Japanese demand for fuel oil imports up
Fuel oil imports into Japan were up year-on-year by 6% in August. However due to the unusually moderate summer weather, demand for electricity generation dropped in August by 4%. With the gradual return to operation of nuclear power stations and greater potential hydro electric power available, as a result of increased rainfall, demand for fuel oil imports may ease from first half 2003 volumes in the short to medium term.
Russian crude exports to rise 4q03
Russia's energy ministry has said it expects total crude exports of 3.91 mb/d in the 4q03 -- a rise of about 2.3% on the same period last year (although a seasonal fall of 2.6% from the 3q03). About 82% of these exports are to outside the FSU region. According to the latest Argus FSU Energy report Russian refining is also expected to see a rise as a result of the higher crude supply expectations. Although domestic consumption will absorb much of this production hike, gasoline exports are expected to rise significantly (although the report says such exports will be low when compared with volumes of fuel oil or gas oil).
India to Boost Iron Ore Imports to China?
Stories are circulating in the Indian press that the country's government may ease restrictions on high-grade iron ore exports to China. The Financial Express reports that a joint initiative with Chinese authorities has been set up following rapid increases in Chinese iron ore imports, which would enable India to export ore with an iron content of over 64%. It has been suggested that India's iron and steel exports would increase by 7% per annum as a result of the relaxation of existing regulations. SSY predicts that Chinese iron ore imports will reach a record 146.2 Mt in 2003, up from 111.5 Mt in 2002.
Record Chinese Steel Output
Further evidence that China is driving global steel production is provided by the latest International Iron and Steel Institute report. Total global steel output for the year-to-date totalled 622.9 Mt, up 7.6% from the same period last year. Much of the growth can be traced to China: the country's YTD output for the first 8 months of 2003 rose 21% year-on-year to 140.4 Mt and its August production reached a monthly record of 18.9 Mt.
In contrast, other large steel producers experienced more moderate growth in the YTD: Japanese and Russian production climbed 4.2% and 5.5% respectively, while EU output increased marginally by 0.8% and US production stagnated, rising 0.6%.
IMF bullish on 2004
The latest report from the International Monetary Fund indicates that the global economy is improving, but that the pace and strength of recovery remains somewhat unclear. In the IMF's semi-annual World Economic Outlook the group forecast world growth outlook of 3.2 percent for 2003 and a more robust expansion of 4.1 percent next year.
The US and emerging Asian economies will lead the upturn according to IMF officials, while Europe continues to make ground. The more buoyant outlook should raise pressure on oil demand in 2004 from this year's levels and will have an upward effect on tanker demand at a time of rapidly rising fleet growth.
Chinese Iron Ore Demand Keeps Growing
China imported 12.3 Mt of iron ore in July 2003, a 20% increase on July 2002, according to the Tex Report. The annualised level of Chinese iron ore imports for 2003 is set at 145 Mt, substantially higher than the 111.5 Mt imported in 2002 and the 92.4 Mt imported in 2001. Chinese crude steel production also rose by 20% in the January-July 2003 period from the same period last year to 121.6 Mt.
Meanwhile, China Economic Net reports on official statistics, which show that the country's retail sales in July 2003 jumped 9.9% from July last year, the fastest growth rate for seven months.
July US Coal Imports Up 67% Year-on-Year
Official US trade statistics show that coal imports into the country in July 2003 rose by 67% on the same month last year to 2.37 Mt, according to the Tex Report. Imports in January-July 2003 now stand at 12.6 Mt, up 48.5% year-on-year. Colombia supplied 62% of US coal imports in 2003.
Oil prices fall on US oil inventory status
Oil prices fell again today ahead of tomorrow's US stock reports that are expected to show a rise in crude inventories of about 2.8 mb/d last week. The rise is expected as refineries cut runs for autumn maintenance, and on preliminary figures suggesting a rise in imports back to 10mb/d (after 9.5 mb/d in early September).
A gain in gasoline and distillate stocks is also expected in tomorrow's figures, although heating oil is showing a bigger year-on-year deficit and is well below the 5-year average.
Soybean Exports Forecast Revised Down in US and Up in South America
The latest US Department of Agriculture forecast for global soybean exports in 2003/04 has been revised upwards by 0.3 Mt from last month's prediction to 64.8 Mt, resulting in a 2.2% rise from 2002/03. Projected soybean exports from both Argentina and Brazil each stand 1 Mt higher from August's estimates. However, US soybean exports are expected to fall by 1.6 Mt to 25.6 Mt from last month's estimate as a result of unfavourable weather conditions. The latest global import estimates have been raised 0.5 Mt, thanks to an increase in anticipated Chinese imports.
Iraqi oil production up
Oil production from Iraq's southern fields has risen to above the 1mb/d mark, according to officials from the State Oil Marketing Organisation. This brings the country's total oil production to over 1.8-mil b/d. Exports have resumed with relative ease from Mina al Bakr, although they are being hampered in the north of the country due to sabotage of the Ceyhan pipe-line. Officials put the recent increase in the country's oil production down to an improvement in electricity generation.
Meanwhile oil prices fell to their lowest level in four months on Friday when it became clear that hurricane Isabel would pass north of the US Gulf oil and gas installations. The storm is now forecast to reach land in North Carolina by Thursday this week.
EU Wheat and Corn Projected Output Falls
Partly as a result of the hot and dry weather in Europe, the US Department of Agriculture's prediction for the total world corn output in 2003/04 (minus the US) has been revised downwards by 4 Mt from last month's forecast, falling 18 Mt from last year's total. Projected EU corn production now stands at 32 Mt, down 2.5 Mt from August's forecast and down 19% from last year, increasing European demand. EU wheat output is also expected to be 2 Mt lower, although Australia's wheat crop is now forecast to be 24 Mt (adjusted up by 1 Mt), the third highest on record.
China Forecasts Increased Soybean Imports
China's National Grain and Oils Information Centre estimates that soybean imports are set to rise in the year October 2003 to September 2004 to 20 Mt from the previous total of 18.5 Mt. Chinese authorities believe a reduced domestic crop and greater crushing capacity will push demand upwards. If this prediction holds true, demand for shipments would increase substantially following recent soybean import restrictions imposed by the Chinese government.
World Oil Production continues upward trend.
According to the latest International Energy Agency (IEA) figures, world oil production in August increased by 798kb/day. OPEC's share of the rise was just over 50% at 415kb/day of which Iraqi production accounted for 390kb/day.
Saudi Arabia is set to re-open the IPSA pipeline, which runs from Iraq across Saudi Arabia to the Red Sea port of Yanbu, in an effort to assist in getting Iraqi crude to western markets. The pipeline has a design capacity of 1.65mb/day, and was appropriated by Saudi Arabia after the Iraqi invasion of Kuwait in 1990.
Low oil stocks raise risks - IEA
In its latest oil market report, the International Energy Agency warned that low OECD oil inventories and the tight OECD natural gas and hydropower supply are causes for concern at the end of the 3q03. "In a period of increased dependency and geopolitical uncertainty, reduced inventory levels expose the global economy to elevated risks associated with factors such as weather and even small supply disruptions," said the Agency. The low OECD stocks could provide additional upside pressure to tanker demand and rates in the run up to the northern hemisphere winter this year and lead to volatile oil pricing.
Japan's Growth Exceeds Expectations
Economic growth in Japan rose by 1% in the 2q03, outperforming August's estimate of 0.6%, the BBC reports. The annualised figure for Japanese growth in 2003 is now 3.9%, suggesting faster growth than the US. The BBC adds that the Japanese current account surplus jumped 34.6% in the year before July 2003 -- an indication that exports are leading the apparent turnaround.
Cooler Weather and More Nuclear Power Prevent Japanese Power Shortages
The return to operation of a sixth Japanese nuclear power station has reportedly helped prevent Tokyo from experiencing serious shortages in electricity supply this summer. Platts reports that low summer temperatures coupled with power purchases have also favoured the energy provider Tepco. Tepco is pushing for four more plants to restart this month as two currently in use are due to be closed for inspection on September 23rd and 30th.
Iraq bullish over oil production and exports.
According to a statement made today by Thamer Ghadban, the ex Iraqi Oil Minister, oil production is now almost 2mb/day and sustainable exports of 1mb/day are expected to be achieved in the near future. Exports in August averaged 709mb/day and the target for September is between 850-900mb/day. He further stated that Iraq aims to be producing 3-3.5mb/day by the end of the first quarter of 2004, and 4-5mb/day in 2005.
Butinge oil terminal set to increase exports by 80% this year.
Butinge oil terminal, currently capable of handling 14 million tons of cargo a year, is building 2 new storage facilities, each capable of holding 52,000 cbm. The aim is to overcome the limitations of the pipeline infrastructure, at a time when exports are increasing at an ever increasing rate. The terminal has already increased its throughput of oil by 160% in the first 8 months of this year, to 7.5million tons.
The storage facilities are expected to be completed by the end of this year, and will enable continued shipments to be made, from the Baltic, despite the current pipeline constraints.
Tightening of Supply of Chinese Coal
The tightening of Chinese supplies caused by the closures of many mines in the Datong and Shanxi provinces to allow safety inspections is now causing concern among Japanese utilities, such as Chubu and Hokuriku, as well as gencos in Hong Kong, South Korea and Taiwan, according to McCloskey's Coal Report. Many of the 902 affected mines are reportedly still closed as new safety measures are enforced. It was estimated that 1.5 Mt had been removed from the export market, but that the extended closures of certain mines may mean that over 4 Mt may have been lost.
Soya Import Certificates Issued by China
Reuters reports that the Chinese Ministry of Agriculture has issued safety certificates which are required for genetically modified soybean imports arriving in the country after September 20. These regulations had been blamed for slowing soya imports into China, the world's largest soya importer. However, soybean suppliers fear that waits for quarantine permits may further delay deliveries.
Crude prices soften as US inventories increase.
According to figures from the US Energy Department, crude oil inventories unexpectedly rose last week by 1.8 million barrels to 280.4 million barrels. The rise was largely due to a drop in gasoline demand, which had been expected to peak over the Labor Day weekend.
Lower than expected crude oil production from Iraq had put upward pressure on prices, however Iraq exported 645,000 bbls/day of crude in August, a 60% increase over July, and with the lowering demand in the US for gasoline crude stocks are on the rise again.
Tanker fleet growth
The Handymax tanker fleet (38K-49K dwt) has grown by 1.6 mdwt this year to date, with 37 ships delivered and just two removed. There are a further 34 tankers in this sector to be delivered in the balance of the year and we expect fleet growth in excess of 2mdwt. In 2004 there are a further 67 ships of this size due for delivery. The Aframax (75K-119K dwt) fleet has also grown considerably this year, with 46 additions and just 15 deletions, leaving net fleet growth of 35 ships or 3.6 mdwt to date.
Record Steam Coal Imports into South Korea
In July, South Korea imported a record amount of steam coal (4.6 Mt), according to the Tex Report, marking an increase of 11.9% from July 2002. Official trade statistics show that 3.2 Mt were imported from China (up 64% from last year) and 1 Mt from Australia (up 8.9% from 2002). The year-to-date total of 28.3 Mt represents a 3.6% increase from the same period last year.
Chinese Aluminium Industry Drives Market
While attention has been focussed on Chinese demand for steel and iron ore, the country's aluminium industry has been driving international trade in the sector, as figures from the International Aluminium Institute demonstrate. China produced 453,000t of aluminium in July, an increase of 2.5% from June 2003, but more significantly, a rise of 27.2% from July 2002 -- well above the international average. According to Chinese Customs Statistics, China imported 620,000t of aluminium oxide in July to meet rising demand.
Chinese imports surge
Chinese oil imports for July were up by more than 20% year-on-year, according to the latest official figures from the Chinese customs administration. Averaging 1.6 mb/d, crude imports showed a slight decline from June levels, but refined product imports rose to the highest monthly average on record, at 0.7mb/d.
Although a seasonal dip in imports is usual for July, imports are expected to rise again from September and through the 4q03 to help fuel GDP growth of about 8% and industrial production of 17%. The vast majority of China's imports are by way of long-haul VLCC tonnage (from the Middle East) and the rise in the country's oil demand has become one of the key drivers of crude tanker demand this year. For more detailed analysis of the growing role of China in the tanker markets, see the forthcoming issue of SSY's World Oil Tanker Trends. http://http://www.ssyonline.com/Buy_Online/index.html