News archive November 2004

The OECD has revised both its forecasts for growth for 2004 and 2005 in the OECD states. As a result of the rising oil price, the organisation estimates the GDP of the OECD states to grow at 3.6% this year, but at the lower rate of 2.9% in 2005. This compares with the previous projections of 3.4% for 2004 and 3.3% in 2005 made in May.

US economic growth is expected to reach 4.4% this year, falling to 3.3% next year. GDP growth in Japan is now predicted to fall to 2.1% in 2005 after reaching 4.0% this year. Meanwhile, the OECD expects eurozone growth of 1.8% in 2004 and 1.9% in 2005.

Soyabean export sales reported by the Chicago Board of Trade in the week to Friday (26 November) totalled 1.337 Mt including some 1.014 Mt to China, according to the Chicago Board of Trade. This compared with market expectations of 600,000-800,000t. So far, sales have reached 57% of the US Department of Agriculture's forecast for the whole season.

Corn exports also performed well in the past week. CBOT reports that corn export sales in the same week stood at 1.319 Mt, beating market expectations of 700,000-900,000t. Japan was the largest buyer, accounting for over 480,000t. To date, sales have reached 37% of the US Department of Agriculture's forecast for the entire season.

According to the South Korean National Statistics Office, the country's industrial output unexpectedly fell in October by 0.9%. In September industrial production measured 9.3% year-on-year. The October fall was the largest drop since June this year, and was largely due to increased credit card debt restricting domestic spending, and increased oil prices. Meanwhile South Korean GDP growth slowed to 4.6% in 3Q04 down from 5.5% in 2Q04, and average crude oil imports during 3Q04 fell to 2.1mb/d compared with 2.14mb/d over 2Q04.

The Baltic Dry Index passed the 6,000-mark for the first time last week. Panamax vessel returns are at historical highs; the Baltic Panamax Index currently stands at 5,812 points - over 200 points above the previous peak - and average earnings for Baltic-type Panamax vessels are now over $48,000/day.

Meanwhile, the SSY Pacific Capesize Index has reached a new record of 19,282 points, pushing above 19,000 points for the first time following a weekly rise of 599 points. The SSY Atlantic Capesize Index has also reached a record 19,657 points, surpassing the previous peak set in January.

Furthermore, the Baltic Capesize Index has advanced past its existing record high of 8,154 by climbing to 8,868 points. Average time-charter earnings for Baltic-type vessels are now in excess of $104,000/day.

Force majeure has been declared at the Venezuelan coal mine of Mina Norte, McCloskey reports. Heavy rain has been responsible for destroying the bridge linking the mine's output to the port railway, prompting mine operators to call force majeure on all deliveries for the rest of November and December (expected to amount to 0.4 Mt, all bound for North America). Output at another mine in the country, Paso Diablo, has also been adversely affected by the severe weather, but shipments are expected to continue as stocks held at the port are drawn down.

Heavy rain in Colombia is expected to lower 4q04 coal output at La Loma mine by at least 0.5 Mt, McCloskey reports. As a result of the adverse weather conditions, railings from mine to port have been delayed, with repair work on the line taking two days to complete. Ten vessels are reported to be queuing at Cienata.

The Chinese media has announced that China's premier Wen Jiabao will sign two trade agreements this month with the ASEAN-10 states (Association of Southeast Asian Nations). The People's Daily reports that the agreements cover the region's goods trade and the establishment of an arbitration body, both aimed at promoting intra-regional trade. Wider negotiations towards a Free Trade Area (FTA) involving China and ASEAN are also understood to be underway. ASEAN is also in discussion with South Korea, Japan and India regarding FTAs.

According to the latest US Department of Energy weekly statistics, US crude oil stocks rose by 85,000 bbls over last week, reaching a total of 292.4 million barrels. Distillate stocks rose for the first time in 10 weeks, reaching 115.6 million barrels, an increase of 1 million barrels, helping to reduce nervousness over heating oil shortages in the coming winter. With temperatures in the New York area currently higher than the seasonal norm the immediate pressure on prices has lessened.
The US Thanksgiving holidays at the end of this week mean the New York market will be closed tomorrow and Friday.

Concern that the weak US dollar is harming eurozone, Japanese and Korean exports is intensifying, the Financial Times reports. The Japanese government is reportedly considering currency intervention after rapid currency movements in the last week forced the yen close to a four-year high against the dollar, undermining the competitiveness of Japanese exporters in the process. South Korea's finance minister has also requested the country's central bank to intervene to prevent the South Korean rising further after it reached a seven-year high against the dollar. Moreover, Germany's export data from the 3q04 showed a fall of 1.1%, suggesting the country's exports have been affected by the strength of the euro.

According to the latest Chinese Customs figures, imports of fuel oil were 26% higher year-on-year in October, averaging 552kb/d, and breaking the record level achieved 12 months earlier 443kb/d.
Imports of diesel in October were also higher, rising by 142% year-on-year to average 50kb/d ,and are expected to continue rising in November, in the run up to winter.
Reports of a drought in Southern China could lead to a drop in hydro-electric power generation, leading to an increase in demand for both fuel oil and diesel.

China imported a total of 22.48 Mt of dry bulk imports in October, up 48% year-on-year, according to China's customs data. This brought combined Chinese imports of coal, grain, iron ore and steel products in the January-October period to 234.52 Mt, 37% more than during the same period last year. Although iron ore imports dropped from September by 2.39 Mt (reflecting a seasonal trend), October grain imports were up, reaching 1.19 Mt, the second highest monthly total since 1996, and imports of coal in October stood at 1.69 Mt, the third highest monthly total ever.

The latest International Iron & Steel Institute data show that China produced a monthly record of 24.9 Mt of steel, marking a year-on-year rise of 25%. Global output in October rose 9% YOY to hit 90 Mt. With world production standing at 854.1 Mt in the year to date, it is now very likely that world output in 2004 will total one billion tonnes for the first time. Meanwhile, Japanese output in October reached 9.74 Mt - the highest monthly total this year, with output this year well on course to be the highest annual total since 1974.

China produced a monthly record of 582,000 tonnes of aluminium in October, according to the latest data from the International Aluminium Institute. This represents a year-on-year rise of 16%. Global aluminium output in October increased at the markedly slower pace of 4.5% YOY, reaching 2.5 Mt, demonstrating the extent to which China is driving world production.

The International Monetary Fund has lowered its forecast for global economic growth in 2005 to 4.0%, down from its late September estimate of 4.3%. The IMF attributed its revised outlook to oil prices holding at near record highs and to the budget deficit in the US. Growth in Europe and Japan weakened in the third quarter of this year while annual growth in the US was at a slower-than-expected 3.7%.

China imported a total of 22.48 Mt of dry bulk imports in October, up 48% year-on-year, according to China's customs data. This brought combined Chinese imports of coal, grain, iron ore and steel products in the January-October period to 234.52 Mt, 37% more than during the same period last year. Although iron ore imports dropped from September by 2.39 Mt (reflecting a seasonal trend), October grain imports were up, reaching 1.19 Mt, the second highest monthly total since 1996, and imports of coal in October stood at 1.69 Mt, the third highest monthly total ever.

Crude oil exports from southern Iraq are being disrupted by bad weather at the same time as exports from the north are being affected by sabotage to pipelines. With only about 1.4 million barrels of crude currently in storage at the Turkish export terminal of Ceyhan, upward pressure is being brought on crude oil prices, as the first signs of colder winter weather are being experienced in the US and Europe.

The latest International Iron & Steel Institute data show that China produced a monthly record of 24.9 Mt of steel, marking a year-on-year rise of 25%. Global output in October rose 9% YOY to hit 90 Mt. With world production standing at 854.1 Mt in the year to date, it is now very likely that world output in 2004 will total one billion tonnes for the first time. Meanwhile, Japanese output in October reached 9.74 Mt - the highest monthly total this year, with output this year well on course to be the highest annual total since 1974.

In its latest monthly report, OPEC has reduced its forecast for world demand of OPEC oil, due to high oil prices impacting on economic growth. The Group cut its estimate of annual global demand by 120,000 b/d to 81.74mb/d for this year, and is estimating demand next year to grow by 1.49mb/d to 83.23mb/d, or 1.8% compared with the 2% growth in their last month's forecast.
The report stated that Group forecasters now expect oil prices of $42/bbl to $43/bbl next year, (a rise of 10%), reducing the world GDP forecast for 2005 by 0.1% to 4%.

China's fixed asset investment grew 26.4% in the year to October, according to the Financial Times. This follows year-on-year growth of 27.9% in the previous month and 43% in the 1q04. Meanwhile, the World Bank predicts that developing states' GDP will expand at the fastest rate since 1974 (6.1%). The bank also expects that reduced trade barriers will boost economic growth in developing countries to an annual growth rate of 3.4% between 2006 and 2015 compared with less than 2% in the 1990s.

According to the latest weekly report from the US Department of Energy, crude oil stocks rose last week by 815,000 barrels, less than the anticipated 1.5 million barrels.
Unexpectedly, stocks of distillates fell, and were down by 1 million barrels, putting them 11% lower than a year ago, at 114.6 million barrels. Imports of distillates ran at 200,000 barrels over the week, when normally at this time of year they average about 300,000 barrels. Demand for imports of distillates could increase in the short term, prior to the onset of colder weather, which would push trans-Atlantic product carrier rates higher.

The US Department of Agriculture has raised its wheat export forecast for Russia by 1.0 Mt to 6.0 Mt for 2004/05 (July-June). Combined wheat exports from Russia & the Ukraine in 2004/05 are now forecast to reach 9.5 Mt compared with 3.3 Mt in 2003/04. The largest wheat exporters next year are expected to be Australia (up 1.9 Mt from crop year 2003/04 to 17.0 Mt) and the EU-25 (up 5.1 to 16.0 Mt). World wheat exports are now forecast to reach 106.0 Mt in 2004/05 - up 0.3 Mt from 2003/04.

In a statement in Tokyo today, the Executive Director of the International Energy Agency said "World oil supplies are higher than demand, and the market is well supplied and stocks are building. Global inventories are gaining on increased output by OPEC and other producers."
US crude stocks are expected to show a rise of about 1.75million barrels over last week, when the US Government weekly figures are released tomorrow.

Coal exports from Colombia between January and September rose by 5.5 Mt year-on-year to 38.1 Mt, representing a rise of almost 17%, McCloskey reports. This was achieved despite industrial action by truckers in September, which hindered deliveries to the country's ports. Exports for the year are now expected to show a 7 Mt-increase on 2003.

Crude oil prices fell again today, on speculation that US stocks of crude and distillates are growing, as mild weather prevails. With the majority of oil production in the Gulf of Mexico now back on stream, after September's hurricanes, and US refineries having completed their annual autumn maintenance, fears of winter shortages continue to abate.
A threatened Nigerian oil strike is due to start tomorrow, but is not expected to impact on exports for at least a week. Unconfirmed reports from Nigeria today, state that President Obasanjo has ordered the state oil company (NNPC) to reduce the price of cooking kerosene, with a view to calming public anger at fuel price rises and averting the strike.

US consumer confidence appears to be high with retail sales data for October showing an 0.8% increase in underlying sales growth in spite of fears that high oil prices would dampen demand, the Financial Times reports. Some economists have expressed optimism that improved job growth was behind the increase in spending.

In contrast to the positive US data, latest GDP data for Japan and the eurozone suggest that the economic recoveries there may be faltering. Quarter-to-quarter GDP growth in the eurozone fell to 0.3% in the 3q04 from 0.5% in the 2q04. In Japan, economic growth grew by a mere 0.1% in the 3q, casting doubt on government claims that the country's recovery is in place.

German GDP rose by just 0.1% in the 3q04, bringing the annual growth rate to 1.3%, the BBC reports. The Economist's poll of forecasters currently projects Germany's economic growth for 2004 at 1.3-1.8%, and analysts now anticipate that the eurozone's growth figures due out this week will also be revised down. High oil prices have been blamed for the disappointing data.