News archive October 2003

The US economy grew at an annual rate of 7.2% between July and September this year, the fastest growth in almost 20 years. The US being the largest energy user in the world, this surge is seen as an indicator of increased demand for oil.
Additionally reports that Japanese industrial production rose 3.4% year-on-year in September, gives rise to the prospect of more co-ordinated world economic growth.
The latest cut in OPEC production of 900,000 bbl/day is due to come into effect tomorrow, taking official production levels down to 24.5mb/day

Russian oil production averaged 8.36 mb/d from January to September 2003, an 0.8mb/d or 11% increase year-on-year, according to a statement today by Deputy Prime Minister Viktor Khristyenko.
Some 43% of the oil production was exported, whilst domestic markets in Former Soviet Republics absorbed a total of 204 million barrels during the period.
The statement added that sufficient oil stocks have been built up at refineries and power plants for the coming winter.

Year-to-date steam coal imports into South Korea reached 35.5 Mt, up 1.3% from the same period in 2002, according to the Tex Report. Imports totalled 3.8 Mt in September, registering a slight increase from the same month last year. Imports in September from China (2.0 Mt) and Australia (1.3 Mt) both rose 4% from last year, while Indonesian imports fell 23% to 0.4 Mt.

Further indication of the increasing influence China has on the seaborne iron ore trade has been provided by the latest report from China's Customs Statistics. China imported a monthly record 13.9 Mt of iron ore in September, which represents a rise of 16% from August and an increase of 27.5% on September 2002. Total iron ore imports for the year to date currently stand at 110.7 Mt -- up a massive 33% on the same period last year.

Corn future prices have been influenced by reports of lower Chinese corn exports. According to the Chicago Board of Trade, some analysts believe the Chinese figure in 2003/04 could be as low as 5-6 Mt (compared with 14.9 Mt in 2002/03) after a spring drought and subsequent flooding took their toll on the crop. The US Department of Agriculture had forecast 8.5 Mt and any shortfall would add demand for US supplies from Asian buyers.

Transneft, (the Russian state owned pipeline agency) has announced the opening of a newly expanded pipeline to Primorsk on1st November. Crude oil throughput will rise from the current 18million tons/pa to 30million tons/pa, an increase of 60%. Transeft also announced throughput will be further increased to 42million tons/pa by the middle of next year. The expansion is expected to increase cargo availability for Aframax and Suezmax tonnage in the Baltic Sea.

Chinese officials predict that the country's economy will grow by 8.5% in 2004, the state news agency Xinhua reports. The Development Research Centre of the State Council anticipates that the Chinese car and steel industries will continue to grow rapidly next year and forecasts steady expansion of the computer and machinery industries. Foreign investment is expected to increase, but at a slower rate.

Chinese GDP grew by 9.1% in the 12 months to September, sparking official fears that the country's economy may be overheating, the Financial Times reports. The State Development and Reform Commission reportedly expressed concern over several booming industrial sectors including steel, aluminium, cement, vehicle manufacturing and, most notably, iron production, which official sources estimated rose nearly 20% in the year to date.

With the approach to winter and colder weather already affecting the North East of the United States and Europe, there are concerns that declining crude oil stocks will limit the ability of refineries to produce sufficient heating oil. The closure of a Conoco-Phillips gasoline plant in Louisiana on Wednesday, increased nervousness over possible supply disruptions and with the latest OPEC cut in crude oil production coming into effect at the end of next week, traders are becoming jittery

Electricity generated by Japan's ten major utilities rose by 4.5% in September year on year, according to the Japanese Federation of Electric Power Companies (FEPC). Nuclear power generation fell by 18.3%, causing thermal generation to increase by 12.5%. Coal consumption in the ten major generating companies reached 4.2 Mt in September, up 16.7% YOY, illustrating the effect of the partial nuclear power plant shutdown on coal demand in Japan.

According to the latest report from the US Department of Energy, US refinery throughputs increased by 237,000 b/d, to 15.3-mil b/d, last week. This was the second week in a row in which refinery throughputs have increased, a possible sign that refineries are returning to production after the autumn maintenance period. As a result heating oil inventories increased by 1.6mb during the week, but are still below the 5 year average. As a result of the increased refinery activity crude stocks fell by 1.8mb over the week

Coal stocks at the EMO terminal in Rotterdam have registered a net drop of 0.4 Mt to 2.2. Mt as a direct result of water levels on the Rhine returning to normal and allowing coal barges to replenish stocks at power stations upstream. According to Platts, EMO expects to receive a further 2.5 Mt of coal before the end of 2003.

Another indication of the surging demand in China has been provided by official figures showing that in the year to date 3.2 million cars were manufactured in China, 35% more than in the same period last year. The China Automotive Industry Association reports that car sales in the YTD also increased by some 30% from the first nine months of 2002 to 4.3 million.

The European Union has today implemented its new tanker regulations which means an immediate ban on single-hull tankers of more than 5K dwt calling at EU ports if they are carrying heavy grades of oil, irrespective of age or flag. In addition, the new rules bring forward the existing IMO phase-out target by five years for all single hulled tankers calling at European ports. Effectively this means that Category 1 tankers (non SBT/PL, built around 1982 and before) will be withdrawn from EU trading when they reach 23 years of age or by 2005 at the latest. Other single-hull tankers must be must be phased out by 2010 - five years ahead of the IMO rules. Although the enforcement procedures for these new regulations are not yet clear, the likely result is for the displacement of older tonnage into trading areas outside of the EU and the possibility of more scrapping.

For the second successive month, China has set a new monthly record for steel production, according to International Iron & Steel Institute (IISI) figures released today. In September China produced 19.2 Mt, up 26% on September last year and 1.2 % on August 2003. For the year to date, Chinese output grew 21% on the same period last year. In the US, however, September's steel output fell by 0.5 Mt from August to 6.8 Mt, down 15% from September last year. As a result, US steel production in the YTD has now fallen from its 2002 level.

The IISI report also records that Japanese steel production grew by 3.5% in the YTD, EU production rose by 0.2% and Russian output rose 5.1% on the same period in 2002.

Venezuela's Finance Minister, outlining next year's budget, said that oil exports, (currently 1.93mb/d), would be increased to 3.02mb/d in 2004. Venezuela's production, according to government figures, is said to be 3mb/d. However industry sources estimate current production to be around 2.3-2.6mb/d and falling, due to lack of investment and staff shortages after the 2 months strike which ended in February. Their current OPEC quota is 2.923mb/d, which will be reduced on 1st November to 2.819mb/d, but to date they have not managed to match the quota since the strike.

Exports from Poland's biggest coal exporter, Weglokoks, have fallen from last year's level. In the year to September, exports reached 15.7 Mt, down 0.6 Mt from the same period last year. However, the overall decline masks increases in seaborne exports to Finland (up 39% to 1.81 Mt) and the UK (also up 39% to 1.82 Mt). Around 90% of Weglokoks' exports are steam coal.

According to figures released today by the Chinese National Bureau of Statistics, GDP in the third quarter of this year has increased from the previous quarter by 2.4%, and GDP growth for the 9 months to date is 8.5%.
Retail volume was up by 8.6% over the same period, including an increase in sales of automobiles of 77.5%.
Industrial growth is reported to have risen by 4.3% year-on-year, the highest growth rate recorded since 1995.
The Bureau also reported that annual economic growth is expected to continue at 7% or more for the next 2 decades.

Latest estimates from the USDA put Brazil's 2003/04 soya exports at 42.5 Mt, having been revised upwards by 3.4 Mt since last month's forecast. The new figure represents year-on-year growth of nearly 8 Mt. USDA has also raised its import forecast for China, which is now expected to take 20.5 Mt during 2003/04, up by 1.5 Mt from last month's estimate, putting Chinese imports at a similar level to 2002/03.

According to the latest figures released by the US Department of Energy today, US industrial crude oil stocks rose to 290 million barrels last week, an increase of 3.8 million barrels, and more than double the expected rise.
Prices have escalated by 21% since 24th September, when OPEC announced production cuts of 900kb/day, that will come into effect on 1st November. Fears of supply shortages in the run up to winter, which had been behind the price rises, have now been somewhat allayed

The US Department of Agriculture (USDA) has revised its world wheat trade forecast for 2003/04 upwards by 0.3 Mt from last month's estimate to 95.9 Mt. A large wheat crop prompted the USDA to raise its forecast for Canadian wheat exports from last month by 0.5 Mt to 14.5 Mt, an increase of 5.1 Mt on last year. In contrast, tightening supplies and higher domestic wheat prices led the USDA to reduce its EU export forecast from last month by a further 0.5 Mt to 9 Mt -- down 6.5 Mt from last year.

State Oil Marketing Organisation of Iraq (SOMO) has announced its intention to export 1.1mb/d of Basrah Light in October and 1.3mb/d in both November and December. Their aim is reach the maximum Mina al Bakr capacity of 1.5mb/ in January of next year.
Pre-war export levels at Mina al Bakr averaged 1.1mb/d, occasionally reaching1.5mb/d. Exports of Kirkuk crude from the north averaged close to 1mb/d, but since the war it has not been possible to utilise the pipeline to Ceyhan due to persistent sabotage.

The China Iron & Steel Association predicts that the country will require 182 Mt of imported iron ore in 2005 compared with 145 Mt in 2003 in order to meet domestic demand, according to the Tex Report. The industry body identifies the prospect of an iron ore shortage as China's most serious industrial issue, adding that the construction of new blast furnaces will place great strain on the country's import and export facilities, rail links, waste management and water supplies.

According to figures released by China's General Administration of Customs, China bought 28.71-m/mt of crude from Middle East producers in January-August this year, up 29.61% year-on-year. The volume accounted for 50% of the country's 57.43-m/mt crude imports in the first eight months of 2003, up 48.62% from the same period last year. China's total crude imports in January-August were 26.05% higher than a year ago.
Saudi Arabia was the top crude supplier with 9.48-m/mt in the eight-month period, an increase of 34.02% on the year. Iran was second, with 8.47-m/mt, versus 7.59-m/mt in the same 2002 period. Imports from Angola, Yemen and Congo all registered year-on-year gains ranging between 117%-380%, the customs figures showed.

The South African Coal Report has predicted that around 5.7 Mt of coal are expected to be loaded at Richards Bay in October 2003, just down on the predicted level of 5.75 Mt. Some 5.87 Mt were exported in September from the terminal, while 6.25 Mt passed through the port for export in October 2002. It was also reported that the number of vessels queuing to enter the port had risen to 6 and that berthing delays now stood at 3 days. There are reportedly 1.8 Mt of coal now stockpiled at Richards Bay.