Global Steel Production Up 8.6% in February
World crude steel output in February totalled 99.0 Mt, up 8.6% on the same last month year, according to the latest data from the International
Iron and Steel Institute. China continues to dominate steel production growth, with monthly output up 20.1% year-on-year to 36.1 Mt. Healthy
growth was also recorded in the FSU (up 11.5% to 9.6 Mt) and Japan (up 3.6% to 9.2 Mt). Steel production in the US, in contrast, fell 8.0% on
February 2006 to 7.1 Mt.
Capacity Increase at Newcastle
Capacity at the port of Newcastle is set to increase in the 2q07 as the result of various rail and port infrastructure improvements being completed ahead of schedule, McCloskey reports. The Hunter Valley Coal Chain Logistics Team (HVCC) announced that the target "declared capacity" at the port for the 2q is now 90.4 Mt per annum compared with an annual rate of 87 Mtpa so far this year. This week, the vessel queue at Newcastle was reported at 63.
Chinese and Indian Industrial Production Growth
The rapid expansion in Chinas industrial sector is underlined by the latest data from the National Bureau of Statistics. Bloomberg reports that industrial production in the country in the first two months of the year grew at an annual rate of 18.5%, compared with growth of 16.2% in the same period last year. The latest annual rate is the fastest in eight months.
Meanwhile, industrial output in India in January grew at 10.9% annually, exceeding economists expectations. Bloomberg comments that Indias industry is benefiting from increased investment in infrastructure. Government infrastructure expenditure is set to rise 40% in the fiscal year beginning April 1.
Latest Report on Newcastle Tonnage Allocation System
The proposed reinstatement of a tonnage allocation system at the port of Newcastle has reportedly received interim authorisation from the Australian competition regulator, according to McCloskey. McCloskey adds that the system -- if fully approved -- would not be implemented until the end of this month following a consultation period. With the vessel queue at the port currently at 63, Newcastle port operator, PWCS, has cautioned that the queue would not be lowered to a "working" level of around 20 until the end of the 2q07.
US Crude Stocks Up, Gasoline and Distillate Down
US crude stocks grew 1.1m bbl last week to 325.3m bbl but remained 4.3% lower year-on-year, as imports increased 930k b/d to 9.8m b/d, according to the latest data from the US Department of Energy. Gasoline inventories fell another 2.5m bbl to 213.9m bbl, 4.4% lower on the year, despite imports rising 122k b/d to 910k b/d and demand falling 33k b/d to 9.16m b/d. Distillate stocks dropped 2.8m bbl to 120.4m bbl, 5.6% lower on the year. Imports fell 110k b/d to 322k b/d but remained 14% higher than a year earlier. Refinery utilisation inched lower to 85.6%.
February Iron Ore Imports into China Up 4 Mt YOY
Chinese iron ore imports in February totalled 28.7 Mt, according to preliminary customs data. Although this figure marks a fall from January's record 35.9 Mt, it still represents a healthy import total (up almost 4Mt yr-on-yr), especially as February 2007 was a very short month allowing for Chinese New Year holidays. Furthermore, the combined January-February imports were up 13.2 Mt on the same period last year.
OECD Oil Stocks Fall In January and February
Preliminary data indicate OECD oil stocks have fallen by over 1.26m b/d over the first 2 months of 2007, and could be heading for the largest quarter stock draw for over 10 years, according to the latest IEA report. Levels dropped 8.6m bbl in January as a crude draw in Europe outweighed a weather-induced product build, leaving forward cover at 54 days. Global oil output fell 65k b/d in February to 85.5m b/d, with OPEC supply averaging 30.2m b/d, 125k b/d down from January as a 365k b/d cut from OPEC-10 was partly offset by increases from Iraq and Angola. Oil demand is still forecast to grow 1.8% in 2007 to 86m b/d.
Higher Shipments from Richards Bay to India in February
Throughput during February at Richards Bay reached 6.19 Mt, compared with 5.50 Mt in the same month last year, McCloskey reports. Significantly, an estimated 1.0-1.3 Mt of the monthly total were bound for India, a high total given that India imported just 2.7 Mt from South Africa during the whole of 2006. The combined January and February Richards Bay throughput total, however, is down 1.3 Mt year-on-year, and annualises to 60 Mt (the official port throughput is 72 Mtpa).
China's Crude Imports Rise In February
China's crude imports rose 8% in February year-on-year to an average 3.17m b/d, despite falling 69k b/d on the month, according to preliminary data from the China's Customs Statistics, reports Dow Jones. Product imports were down 8.7% on the year at 598k b/d having dropped 58k b/d from January. Product exports were up 150k b/d from January at 370k b/d.
Positive US Employment Data
Job creation in the US rose at a steady rate in February, easing concerns of a slowdown in the world's largest economy, the Financial Times reports. The US Labor Department data show that 97,000 new jobs were created, while 55,000 more jobs were created than previously expected in December and January. The increases were attributed to rising employment in the service sector outweighing weaker housing and construction sectors.
Approaching Cyclone Closes Port Hedland
BHP Billiton has suspended port operations at Port Hedland due to an approaching cyclone, Reuters reports. Mining operations serving the iron ore port have been unaffected so far, the report says. Tropical cyclones occur most frequently in Western Australia during the first quarter.
Record Australian Coal Exports Despite Congestion
Australian coal exports were a record 22.6 Mt in January, the latest trade data show. This represents a rise of 12.8% on the same month last year and was achieved in spite of severe ongoing congestion at the country's ports. Both steam and coking coal shipments set new monthly highs of 11.9 Mt and 10.7 Mt respectively. In 2006 Australia exported 237.1 Mt of coal, up 1.5% on the previous year.
US Oil Stocks Fall
US crude stocks slumped 4.8m bbl last week to 324.2m bbl, 3.3% lower year-on-year, mainly due to delays in the Houston Ship Channel causing imports to fall 650k b/d to 8.87m b/d, the lowest since October 2005, according to the latest data from the US Department of Energy. Gasoline inventories dropped 3.8m bbl to 216.4m bbl after imports fell 101k b/d to 788k b/d, 29% lower on the year and demand rose 70k b/d to almost 9.2m b/d. Distillate stocks were down 1.3m bbl at 123.2m bbl despite imports rising 51k b/d to 432k b/d, 33.7% up on the year, and demand falling 212k b/d to under 4.5m b/d. Refinery utilisation inched lower to 85.8%.
Preliminary Data Shows Global Oil Demand At Record High In February
Global oil demand grew 1.7% year-on-year in February to 87.26m b/d, a new record high, having risen 3.74m b/d from January, according to preliminary data, reports Energy Intelligence. 1.2m b/d of the increase came from the US, leaving the rest of the world with growth of 250k b/d, or 0.3%. Growth in non-OECD oil demand is estimated at a below-trend 750k b/d, or 2.1%. Oil supply was up 450k b/d year-on-year at 85.49m b/d having risen 460k b/d on the month despite a partial implementation of another OPEC cut and several problems in non-OPEC supply as volumes from Iraq rose 410k b/d from January. Even so, demand outstripped supply by 1.8m b/d in February, reports Energy Intelligence.
Reaction to Indian Iron Ore Export Duty
Reports are circulating from Indian media of diverted or cancelled shipments in response to the imposition of an export duty of 300 rupees per tonne (approximately $7/t) on iron ore shipments. The fiscal measure is likely to benefit Brazilian suppliers, but despite dire warnings from industry officials (the vice president of the Federation of Indian Mineral Industries warned that this year's iron ore exports could fall by 50%, according to Reuters), there would appear to be insufficient replacement supplies worldwide for a massive reduction in Indian shipments.
It is therefore likely that any reduction in shipments will be temporary. If the Indian government does not revise its new tax policy in response to iron ore industry lobbying, then the financial burden of the new export tax will have to be absorbed between the exporters and their customers, either by iron ore buyers or steel purchasers. Significantly, prior to the introduction of the duty, the spot price of iron ore was rising steeply to over $60/t fob (for 63.5% Fe content) from a 4q06 low of $53/t.
Strong January Iron Ore Imports Into Japan
Japanese iron ore imports in January reached their highest monthly level since March 2005, according to trade data quoted in the Tex Report. January imports were 12.6 Mt, up 1.2 Mt on the previous month and some 1.1 Mt more than in the same month last year. Much of the month-on-month growth came from shipments of Australian iron ore, which climbed 1.0 Mt to 7.4 Mt. Imports of both Brazilian and Indian iron ore into Japan experienced small month-on-month declines to 3.2 Mt and 0.9 Mt respectively.
Newcastle Queue Forecast to Reach 88 By End-March
Congestion at the port of Newcastle is expected to worsen ahead of the planned introduction of the amended tonnage quota system from April 1, according to the Hunter Valley Coal Chain Logistics Team (HVCC), which represents rail and port operators for Newcastle. The HVCC now forecasts that the vessel queue at Newcastle will reach 88 by the end of March, McCloskey reports. This week the vessel queue reportedly reached a new high of 73. The SSY Australian Coal Port Congestion Index, which measures average berthing delays at all coal ports in Australia, climbed to a record 18 days at the beginning of the week.
Mexico's Crude Output and Exports Rise In January
Mexico's crude oil production and exports recovered in January after the sharp declines in December, with output rising 165k b/d to 3.14m b/d, reports Energy Intelligence. Levels were still 20k b/d lower than November and 257k b/d, or 6.8%, lower year-on-year. Crude exports rose 57k b/d month-on-month to 1.58m b/d but remained 22.9% lower on the year, reports Energy Intelligence.
US Steel Imports
US steel imports in January were 2.44 Mt, the lowest monthly total since November 2005, according to data from the American Iron and Steel Association. January's total also marks a year-on-year fall of 0.75 Mt. Despite the downward trend, the American Iron and Steel Association President, Andrew Sharkey, emphasised the organisation would "continue to monitor inappropriate market interventions by offshore governments, government support and overproduction of steel in Asia."
The downward trend in US imports has not prevented a recovery in world steel export prices. According to World Steel Dynamics' Steel Benchmarker, over the last two weeks the world export price for hot-rolled band rose 5% to $562/t, which compares with its late 2006 lows of $500/t. This suggests firm underlying levels of world steel demand.
UAE Becomes Japan's Largest Crude Supplier In January
Japan's crude imports in January averaged 4.31m b/d, 0.6% lower year-on-year but up 0.7% from December, reports Platts. The United Arab Emirates became the largest crude exporter to Japan pushing Saudi Arabia into second for the first time since September 2005. The UAE supplied 1.22m b/d, up 17.9% from December and 21.5% higher on the year, making up just over 28% of Japan's total crude imports. Imports from Saudi Arabia have been easing since November, when OPEC members began cutting production, with the kingdom undertaking the biggest cut of 380k b/d. Volumes dropped 20.2% on the month in January to about 935k b/d, 28.3% lower year-on-year. Imports from Iran were also down 18.3% from December at 487k b/d. Crude from the Middle East accounted for 83.2% of Japan's total imports in January, down 5.1% on the year, reports Platts.
New Export Tax on Indian Iron Ore Exports Reported
Reports from India indicate that the new Indian Budget has imposed an export duty of approximately $7/t on iron ore exports with immediate effect.
With the delivered price of Indian high-quality iron ore into China already over $80/t, the new delivered price could approach $90/t. This would improve competitiveness of Brazilian ore into China (even after the 9.5% iron ore fines contract price rise enters force from April 1).
In the longer term, this appears to signal that the Indian government is trying to ensure that a higher proportion of ore mined in India goes to the expanding domestic steel industry (which grew almost 8% in 2006). In a further boost to the Indian steel industry, the import duty on coking coal (previously 5%) has been abolished.
US Distillate and Gasoline Stocks Fall, Crude Rise
US distillate stocks dropped another 3.8m bbl last week to 124.5m bbl, 7.2% lower year-on-year and the lowest since mid-June 2006, according to the latest data from the US Department of Energy. The fall came despite a 47k b/d rise in imports to 381k b/d, 24.5% higher on the year, and a 24k b/d drop in demand to 4.7m b/d. Gasoline inventories also fell another 1.9m bbl to 220.2m bbl as imports declined 59k b/d to 889k b/d, 27.7% lower year-on-year. Demand dropped 77k b/d to 9.1m b/d. Crude stocks rose a further 1.4m bbl to 329m bbl despite imports falling 220k b/d to 9.5m b/d. Refinery utilisation rose 0.8% to 86%.
Positive Outlook for India's Economy
India's government expects the country's economy to grow 9.2% in 2006/07 (April-March), a slightly faster rate than during the previous year, according to an official press release. Bloomberg comments that growth averaged 8.6% in the past four years, with industrial production (which comprises a quarter of the economy) enjoying annual growth of 15.4% in November 2006, the fastest expansion since April 2005.
Azeri Light Exports Set To Rise In March
Exports of Azeri Light from the Turkish port of Ceyhan are set to rise to 510k b/d in March, up 42% from January, reports Petroleum Argus. The increase is a result of strong demand for light sweet crude in Asia-Pacific and the US. Sales of Azeri Light, Algerian and Libyan crude to the USG and Asia-Pacific have been climbing due to tighter transport fuel specifications and a desire to diversify away from Nigerian crude due to supply issues. Security of supply concerns are prompting refiners in India, Indonesia and China to increase their purchases of Caspian and N. African crude. Over 160k b/d of Saharan Blend moved east on a spot basis last month, up 61% compared with 2 months earlier. Sales of February-loading Azeri Light to Asia-Pacific rose to 220k b/d, up from about 50k b/d 2 months earlier, reports Argus.
Slower US Economic Growth Expected in 2007
According to a poll of 47 leading economic forecasters, US economic growth this year is expected to be the slowest since 2002. The BBC reports that the survey from the National Association for Business Economics projects annual GDP growth at 2.7%. US GDP grew by 3.4% in 2006. The survey suggests that strong consumer spending (+3.2% annually) will offset the effects of a slower housing market.