be.

Democrats and Markey should be more concerned about the oil spill being plugged than whether they can watch it live on TV.

Exxon Mobil (NYSE:XOM) Sells Global Partners (NYSE:GLP) 190 Gas Stations

Exxon Mobil (NYSE:XOM) has sold 190 gas stations to Global Partners LP (NYSE:GLP) for $200 million.

Global said their decision was based on the desire to increase profits by supplying retailers gasoline and diesel.

The gas stations are all located in the northeast United States, in the states of Rhode Island, Massachusetts and New Hampshire. There are 31 other gas stations in the region owned by independent retailers which are also part of the deal.

Exxon has been selling off their gas stations, which they now consider a non-core asset in order to put their attention on oil and natural gas production, which bring much higher returns.

Global said they're going to finance the deal either with an existing credit line or via capital markets.

Exxon (NYSE:XOM), Chevron (NYSE:CVX) Down on Lower Oil Prices

The price of oil futures plunged below the $69 a barrel mark to close the day at $68.75 a barrel, dropping as low as $67.15 a barrel. Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) closed down as well, moving in unison with oil prices today.

Exxon Mobil dropped 48 cents, or 0.8 percent, to $59.71, while Chevron was down 87 cents, or 1.2 percent, to $72.57.

Volume was high for both companies, with 22,308,218 Chevron share changing hands, in contrast to the 3-month average of 10,814,000. Exxon Mobil surged to 50,536,767 shares being exchanged, against the 3-month average of 28,592,600.

The Dow Jones Industrial Average declined by 22.82 points, to finish at 10043.75, a 0.23 percent drop.

Vale (NYSE:VALE), BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP) and Changing Iron Ore Story

The iron ore story is of course tied into the steel story, and they're joined at the hip. The move by Vale (NYSE:VALE), BHP Billiton (NYSE:BHP) to Rio Tinto (NYSE:RTP) change the way they price iron ore as far as on a quarterly basis versus the old way of annual pricing, has shook up the industry, and China along with it, as iron ore prices skyrocketed as a result.

Frustrated over lack of desired results of negotiating prices, China has taken several steps to lower their dependence on iron ore from these three major providers.

The two major steps are to import iron ore from other countries like Iran, and to increase domestic iron ore production. In April alone, domestic iron ore production increased 50 88 million tons, a 45 percent increase over April of 2009, and a 10.5 percent increase over March.

Add to that the probable and expected decrease in raw materials in China as a consequence of rising inflation, and you have a different iron ore demand picture than was recently portrayed.

China consumes the most iron ore, accounting for 54 percent of all world consumption, and also supplies 40 percent of all iron ore in the world, leading both categories.

Even so, at this time the three major iron ore suppliers, BHP Billiton, Vale and Rio Tinto have no intention of cutting back on expansion plans or capacity, meaning they believe the demand will exceed China's ability to meet it, and they'll have to pay top dollar to attain enough iron ore to meet their needs.

Yet there is also the European sovereign debt crisis hanging over the global economy, which could significantly cut back on iron ore and steel demand as austerity measures are implemented in the region.

The conclusion is the iron ore picture isn't near as clear as it was just recently, as China is the major part of the story, and how China goes, so will go the iron ore narrative.

For the reasons stated above, iron ore prices have already dropped 20 percent since the introduction of the quarterly pricing model, and it remains to be seen how much further they drop before they find a bottom.

For the steel industry in general, they've rebounded nicely today as far as stock prices go, as the drop in iron ore prices will expand the margins, and allow them to possibly drop prices to generate more revenue and earnings.

U.S. Steel (NYSE:X), ArcelorMittal (NYSE:MT) Up on Positive Sentiment

Even though most analysts agree the metals industry is struggling, what has changed some of their minds is the degree to which that struggle is going to go, and with that in mind, there were some positive moves in the market today with metals, and steel companies like U.S. Steel (NYSE:X) and ArcelorMittal (NYSE:MT), among others.

Few believe there is going to be a huge change in demand any time soon, but the macro-economic conditions have changed in light of the inflation challenges in China and the European sovereign debt crisis, which has generated questions on the demand side of the equation, which not too long ago was considered easy to estimate on the upside.

That has all changed now, and the uncertainties are continuing to weigh on the market and general, and steel producers and metal providers specifically.

On one side you had the surging price of iron ore which was sure to hit the steel industry hard, but with the slowing demand in China, even that has changed quickly, with iron ore prices dropping about 20 percent since then.

Now the iron ore companies are growing concerned with the drop in prices, while the steel industry is breathing a sigh of relief, which has led to some of the more positive outlooks today, from the point of view of it not going to be as hard on the steel industry as thought just a little while ago.

Consequently, analysts think while a correction was justified, it degree of the correction wasn't, and since the market conditions have changed drastically, they've given a more positive view of the steel and metals industry, although still holding price targets down, as iron ore prices are still up high, and demand for other metals don't have many trends to follow and make decisions on, as the market has been volatile and hard to read for now.

Cliffs (NYSE:CLF), Alpha Natural Resources (NYSE:ANR), Peabody Energy (NYSE:BTU) and Freeport (NYSE:FCX) Top Bank of America (NYSE:BAC) Picks

Natural resource stocks enjoyed some renewed attention today, and overall the news was good, as a couple of them were upgraded, and some were among the top picks of stocks going forward, specifically Cliffs (NYSE:CLF), Alpha Natural Resources (NYSE:ANR), Peabody Energy (NYSE:BTU) and Freeport (NYSE:FCX) from Bank of America (NYSE:BAC), which along with Citigroup (NYSE:C) upgraded AK Steel (NYSE:AKS), and Bank of America also upgraded RTI International Metals (NYSE:RTI).

Metal stocks were particularly strong today, based on the conclusion they've been vastly over-corrected, which means they're cheap and have a lot of upside, even in the uncertain market and unknown demand factors, which have been skewed by the European sovereign debt crisis, as well as the inflation challenges faced in China, which could result in lower demand for a number of raw materials than previously expected.

Bank of America (NYSE:BAC) Upgrades RTI (NYSE:RTI), AK Steel (NYSE:AKS)

Metal stocks were back in favor today, as Citigroup (NYSE:C) and Bank Of America (NYSE:BAC) both upgraded AK Steel (NYSE:AKS), with Bank of America analyst Kuni Chen adding RTI International Metals (NYSE:RTI) as an upgrade as well.

Most of the change in opinion on metals stocks is related to the idea that there has been an overresponse to market conditions, and the stocks have a higher value than the market is giving them.

Overall, the metal sector enjoyed a good day, with most stocks talked about in reference to being undervalued were in the positive at close.

The upgrades should help RTI and AK Steel, which have been hit hard recently.

Freeport-McMorRan (NYSE:FCX) Cliff Natural Resources (NYSE:CLF) Nucor (NYSE:NUE) Top Citigroup (NYSE:C) Picks

Citigroup (NYSE:C) analyst Brian Yu revealed his top picks today, the metals stocks leading the way. In the preferred order of his picks were Freeport-McMorRan (NYSE:FCX) Cliff Natural Resources (NYSE:CLF) Nucor (NYSE:NUE) and AK Steel (NYSE:AKS), the latter of which he upgraded to a "Buy."

Yu asserts the 26 percent correction in metal stocks is excessive, as was the correction in AK Steel; the reason he upgraded it today.

If the fears of a double-dip recession becomes a reality, the least exposed companies of those above, in Yu's view, are Freeport-McMorRan and Nucor.

Freeport-McMorRan, Nucor, AK Steel and Cliff Natural Resources all finished the day up.

Citigroup (NYSE:C) Upgrades AK Steel (NYSE:AKS) to "Buy"

Saying he believes the correction of AK Steel (NYSE:AKS) is overdone, Citigroup (NYSE:C) analyst Brian Yu upgraded the company from "Hold" to "Buy."

Yu likes the stainless steel segment of the company, while recognizing the upward pressures on iron ore prices and how they will affect AK Steel and the rest of the industry.

Two forces on working on iron ore prices, one in the short-term, which has already happened, with prices surging, and one for the long-term, which is related to the uncertainties of the potential lowering of demand from China could cause prices to tumble from where they are today.

The near-term term concerns are how the rising prices will affect margins for AK Steel from higher input costs.

Barrick Gold (NYSE:ABX) Upgraded by Deutsche Bank (NYSE:DB)

Deutsche Bank (NYSE:DB) upgraded Barrick Gold (NYSE:ABX) today from "Hold" to "Buy," saying their view on gold has changed drastically based on increasing uncertainty in relationship to currencies and macro-economic conditions.

They've increased their projections for gold futures in 2011 and 2012, adding 16 percent to their former numbers, with expectations of $1,450 an ounce in 2011, and in 2012, prices are now estimated to reach as high as $1,600, which is 60 percent over their former numbers.

This is much higher than consensus in the short-term, 25 percent above those numbers.

Analyst Jorge Beristain said, “The probability of extremes in future inflationary prospects is taking a step higher over the next 6-12 months, as investors contemplate the twin threats of deflation and inflation.”

Potash (NYSE:POT) Among Most Efficient in their Industry

Potash (NYSE:POT) is among the most efficient companies in their industry, as its earnings for each employee stands at $219,591 over the last year. Revenue per employee during that same time period was $927,588.

Some other fertilizer companies did well too, as prices dropped they worked on cutting costs and streamlining their businesses.

Potash has said they're looking forward to stronger revenue and earnings in the growing season this year, and when addressing concerns over pricing pressures on potash fertilizer, CEO Bill Doyle said over the short term that is true, but going forward he sees a healthy price increase, and even today they're operating at margins over 60 percent.

Combining their efficiency and margins, it does look good going forward for Potash in the long term.

Alcoa (NYSE:AA) Earnings Power Questionable

The growing fears over a global economic meltdown from the sovereign debt crisis in Europe, along with an expected slowdown in demand for raw materials in China has Alcoa (NYSE:AA) and other raw material producers under revenue and earnings pressure, as expected demand may not appear in the near-term, and that has the companies scrambling for answers that don't seem to be out there.

For Alcoa, the one positive is the proposed launch of several aluminum ETFs later in the year which could create a demand that didn't exist before.

Rusal is carrying the brunt of that supply though, but word is out that they are having trouble meeting the demand, and Alcoa seems to be next in line to meet that demand.

The problem is there aren't any figures out yet as to how much that will have an effect on Alcoa, and how much aluminum that will account for.

So based on existing conditions, Alcoa will be under earnings pressure for some time, and there doesn't seem to be anything ahead that will change that.

A growing number of those following the company believe they'll be lucky to reach even a $1 in earnings a share, with most thinking about 70 cents. That could even be questionable if an expected slowdown indeed happens.

Rand Paul, Economics, and Why They Fear Him

An article from a Keynesian attempted to make Rand Paul look like a clueless idiot when it comes to his style of economics, which the writer hates.

Here's one thing David Weidner said about Paul in what he believes Paul's economic vision is for America:

"It's easier to imagine than you might think. Until 1933, there was no Securities and Exchange Commission, no Federal Deposit Insurance Corp., the Federal Reserve was a nascent, inactive and poor regulator. It's different now in that the Fed is no longer new.

"The decade that preceded the creation of the SEC and FDIC was not too far from the vision Paul and his kind want to see again: markets full of speculation, manipulation and unprecedented leverage through investment trusts -- a kind of mutual fund on steroids that promised to give investors access to an ever-inflating stocks market. We were on the gold standard. The U.S. had a balanced budget policy. It was Paul's kind of market."

I just want to mention one quick thing about the above before getting into the reason behind Weidner's tortured fear of Rand Paul.

In the first paragraph quoted, it's obvious Weidner expects no one to understand the ineptness and idiocy of the Federal Reserve and how it reacted to the housing market, and what is has evolved to today. For him to say the Federal Reserve of old "was a nascent, inactive and poor regulator. It's different now in that the Fed is no longer new," is almost beyond believe.

The Federal Reserve is no different now than it was back when it started, except it prints even more money than ever before in history, and is even more crooked, ineffective and dangerous. That doesn't include the secrecy surrounded it that is protected by politicians.

He even says the poor performance of the Fed in the crisis (which he now evidently admits to) doesn't "explain the behavior of big banks which, without regulation, loaned billions to investors to speculate in the market."

It doesn't explain the failure of the Fed? Who does he think supplied the banks with the billions?

Anyway, as far as Rand Paul, it shows the underlying panic and fear about a candidate like him? Why? Because he's the first to emerge with a real chance to win the Senate seat. He was leading his Democratic opponent by almost the same margin he won over his primary opponent, by about 59 percent to 35 percent.

This of course has driven the liberals and Democrats crazy (and some Republicans), because he could be the first of many, and his primary victory gave others hope, and that could lead to some key victories for some that could change the course of American politics for years to come, and America itself. That's what Rand Paul represents, and why on a national level the attacks are seemingly out of proportion for someone running for a Senate seat.

In other words, it's an attempt to kill what the tea party represents at its birth, as if they can get rid of Paul by presenting him as a nut and out of tune with average Americans, they can then use those same tactics to go after those that follow him.

Imagine a solid group of lawmakers like Rand Paul inhabiting Washington, and the past practices of Politicians would be over. There would be no backroom deals which they didn't believe in to allow dubious legislation to go forth. There could be the strong possibilities of repealing legislation like Obamacare, which Americans by a majority didn't want, but was forced upon them.

Bottom line is Rand Paul represents what the Tea Party stands for, and that is a threat to those whose only faith seems to be in government, and the idea of someone coming in to limit their daddy is just too much for many to take.

The attacks on Paul will continue, but others are starting to rise up after his primary victory, and that could deflect some of the focus that is on Paul.

Rand Paul is more connected to what most Americans want and stand for than the vast majority of politicians, and to see him gain victory as a Senator would be great for America, and hopefully a significant number will follow him and win in their races; if not this election, in many elections to come.

Again, that's what people fear in Rand Paul, and why many will do almost anything to attempt to defeat him in November.

For the sake of our economic future and freedoms, I hope he wildly succeeds.

Monday, May 24, 2010

BP (NYSE:BP) Paying Lost Wages

The sometimes complex task of paying for those whose livelihood have been lost due to the Gulf of Mexico oil spill has now begun, and BP (NYSE:BP) has already paid out about 9,000 claims, out of a total of 23,000 business owners and workers have made.

For those waiting to see which way things are going to go, and are without income, the payments have reached $27.8 million. A total of 420 claims adjusters are available in the four affected states of Alabama, Florida, Louisiana and Mississippi.

The focus in the beginning has been on "immediate hardship," said BP spokesman David Nicholas. That means they're paying for a months salary to help out right away.

Some who may get hit the hardest are the newer fishing businesses, who have no way of knowing what their businesses were going to make this year, and have no history to fall back on for claims adjusters to have a guideline to follow.

Many are saying it was going to be a great year, but that's of course an assertion that now can't be proven.

It'll be easier in some ways for those that have been in business for years, but on the other hand, the larger the claims they make the more complex and time consuming they'll be, and there will have to be documentation to back up the amount the claims are asking for.

One of the most obvious requirements is tax records, which the last 3 years are being asked for from those that have been around awhile.

For newcomers, they're probably going to be hurting more than others, in the sense they can only project what they thought they were going to make, and it has yet to be seen whether that will fly with BP.

Commercial Metals (NYSE:CMC) Rebounds After Hours

Commercial Metals (NYSE:CMC) doesn't have too good of an outlook in the near term, and they've been pretty shake in their stock performance over the last year.

They did have a nice spike in the second quarter, but other than that, they've pretty much been level, spiking up and down with seemingly no direction.

Recent guidance from the company confirms they're not too optimistic going forward, as in the third quarter they're expecting a loss of 10 cents a share, or at best, breaking even. And from the recent history of the company, that seems to be in line with the reality.

But even that weak guidance is more optimistic than analysts, who are looking for a loss of 19 cents a share for the third quarter.

Commercial Metals ended the session at $14.16, down 24 cents, or 1.67 percent. They have rebounded slightly in after hours trading, gaining 9 cents, or 0.66 percent.

Their third-quarter report is scheduled for June 22.

Cliffs Natural Resources (NYSE:CLF) "Big Daddy" Acquisition

Cliffs Natural Resources (NYSE:CLF) is putting together a strategy to acquire either Spider Resources Inc. (SPQ.V) or KWG Resources Inc. (KWG.V) in order to get a majority stake in the "Big Daddy" chromite project in Northern Ontario. The company could even acquire both of them if they can swing it.

Each of the companies, KWG and Spider, hold a 26.5 percent stake in Big Daddy.

The good news is the company won't have to use debt to make the acquisition, as they have enough cash to do a deal.

While they said they're interested in both companies, making a deal with one isn't conditional for a deal with the other.

At this time Cliffs has a 47 percent stake in the Big Daddy chromite project, and is offering each company C$0.13 a share in cash.

ConAgra Foods (NYSE:CAG) Maintains Earnings Estimate

ConAgra Foods (NYSE:CAG) reiterated its earnings projection of about $1.73 a share for 2010, still up from 2009's performance, but down from analysts' expectations.

Annual revenue growth guidance stands at from between 3 percent to 4 percent, with an eight to ten percent growth rate a share for its net income for the long term.

Analysts are looking for net income to reach $1.75 a share on revenue of $12.4 billion for 2010.

Original estimates for the year were for $1.70 a share for earnings, which was revised in December to $1.73, and reaffirmed today.

Annual earnings in 2009 was $1.52 a share on $12.7 billion in revenue.

Democratics Want Union Bailout: $165 Billion

The Democrats can't spend enough money fast enough, and the outrageous idea of taxpayers having to pay for their retirement after they have mismanaged their pensions, is sickening at best, and criminal at worst.

Think of it. The Democrats' special-interest groups who are overpaid and pressure, threaten and mock those who aren't part of unions, are now wanting the rest of us who are in fact responsible with our money to bail those bums out after even above-market wages and benefits are wasted by them, as they can't hang on to their pension money.

Don't get the idea this is because of the recession, because it isn't, as they pensions were in trouble in 2006, before the impact of the housing bubble and banking problems.

Senator Bob Casey, (D-Pa.), has introduced legislation which would cost the rest of us a minimum of $165 billion, and because of life expectancy, would be far beyond that. Think of the bankrupt social security fund to see where this is going to go.

What really needs to happen is to have an investigation of these pensions and their union overlords to see who's draining them, as it sounds fishy when the unions are suddenly begging for more money, and that's after the hideous bailouts of the union automakers who were priced out of market by their outrageous wages and benefits, which we are still paying for, and which they borrowed more taxpayer money to pay off.

The hearing is set for Thursday, and our representatives had better toe the line and reject this outright. Obama also better learn to say the word "no" to these beggars, who are making more than the average American, who is now being called upon to bail them out. If this doesn't get your angry and ready to rid Washington of the Democrats and their endless willingness to spend money on their constituents, nothing will.

And even if you're a Democrat, you should be outraged that they're already talking about spending more money, which has already brought an enormous amount of destruction to the country, which has yet to be experienced when the banks start lending, businesses borrow, and the price of everything goes up.

BP (NYSE:BP) Spill Results in Gigantic Tax Increase

Out of control American politicians are at it again, using the BP oil spill for an opportunity to tax the oil industry to the tune of four times what it is today per barrel.

Anyone with a brain knows all of this will be passed on to the consumer, who will have to struggle even more economically on a daily basis.

The current tax on oil is 8 cents a barrel, and will be increased to 32 cents a barrel; all in the name of raising money to finance oil cleanups. This would raise an additional $11 billion in the next decade.

If the new tax is signed into law, it would be applied to oil from foreign imports and domestic oil as well.

The problem with this is nobody has debated what possible unintended consequences could accompany the new tax, and that has people nervous, as the U.S. government and the Democrats continue to think printing money and raising taxes is the answer to everything, even though it's going to devastate everyone before this clowns are thrown out of office in a few months.

There have been no hearings whatsoever about the proposed tax, which will be attached to a larger bill which includes a variety of unrelated issues and measures.

U.S. Pushing BP (NYSE:BP) by Raising Liability Cap for Oil Spill

The U.S. governments' attempt to force BP (NYSE:BP) pay more than they legally have to for Gulf of Mexico oil spill will have the usual unintended consequences, having the potential to make it too costly for smaller oil companies to drill for offshore oil. It would also generate a slew of lawsuits related to existing agreements in place.

In relationship to economic losses connected to oil spills, politicians have introduced legislation which would raise the cap to $10 billion as the maximum payout required.

The existing $75 million cap on damages is also being considered to be raised, with Obama supporting it.

What will raise legal problems and challenges is the legislation is targeting leases that are already in place, and not only new leases, something that could cause all type of problems for companies drilling, as the lease agreements were based on existing conditions and costs, and the increase in insurance premiums could devastate the companies if this is what ends up happening.

There is precedence in a prior Supreme Court ruling which favored existing leases, which says the laws in place at the time the lease was agreed to are considered to be still part of the contract, and would rule in the situation.

More than likely the attempt to change the terms of the lease would be rejected, as it would breach the leases in place.

The idea of applying a cap to BP alone could also be unconstitutional in reference to due process and basic fairness, so is also unlikely to be implemented.

With BP saying they're more than willing to pay for legitimate economic claims, it's questionable as to why the politicians are going forward with this, as they could do it at another time once they see how BP responds practically to their promise. This of course only applies to this specific case, and no other.

Morgan Stanley (NYSE:MS): Crisis Could Trigger Massive Sell-off

According to Morgan Stanley (NYSE:MS), if the current sovereign debt crisis in Europe continues, we could see a massive sell-off of up to 15 percent in the markets, according to managing director and head of equities at Morgan Stanley India, Ridham Desai.

On the other hand, if things don't worsen, Desai says markets could be up by a similar percentage on the positive side.

As I don't see how things won't worsen, I expect the worst in Europe, and believe we'll see a drop in equities as the width and depth of the debt crisis emerges. We're only at the beginning of seeing a large number of banks in the region default, and countries as well.

Overall, Desai sees India outperforming other emerging markets, and this time that could be the case, depending on how deeply China responds to their inflation problems, which should cut back on growth and related imports for the country.

Goldman Sachs (NYSE:GS) Bullish on Broader Market

While they acknowledge the challenges associated with the European debt crisis, especially if it continues on for the rest of 2010, and onward, Goldman Sachs (NYSE:GS) remains bullish on the broader market.

Here's how they described the reason for their bullish sentiment:

“We recognize the dramatic decline in the Euro, and the potential impact it may have on reported US corporate earnings if it persists through year-end. We acknowledge the risk that European economic growth may be weaker than many currently expect as a result of pending fiscal tightening. However, we remind equity investors that US companies in the S&P 500 have total annual revenues of $8.4 trillion and Europe, Middle East and Africa combined explicitly account for just 10% of the total (and if charitably inclined, perhaps as much as 15% of the total if a generous allocation of sales to “Other” regions is allocated to Europe).”

I'm not as optimistic as Goldman, and just like their positive outlook for the banking sector, looks a little too strong for the broader market as well.

Even if revenue is close to what Goldman states, many companies have said their growth is going to be based on China, something Goldman didn't comment on.

With the demand from China expected to decline, combined with the austerity pressure in Europe, it looks like the outlook by Goldman may not be as good as they're saying.

It does make me wonder if they're doing this as a gesture to put them in a more positive light or not, as they have to take the global exposure of these companies, and not just selected regions.

Sarah Palin: BP (NYSE:BP) and Obama Connection

Sarah Palin lashed into Barack Obama this weekend for his cozy relationship with oil companies like BP (NYSE:BP), and others in the industry, saying it is Obama's Katrina in the way he responded.

Palin said, "I don't know why the question isn't asked by the mainstream media and by others if there's any connection with the contributions made to president Obama and his administration and the support by the oil companies to the administration."

Obama's lack of action in the beginning has been questioned by a growing number of people, saying his relationship with big oil has been too close.

Citing the response of mainstream media against President George W. Bush, Palin added if this was Bush, he would have been scrutinized much tougher than Obama has.

Obama has received the largest contribution from BP in the last two decades, getting $77,051 in one donation from them, according to the Center for Responsive Politics.

According to Palin, this is why he took "so doggone long to get in there, to dive in there, and grasp the complexity and the potential tragedy that we are seeing here in the Gulf of Mexico."

Fluor (NYSE:FLR) Awarded Alcoa (NYSE:AA) Contract

Fluor (NYSE:FLR) has won approximate $3 billion in business from Alcoa (NYSE:AA) and Saudi Arabian Mining Co. in the $10.8 billion project to build an aluminum facility in Saudi Arabia.

Chief Operating Officer of Fluor, David Seaton, said, "The mining and metals sector continues to be a bright spot for Fluor."

Alcoa originally had a 40 percent stake in the project, but slashed it to 25.1 percent in the early part of 2010.

There will also be a bauxite mine brought on, which will generate an estimated 4 million tons a year. A refinery with with capacity for 1.8 million tons-a-year will also be part of the final project.

Fluor's place in the development will include procurement, construction management and engineering.

Saturday, May 22, 2010

BHP (NYSE: BHP), Rio Tinto (NYSE:RTP) Want Compromise on Outrageous Australian Tax

BHP (NYSE: BHP) and Rio Tinto (NYSE:RTP) are getting together with Australian government officials this week in an attempt to have adaptations made to the outrageous tax being levied against the industry to the tune of 40 percent, starting in 2012. Those taxes will include existing, as well as future projects.

Rio and BHP are looking for the government to exempt mine already operating, and to also increase the price-point at which the tax will kick in.

BHP CEO Marius Kloppers has already let it be known that he believes the tax in its current form is a disaster, and it will hold back investment in the country, companies will go offshore, and could do extensive, long-term damage to the mining industry in Australia.

It does make me wonder if this is what the Australian government planned from the beginning, and anything the give up will be looked at as a compromise by them, when in fact it was a cynical strategy to get a lot more out of the miners while making it look like the government is giving in.

They probably don't have the will to do it, but if they did, it would be a lot of fun to see the Australian government backpedal and reveal what they're really up to.

Already Fortescue Metals Group (OTC:FSUMY.PK)has put some of their projects on hold because of the tax, and there's sure to be more.

Anadarko (NYSE:APC): JPMorgan (NYSE:JPM) Keeps Overweight on Them

Anadarko (NYSE:APC) has retained its overweight from JPMorgan (NYSE:JPM), as they recommend them as a buy, believing they're going to outperform their competitors, not only in the short term but the long term as well.

Analyst Joseph Allman said he and his team see the value of Anadarko as standing at $46.03 a share after operational costs, and an NAV of $81.93 a share. It last traded at $53.83 a share, but was down in electronic trading by over 3 percent on Saturday.

At this time the stock is weighed down by the costs of the Macondo oil spill, but its exploration projects in the Gulf of Mexico and West Africa positions it for a strong upside going forward.

In West Africa alone it is now drilling about 30 deep-water, offshore wells, and also has some land positions in the United States.

JPMorgan retained their price target of $82 on the company, expected to be reached in December 2010, which will be quite a move upward in the current climate.

CF Industries (NYSE:CF) Sees Savings from Terra Acquisition on High End

Only a short time after acquiring Terra, CF Industries (NYSE:CF) says it looks like the two companies have more synergies than expected, and savings should be on the high end of the $105 million to $135 million estimated, in about two years. That's figured on an annual basis.

Some of the particular segments of the company which will benefit strongly are vendor services, transportation, an storage, according to CF President and CEO Steve Wilson.

Wilson said he is "confident" after the early results have come in, and they haven't "been that hard to identify and realize so far."

CF took over Terra for $4.72 billion after pursuing the company for about a year, bidding against major competitors like Agrium (NYSE:AGU) and Yara International.

This make CF Industries the largest producer of nitrogen in North America, and second-largest in the world.

Why Commodity Prices Remain Down

While there is no doubt the bull commodity market will continue on, as demand for raw materials isn't going to decline any time soon, we do have to look at what is causing the temporary drop in commodity prices in the midst of the bull market.

Although there are numerous variables, I only want to touch on the major ones, as most of the others are primarily offshoots of these several factors, and aren't as important in understanding the big picture.

First of all, nothing has changed in ordinary market behavior. Prices fall because demand falls. There's nothing else to it.

Having said that, we need to understand what's behind demand falling in order to grasp the implications and how to invest in response to them.

I do want to start with natural gas, not because it's actually connected to what I want to get into, but because it has unique elements outside what we're going to talk about, so I want to get that out of the way.

It's not that there isn't the potential for a lot of natural gas demand, it's that there is now so much more natural gas to supply our needs, that the sheer volume of it has changed the supply/demand picture, and prices are falling because of the enormous quantities in the U.S., and continually being discovered in other parts of the world.

So there's an oversupply for decades, if not longer, and that has changed the prices as far as natural gas goes.

Now as far as most other commodities, there's a different reason for demand falling, and that's because banks are doing little lending, and businesses are doing very little borrowing. Even though we here the occasional media story to the contrary, the truth is there is no confidence in the economy, as it has been propped up by government spending on dubious stupid and unsustainable projects and not by the private sector.

But the reason why the private sector isn't participating in the recovery, is because they, along with the banks, don't trust this so-called recovery either, and aren't trying to secure loans because there has to be projected demand for products and services, and they don't believe that the demand is out there. And no matter how hard politicians call for business loans to be made, there aren't that many buyers out there that want or need them.

So with with bankers and businesses not trusting the recovery, or that there really is one, other than taxpayer money being thrown at the problem in attempts to prop up prices, it's likely that commodity prices will continue to be under downward pressure, with occasional exceptions related to a specific commodity.

Here's another example of that to watch for, so you don't take this as a blanket statement for every commodity. I'm just talking about commodities as an overall sector will probably continue to lose value.

One exception may be aluminum. A unique factor has recently been introduced which could drive the price up because of a new source of demand, and that is the introduction of several aluminum ETFs in the latter part of the year, which will include in the holding of physical aluminum, just like gold ETFs do with physical gold.

That means there will be an increased aluminum demand that has never been there before in history; at least in the way the ETFs operate.

So near the end of 2010 and onward, we could see aluminum prices go up because Rusal, and to a lesser degree, Alcoa (NYSE:AA), will be the major providers of aluminum for the funds, and Rusal is reportedly having a difficult time coming up with enough aluminum, so Alcoa will be a secondary provider.

The point is revealing this is to understand any commodity can be an exception at one time or another, and even though the overall commodity sector will probably continue to fall in prices in the near-term, there are always exceptions, and we need to remain vigilant while understanding why prices are being pushed downward.

Once banks start releasing their money into the economy again, i.e., lending to businesses, there could be, and should be, an explosion of upward commodity price movement. Until that happens, we have to watch for anomalies in the market which could make it different for specific commodities within the sector.

Without getting into it, gold should be another exception for pretty obvious reasons, as it will continue going up for some time, and is of course unique to the overall picture concerning commodities.

Chesapeake Energy (NYSE:CHK) Increases Debt to Retain Leases

Even though Chesapeake Energy (NYSE:CHK) CEO Aubrey McClendon has recently said the company wouldn't go into deeper debt to raise capital, they once again have changed their minds and reversed direction, as they've decided to issue $1.7 billion in preferred convertible shares to raise the money.

This pretty much deja vous for the company, as the almost exact reasoning behind this debt has been stated in the past, as the debt will be used to reduce debt. Sounds like the government in many ways.

One other way of raising capital is through the sale of some of its Marcellus Shale assets, which will evidently also be used to pay down debt to the tune of $3.5 billion.

What is left over is targeted for investing in more liquid gas and oil assets. As I said, deja vous.

The company has been brought to this place because of the increased supply of natural gas which is pushing prices down, as well as the large number of acquisitions which led to the debt in the first place.

If it didn't access capital, which the lower natural gas prices can't buy, they could lose their drilling leases, which would happen if they quit drilling.

Consequently, the company will have a dilution of their shares which will cause share price to fall.

Williams Companies (NYSE:WMB) a Takeover Target?

Although there are no known overtures from giant oil and gas companies to woo Williams Companies (NYSE:WMB), the way the market will probably go over the long term makes them a possible target in the future.

What Williams does is produce and transport gas in a number of regions in the U.S. and Canada, and even though the price of natural gas has downward pressure on it, that won't necessarily cut into their transport costs, as natural gas will have to be moved, no matter what the price is at the moment.

So on the transportation side they are probably more attractive than on the production, which has an enormous number of competitors, as well as supply for many years.

With energy companies gravitating toward oil because of the vast supply of natural gas, Williams may not be as attractive as some think they are, unless they expand the transportation business to make it so.

For a large company looking to expand their natural gas play in the future, Williams could be a potential and attractive candidate in that regard, although they'll probably have to wait until the natural gas prices rise, which could take some years to do.

Arcelor Mittal (NYSE:MT) India Joint Venture Talks

Arcelor Mittal (NYSE:MT) is reportedly in talks with the state-run Steel Authority of India and Tata Steel to enter into a joint venture.

The Steel Authority of India is also in negotiations with Posco, the largest steel producer in Korea concerning a joint venture as well.

Much of this is probably coming from the high demand for steel, which while slowing some in China, is still poised for significant demand for the year, and into the distant future.

China has a strong and growing steel industry, and this would help India compete better if they could land some joint ventures from strong foreign companies like Arcelor Mittal or Posco.

Archer Daniels Midland (NYSE:ADM) Closing Mansfield Plant, Expanding Chocolate Plant

Archer Daniels Midland (NYSE:ADM) is closing their operation in Mansfield, Massachusetts in the fall, but will be expanding operations at their chocolate plant in Hazleton.

Approximately 83 jobs will be coming to the chocolate plant, some of them possibly transferring from the Mansfield facility.

At this tim eabout 200 workers are at the Humboldt Industrial Park plant, which ADM has expanded in the past, transferring 53 workers from its cocoa-processing plant in Glassboro, New Jersey.

Intrepid Potash (NYSE:IPI) CEO Role Changed

Intrepid Potash (NYSE:IPI) has done a few changes at the top of its executive ranks, naming CEO Robert P. Jornayvaz III as executive chairman of the board, while also changing his CEO designation and role to principal executive officer.

In a statement, the company said, "This transition of duties will permit Jornayvaz to focus on strategic matters for Intrepid, especially matters relating to long-term corporate growth opportunities, sales and marketing, mineral leasing and government affairs."

Also promoted near the top was David W. Honeyfield, who was executive vice president, and now is the president of the company, although he'll continue to serve as chief financial officer, treasurer and secretary.

Intrepid's chief technology officer Hugh E. Harvey Jr., was promoted to executive vice chairman of the board. He had been a board member before, and will evidently leave his former position.

Will Alcoa (NYSE:AA) Be Saved by Aluminum ETFs?

As the recession continues on, contrary to mainstream media reports to the contrary, Alcoa (NYSE:AA) continues to be challenged by the relatively low number of cars and planes being bought, and consequently, built.

That has of course caused aluminum demand to fall, and the price of aluminum with it, resulting in the inevitable fall in the share price of Alcoa as well.

One thing that could help them a lot in the near term, is the planned introduction of several aluminum ETFs in the latter part of the year, which they're expected to have a part in supplying the aluminum for, which is physically held by the ETFs, similar to gold being held by gold ETFs.

The question is how big of a role will Alcoa play in these new investment vehicles, as Rusal is already working on supplying aluminum for them, and they're the primary supplier. Alcoa's role at this time seems to be supplementary to what Rusal can't supply, so it's unclear at this time how much revenue and profits they'll generate as a result.

It is something everyone interested in Alcoa needs to carefully watch as the year goes on, as it may end up being a key factor in their short- and mid-term performance, as the conditions in Europe and China will probably result in aluminum demand being subdued for possibly a very long time, i.e. a couple of years or more.

Friday, May 21, 2010

Arch Coal (NYSE:ACI) Production Resumes at Dugout Canyon Mine

Subsidiary of Arch Coal (NYSE:ACI), Canyon Fuel, said its Dugout Canyon Mine in Utah has brought its coal production back online after shutting it down temporarily because of concerns over elevated levels of carbon monoxide, which was detected in the latter part of April.

The mined out area in question was permanently sealed, according to a press release from the company, which was the source of the high levels of carbon monoxide at the mine.

The mine produces low-sulfur bituminous coal, and in the first quarter generated about 200,000 tons, accounting for about 2 percent of bituminous coal for the company

Bituminous coal is cleaner burning than its counterpart.

Pan American Silver (NASDAQ:PAAS) Bolivian Mine to Increase Production

Pan American Silver (TSE:PAA) (NASDAQ:PAAS) said they estimate their San Vicente mine in Bolivia will increase production in 2010 by 2 percent, increase about three times what it generated in 2009.

After a new processing plant was built, it helped the miner to increase production in 2009 to about 2.5 million ounces of silver, a big increase over the 875,000 produced in 2008.

Vice President for Geology and Exploration at Pan American, Michael Steinmann, said the goal is to bring silver production to from 3 million ounces to 3.2 million ounces, and once that's achieved, they'll keep it level there.

Also operating mines in Mexico, Peru and Argentina, their Argentina Navidad project will have $40 million injected into it for pre-feasibility and feasibility studies, which Steinmann said could bring Pan American into the upper echelon of silver producers, if the expected potential there is as high as expected.