Mined iron ore—sourced outside of Chinese mines—continues to be the lowest cost and highest quality source of commodity. With future iron ore prices forecasted to remain in the $100 per ton range, Chinese domestic production will likely become uneconomic.
Currently, NMM has fixed 91.5% of its available days for 2014. However, this falls to 55.9% for 2015. This leaves the company exposed to how the industry will perform in 2015. On the dry bulk vessels, NMM believes that they have positioned the company well to take advantage of the improving market.
For 2Q14, NMM recorded a 12.3% increase in revenue to $55.2 million from $49.4 million recorded in the same quarter last year. The increase was mainly due to the acquisitions of new vessels between September, 2013 and January, 2014.
Navios Partners operates 32 vessels with a total capacity of 3.3 million deadweight tons (or dwt). It has an average age of 7.3 years—lower than the industry average. Its fleet consists of 14 Panamax vessels, eight Capesize vessels, three Ultra-Handymax vessels, and seven container vessels.
A wider WTI-Brent spread is profitable for U.S. refineries. Cheap inputs, in the form of lower priced crude, are an advantage for refineries. U.S. refineries are profitable when their products are benchmarked by more expensive Brent crude.
Inventories have now increased for the third week in a row at CVR Refining’s 115,000 barrel per day Coffeyville, Kansas refinery. CVR draws its supplies from Cushing. CVR is gearing up to resume operations after a three-week shutdown. A fire on July 29 had put the plant out of commission.
According to the EIA’s data for the week ending August 15, crude oil runs at the Gulf Coast refineries in the U.S. hit a record high—up 177,000 barrels per day (or bpd) to 8.74 million bpd. Crude inventories will likely increase more in the coming months because refineries entering seasonal maintenance will reduce demand.
At the middle of this year, there were multiple factors that pushed global crude oil prices higher. While WTI crude reached ~$107 per barrel in mid-June, Brent crude, the international benchmark, hit ~$115 per barrel.
According to Russ’s paper on “Oil’s precarious balance,” Asia remains a key contributor to the increase in oil consumption. India (EPI) and China (FXI) still aren’t near developed markets when it comes to per capita energy consumption. This is because of production and consumption efficiencies.
According to Russ, the fall in production of U.S. oil (USO) can be attributed to the increasing amount of supplies. This requires a higher breakeven price, increased concentration of cash flow instead of acquisition of new acreage, and decreased resource estimates on undeveloped shale plays.
The energy sector has outperformed the broader market indices like the S&P 500 (SPY) (IVV), the Dow Jones Industrial Average (DIA), and NASDAQ (QQQ) this year due to heightened geopolitical risks. According to Russ, the valuations remain attractive at a 15% discount to broader market indices.
Increases in industrial production generally signal increases in employment. Lower-skilled workers have struggled since the financial crisis. This has dampened aggregate demand and consumption.
Economic activity increases causing inflation. The Fed raises interest rates in response the increased inflation. The business activity slows, the inventory builds up, and workers get laid off. Once the inventory is worked down, the workers are rehired and another expansion begins.
The U.S. economy is experiencing a bit of a manufacturing renaissance because cheap energy costs have offset the cheap labor arbitrage that contributed so much to offshoring. Also, manufacturers are realizing that extended supply chains are extremely vulnerable.
The General Business Conditions Index showed that manufacturing continued to expand in New York, but at a slower rate than the month before. 31.4% of respondents reported better conditions, while 16.7% reported worse conditions—the net result was 14.7%. This was a decrease from last month.
Southwest’s stock price has increased by 63.2% as the share price closed at $30.82 on August 18, 2014 from $18.8 in the beginning of the year. Apart from capital appreciation…
Southwest’s leverage lowest among peers The airline industry is defined by high levels of debt to finance its huge capital expenditure. Southwest has been an exception to this as it…
Capacity expansion plans As of June, 2014 Southwest had 683 aircrafts. During the second quarter, Southwest took delivery of 15 aircrafts out of which 12 were Boeing 737-800 and 3…
Aircrafts in Southwest’s fleet in 2Q14 For an airline company fleet management is an important strategic decision to maintain and improve efficiency of operations. Southwest’s single fleet strategy has helped…
Operating margin Southwest’s operating income increased by 79% year-over-year in 2Q14 despite the increase in operating costs, driving operating margin up to 15.5%, from 9.3% in 2Q13. The operating margin…