News archive April 2004

The latest report from the International Grains Council shows a revised world wheat export forecast for 2003/04 (July-June) of 99.7 Mt - up 0.3 Mt from last month's forecast. The increased forecast is due to projected US exports, which have been raised 0.5 Mt to an 8-year high of 32 Mt (up 9.3 Mt from 2002/03). The largest corresponding increase in wheat imports is in North Africa, where projected imports for 2003/04 have been revised up from 14.1 Mt to 14.8 Mt.

Crude oil prices reached the highest level for 3.5 years today on the back low gasoline inventories and strong demand.
According to market analysts US gasoline inventories need to increase by at least 5% by the end of May in order to ease pressure on prices in the run up to peak seasonal demand.
OPEC estimates that crude stocks currently are sufficient and that the only pressure is on products, whereas the International Energy Agency (IEA) has stated that present stock levels do not allow for a safety margin.

Chinese imports of dry bulk goods reached a monthly record of 27.5 Mt in March, according to China's Customs Statistics. The March total was up 4.4% on the previous month and up a massive 50% on March 2003. The dramatic increase was caused by a surge in iron ore imports, standing at 19.1 Mt in March 2004.

Russian production of crude and condensate increased in the first quarter of 2004 by about 11% year-on-year, to reach a record 8.92mb/d. According to International Energy Agency (IEA) preliminary figures, 1Q04 exports rose by 270kb/d in March giving a quarterly average of 7.49mb/d. Seaborne exports from the Black Sea and the Baltic are expected to have increased over April, with the Baltic possibly exceeding the Black Sea for the first time, as weather related factors become less prevalent.

The Asian Development Bank has forecast accelerated economic growth for developing states in Asia during 2004, the Financial Times reports. The bank attributes the faster-than-expected growth primarily to the role played by China in enhancing intra-Asian trade. The ADB also predicts China's GDP will grow by 8.3% this year and 8.2% in 2005.

According to the latest report for the US Department of Energy, gasoline stocks rose last week by 900,000 bbls, to reach a total of 200 million bbls. Market analysts had been expecting a rise in excess of 1.5 million barrels. Crude oil stocks however rose by 3.2 million barrels over the course of last week, to reach their highest level since August 2002. Lower than expected builds in gasoline stocks are of particular concern as the start of the US driving season is imminent - (1st May). Refinery utilisation was also lower last week, down by 0.6% from the previous week.

Despite the current tightness in global coke markets, world steel production reached a new monthly peak in March, according to preliminary data released by the International Iron & Steel Institute. Steel output grew by 5.9% year-on-year to 85.9 Mt last month. China produced a new monthly record of 21.8 Mt, marking a year-on-year rise of 23%.

China exported 19.5 Mt of coal in the 1q04, according to preliminary figures reported by Platts. The 1q04 total represents a year-on-year decline of 10.9%. Similarly, coke and semi-coke exports have dropped 43% YOY to 2.3 Mt, illustrating the tightening in Chinese. Platts also reported that coke prices appear to have risen once again, with rumours of several deals well in excess of $400/t.

China's growing importance to the alumina and bauxite trades is underlined by the latest world data released by the International Aluminium Institute. China produced a monthly record of 510,000 tonnes in March, equating to a year-on-year rise of 23%. Output in the rest of the world over the same period increased by 3.1% to 1.92 Mt in March. The latest figures show that China now currently accounts for around 21% of world aluminium production.

The China Iron and Steel Association has called for continuing support for "high value-added projects" undertaken by larger steel firms in the face of record steel production, the state news agency Xinhua reports. China produced 61.5 Mt in the 1q04 (a year-on-year rise of 26%). Fixed asset investment in the steel sector also leapt by 107% over the same period.

The report cited Chinese analysts' views that the government fears oversupply as a result of near-term power and raw material shortages combined with an inadequate transportation capacity. In the long term, major investment in the steel industry is causing concern. China's largest steel manufacturer, Shanghai Baoshan Iron & Steel Corp, plans to increase steelmaking capacity from 10 Mt at present to 30 Mt by 2009.

The OPEC President has today announced discussions over whether to raise the oil price band (currently $22-$28/bbl) to a level of around $32-$34/bbl, in order to compensate for loss of earnings from the weaker US dollar. Venezuela and Nigeria are in favour of a rise whereas Saudi Arabia and Iran have said they are committed to maintaining the current price range. The announcement has put upward pressure on oil prices.
The OPEC basket price has been above the upper end of the current price range since the beginning of last December, and in order for such a price band increase to be effective greater discipline over production levels would need to be put in place and adhered to. Currently the official OPEC 10 quota (excl. Iraq) is 23.5mb/d however average production in March was 25.81mb/d.

A joint venture between an Australian mining company and a Chinese steel manufacturer will see additional iron ore output being earmarked for China, Metal Bulletin reports. Shanghai Baosteel Group and Rio Tinto subsidiary Hamersley Iron have opened a mine in Eastern Ranges, Western Australia, as part of a series of agreements, in which the Chinese steelmaker takes 10 Mt/year for 20 years from Hamersley and another 7 Mt/year for 10 years from 2006.

Meanwhile, CVRD has forecast that the world seaborne iron ore trade is to expand by 7% in 2004 to 575 Mt. The Brazilian mining company estimates that Chinese imports will account for 71% of the anticipated increase, taking annual Chinese imports up to 175 Mt.

Despite a terrorist attack by boats on Basrah Oil Terminal and Khor Al Amaya Terminal on Saturday, exports from both terminals have resumed today.
Nervousness amongst traders has pushed crude oil prices higher today, as supplies from Iraq are looking vulnerable. Meantime the UAE oil minister in a statement today announced that OPEC will fill any gaps in production, although they are currently close to maximum production.

The Canadian news source CBC reports that the week-long strike by Canadian tug and barge operators in British Columbia has now halted an estimated 80% of coal traffic, according to the Vancouver Port Authority. A report in the Vancouver Sun states that grain shipments are protected from the industrial action by federal law. Employers and striking operators have to decide today (April 23) whether to accept the recommendations of the federal mediator.

China's growing importance to the alumina and bauxite trades is underlined by the latest world data released by the International Aluminium Institute. China produced a monthly record of 510,000 tonnes in March, equating to a year-on-year rise of 23%. Output in the rest of the world over the same period increased by 3.1% to 1.92 Mt in March. The latest figures show that China now currently accounts for around 21% of world aluminium production.

Sinopec Zhenhai Refining & Chemical which operates China's largest oil refinery has announced plans to increase output from 16million to 20 million tonnes a year, a total of 400,000 bbls/day, by mid 2006. The company has been running the refinery at more than 95% capacity since last year.
Demand for refined oil (gasoline and diesel) from the vehicle sector has risen by 30% annually over the past 2 years, and refining margins increased by close to 8.5% last year. Refined oil demand grew by 7.2% last year with GDP growth of 9.1%, and this year's figures are expected to be over 7% growth in GDP, and in excess of 5% growth in demand for refined oil.

China exported 19.5 Mt of coal in the 1q04, according to preliminary figures reported by Platts. The 1q04 total represents a year-on-year decline of 10.9%. Similarly, coke and semi-coke exports have dropped 43% YOY to 2.3 Mt, illustrating the tightening in Chinese supply which has created problems for steel manufacturers around the world. Platts also reported that coke prices appear to have risen once again, with rumours of several deals well in excess of $400/t.

The World Bank has raised its 2004 growth forecast for Asia (excluding Japan) from 5.7% to 6.3%. The Bank bases its revision on strong Chinese expansion but also gains in some of the South East Asian economies, particularly Indonesia. Although the Chinese economy expanded by about 9.7% in the 1q04, it is expected to slow through to the end of the year, averaging 7.7%. As the dominant influence on the regional economy, the World Bank has warned that the economic health of the region is increasingly dependent on China, and any slow down in its imports would have a severe knock on effect to the rest of the Asia Pacific.
Japan's economy, meanwhile, is showing improvement, with its imports showing their biggest gain since October 2000 (reflecting higher consumer spending) and exports rising to their second highest on record in March. This should help to off-set the year-on-year decline in Japanese oil demand expected for 2004 as the country's nuclear power generation rises. Chinese oil demand is forecast to rise by 13% this year to 5.5mb/d and total Asian oil demand is expected to rise by 4.4% to an average of 21.95mb/d.

According to a Chicago Board of Trade report, the Buenos Aires Grain Exchange has reduced its forecast for this season's soybean crop in Argentina to 33.7 Mt as a result of drought conditions. The revised figure is lower than both the US Department of Agriculture's forecast of 35 Mt for 2003/04 (Oct-Sep year) and its estimate for 2002/03 of 35.5 Mt. The current USDA forecast for Argentinian soya (bean & meal) exports from 2003/04 stands at 30.1 Mt.

According to the latest US Department of Energy monthly report, soaring Chinese demand for imports of fuel oil and gasoline have increased refining margins sufficiently to cause some Japanese and Korean refiners to delay annual maintenance turnarounds. Japanese exports of gasoline to China in February increased by 59% year-on-year, causing a decline in Japanese product inventories. Increased refining margins in 2003 also caused some refineries to postpone turnarounds until this year, and according to industry reports cannot be postponed for yet another year.

Chinese GDP grew by 9.7% in the 1q04, exceeding the consensus forecast of 9.2%, the Financial Times reports. By comparison, in the 1q03, GDP had amounted to 7.9%. Total lending by Chinese financial institutions in the 1q04 leapt by 20% year-on-year, according to Chinese media sources.

The news follows recent restrictions placed by the Chinese authorities on investment in the aluminium, cement and steel industries in order to avoid oversupply. On Monday China's central bank, the People's Bank of China, raised the minimum reserve requirements for commercial banks in an attempt to curb lending. However, the People's Bank argued that the bank loan growth in the 1q04 was in sectors such as agriculture, which require investment, not in heavy industry.

Meanwhile, railway repairs have severely disrupted coal supplies to the major load port of Qinhuangdao, Platts reports. Work on the line between the port and the Datong mines in Shanxi province is thought to have reduced shipments by up to 30%. Korean and Japanese buyers are reported to be experiencing difficulties in acquiring deliveries, which may impact supply into May.

Despite the current tightness in global coke markets, world steel production reached a new monthly peak in March, according to preliminary data released today by the International Iron & Steel Institute. Steel output grew by 5.9% year-on-year to 85.9 Mt last month. China produced a new monthly record of 21.8 Mt, marking a year-on-year rise of 23%.

According to OPEC, member countries are being allowed to produce crude above their recently agreed quota's, in an effort to bring prices within their $22-$28 target range. However crude oil demand in the US, ahead of peak summer gasoline demand is causing prices to keep rising as refineries strive to boost gasoline output. According to industry reports refining margins in the US last Friday were 42% higher than a year ago, and crude prices have reached a 4 week high today.

Railway repairs have severely disrupted coal supplies to the major load port of Qinhuangdao, Platts reports. Work on the line between the port and the Datong mines in Shanxi province is thought to have reduced shipments by up to 30%. Korean and Japanese buyers are reported to be experiencing difficulties in acquiring deliveries, which may impact supply into May.

According to industry reports, the re-opening of Japanese nuclear power stations is set to continue, and will result in lower demand for oil to power electricity generation.
The total crude imports by utility companies, in the coming year, is expected to total about 137kb/d, compared to 263kb/d over the last 12 months. Japanese oil imports over 2003 averaged 4.97mb/d.

Chinese GDP grew by 9.7% in the 1q04, exceeding the consensus forecast of 9.2%, the Financial Times reports. By comparison, in the 1q03, GDP had amounted to 7.9%. Furthermore, official sources revealed that fixed asset investment jumped by 43% over the same period in spite of attempts by the country's central bank, the People's Bank of China, to rein in investment in the aluminium, cement and steel sectors.

The latest U.S. Department of Energy report shows a rise in crude stocks of 3.2 million barrels to 295.4 million barrels over last week, significantly higher than the expected1.9 million barrel increase.
Gasoline stocks also rose and were 1.0 million barrels higher at 201.1 million barrels, but 0.5% lower than a year ago, and not sufficient to allay fears of a shortage in the summer peak demand period.