News archive March 2004

We are pleased to announce that PT SSY Indonesia has formed a joint venture company with PT Parna Raya Group called PT SSY Parna Raya.

PT SSY Parna Raya has been formed with the purpose of offering ship agency services as well as other logistical services such as stevedoring and trucking. Both SSY and Parna Raya see this as a natural extension to their core business, enabling them to serve better the growing needs of their client base.

PT SSY Parna Raya will be domiciled at the current SSY office in Jakarta and the company will in due course be opening further offices as required at various strategic locations around Indonesia.

SSY's International Shipbroking Organisation combined with Parna Raya's long-established network in SE Asia is seen as an ideal blend of strengths which will enable the newly formed company to establish itself quickly in the forefront of ship agency and logistical services in Indonesia.

The company's agency department will be run by Captain Apollinaris and his three staff members, who bring with them a wealth of experience and knowledge to the company.

PT SSY Parna Raya
S. Widjojo 3rd floor
Jl. Jend. Sudirman Kav 71
Jakarta 12190 Indonesia
Tel: +62 21 526 4425
Fax: +62 21 526 4426
E-mail: ssyparna@cbn.net.id

India's economy grew at a faster pace in the 4q03 than the Chinese economy, the BBC reports. Newly released figures show year-on-year growth of 10.4%, surpassing the 9.1% growth registered in China. While a large proportion of the growth can be attributed to increased agricultural production, India's manufacturing sector grew by 7.4%. The country's industrial production also rose 7.4% in January 2004.

OPEC announced a 4% reduction in its production quotas to 23.5 mb/d as of April 1 in line with its announcement in February. Industry observers indicated some concern as to the loss in oil supply, and upward pressure on prices, (particularly gasoline in the US) following the explosion at one of the largest American refineries on March 30. OPEC has indicated that another cut is possible in the 2q04. For January and February OPEC production averaged 27.78mb/d, slightly/well above its target output of 25.4mb/d.

Yesterday's refinery fire in Texas sent US gasoline prices in New York to an 18-year high on fears of a shortage to supply in the run up to the American driving season. US gasoline inventories have fallen by eight out of the nine of the last weeks and are now well below the seasonal average range. The US Energy Department has indicated that a rise in gasoline imports could be a feature of the market in the near term.

Metal Bulletin reports that India has raised the ceiling for exports of high quality iron ore (65-66% Fe) from the Bellary-Hospet region from 3 Mtpa to 5 Mtpa in 2004-05, thus paving the way for increased production levels. Demand from China has lifted the iron ore FOB price (for direct charge iron ore of 62-64% Fe) to around 90$/t with further rises anticipated, according to Goan iron ore exporters. Some 45 Mt of iron ore were exported by India in 2003.

In a report issued by the Japanese Ministry of Economy Trade & Industry today, recovery from the third recession since 1991 may be slowing. Industrial production fell by 3.7% year-on-year, the largest drop for over 3 years. Manufacturers have cut jobs, moved production overseas and are keeping inventories close to 14-year lows. The yen has strengthened by 14 % against the US dollar in the past year putting pressure on exporters' profit margins, forcing them to keep costs and stockpiles low. Exports fell 1.4% in February, the first drop in five months
Manufacturers cut 350,000 jobs in February, according to unadjusted figures in today's report, the biggest decline since last June 2003..

Grain exports are resuming at the Brazilian port of Paranagua, following the end of industrial action by port workers, which resulted in a five-day shutdown at the port (from 19-24 March). The strike action occurred just as the Brazilian soybean harvest is nearing its peak. According to Bloomberg, police estimated that the queue of trucks laden with corn and soybeans for export stretched to 63 miles (100 km) at one stage. It was estimated that fifty bulk carriers were waiting to dock when the strike ended.

Traders have been following Brazil's soybean crop forecasts closely. Earlier this month, the US Department of Agriculture revised its 2003/04 soybean production forecast for Brazil from 61 Mt to 59.5 Mt 2003/04 (October-September) due to bad weather, with soya exports (bean and meal) projected at 41 Mt. Moreover, Safras e Mercado, the Brazilian-based forecasting company, lowered its projection from 56.7 Mt to 52.3 Mt.

There are reports that China has issued coke licences for a further 5.4 Mt, adding to the 3.3 Mt already issued for delivery in 2004, according to Platts. The combined figure is still down on last year's estimated total of 14.7 Mt. The tightened supply of coke has become a critical issue for steel manufacturers around the world with FOB prices approaching $400/t.

Signs are emerging from OPEC of a possible delay to the 1mb/d production cut, proposed at their previous meeting in February. Unconfirmed reports indicate that most OPEC ministers believe current prices are between $5-$8 higher than they should be. The OPEC basket price has recently risen to over $32/bbl, the highest level in 13 years, and has been higher than the upper limit of the $22-$28 target range, since the beginning of November 2003. OPEC is reportedly concerned that a possible excess of crude onto the market in 2Q04 may cause prices to fall in the short term, and with the weakness of the US dollar it is not keen to risk falling revenues.

The International Grains Council has revised its forecast for Chinese corn exports in 2003/04 (July-June) upwards from last month's projected 11 Mt to 12 Mt. US exports, on the other hand, are projected to reach 54 Mt (revised down from last month's 2003/04 forecast of 55 Mt, but still marking a substantial increase on 2002/03's estimated total of 47.6 Mt). The IGC's world corn trade forecast remains unchanged.

Transneft (the Russian state pipeline company) has announced a total of 1.24mb/d pipeline shipments to Baltic ports for April, an increase of 91,000 b/d from March. April shipments from the Black Sea however, have been set at about 1.16mb/d, a reduction of 68,000 b/d from March, and the first time exports have been lower than from the Baltic. Recent upgrades of the Baltic Pipeline System (BPS), to 840,000b/d, have allowed increased exports to North West Europe, and with upgrading work ongoing, the April schedule has been set at 856,000 b/d. Traders say that it would be possible to increase pipeline shipments to Primorsk, but exports are constrained by the shortage of ice-classed tankers

Surging exports in February have contributed to Japan's economy being on course for what a senior official from the Bank of Japan described as a "self-sustaining recovery phase", the news agency Kyodo reports. The overall trade surplus grew year-on-year by 52%, with exports registering a 10% increase over the same period. A small fall in imports did not deter the Nikkei-225 index from rising on the announcements.

According to the latest US Government Energy Department figures, US commercial crude oil stocks rose last week by 7.5 million barrels, to reach a 4 monthly high of 288.6 million barrels. Imports for the week averaged 10.1mb/d, an increase of 16% year-on-year. However crude oil inventories are still well below the 5 year average, and with annual refinery maintenance coming to an end, refinery throughputs will shortly begin to increase, putting stocks under greater pressure. Demand for crude imports is therefore expected to increase in the run up to peak seasonal demand for gasoline.

The six-day strike by Brazilian port workers at Paranagua has been called off by union leaders, according to Bloomberg. Exports are reportedly scheduled to resume later today (March 24). It is estimated that fifty ships are waiting to dock.

Latest data from the International Aluminium Institute (IAI) show that world aluminium output in February stood at 2.29 Mt - up 11% year-on-year. As with the steel industry, an increase in Chinese output has been behind the recent growth in global aluminium production. China produced 491,000 tonnes in February, which, although slightly short of monthly production levels in the 4q03, still marked a YOY rise of 25%. China produced 21.5% of the world's output in February, contrasting with 2000, when the country's annual production accounted for 11.6% of the world total.

The 360,000 mtdwt converted ULCC 'Belokamenka', moored off Murmansk, will receive her first transhipment cargo of about 15,000 tons of crude oil, tomorrow. Exports from this ice-free storage terminal are expected to commence at the end March in Aframax tonnage. Rosneft plan to export up to 240,000 tonnes of crude per month from June, by which time the 'Belokamenka' will be serviced by a fleet of 4 shuttle tankers. The long awaited development will simplify Russian export logistics, which are currently hampered by lack of pipeline infrastructure, and shallow and ice restricted loading ports.

US coking coal exports have surged in January 2004, according to figures released by US trade organisation the National Mining Association. Coking coal exports for the month totalled 2.25 Mt - virtually double the quantity of the previous month and up 26% year-on-year. The data demonstrate how the scarcity of coking coal is forcing steel mills from around the world to turn to the US: the YOY rise is the result of increased transatlantic exports to Algeria, Brazil, the EU and Turkey, as well as exports to hard-pressed Japanese buyers.

Some positive news for coking coal supply came from Australia. Coking coal output in the country is set to grow as a result of an announcement by BHP-Billiton Mitsubishi Alliance (BMA). Nikkei reports that the BMA's coking coal output in Queensland, which feeds such ports as Gladstone, Abbot Point and Dalrymple Bay, will rise from 48 Mt to 53 Mt annually. Efficiency improvements in train scheduling and unloading times were being sought in order to help meet demand, according to McCloskey.

Industrial action involving Brazilian port administrators, shippers and dock workers at Paranagua is continuing to halt exports just as the soybean export season is due, Reuters reports. The port had been closed until further notice from 19 March. Police estimate that the queue of trucks laden with corn and soybeans for export has now lengthened to 63 miles (100 km).

Meanwhile, a strike by Canadian railway employees, which had slowed exports for four months, has ended, according to The Toronto Star. Crop exports had suffered as a result of loading delays between lorries and trains.

Russia has finally decided to build an oil pipeline from Siberia to Nakhodka to serve Far Eastern markets. The project involves about $7billion of Japanese loans and investments. China had been competing with a proposal for a pipeline to run from Siberia to Daqing, however Russia has now decided in favour of the Nakhodka route, with a branch running to Daqing.
The Japanese scheme is preferred as it gives greater flexibility allowing for Russian exports to reach South Korea and USA, in addition to Japan. The pipeline will require development of the untapped East Siberian oil field, for which European and US oil major involvement will also be sought.

Tokyo Electric Power Company has announced it has restarted the No 4 reactor at its Fukushima Daiichi nuclear power plant, Bloomberg reports. The reopening means that eight of Tokyo Electric's 17 reactors have now returned to operation following the initial shutdowns, which began in September 2002. The company also revealed that two further reactors only require local government approval before resuming generation. The move is likely to soften Japanese demand for steam coal this year.

India's industrial production figures for January rose 7.4% - its highest level since April 2000, according to data released this week. In December 2003 its industrial production measured 6.2%. Last year Indian crude oil imports rose by 16% from 2002 to an average of 1.8mb/d, largely on the back of an expanding refinery sector for product exports. In the last two months of 2003, however, India's oil consumption rose by 5% in November and 3.5% in December. This is a marked change from the fairly flat pattern in the country's oil demand over the last couple of years. This year the International Energy Agency has forecast Indian oil demand to rise by 6% to 2.42mb/d. In 2003, its oil demand rose by less than 0.5%.

US gasoline demand has been very strong this year, averaging 4.5% above year-ago levels in the last four weeks. The US Dept of Energy warns, "the lack of ability to increase gasoline production substantially, including here in the US, may make it difficult for refiners to supply enough gasoline this spring". US gasoline imports are averaging below year-ago levels, despite the fact that product imports in January and February 2003 were adversely affected by the disruption in Venezuela. The Dept of Energy says that gasoline imports have been lower due to "relatively high freight rates, low supplies available for export from Europe, and, possibly, from lower-than-normal exports from Venezuela."

A strike by Brazilian agricultural inspectors is causing severe delays to grain exports from the country's ports, Bloomberg reports. A queue of trucks stretching for 36 miles (60 km) has reportedly formed outside the major grain-exporting port of Paranagua. According to Oster DowJones, the port's throughput capacity was already under strain as a result of high levels of corn and soybean exports combined with heavy rainfall stopping operations over the weekend. The government has announced it is considering a special decree to end the industrial action.

According to the latest reported government figures, Chinese car production in February grew by over 60% year-on-year. Actual car sales in China, however, grew by about 36% in the first two months of the year. Even so, the rapid increase in vehicle ownership is likely to lead to higher demand for imported gasoline in the near term and also crude to feed domestic refineries.

Coking coal output in Australia is set to grow as a result of an announcement by BHP-Billiton Mitsubishi Alliance (BMA). Nikkei reports that the BMA's coking coal output in Queensland, which feeds such ports as Gladstone, Abbot Point and Dalrymple Bay, will rise from 48 Mt to 53 Mt annually. Efficiency improvements in train scheduling and unloading times were being sought in order to help meet demand, according to McCloskey.

Another fall in US gasoline inventories has sent oil prices rising today with Brent trading well above $33/barrel and WTI up to the $38/barrel mark. Strong demand for gasoline in the States is leading to a squeeze on inventories with stocks a reported 3% below the 5-year average. Since the start of 2004, average gasoline import volumes have averaged 8% below the same period last year. Because of the low inventories, the US Department of Energy has reported that "imports, for both gasoline and crude oil will be an important factor in determining gasoline prices this coming season".