News archive May 2004

Japanese official figures indicate that after 10 years of stagnation, industrial output rose by 3.3% in April compared to March, a record increase of 8.5% year-on-year. The upsurge is led by stronger demand for Japanese exports, mainly from China and other emerging Asian economies. The stronger results are further supported by flat unemployment figures of 4.7% month-on-month, significantly lower than the 5.5% level of January 2003. Increased consumer spending in April, 9.3% higher than March also lent support to the reported recovery.

The US Department of Commerce has lifted its estimate of 1q04 US GDP growth. The Washington Post reports that 1q04 growth now stands at 4.4% - 0.3% higher than economic growth in the 4q03 and 0.2% higher than the Commerce Department's estimated rate of one month ago. The improvement has been attributed to increasing business inventories, reflecting stronger business confidence. The Post adds that some analysts anticipate 2q04 GDP growth of 4.5-5%.

The OPEC President has hinted that increasing quota's in order to encourage lower oil prices is the most likely outcome from next week's meeting. Saudi Arabia has taken the lead in calling for increased production, but is one of the few member countries that have spare capacity. Several of the members are already pumping at maximum capacity whilst Venezuela and Indonesia are currently unable to meet their quota targets. Non OPEC Mexico and Russia have also agreed to increase production to meet global demand. OPEC is currently producing 25.8mb/d, although the official quota is 23.5 mb/d.

Further indications of a healthy level of growth in the Japanese economy were provided by the latest trade data, the BBC reports. Japan's trade surplus in April rose by 30% year-on-year, primarily driven by Asian demand for Japanese electronic and steel products. Recently, it was announced that Japan's GDP expanded by 1.4% in the 1q04, exceeding many market expectations, while industrial production grew by 7.7% YOY in March.

According to the latest weekly US Department of Energy figures, gasoline stocks dropped by 700,000 bbls over the week to 203million bbls. Stock levels are now 1% lower than a year ago, compared to the previous week when they were 2.3% lower year-on-year. Crude oil stocks were unchanged at 298.9mbbls and the improved situation was sufficient to bring futures prices slightly lower.

The Brazilian trade delegation accompanying President Lula on his visit to China appears to have boosted trade between the two countries. The Financial Times reports that Brazilian mining company CVRD has signed a series of agreements with Chinese steel manufacturers. These comprise production of an additional 2 Mtpa of coke in China from 2006, 25% of which will be exported to Brazil, as well as the planned construction of a steel mill in Brazil which could eventually produce 7.5 Mtpa of steel slabs.

Falling domestic oil products demand has caused a build up in stocks in Japan and brought significant delays to vessels waiting to discharge clean imports. The build up coincides with stagnating domestic prices and rising prices in China and USA, opening up arbitrage opportunities. According to the Japanese Ministry of Economy, Trade and Industry (METI), in March, domestic oil product sales fell by 5.3% year-on-year, whilst exports increased by over 50%.
Reports indicate that some vessels have been waiting for over 2 weeks to discharge cargo in Japan putting pressure on clean LR2 tonnage supply for June loadings in the MEG, and forcing freight rates higher.

Saudi Arabia’s pledge to raise production by about 6% to 9mb/d from June has led to bullish sentiment in the tanker markets at the start of the week at the prospect of more available cargoes. Saudi has also said it will urge OPEC to raise its output ceiling by 2mb/d from the current 23.5mb/d. The likely boost in OPEC production comes as pressure from some key importers intensifies. The US has led the call for more crude to be released onto the market as a means to reduce prices. Saudi’s share of crude supply the American market, meanwhile, has fallen to a reported 14% so far this year (from 20% in the 1h03) but a significant production increase could raise long-haul exports to the US and boost tonne-mile demand.

American oil demand is up by about up 1.5% so far this year on the back of a buoyant economic climate and strong demand for transport fuels in particular. In addition, the stockpiling of crude for the strategic reserve is adding to the robust import volumes. On Friday, the American energy secretary said that in spite of the high oil prices and strong commercial demand for crude, the strategic reserve would continue to be built to its 700mb capacity by early 2005. The reserve currently stores about 660mb and according to US Dept of Energy data, has been growing steadily by an average of 1mb/week over the last 12 months.

China produced a monthly record of 518,000 tonnes in April, according to data released by the International Aluminium Institute. China now accounts for 22% of world aluminium output, with April's total marking a year-on-year rise of 21%. In contrast, North American production (currently 18% of the global total) fell YOY by 5%, while world output rose by 9%.

The Financial Times reports that Chinese soybean buyers are demanding a renegotiation of existing contracts from Brazilian producers. Some 4 Mt of soybeans reportedly ordered in February and March have not yet been delivered, and 16 Chinese purchasing companies are seeking a lower price and later delivery dates than previously agreed. Furthermore, Chinese sources have claimed that a banned fungicide has been detected in a second shipment of soybeans from Brazil. A temporary ban on imports from four overseas companies has already been put in place by Chinese authorities.

Saudi Arabia has announced it will raise production by about 6% to 9mb/d from June, according to news wires today. The announcement comes under widespread pressure from some key importers in the run up to OPEC's next meeting in Beirut.

Saudi's share of crude supply the American market has fallen to a reported 14% so far this year (from 20% in the 1h03) but a half-million barrel production increase could raise exports to the US. The American energy secretary said today that in spite of the high oil prices and strong commercial demand for crude, the strategic reserve would continue to be built to its 700mb capacity by early 2005. The reserve currently stores about 660mb and according to US Dept of Energy data, has been growing steadily by an average of 1mb/week over the last 12 months.

US gasoline inventories rose by less than was expected by the oil industry last week, leading to a rise in forward prices and more pressure on commodity and stock markets as fears that the higher energy cost could slow economic growth.
In its most recent weekly report, the US Department of Energy warns that a further draw on crude inventories is likely in the near term crude. "Oil imports would need to average about 10.4 million barrels per day just to keep inventories from falling," the Department reports, but points out that there have only been a total of five weeks in which US crude oil imports have ever averaged above 10.4 mb/day. "Thus, it is more likely that crude oil inventories will fall away from the 300-million-barrel mark over the next few months."

An upbeat statement by Huang Ju, China's vice-premier, indicates that measures taken to cool overheated investment are beginning to work and that interest rates are unlikely to rise before the central bank has gauged the effectiveness of the current credit squeeze, the Financial Times reports. He said that the Chinese economy "will continue to grow at a relatively fast and steady pace" and that the government "will continue to implement stable monetary policy using various monetary policy tools to appropriately control the money and credit scale to prevent inflation and financial risks, at the same time promoting economic development".
Meanwhile, a delegation led by Brazil's president will visit China this weekend with the aim of significantly expanding bilateral trade, which has more than quadrupled over the past four years. This will include soya trade, which has been subdued over recent weeks.

The tightening of Chinese coal exports is demonstrated by an announcement from the main coal-producing Chinese province of Shanxi that production in the province is to be increased, but exports reduced, in order to meet surging domestic demand. McCloskey reports that total coal output in Shanxi province is to climb from 471 Mt last year to over 500 Mt this year. Some 5 Mt of Shanxi coal were exported to such countries as Japan and South Korea last year. An official in the province added that a shortage of Chinese coal would continue to cut exports in the long run.

OPEC looks increasingly likely to raise its output following its meeting in early June according to industry reports this week. Due to the very strong demand for crude, and recent IEA upward revision of its demand estimate for 2004, OPEC ministers meeting this weekend to discuss a Saudi Arabian proposal to raise quotas in order to help lower prices, could mean as much as 1.5 mb/d on the group's official output level (currently 23.5mb/d). OPEC is already producing 2m barrels a day more than its self-imposed quota.

The latest International Iron & Steel Institute data indicate that world steel production in April egded down from the record output recorded in March to 83.4 Mt (from 86.5 Mt). Nonetheless, global steel output in April still stands 6.5% higher year-on-year. Chinese steel output in April was over 20% higher YOY, reaching 20.9 Mt.

According to State Oil Marketing Organisation of Iraq, (SOMO), repairs have been completed to the pipeline near Basrah, which was damaged in an attack last week. The pipeline is now being tested prior to resumption of normal pumping. Since the attack, the pipeline has been operating at about half the recent level of 1.7 to 1.8mb/d. In the meantime SOMO advised that oil flows from Kirkuk to Ceyhan have been halted due to 'unspecified problems' and there are no immediate plans to issue another tender for Kirkuk crude.

Japan’s product imports are down by 8% for the 1q04 compared with the same period last year, according to the country’s latest import data.
Crude imports, meanwhile, are lower by 5% with some of the most significant falls from West Africa. Crude imports from the Middle East remained at similar levels to the 1q03. The reduction in oil imports is as more nuclear power plants are re-started in the Tokyo area after a shut-downs of 17 units in 2002/03. As its demand for domestic
consumption of oil falls, Japan’s product exports are rising. For the first quarter this year, product exports were up by 36%. Much of this rise is due to the growing volume of gasoline cargoes shipped to China in February and March this year. Notably Japan’s total jet fuel exports were also up, by 42% year-on-year in the 1q04.

SSY are pleased to announce that they have now officially registered a joint venture company with containership specialist Stuewe + Co of Hamburg which is headed by Jan-H. Heikes and Kenneth Mahler. The establishment of the company follows a period of co-operation between both companies which has been very successful.

The new company SSY Stuewe + Co Schiffahrts GmbH + Co KG will be located in Hamburg within Stuewe + Co's current office and where SSY newbuilding broker James Kitching will be based.

The joint venture company will focus on project deals by combining Stuewe's expert knowledge of the containership markets and client contacts within Germany with SSY's global network of information and knowledge of the newbuilding and sale and purchase sectors.

SSY senior partner John Welham said, "We are absolutely delighted with the new venture. Jan-H. Heikes and Kenneth Mahler share so many of the same views, values and philosophies held by SSY. We are very comfortable with them and we are very confident that the new business venture will become extremely successful by pooling our different areas of expertise."

Jan-H. Heikes said, "Thanks to SSY's excellent connections to the yard industry, we will be able to offer our clients direct access to building spaces and we will be able to guide and support our clients with solid research data from SSY's independent research company. This combination is unique in Germany."

SSY are also pleased to announce the establishment of SSY Gas Ltd.

Gas broking specialist Jan Fredrik Hammer has joined SSY and is a director of the new gas company to be based in London, although initially he will be located in SSY's office in Oslo.

Jan Fredrik Hammer has some eighteen years of expertise in the gas broking field specialising in both the LNG and LPG sectors. John Welham said that SSY were very pleased to have hired such a respected individual in the gas market and that SSY's entry into this sector was a natural progression for the group.

He further stated that SSY, on behalf of clients, had recently contracted newbuilding LNG carriers in Korea and had acquired further such tonnage from the secondhand market, and that SSY felt confident that they can introduce other new players into the gas market from their existing client base now that they had genuine in-house knowledge.

For both the joint venture with Stuewe + Co and for the gas company, John Welham sees these developments as only a starting point. He said that SSY are committed to expand both businesses and will be hiring other people to be based in London, Hamburg, Oslo and in the Far East. We have the support of many of our clients and we are very excited about the prospect of expanding into these areas which means that SSY now has a comprehensive coverage of all the major sectors of the shipping markets.

SSY are pleased to announce that they have now officially registered a joint venture company with containership specialist Stuewe + Co of Hamburg which is headed by Jan-H. Heikes and Kenneth Mahler. The establishment of the company follows a period of co-operation between both companies, which has been very successful.

The new company SSY Stuewe + Co Schiffahrts GmbH + Co KG will be located in Hamburg within Stuewe + Co’s current office, where SSY newbuilding broker James Kitching will be based. The joint venture company will focus on project deals by combining Stuewe’s expert knowledge of the containership markets and client contacts within Germany with SSY’s global network of information and knowledge of the newbuilding and sale and purchase sectors.

SSY are also pleased to announce the establishment of SSY Gas Ltd.

Gas broking specialist Jan Fredrik Hammer has joined SSY and is a director of the new gas company to be based in London, although initially he will be located in SSY’s office in Oslo. Jan Fredrik Hammer has some eighteen years of expertise in the gas broking field specialising in both the LNG and LPG sectors. SSY Senior Partner John Welham said that SSY were very pleased to have hired such a respected individual in the gas market and that SSY’s entry into this sector was a natural progression for the group.

For both the joint venture with Stuewe + Co and for the gas company, John Welham sees these developments as only a starting point. He said that SSY are committed to expand both businesses and will be hiring other people to be based in London, Hamburg, Oslo and in the Far East. We have the support of many of our clients and we are very excited about the prospect of expanding into these areas which means that SSY now has a comprehensive coverage of all the major sectors of the shipping markets. [In Full]

The US Department of Agriculture has made its first forecast for the 2004/05 year. Wheat exports are forecast down 2 Mt from 2003/04 to 101.6 Mt in 2004/05 (Jul/Jun year). Notable increases in exports are projected in Australia (up 3 Mt to 17 Mt) and the EU-25 (up 4.5 Mt to 14 Mt), while US exports are expected to drop (down 6.5 Mt to 26 Mt). Chinese wheat imports are predicted to rise from 3 Mt in 2003/04 to 8 Mt in 2004/05.

Coarse grain exports are forecast down 1 Mt to 101.2 Mt in 2004/05 (Oct-Sep year). US corn exports are projected to rise to a six-year high, reaching 53 Mt (up 1 Mt from 2003/04).

Due to the very strong gasoline demand seen so far this year, the US Dept of Energy has warned that as domestic refineries near their capacity limits, gasoline supply could, "meet a summer supply crunch". In this case, demand is likely to increasingly met by more product imports. However, the Energy Department points out that maintaining the higher rate of gasoline imports seen so far this year may be difficult due to more stringent global regulations on the sulphur content, thus limiting foreign refiners' ability to export greater volumes of the lower-sulphur-content gasoline to the US.

Monthly US coal exports in March (excluding exports to Canada) reached their highest level since January 2001, according to trade data in the Tex Report. The March total was 3.33 Mt, marking a 67% rise from last year. The data indicate clearly the return of US coal exports to Japan: Japanese imports of US coal reached 558,000 tonnes in March (approximately 396,000t of coking coal and 161,000t of steam coal), as opposed to around 3,000 tonnes in the whole of the 2003 calendar year.

According to the US Department of Energy, gasoline demand has reached record levels this year driven by recovery of the US economy. Demand over the first 4 months of 2004 averaged 8.9mb/d compared to 8.6mb/d over the same period last year, and is continuing to strengthen. The latest weekly figures show demand for the last week of April and first week of May reaching 9.3mb/d. The Department forecasts gasoline demand over the summer will increase by 1.8% over last year’s levels. The strengthening demand is preventing inventories from building and putting upward pressure on crude oil prices.

Australian coal exports in April rose 11.3% year-on-year to 19.5 Mt despite supply-side difficulties and port congestion, McCloskey reports. Moreover, year-to-date figures show an enhanced performance YOY, increasing 5.7% to 75.5 Mt. Of the major ports, Dalrymple Bay is the only one to register a YOY decline in April due partly to the process of returning to full operations after equipment failure cut throughput.