News archive November 2002

According to the IGC the Ukraine and Russia have been shipping out as much grain as possible before the introduction of EU import quotas in January. Total November grain exports from the two countries are estimated at 1.45m tonnes, Ukraine began shipping grain to France and South America.

Russia is expected to ship a record 7.0m tons of grain this crop year, 1.5 Mt more than previously expected. The Ukraine has concluded sales at around 6 Mt, with an estimated 6.5 Mt total export figure for the crop year. India is set to export a record 5 Mt of grain for the year and China and Pakistan have also both up exports towards the end of the year.

The five major grain exporters share of the total world grain trade is the lowest ever this crop year reaching only 68.5 Mt.

Product demand in China is expected to grow by between 3 and 4% in 2003, according to China Petroleum & Chemical Corp. Total demand for refined product is expected to reach 125 Mt in 2003 compared to this years estimated total of 120 Mt. The predicted increase in product demand is linked to the GDP growth estimates of 7%. The higher demand should prompt China to increase its refinery runs. This year crude runs are up 2% on 2001 totalling 104 Mt with around 5Mt being exported.

Dated Brent was trading at $24.95 a barrel, late afternoon in London today.

Further evidence that the US economy is recovering was provided this week by October's durable goods orders, which were up 2.8%. The Chicago purchasing manager's index (a popular barometer of buying future sentiment) was higher than expected for November. The increase in the Chicago PMI month on month is the largest seen since April 1985. Production and employment figures were also higher.

These indicators all point towards consumer and industry confidence that the economy is set to recover and avoid the double dip recession that has been feared.

Brent crude was trading today at $25.03 a barrel late afternoon London.

Further evidence that the US economy is recovering was provided this week by October's durable goods orders, which were up 2.8%. The Chicago purchasing manager's index (a popular barometer of buying future sentiment) was higher than expected for November. The increase in the Chicago PMI month on month is the largest seen since April 1985. Production and employment figures were also higher. These indicators all point towards consumer and industry confidence that the economy is set to recover and avoid the double dip recession that has been feared.

Brent crude was trading today at $25.03 a barrel late afternoon London.

France and Spain have today initiated a clamp down on ships that are carrying dangerous cargoes, this could pose serious changes to chartering in Europe in the very short term. The leaders of the two counties met yesterday and agreed to begin inspecting vessels that were "potentially dangerous", if found to be inappropriate vessels will be forced out of the 200 mile exclusion zone around the two coast lines. The new legislation suggests that all single hulled tankers over 15 years of age will be subject to inspection.

The move by France and Spain to up security has gone ahead before consulting the rest of the EU. The two counties will, however, propose the changes are adopted by all of the EU at the next European summit in December.

Brent Crude was trading today at $25.21 a barrel late afternoon in London.

In the 3q02 the US economy grew at an annualised rate of 4% a figure well above the Commerce Departments estimates of 3.1%. The 3q growth was three times greater than that experienced in the 2q.

The strong growth was the combined result of higher levels of government spending, domestic investment and car sales. Growth in the 3q is expected to slow, with 4q02 estimates by the National Association for Business Economics lowered to 1.4% (from 2.7% two months earlier).

Iraqi oil exports through the oil-for-food programme are to continue for at least another week. The short period is a compromise decision made by the UN Security Council, Monday, in reaction to the US opposition to a 6-month rollover (the US proposed a 90-day extension instead). But the temporary nature of the latest 'roll-over' could add some volatility to the relatively tight tonnage positions currently felt in the VLCC market. Iraqi exports are currently average about 1.2 mb/d.

Brent Crude was trading at $24.82 per barrel in London late afternoon today.

Thermal coal exports from China are predicted to rise by 8Mt in 2003 with all coal reaching a total export figure of over 100mt for the year compared to 92mt in 2002 according to the Argus Coal Daily. The growth will occur despite continued strength in domestic coal demand which is expected to retain its 90% claim on total coal production of 1.15Bt. The report states that a rise in exports of steam coal to Japan is expected and is expected to account for 26% of total exports, South Korea at take 23% and Taiwan at 17% of exports.

Early days yet to start concluding what the effect on the tanker market will bring, but there are some early signs that the EU might take a tough stance on single hull tankers trading in its waters following the sinking of the Prestige last week. According to press reports Monday, the European Commission is to recommend the EU ban single hull tankers from its territorial waters while officials from Spain and Portugal say they will ask the EU to move 'shipping lanes' further away from their coastlines. Both measures would likely require legislation to prompt change (rather than voluntary market action) and would doubtless raise cost of chartering. As yet, brokers report muted reaction in the tanker markets to the Prestige incident.

Oil prices remain fairly firm at the start of the week as a 'war premium' appears factored into the market once again. Dated Brent was trading at $25.15/barrel by mid-afternoon in London.

The heavy drought which has decimated Australia's winter wheat crop may be just the tonic for struggling UK exporters who are desperately searching to offload this year's 3.5m tonne export surplus. Shipping sources in London have confirmed that a charterer was seeking freight to move 50,000 tonnes of UK wheat to Australia in December. This news came after traders speculated that Australia could turn to the UK for feed grain.

On Thursday the US Agriculture Department reported the sale of 45,000 tonnes of US corn to Australian interests; this is more proof of Australia sourcing alternate supplies of foodstuffs.

Domestic steel demand in Brazil has been slow for most of the year but a recent recovery may signal the beginning of a prolonged period of growth. The Gerdau group quality development manager Clayton Labes stated this week that domestic steel demand could grow by 1 Mt a year "for a considerable period".

The predicted domestic demand growth suggests a decrease in exports as the Brazilian steel industry is working at its 33 Mt capacity with no short-term growth options.

In November the volume of VLCCs carrying crude oil from the Middle East to the US Gulf was reportedly double that of a "normal" month based on reported voyage movements. 31 VLCCs carrying a total of 8.7 million mt of oil discharged in the Gulf and the Caribbean, this comparing with 26 in September and 31 in October. In a normal month around 15 VLCCs make the trip; the trend is expected to carry over to December and is believed to be caused by the US building stocks to prepare for war with Iraq.

World steel production increased by 2.2 Mt in October compared to month earlier figures. Total production figures for October were 77.6 Mt compared to September's figures of 75.41 Mt. All of the world regions exhibited positive growth with the exception of the Middle East, whose production fell by 0.3 Mt from September. The largest growth was seen in the EU where production increased by 0.4 Mt. The growth has been spread evenly across all countries but the largest growth was seen once again in China, where production rose by 0.6 Mt.

The "Prestige" oil spill has raised increased objections to use of older, single-hulled ships on trades to and from EU member states. SSY's analysis of reported spot fixing in the Baltic, UK/Cont, Med and Black Sea regions in 2002 to date shows that in the Aframax size sector alone, 75 single-hulled ships have been fixed this year to date - around 28% of all such vessels chartered on these trades. A further 15% were double side or double bottomed. Thus, only 57% of fixings have been of fully double-hulled vessels.

Brent Crude was trading at $24.84 a barrel in London, late afternoon.

Saudi Arabia has changed it tack on oil production and is now leading a push to combat quota busting within the OPEC ranks. The change in Saudi Arabia's production policy has come as Brent crude prices have slumped from September highs of $30/bbl to $24.50 on Tuesday. The drop in price is directly created by increased oil supply in recent weeks, the market should be experiencing high prices because of the situation with Iraq. In an attempt to regain September's firmer prices Saudi Arabia is expected to drop production by 0.15 mb/d in December; the main reductions in supply are set to be to the US and Europe.

Brent Crude was trading today at $24.46 a barrel in London, late afternoon.

In the three months leading to September Japan reported continued economic recovery, on an annualised basis 3q02 economic growth in Japan was 3%. This was the third consecutive quarter in which the Japanese economy grew, an increase of GDP by 0.7% 3q02 was higher than expected.

Exports, which had been shoring up the economic recovery, reduced for the fourth month in a row in September. The fall in exports led to reduced factory output for the first time in four months.

The total number of ships in the Handymax category has risen by 158 vessels since the end of 2001. In dwt terms this is a 3.84 million tonne increase (a 7.7% growth in the fleet).

The Panamax fleet expanded over the same period by 108 ships, an increase of 2.29 million dwt (3.4%).

The most growth was seen in the Super Handymax class (50-59,999 dwt), this nearly doubled in vessel numbers from 116 to 227 ships. The rise in dwt was 2.83 million mt (32.2%).

An official from a Dutch salvage company has today reported that the oil tanker Prestige, struggling to remain afloat off the coast of Spain has started to leak from a third tank. The vessel lost all of the oil from two tanks last week, the total amount of oil lost is estimated to be between 5,000 and 8,000 mt. The ship was carrying 77,000 tonnes of fuel oil when it ran into trouble last week. Although the tanker is 70 miles offshore the effects of the slick have begun to show themselves along the coast. As the situation deteriorates and gains more media coverage the chances of stricter legislation either on shipping routes or concerning the age of vessels becomes more likely.

Dated Brent was trading at $23.77/barrel by late afternoon in London.

An Aframax tanker, the Prestige, carrying 77,000 tonnes of fuel oil is in danger of sinking off the north coast of Spain. The 27-year loaded its cargo in Latvia and was due to discharge in Gibraltar, neither of which are EU members, nor are they members of the Paris Memorandum of Understanding (a body responsible for ship inspections). The Prestige is a single hulled ship and classed by ABS. Following the sinking of the Erika in December 1999 the EU passed legislation to ban single hulled ships from its waters by 2015.

Dated Brent was trading at $22.80 a barrel late afternoon in London.

Argentina has been given a 30-day grace period, which ends today in which to pay off $800m of World Bank debt. The IMF cut off its lending to Argentina after it failed to pay back $140bn of international loans last year.

By not meeting the payment Argentina risks future lending opportunities, and threatens the economic stability of Brazil and Uruguay. The IMF has suggested tax raises be implemented to raise the loan repayment. This, however, is unlikely because of the poor state of the economy.

Official Chinese Customs figures show total Chinese imports increased by 33.4% in October compared to year earlier figures. October Imports were up by 31.5% year on year. The monthly trade surplus of $4.75bn is the healthiest in three years.

The robust exports are positive news for the shipping industry, with imported raw materials being essential to industrial production.

In its latest Oil Market Report the International Energy Agency (IEA) says oil demand is set grow at a faster rate in the 4q02 than earlier in the year. The IEA puts this down to colder temperatures in the Northern Hemisphere and strong automotive fuel demand in OECD countries. US gasoline imports were 3% higher in October than year earlier figures.

Crude prices came off slightly today on the news that Iraq would accept UN weapons inspectors.

Dated Brent was trading at $22.70 by late afternoon in London.

The International Energy Agency's (IEA) reported that both crude and product stocks are currently below their seasonal average this despite, the recent fall in oil prices and increase in OPEC supply. The low stocks have been attributed to reduced US refinery production coupled with the high seasonal demand. The EIA expects increases in oil supply to continue into next year and predicts an increase in demand of 1.13 mb/d to be met by non-OPEC producers.

Brent Crude was trading at $23.79 per barrel, late afternoon in London.

Heavy snowfall has disrupted the rail links to Vostochny and the port has been shut since 8th November. The port is due to begin operating again soon but at present there is no coal at the port. Previous vessel entry delays had been 10 days but with the lack of coal, shipping could be held up for considerably longer.

Vostochny had hoped to load a total of 12.5 Mt of coal in 2002, a figure 2 Mt larger than that of 2001. Current events could have an effect on the total coal loading but the short-term disruption is to exports to Asia that are responsible for the majority of the coal throughput at the port.

The US Energy Department (EIA) has projected product demand to average 630,000 b/d in 2003 (an increase of 3.4%). The growth if is forecast to be spread equally amongst the major product groups. Jet fuel is expected to increase 5%, mainly on the back of low demand experienced in 2002. The EIA forecasts a recovery in the US economy should see fuel oil demand stabilise around 730,000 b/d, up on 2002 figures by 100,000 b/d. Gasoline demand is expected to rise 3%.

Dated Brent was trading at $23.83 a barrel late afternoon in London today.