News archive November 2003

Coal exports from Queensland, Australia during the 3q03 totalled 33.0 Mt, a year-on-year increase of 1.6 Mt, according to the Tex Report. Coal exports to Japan fell by 1.0 Mt to 12.3 Mt while those to other Asian destinations were up by 2.1 Mt to 11.4 Mt, with both coking coal (up by 1.2 Mt) and steam coal (up by 0.9 Mt) showing substantial rises. Coal exports to Europe rose by 0.4 Mt to 6.9 Mt, thanks to an increase of 0.6 Mt in coking coal exports more than offsetting a decline in thermal coal shipments of 0.2 Mt.

Beijing sources report that Chinese oil companies are planning to start building a national oil reserve, at the end of this year. The target is to build a reserve of 5million tons by the end of 2005. China whilst being the fifth largest oil producer in the world, has become a net importer of oil since 1993. Oil imports have risen 150% over the last 5 years, and with projected annual GDP growth in the coming year of close to 9%, the need for a strategic reserve is becoming more pressing.

The US Department of Energy weekly statistics indicate that crude oil stocks fell last week to 289.1 million barrels, a drop of 4.9 million barrels over the week, and crude imports also dropped over the week to 9.2mb/d.
Venezuela has intimated that production cuts will be discussed at next weeks OPEC meeting. Reports earlier this week estimated OPEC production for November to be 1mb/d in excess of their quota of 24.5mb/d,.

Latest data from the International Grains Council put EU wheat exports at an estimated 8.5 Mt for the current July/June marketing year, down 1.5 Mt from last month's forecast, due to very tight supplies. This represents a reduction of 7 Mt from 2002/03. After very poor crops, many countries in central and eastern Europe are expected to import more wheat than usual while Ukraine's imports are now put at 3.5 Mt compared to 0.5 Mt in the previous year. The reduction in EU exports is expected to be balanced by increases for Australia, Russia and also the US, where export sales have been particularly strong in recent weeks.

The OECD in its latest report is predicting increased economic growth amongst member nations over the next two years. The strongest growth is likely to be in the US, with 4.2% anticipated for next year, after growth of 2.9% this year and an estimated 3.8% in 2005. The figures for Japan this year are estimated at 2.7% with 1.8% forecast for 2004. The 15 European Union economies are predicted to grow by 0.7% this year, 1.9% next year and by 2.5% in 2005.
Combined with continuing impressive economic growth in China, and recent interest rate and tax cuts in OECD nations, the signs of wider global economic recovery are fuelling optimism for increased oil demand in the short to medium term.

Leading Chinese economic officials have rejected claims that the country's economy is now in a general state of overheating. Interviewed by the Financial Times, Wu Xiaoling, vice-governor of the People's Bank of China, implied that Beijing has no plans to slam the brakes on credit growth or to raise domestic interest rates in the near future. She pointed out that measures already in place have helped to bring about an easing in Renminbi-denominated lending, which grew by Rmb61.6bn ($7.4bn) in October, 17% lower year-on-year. However, Ms Wu did single out a number of sectors which may be adding capacity too quickly, including steel, property, cement, autos and aluminium.

Hopes for a sustained period of economic recovery in the US have been boosted by latest Commerce Department figures, which put growth in the 3q03 at an annualised 8.2%, the BBC reports. The official figure is considerably higher than the first estimate released last month of 7.2%. Corporate profitability is seen as key to a sustainable recovery and the latest figures are encouraging. Company profits rose by more than 10% in the 3q, representing a turnaround from the 5% contraction during the previous quarter.

Latest reports indicate that OPEC (excluding Iraq), in November is producing crude at about 25.5mb/d. The official OPEC output quota was set at 24.5mb/day, from the 1st of November, as a result of a surprise 900,000 barrel/day cut announced in September. Crude prices have fallen for three days in a row as supply exceeds demand for a second consecutive month.

According to preliminary data from Japan's Ministry of Finance reported in the Tex Report, the country's coal imports totalled 12.7 Mt in October, down nearly 12% year-on-year and the lowest monthly total since June 2002. This follows a period of high import levels ahead of the introduction of a steam coal import tax on October 1, as well as strong demand for coal during the summer peak in electricity generation while a substantial part of the country's nuclear capacity has been offline.

Maintenance work at the Koolagong coal terminal at Newcastle has led to a queue of 30 vessels outside the Australian port, Platts reports. Two out of three berths have been idled for several days, but are expected to return to operation this weekend. Newcastle's other coal terminal is still functioning normally with no maintenance closures scheduled in the near future.

The German Federal Statistics Office has announced that the country's economy grew by 0.2% in the 3q03 from the previous quarter, Bloomberg reports. The growth was attributed to a 3.2% rise in exports which compensated for the 0.6% fall in German consumer spending. The French statistics office Insee also announced that the French economy grew: it was up 0.4% in the 3q03 on the previous quarter as a result of growth in both consumer spending and exports.

The news follows last week's announcement by the EU statistics office that the eurozone economy grew 0.4% in the 3q03 from the 2q03 - the fastest pace of growth for five quarters.

According to Algerian oil minister Chakib Khelil, world oil markets are balanced despite current high prices, and OPEC's decision-making at its upcoming Dec 4 meeting is likely to take into account fears of possible over-supply in 2q04.
"Geopolitical fears related to the Middle East and elsewhere have caused current prices to rise," Khelil is reported as saying at a conference in Algiers today. "What we are going to be worried about in the Dec 4 meeting is what will happen in the second quarter of 2004, world demand is going to fall by 2-mil b/d and production from non-OPEC countries is going to rise by 1-mil b/d. If there is not a balance between supply and demand, prices will automatically fall...," he added

Vessel waiting time at the Brazilian iron ore exporting facility Ponta de Madeira has risen to 18-19 days, according to Platts. Delays had reportedly fallen from 20 days last month, but the latest figures reveal that surging demand from China's steel industry has led to increased congestion.

In the latest US Department of Energy weekly report, crude oil stocks have risen by 2.9 million barrels to 294 million barrels. Despite this larger than anticipated increase in inventories, crude prices have risen. According to Claude Mandil, Executive Director of the International Energy Agency in Paris, supplies are too low, and may not be able to meet increased demand in the event of a colder than normal winter.
In addition recent attacks in Saudi Arabia and Iraq have caused traders to build a security premium into the pricing of crude oil.

World crude steel production in the year to the end of October was up by 7% year-on-year to 783.1 Mt, according to International Iron & Steel Institute figures released today. The IISI's data underline the importance of China's contribution to the current growth in global steel output: in the same period, China's steel production jumped 22% to 179.6 Mt, making up 22.9% of the world total.

Elsewhere in the YTD, US production fell 1.3% to 76.1 Mt, EU output rose slightly by 0.2% to 133.2 Mt while Japanese output rose 3.2% to 92 Mt and production in South Korea increased by 1.8% to 38.3 Mt.

According to an announcement today, State Oil Marketing Organisation of Iraq, (SOMO), has extended its crude supply contracts for Basrah Light with all of its current customers, until the end of June 2004. In addition they have added one new customer, the Chinese Oil Company Unipec. However SOMO have declined to specify the volumes of the extended contracts. Originally the contracts were for 2million barrels per month per customer, November exports of Basrah light averaged 1.8mb/d.

China's central role in the recent strength of both the dry bulk and tanker markets is underlined by latest import data. Underpinning growth in the Capesize bulker market, Chinese iron ore imports have been running at levels of over 20% yr-on-yr and SSY estimates an increase of 25 Mt during 2003. Meanwhile China's imports of soya, a key source of both Panamax and Handymax demand, were up by over 10 Mt in the first nine months of 2003 at 17.7 Mt.
In addition, Chinese crude imports surged beyond the 3mb/d mark in September, rising by almost 40% from August figures to an average of 3.14mb/d. Year-on-year imports rose by more than 50%. The latest figures make for a very strong third quarter and go some way in reflecting the surge in VLCC rates in late August and early September. A further rise in rates in November reflects more Chinese buying - as well as buoyant general demand conditions moving into the Northern Hemisphere winter and plentiful cargoes from the Middle East.

Coal exports from Australia rose 17.3% year-on-year to 18.8 Mt in October, lifting the year-to-date total by 6.9% from the same period last year, according to McCloskey. The increase in exports occurred despite reported loading delays at various ports; the waiting time for vessels at Australia's largest coal exporting facility Newcastle was estimated at 12 days, yet exports have increased over the last two weeks.

In South Africa, coal exports during October from Richards Bay reached 5.8 Mt, down 0.4 Mt from October 2002, but up 2% in the YTD compared with the same period last year. Vessel waiting time is thought to be 2-3 days, while stocks have risen by 0.6 Mt from the end of September to 2.4 Mt.

The US Department of Agriculture predicts a further upward revision in world soybean exports in 2003/04 (October-September period) to 67.2 Mt following 2002/03's total of 63.8 Mt, boosting Panamax and Handymax demand. Much of the increase can be traced to Argentina (up 2.7 Mt to 12.0 Mt) and Brazil (up 4.3 Mt to 25.8 Mt). Soybean imports into China are expected to rise again to 22.0 Mt, following last year's record of 21.4 Mt.

Global soya meal exports are expected to reach 48.4 Mt in 2003/04, up 4.6 Mt from last year. Argentinian soya meal exports are expected to reach 20.1 Mt from 18.3 Mt, Brazilian exports are forecast to go up by 2.8 Mt to 16.5 Mt, while Indian soya meal exports are anticipated to grow to 2.6 Mt, double last year's total.

According to the latest US Department of Energy report, stocks of distillate fuel, which includes heating oil, have fallen over the preceding week by 1.5million barrels to 131.2 million barrels. This combined with the International Energy Agency report yesterday, indicating that US and Chinese demand will grow faster than previously forecasted, due to economic growth, are causing crude prices to rise, despite increased oil supply from Iraq, Venezuela and Russia.

The US Department of Agriculture has revised its corn production forecast for Argentina in 2003/04 down by 2 Mt from last month's forecast. The USDA now expects 03/04 corn output to be 14 Mt, in contrast to last season's 15.5 Mt, as a result of drought conditions in some areas delaying corn planting and reducing yield potential.

Conversely, the USDA has raised its 03/04 soybean production forecast for Argentina by 1 Mt from last month to a record 38 Mt. Some 35.5 Mt were produced last season. The USDA based its calculations on increased soybean planting as farmers switched from corn and sunflowers.

In their latest monthly report the IEA have raised global oil demand growth by 170 kb/d to 1.3 mb/d for 2003, and by 20 kb/d, to 1.1 mb/d for 2004.
The Chinese demand figures have been revised upwards by 1.5%, from 5.3mb/d to 5.39mb for 2003, and by 3.5% from 5.5mb/d to 5.7mb/d for 2004. The Chinese contribution to global oil demand growth is almost 35% this year and 30% in 2004.
Meanwhile OECD demand estimates are cut by 80 kb/d for 2004, reflecting more comfortable US natural-gas inventories.

The Japanese Iron & Steel Federation has disclosed that domestic steel orders in the January-August 2003 period totalled 35.2 Mt, up 0.3 Mt on the same period in 2002, but still down 4.7 Mt from 2001. The annualised figure for 2003 suggest that domestic orders this year will reach 52.9 Mt, the lowest total since 1999, indicating a slight weakening in domestic demand.

Meanwhile, Japanese steel exports in Jan-Aug 2003 reached 13.9 Mt, down 0.6 Mt from last year. While the annualised total for this year of 20.9 Mt is in keeping with annual export figures from 2000, it stands well above mid-1990s export levels of 13-16Mt per annum, suggesting that exports remain firm for the time being.

According to Chinese customs data, imports of crude oil in the first 3 quarters of 2003 have reached 68million tons, a 30% increase year-on-year. Sinopec the largest Chinese refiner has announced plans to raise fourth quarter throughput to 31million tons, a 10% increase on the average of the first 9 months of this year.
Whilst Chinese refineries have been operating at increased levels to meet domestic demand for products, it is expected that exports of gasoline will be reduced by as much as 30% during 2004 as increasing car ownership is creating additional domestic demand.

Chinese industrial output in October was up 17.2% on the previous year, the National Bureau of Statistics has announced. This was the fastest growth in 8 months and compares favourably with September's figure of 16.3%. The state news agency Xinhua added that car production in October, although at 52% more than October 2002, rose at a slower rate than in September.