Friday, April 7, 2017

Natural Gas Prices

In the January-February 2014 time frame in the United States (US), the natural gas (NG) price spiked above $5 per thousand cubic feet (MCF).   Both for a long-term period (months) before and after this January-February 2014 US NG price spike, prices trended in a range significantly below $5 per MCF.  The reason for this price spike was an extremely cold period across the US caused by a southward shift of the North Polar Vortex.  Record-low temperatures were recorded in many parts of the US during this period.  More than 200 million people were affected. With this unexpected cold increase, NG demand for heating greatly increased, without a corresponding increase in NG supply, resulting in the price spike.

This cold weather affect on the price of NG prices is an example of one of the most common of determinants affecting NG prices – the weather.   The tables below identify and explain the results of several determinants (factors) that affect NG demand or supply, which in turn affect the NG price.

demand determinant table (all change over time)

determinant
explanation
weather
e.g., colder and warmer weather increase demand
fuel competition
e.g.,  cheaper NG can move energy users from more expense energy
demographics
higher populations increased demand
income
more income means more energy use, such as NG
NG price increase/decrease
lower prices can increase energy use
exports
foreign demand

supply determinant table (all change over time)

determinant
explanation
weather
interfere with production
NG storage levels
higher levels, higher supplies
pipeline-transport improvements
improvements lead to greater supplies at customer locations
gas drilling-production rates
increases supplies
improved technology
increases supplies
adverse issues at production
decreases supplies
NG price/decrease changes
higher prices incentivize for more supply
imports
increases supplies

The above tables indicate than many determinants affect NG price.  NG price is, in fact, primarily a result of the affects of these determinants on demand and supply

For example, fracking in shale gas fields (a supply gas drilling-production rates determinant) has greatly increased NG supply in the US compared to supply in the rest of the world.  This increased supply has resulted in a significant decrease in price compare to other areas in the world.  This increase in supply is reflected on the demand-supply curve graph by a shift of the supply curve to the right.

As the US NG price significantly decreased, NG became much less costly than competitive energy sources (a demand determinant – fuel competition) and, as a result, electricity providers moved to the use of NG as an energy source.  This greatly increased US NG demand and interactions between demanders and suppliers, affected the price offered by the NG suppliers.  The settled prices between the demanders (the electricity providers) and suppliers (those holding NG supplies) will initial be in a non-equilibrium state over a short time, but fairly soon with many (large) market participants negotiating prices, the price will stabilize to a market equilibrium (clearing) price. Now with greater demand, the demand curve shifts to the right.  The eventual market-determined price (and quantity supplied and demanded) will be shown on the demand-supply curve graph as the new point of intersection of the two curves. An important suggestion in this analysis is that usually the supply is the predominant determinate of changes in demand-supply equilibrium prices.

One conclusion I have reached from considering the many price determinants given in the tables above is that several determinants can be present at any one time making confidently predicting an equilibrium price very difficult.  This is especially true, it seems to me, over the short term, e.g., over a several-month period.  So, a prediction of future price trend will be limited to how US NG price will change, not over the short-term, but over a long-term, e.g., over the next five years.

I will use four demand determinants (weather; demographics; income; and exports).  And I will use two supply determinates (gas drilling-production; pipeline-transportation) and expectations in changes of these determinates in forecasting a future US NG price. 

Demand Determinants:

1.      Weather.  Reliable climate scientists predict global temperatures over the next several years will increase. Because of this, less energy should be needed, since less energy is required for cooling than for heating.  Raising temperatures suggest a decline in NG demand.

2.      Demographics.  Populations are expected to greatly increase globally, but not much in the more developed countries.  So a small population increase in the US likely will have little effect on NG demand.

3.      Income.  Incomes are increasing significantly globally but not so much in the US.  Income changes in the US will likely have little effect on NG demand and price.

4.      Exports.  With increasing capabilities of transporting NG by sea and across borders and because of lower US NG prices due to supply, export demand should greatly increase.

Supply Determinants:

1.      Pipeline-transportation advances.  Increases in pipeline capacities and capabilities are being made and this likely will result in more NG supply to meet new demand.

2.      Gas drilling-production rates.   Existing US fields are likely to have been mostly discovered and drilling rates not likely to greatly increase.  Therefore, a significant increase in US NG supply from this determinant is not likely over the next five years.

My conclusion from the above determinant analysis is that supply will show increase long-term over the next five years but the increase is limited.    The likely demand determinant potentially affecting price significantly over the long-term is exports.   Therefore, I would expect to see some movement of both the supply and demand curves to the right, resulting in limited price increases over the next five years.


Saturday, April 1, 2017

Chemical and Metal Shortage Alert – March 2017

The purpose of this blog is to identify chemical and metal shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is March 2017.

Section I below lists those chemicals and metals that were on the previous month’s Chemical and Metal Shortage Alert list and continue to have news releases indicating they are in short supply.  Click here to read the February 2017 Chemical and Metal Shortage Alert list.

Section II lists the new chemicals and metals (not on the February alert).  Also provided is some explanation for the shortage and geographical information.  This blog attempts to list only actual shortage situations – those shortages that are being experienced during the period covered by the news releases.  Chemicals and metals identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   none
      
Section II.   Shortages Reported in March not found on the Previous Month’s List

Cobalt: global; mining not keeping up with demand
Copper concentrate: China; mining not keeping up with demand
Ferrous scrap: Taiwan; insufficient imports
Titanium dioxide: global; production not keeping up with demand
Waste paper: India; insufficient imports

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: cobalt; copper concentrate
2.  Production not keeping up with demand:  titanium dioxide
3.  Government regulations: none
4.  Sources no longer available: none
5.  Insufficient imports:  ferrous scrap; waste paper

6.  Supply not keeping up with demand:  none

Thursday, March 30, 2017

Relative Market Values for Two Adjacent Periodic Table Groups

Total 2015 sales and weight of sales, along with unit sales prices, for elements in two periodic table groups, Group 4 and 5, were searched for on the Internet.  The found data was compiled and analyzed to come up with what is shown in the following tables:

Group 4
 sales
weight in metric tons (mt)
average mt sales price
titanium
 $      3,900,000,000
275,000
 $        14,182
zirconium
 $      4,000,000,000
200,000
 $        20,000
hafnium
 $            45,000,000
75
 $      600,000
cerium
 $          350,000,000
50,000
 $          7,000
totals
 $      8,295,000,000
525,075

Group 5
 sales
weight in metric tons (mt)
average mt sales price
vanadium
 $          824,500,000
85,000
 $          9,700
niobium
 $      2,100,000,000
50,000
 $        42,000
tantalum
 $          342,000,000
1,800
 $      190,000
praseodymium
 $          450,000,000
9,000
 $        50,000
totals
 $      2,892,000,000
60,800



This was done to gain knowledge on the relative economic value of elements in a group compared to another group.   Such knowledge might be useful in decision-making about investments.  For example, the tables above show zirconium and niobium with the highest sales in their groups, while also being next to one another in the same periodic row of elements.   Also, from the tables, Group 4 elements recently have had much higher economic value than Group 5 elements ($8.3 billion compared to $2.9 billion).


The values in the tables are approximate.  The variations in the reported sales and weight of sales found on the Internet suggests that uncertainty exists in the amounts reported and therefore amounts such as those given in the tables above should be considered approximate.

Wednesday, March 15, 2017

Relative Sales Performance Data for Some Pigment Classes


The following table presents recent (2015) sales and weight data for five pigment classes:

pigment class
 sales
weight in metric tons (mt)
average unit sales price
specialty
 $    4,500,000,000
175,000
 $ 25,714
dyes & organics
 $  15,000,000,000
2,100,000
 $    7,143
titanium oxide
 $  14,000,000,000
7,000,000
 $    2,000
iron oxide
 $    2,000,000,000
2,000,000
 $    1,000
carbon black
 $    1,200,000,000
1,200,000
 $    1,000
totals
 $  36,700,000,000
12,475,000
 $    2,942

The sales and weight data are approximate (best estimated) amounts based on various sales and weight data associated with market and other reports on pigments found on the Internet.

Assuming the sales and weight data are approximately correct, I computed an average unit sales price ($ per mt) for each class.  The relative average unit sales prices, it seems to me, can be an indicator of technological and other challenges of bringing the classes to a demanding market.   And along with this, the relative average unit sales prices indicate the classes with expected higher gross profit margins (the higher the average unit sales price, the higher the expected gross profit margin).


Wednesday, March 1, 2017

Chemical and Metal Shortage Alert – February 2017

The purpose of this blog is to identify chemical and metal shortages reported on the Internet.  The sources of the information reported here are primarily news releases issued on the Internet.  The issue period of the news releases is February 2017.

Section I below lists those chemicals and metals that were on the previous month’s Chemical and Metal Shortage Alert list and continue to have news releases indicating they are in short supply.
Click here to read the January 2017 Chemical and Metal Shortage Alert list.

Section II lists the new chemicals and metals (not on the January alert).  Also provided is some explanation for the shortage and geographical information.  This blog attempts to list only actual shortage situations – those shortages that are being experienced during the period covered by the news releases.  Chemicals and metals identified in news releases as only being in danger of being in short supply status are not listed.

Section I.   Zinc:  global; mining not keeping up with demand
      
Section II.   Shortages Reported in February not found on the Previous Month’s List

None

Reasons for Section II shortages can be broadly categorized as: 

1.  Mining not keeping up with demand: none
2.  Production not keeping up with demand:  none
3.  Government regulations: none
4.  Sources no longer available: none
5.  Insufficient imports:  none
6.  Supply not keeping up with demand:  none


Wednesday, February 22, 2017

Estimating the Value of a Country's (Region's) Chemical Industry

I am assuming the chemical industry revenues that a country (region) is able to generate divided by the country's (region’s) population can be useful as a measure of that country’s (region’s) chemical industry value added to the country (region).   If this assumption is correct, then the following table is an estimate of the chemical industry value for various countries (regions):

revenues usd 2015
population 2015
revenues per person
Germany
205,000,000,000
81,000,000
2,531
South Korea
120,000,000,000
50,000,000
2,400
Gulf Cooperation Council countries
120,000,000,000
51,000,000
2,353
Japan
210,000,000,000
127,000,000
1,654
United States
490,000,000,000
319,000,000
1,536
NAFTA
625,000,000,000
441,000,000
1,417
European Union
660,000,000,000
508,000,000
1,299
France
85,000,000,000
66,000,000
1,288
China
1,100,000,000,000
1,400,000,000
786
Russia
85,000,000,000
144,000,000
590
Canada
20,000,000,000
35,000,000
571
Global
3,500,000,000,000
7,400,000,000
473
Brazil
85,000,000,000
200,000,000
425
South America
160,000,000,000
423,000,000
378
Asia
1,600,000,000,000
4,400,000,000
364
India
70,000,000,000
1,300,000,000
54


The table suggests that China’s chemical industry is about 14 times more valuable for China than India’s chemical industry is for India ($786 revenue per person vs. $54 revenue per person; 786/54 = 14.56).   And Germany’s chemical industry produces about twice the value for Germany as France’s chemical industry produces for France ($2531 revenue per person/$1,288 revenue per person = 1.97).

The Internet was used to find chemical revenues and population amounts.

A reasonably accurate measurement that indicates the value added by a country’s chemical industry to the country might be useful in measuring progress a country is making over time in increasing its chemical industry value.   Simply increasing a country’s revenues may not be sufficient in understanding how much value is being added by that increase.   Relating (rating) the increase to per persons could be more useful.