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
Coal Exports From Newcastle Rise
The latest statistics on coal throughput in the port of Newcastle suggest that Australian coal exports are continuing to rise. According to McCloskey, port operator Port Waratah Coal Services has announced that August exports from the port reached 6.7 Mt, an increase of 8.6% on the previous month and 9.8% on August 2002. For the year to date, coal exports total 48.9 Mt, compared with 46.7 Mt for the same period last year.
Crude oil prices drop on expectation of reduced US gasoline demand
With the official end to the US driving season yesterday, demand for gasoline is expected to weaken across September.
Whilst US inventories of gasoline reached their lowest level for nearly 3 years last week, there are fears that the recent peak demand for gasoline has prevented refineries from producing sufficient heating oil, in the run up to winter.
Any drop in crude oil prices may be short lived, due to concerns over disruptions to supplies from both Iraq and Nigeria in the short term.
Australian Iron Ore Exports at Record High
Australian iron ore exports have surged to a record high in July 2003, according to the latest official figures. In July, 17.7 Mt of iron ore was exported -- up 1.7 Mt over the previous month and up 2.5 Mt on July 2002 (a previous record high). Much of this year's jump in exports is linked to Chinese demand: Chinese iron ore imports from Australia this year have leapt by almost 50% on the same period last year, and China is the now the destination of over 30% of Australian iron ore exports.
Threat of oil strike in Nigeria
Oil workers in Nigeria are threatening strike action in protest of an oil majors' restructuring plans. Union leaders are saying the restructuring will lead to job cuts, although the oil major denies this claim. The protests come on top of weeks of civil unrest in the oil producing areas of Nigeria and could jeopardise exports. Over the past few days nearly 100 people have been killed and more than 1,000 injured in ethnic warfare which has rocked the oil city of Warri in the past week.
One industry report estimates that at least 200,000 barrels are currently being lost from production on a daily basis in Nigeria as a result of the instability. Production averaged 2.1mb/d in the 1h03. In April of this year, output fell to 1.88mb/d due to field closures in response to civil unrest.
World Wheat Trade Forecast Revised Downwards
The latest report from the International Grains Council (IGC) forecasts a drop in the world wheat and coarse grain trades in 2003/04. As a result of large domestic wheat crops in Brazil, China and Iran and lower yield forecasts in Europe, the IGC lowered its forecast by 2 Mt for the world wheat trade in 2003/04 from last month. The world wheat trade is predicted to fall to 97Mt -- 6 Mt lower than the 2002/03 level. The IGC maintains its forecast of 104 Mt for the world coarse grain trade in 2003/04 -- still down 3 Mt from the 2002/03 estimates.
IMF Reportedly Optimistic on US Growth
Leaked drafts of the IMF's world economic outlook report suggest that the fund has revised its forecasts for US economic growth upwards, according to the Financial Times. The US forecast has reportedly been raised to 2.4% this year and 3.7% for 2004, however, the report expressed concern over the US current account imbalances. Moreover, predictions for economic growth in the eurozone this year were allegedly revised downwards -- more than halved to 0.5% -- following recent disappointing announcements on growth in France, Germany, Italy and the Netherlands.
Chinese GDP Up Year-on-Year By 8.2%
Chinese GDP in the 1h03 rose 8.2% over the same period last year, exceeding 5 trillion yuan (US$605 billion), state officials have announced. However, as China Economic Net reports, the minister of the National Development and Reform Commission added a note of caution, commenting that the steel and construction sectors still faced "wasteful" practices. He also warned against the rapid increase in the number of loans granted by China's financial institutions.
Australian Coal Exports to Japan Increase
Australian coal exports during July 2003 have risen by 4.3% on July 2002 to 17.5 Mt, McCloskey reports. Exports in the January-July period have also increased on the same period last year -- up 4.9%. The high levels of Australian exports have been linked to strong demand from Japan, which, according to McCloskey, has increased following fears over Chinese supplies and the upcoming introduction of the carbon tax on imported coal to Japan in October.
Oil production in Iraq's northern oil fields set to increase 50% by
A senior member of the US army has suggested crude oil production in the Kirkuk region will increase by more than 50% to reach a daily
output of 770,000 bpd by December. The northern oil fields are currently producing around 0.5 M bd compared to their pre war levels of 0.8 - 0.9 M bd.
Repairs to the Ceyhan pipeline are due to be completed at the end of the week, the capacity of a fully operational pipeline is 300,000 bd from the Kirkuk oil fields. Baghdad is targeting an output of 800,000 bd in September, nearly half of its pre war total of 1.7 M bd. Total Iraqi production is expected to reach half of pre war levels (2.8 M bd) next month.
Oil market jitters on Chavez determination to stay put
In the latest edition of Oil Market Intelligence (OMI), Venezuela's president is quoted as saying he will defend his "revolution" by force if necessary in response to attempts to mount a referendum against his rule. "The confrontation between government and opposition looks set to intensify and could have an impact on already wobbly production targets," reports the OMI. This in turn could lead to fewer cargoes, putting direct downward pressure on TD9 and have a knock on effect onto other Atlantic clean and dirty routes. Meanwhile, the OMI also reports on the US gasoline stocks - saying the picture is "not pretty" as inventories continue to remain below their average range. For week ending Aug 15, US gasoline inventories slumped, putting inventories at their lowest level in nine months.
Lower US stocks could prompt more imports
US crude and gasoline inventories have fallen again, adding to the upward pressure on domestic prices for the United States, particularly since the electricity cuts and refinery outages late last week. Meanwhile there are signs that the US economy is improving with preliminary figures indicating a rise in consumer confidence in August from the previous month. The growth signals in the United States has helped drive up the dollar today in trading. The improved economic picture and low inventories could raise oil and tanker demand particularly in the run up to the American winter season.
Chinese Government Slows Aluminium Production
The Chinese news agency Xinhua reports that the Chinese government is attempting to slow aluminium production by holding back approval of the construction of new aluminium plants as well as the expansion of existing production facilities. According to Lloyd's Register, government sources estimate that scheduled new capacity could reach 9 Mt/year, exceeding market demand and causing a glut in supply. Official sources state that approximately 0.7 Mt of added capacity will not become operational due to shortages of power and alumina.
Eurozone Economic Outlook Gloomier Than Expected
French GDP fell by 0.3% in the 2q03, the Financial Times reports, leading to speculation that the EU statistics institute Eurostat will now revise its forecast for eurozone economic growth in the 2q downwards. Today's announcement by the German Federal Statistics Office that GDP in the country decreased for the second successive quarter (by 0.1%) means that Germany together with Italy and the Netherlands are technically in recession.
US Gasoline inventories drop for 5th consecutive week.
According to the US Energy Department, gasoline stocks at the end of last week were the lowest for 9 months at 196.9 million barrels. They have dropped by 1.2 million barrels over the last week, and in the light of last week's refinery closures, due to power failures, the inventories are even tighter in the West Coast. Gasoline demand over the last 4 weeks was 1.8% higher than a year ago, and with the US driving season still current, upward pressure is being exerted on gasoline futures.
With refinery throughputs under pressure, a demand for imports of clean products in the short term is likely.
July Strongest Month for Chinese Coal Exports
Chinese coal exports in July 2003 have risen by 1.15 Mt on the same month last year to 9.44 Mt, making July the strongest month for exports this year, McCloskey reports. Year-to-date figures also indicate a year-on-year increase in coal exports of some 6.85 Mt to 55.18 Mt. However, supply in the near future could be set to slow after a series of three large mine disasters in the last two weeks. According to the BBC, officials in Shanxi have now instructed privately owned local mines in the province to close for seven days to allow safety inspections.
Boost to Brazilian Iron Ore Capacity in the 1q04
CVRD is to expand its iron ore production capacity at Caraj
Economists raise Japanese growth forecast
There is some consensus amongst economists that Japan's economy could achieve growth of at least 1% this year despite earlier forecasts of an economic contraction. Reports today suggest that GDP growth could reach 1.4% for the fiscal 2003 year, based on a Reuters poll of 20 experts. This is based on improved Japanese exports and capital spending by domestic manufacturing companies in response to better than expected US economic recovery.
The implication of the latest forecast for the tanker sector could mean some fundamental growth for oil and tanker demand later this year. This would be at a time when the exceptional oil imports for power generation could start to tail-off, should Japan's nuclear generators be reactivated in the balance of this year.
Oil prices were slightly lower today on reported profit taking by traders.
Steel Production Boom in Asia-Pacific
The latest International Iron & Steel Institute report records a 7.7% year-on-year rise in global steel production to an estimated 79.9 Mt in July 2003, up only 0.9% compared with the previous month, however. Chinese steel production continued to expand rapidly -- up 20.3% over July 2002 and making up 22% of July's global output. Other Asian countries also recorded large increases (output in India and Japan rose by 14.1% and 3.1% YOY, respectively). While EU steel production grew over the same period by 2.4%, its largest steel producer, Germany, saw its output fall 7.8% from July 2002.
Such figures reflect Germany's disappointing economic performance (its GDP in the 2q03 decreased by an annualised rate of 0.2%) and encouraging news from Asia-Pacific (Japan's GDP beat expectations, growing 2.1% in the 1h03).
Iraq definite, and Nigeria possible production problems.
Having only resumed pumping last Wednesday, for the first time since the war in Iraq ended, the export pipeline to Ceyhan has already been sabotaged. This will prolong the time before Iraqi exports will return to the market via the Mediterranean. Reports suggest that it could be 2 months before the pipeline will be back in service again.
There are also reports today of further ethnic violence in the Niger Delta area which may cause further disruption to oil supplies from Nigeria.
Indian Iron Ore Export Facilities Expanded
A temporary iron ore export terminal is to be built at the Indian port of Ennore. With a capacity of 2 Mt/year, the new facility is due to be operational by December, according to Metal Bulletin, and should further boost exports to China. In the 1h03 China imported 16.6 Mt of Indian ore -- up 41% on the 1h02.