News archive September 2003

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Japanese coal imports reached a record 15.1 Mt in August, an increase of 3.8% from August 2002 and 0.5% from July 2003, the country's Ministry of Finance has announced. 52% of the imports were steam coal, as opposed to 47% in July 2003. The record total is due to the higher electricity consumption of the summer, combined with many nuclear power stations closing for safety inspections and the desire to import coal before the introduction of a carbon tax in Japan from October 1. Australia supplied 56% of the imported coal in August. In the year-to-date Japanese coal imports totalled 113 Mt, up 9% from the same period last year.

McCloskey reports that the mines in Shanxi province, which have been closed for safety inspections since mid-August, are not expected to reopen until next month. According to sources in China, 25 Mt of coal will have been lost as a result of the interruption to production. As some tonnage earmarked for export by Shenhua agency has been diverted to the domestic market, loading at Chinese ports has been delayed by 15 days on average. Meanwhile, Platts disclosed that the exporter Shanxi is to resume its delayed shipments to South Korean gencos in late October.

The Mexican Energy Ministry is sticking to its 1.88-mb/d limit on crude exports for the time being and "in principle" through next year too. Whilst acknowledging OPEC's efforts to maintain stability in world oil markets, the Ministry said it "will responsibly consider the call on non-member countries to moderate increases in crude production."
Since 1998, Mexico has been closely co-operating with OPEC to help stabilise world oil markets, and is currently producing more than 3.4-mb/d of crude, - a record - and exports are running at just under their stated 1.88-mil b/d limit.

The Brazilian government is to end its ban on genetically modified soya, the New York Times reports. Brazil is currently the world's second largest exporter of soybeans, producing 52 Mt this year, 60% more than five years ago. The Brazilian Oilseeds Association has announced that the country's soybean exports in the year to September 15th reached 19.8 Mt, up 30% on the same period last year.

Crude prices rose for a second day after cuts announced by OPEC yesterday.
With northern hemisphere winter approaching and US oil stocks still 5 million bbls lower than this time last year, there are fears that winter weather will increase oil demand and prices. However as some analysts have noted, Iraqi production, despite setbacks, is rising faster than expected. With increased production from non-OPEC sources, particularly Russia, additional global supply may prevent prices from escalating much higher.

The latest report released by the International Grains Council shows that the Council has revised its world wheat trade prediction for 2003/04 downwards by 1 Mt from last month's estimate to 96 Mt -- down from 103 Mt in 2002/03. It attributes the drop to smaller imports by China and the EU. The world coarse grain trade forecast remains unchanged at 104 Mt -- a drop from 108 Mt last year. The figures reflect poor wheat harvests in the EU, Russia, the Ukraine and Argentina as well as a poor corn yield in the EU.

Australian coal exports through Newcastle have been hit by worsening congestion, as McCloskey reports that loading last week was less than 68% of its annualised capacity - down from the previous week's 77%. The vessel queue has reportedly grown from 30 to 34 ships over the same period, with an average waiting time of around 13 days.

Against market expectations OPEC has announced a cut of 900,000bbls/day in production as of 1 November, with the news leading to a sharp increase in oil prices. Analysts report that the cut is in response to the recent softening in price and the expectation of more Iraqi crude on the market.

Since mid-August prices have fallen by 8% and OPEC is intent on maintaining prices within the $22-$28 target range. Iraqi production is currently at about 1.5mb/d and there are some projections of output reaching 2 mb/d by December and up to 2.8 mb/d by the end of the 1q04.

The next OPEC meeting has been set for 4th December.

The US Department of Agriculture (USDA) estimates that European wheat exports are to fall by 25 Mt this year owing to an usually hot summer in the EU combined with a harsh winter in Russia and the Ukraine. As 5 Mt of wheat was imported from Russia and the Ukraine last year, with another 5-6 Mt coming from the EU, the USDA expects North African wheat importers to seek alternative sources. The USDA notes that, despite lower import demand from North African countries this year due to their own large harvests, US exporters are well-placed to export to destinations in Algeria, Morocco and Tunisia as well as into the Middle East in the second half of this marketing year (Oct/Sep). Such a development would boost tonne-mile demand.

Chinese crude oil imports rose to about 1.7 mb/d in the first 8 months of 2003 compared with 1.3 mb/d over the same period last year and domestic refineries are reporting record throughputs. Following the latest import figures for August oil analysts are forecasting a 20% rise in imports for 2003 compared with last year. Analysts report that much of this year's growth has been driven by higher demand for gasoline as car sales rise by 60% year-on-year. Automobile sales, telecoms and building material sales have accounted for the bulk of China's retail sales over recent months.

The latest statistics on electricity generation from the Federation of Electric Power Companies of Japan (FEPCO) show that thermal generation in August 2003 increased by 6% year-on-year. With two more nuclear power stations returning to operation, August was also the highest month for nuclear generation this year, however, nuclear power generation was still down by 33% compared with August last year.

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.

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).

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.

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%.

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.

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.

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 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.

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.

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.

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'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.

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.