Producer prices up on surging gasoline, core rate flat

WASHINGTON, Fri Oct 12, 2012 – Producer prices rose more than expected in September as the cost of energy surged, a government report showed on Friday, but underlying inflation pressures were muted.

The Labor Department said its seasonally adjusted Producer Price Index increased 1.1 percent last month.

Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.7 percent last month.

Despite the rise in overall wholesale inflation last month, there is likely to be little pass-through to consumers given sluggish job growth, which puts a brake on inflation.

Wholesale prices excluding volatile food and energy were flat last month. That was the lowest reading since October 2011 and fell short of analysts’ forecasts.

Consumer inflation is currently below the Federal Reserve’s 2 percent target, and many economists think it will trend below that level for years to come.

In a bid to boost economic activity, the Fed launched an aggressive new stimulus program last month, pledging to buy $40 billion of mortgage-backed debt a month until the outlook for jobs improves substantially.

BofA Merrill sees gold at $2,400 per ounce by 2014 end

NEW YORK, Tue Sep 18, 2012 – Bank of America Merrill Lynch said gold prices could climb as high as $2,400 per ounce by end of 2014 citing aggressive policy easing by the U.S. Federal Reserve and European Central Bank.

The bank expects the Fed will maintain mortgage purchases until the end of 2014 and could move to buy treasuries following the end of its Operation Twist.

“Given the new open-ended nature of QE3 (quantitative easing), the upward pressure on gold prices should continue until employment is strong enough to warrant a change in policy. In our view, this is unlikely to happen until the end of 2014,” BofA said in a note to clients.

The bank kept its gold price target of $2,000 an ounce for the second quarter of 2013.

Oil costs cause first import price gain in five months

WASHINGTON, Wed Sep 12, 2012 – Import prices rose in August for the first time in five months as the cost of imported oil jumped, a factor that could weigh on American consumers and temporarily boost inflation.

Import prices climbed 0.7 percent last month, the Labor Department said on Wednesday.

The cost of petroleum imports increased 4.1 percent. Higher prices at the pump threaten to hurt consumers’ pocket books.

Analysts had expected overall import prices would rise 1.4 percent in August.

Many economists expect higher fuel costs will contribute to a short-term rise in inflation. At the same time, the U.S. Federal Reserve is still expected to ease monetary policy this week.

There was little sign of broader inflation pressures in the import data. Non-petroleum import prices declined 0.2 percent, a sign that the cooling global economy is reducing companies’ ability to raise prices.

Prices for imported consumer goods outside automobiles fell 0.3 percent, while prices were flat for cars and auto parts brought into the country.

Low aluminum price seen hurting Alcoa profit

NEW YORK, Fri Jul 6, 2012 – Aircraft and automobile makers may be using more aluminum, but as long as the metal’s price remains near two-year lows, Alcoa Inc. will struggle, analysts said on Friday.
The average earnings estimate has been cut over the past week from 15 cents per share and Wall Street now expects Alcoa to post only a 5-cent per share second-quarter profit on Monday, according to Thomson Reuters I/B/E/S. That compares with 32 cents per share in the same quarter last year.
With an overhang of high inventories and a 20-percent drop in prices since March, many aluminum producers are losing money. Benchmark three-month London Metal Exchange aluminum stood at $1,903 a tonne on Friday – hovering above the $1,880 low of June 2010.
After a surprise profit in the first quarter, Alcoa’s Chief Executive Officer Klaus Kleinfeld painted a rosy picture of improving demand from the aerospace and auto industries, which are using more aluminum to reduce weight and improve fuel efficiency.
“Aerospace helps them, but it’s only 14 percent of their earnings,” said analyst Charles Bradford, of Bradford Research in New York. The auto market is an even smaller percentage of Alcoa’s business.
Alcoa’s core is its upstream business – mining bauxite, refining it to produce alumina, which is smelted into aluminum. And with raw material and power costs rising and aluminum prices depressed because of over-supply, Bradford saw little relief.
Tony Rizzuto, managing director of Dahlman Rose & Co, cut his second-quarter Alcoa estimate to 3 cents per share from 7 cents per share, citing the aluminum price.
“Although we continue to like the performance of the company’s downstream businesses, we expect the shares to remain pressured as long as LME aluminum prices remain at depressed levels,” he said.
Nomura analyst Curt Woodworth lowered his estimate from 5 cents per share to break-even on weaker aluminum prices. “The rise in aluminum physical premiums has helped to offset a fall in spot prices, but we feel it is likely a short-term phenomenon, given the overcapacity,” he said.

Schlumberger sees results hurt by price pressures

NEW ORLEANS,  Mon Mar 26, 2012 – Schlumberger Ltd., the world’s largest oilfield services company, said profits would be hurt by downward pricing pressure for hydraulic fracturing services, which had now reached North American liquids basins as well.

Chief Executive Paal Kibsgaard said on top of that price squeeze, already widely seen in natural gas areas due to weak gas prices, the shift of pressure pumping equipment to liquids-rich basins was reducing utilization while also adding to costs.

“Together these factors will have an impact on our results both in North America, and overall, in this and in the coming quarters,” Kibsgaard said in a speech to kick off the Howard Weil Energy Conference in New Orleans on Monday.

The use of hydraulic fracturing, or fracking, around the many U.S. shale basins has boosted natural gas production while stemming a decades-long trend of falling U.S. oil production.

“There is some slackening of demand in the gas plays and there has been migration to liquids plays. So there’s more supply coming online and it is normal that pricing would come down,” said David Vaucher, an analyst with IHS-Cambridge Energy Research Associates in Houston.

But supplies in many regions remain scarce in general, from rigs to frack crews, water, sand and synthetic proppants used to keep cracks in shale rock open to get the hydrocarbons out.