News archive September 2004

The International Monetary Fund has cut its 2005 global growth forecast from 4.4% to 4.3% and warned that high oil prices threaten to curb global economic growth, the Financial Times reports. However, the latest estimate would still represent a robust rate of growth, above the world's long-term trend rate of around 4%. The IMF's forecast for 2004 growth of 5% would be the strongest for almost 30 years.

According to its twice-yearly World Economic Outlook, the IMF is forecasting global economic growth for 2004 at 5%, up from its earlier forecast of 4%, and significantly higher than the 3.9% growth achieved in 2003. If the forecast is correct it will be the strongest growth since 1973. Growth is put down to strong housing markets and rising corporate profits. The forecast for 2005 however has been dropped from 4.4%to 4.3% on the back of rising oil prices.

According to McCloskey, China exported 3.52 Mt of coking coal in the year to August, marking a sizeable decline from the same period in 2003, when 8.86 Mt were exported. Coking coal imports, on the other hand, are rising: 4.08 Mt were imported in the year to August, compared with 1.13 Mt in the same period last year. Meanwhile, Chinese YTD coke imports totalled 8.31 Mt, down from 10.44 Mt last year.

According to the latest US Department of Energy weekly figures, crude oil inventories rose last week by 3.4 million barrels to reach 272.9 million barrels. The rise was not anticipated in view of recent interruptions to production and shipping from Hurricane Ivan. However refinery maintenance has caused operating levels to drop to 83.7%, reducing throughputs and allowing stocks to build. The unexpected rise in stocks has taken some pressure of the pressure off crude oil prices.

China imported 16.42 Mt of iron ore in August, according to China's customs statistics. While the August total represents a fall from July's 18.17 Mt, it also marks a year-on-year rise of 37%. Furthermore, August is the second highest month for iron ore imports into China since April.

Disruption to oil production in the Gulf of Mexico by recent hurricanes, is likely to prevent US refiners from building stocks of distillates to normal levels prior to the onset of colder winter weather. Distillates include heating oil and diesel.
The hurricanes have also affected refineries in the area, reducing supplies of gasoline, stocks of which fell by 2.8mb (1.4%) last week, to reach their lowest level since April. Any shortfall in stocks in the run up to winter is likely to increase tanker demand to import replacement supplies.

China's State Development and Reform Commission has forecast that China's economy will grow by 9% in 2004, the state news agency Xinhua reports. This exceeds the original official forecast of 7.2% growth made at the beginning of the year. The Commission acknowledges that while many of the macroeconomic control measures put in place by central government to prevent a "hard landing" of the country's economy have been successful, some of the underlying problems are still there.

Crude oil prices hit record highs today reaching $46/bbl in London according to Reuters. Disruptions to US supplies from the Gulf of Mexico as a result of the current hurricanes is adding to concerns over supplies from Russia, Saudi Arabia and Iraq, and now Nigeria, where rebels are causing some oil production to be shut in, in the Niger delta area.

According to Platts, unconfirmed reports are circulating that the Chinese government will issue export licences for 21.3 Mt of coal, some 4 Mt than originally anticipated, which would bring the country's export total to 80 Mt for this year.

On the one hand, extra coal from China would lower average voyage lengths in the Pacific and have a dampening effect on Panamax tonne-mile demand, possibly easing pressure on congested Australian ports. On the other hand, a reduced coal price in the Pacific could see more backhaul cargoes into the Atlantic, boosting tonne-mile demand for Capesize vessels.

With US crude oil inventories at their lowest level since February and with the imminent arrival of Hurricanes Jeanne and Ivan (for the second time) the US Administration is negotiating loans from the Strategic Petroleum Reserve (SPR) with oil companies.
Hurricane Ivan has already reduced import levels by about 1.5mb/d to 8.4mb/d.

According to the latest Chinese Customs figures, crude imports for January to August 2004 rose by 39.2% to reach 586 million barrels, of which 8.5% came from Russia.
China currently imports about 1.6mb/d of West African light sweet crude, and due to its lack of de-sulphurization facilities, is likely to increase imports from West Africa to compensate for the loss of Russian supplies. State Oil Company CNPC (China National Petroleum Co.) was scheduled to receive 98kb/d of Russian crude in October and 60kb/d in both November and December.

The OECD has raised some of its forecasts for GDP growth in 2004 and argued that the "negative impact of oil market turbulence has. . .been of limited magnitude." The Organisation has revised its projection for Japanese GDP growth in 2004 upwards from 3% to 4.4%, adding that continued structural reform in the financial sector was necessary for the country to escape the trap of deflation. Similarly, the OECD raised its growth forecast for the eurozone in 2004 from 1.6% to 2%. The Organisation noted that the economic recovery in the area was export-led with domestic demand remaining weak with wide differences in economic performance within the EU-12. The OECD lowered its forecast for US GDP growth from 4.7% to 4.3%.

Inflation in China in August reached 5.3% for the second successive month, prompting speculation that the authorities may raise interest rates to rein in growth, the BBC reports. The Chinese government has previously preferred to control lending to sectors such as construction in order to avoid a "hard landing" of the country's economy.

Meanwhile, vehicle manufacture and sales in China have risen in August, ending four consecutive months of decline, China Daily reports. In the first eight months of 2004, total vehicle output was up 21%, compared with growth of 34% in 2003, according to official figures. Fixed asset investment in China in the year to August rose 30.3% year-on-year. The State Council's Development Research Centre declined to give a monthly figure for August, although a senior researcher from the Centre argued that investment growth of around 30% in 2004 would result in GDP growth this year surpassing last year's growth of 9.1%. The official current growth rate is still well down on the first two months of 2004, when fixed asset investment rose 53% YOY.

Latest data from the International Iron & Steel Institute show a new monthly record for Chinese crude steel production in August, up by 1.4 Mt compared to July (the previous record) to 23.4 Mt. This represents a year-on-year rise of 4.2 Mt. Other major Asian producers recorded slight month-on-month falls in output during August although they were still ahead on a year-on-year basis. Japan produced 9.4 Mt (up 0.2 Mt YOY); South Korea 3.8 Mt (up 0.1 Mt); Taiwan 1.7 Mt (up 0.1 Mt).

According to the latest weekly figures from the US Department of Energy, crude oil inventories fell last week by 9.1 million barrels, largely due to the need to shut down oil production platforms in the Gulf of Mexico. US crude inventories as at the end of last week stood at 269.5 million barrels. The assessment of damage caused by Hurricane Ivan last week has increased and is delaying the return of oil facilities to full operation.

According to Chinese government figures released last week, Chinese industrial output rose 15.9% year-on-year in August, up from the 15.5% growth in July, reversing a six-month slowdown and fuelling speculation that the government’s cooling methods were not working.
GDP growth was still 9.7% in the first half of the year, causing the International Monetary Fund (IMF) to raise its 2004 GDP growth projection for China from 8.5% to 9% - significantly higher than the government's target of about 7%. The strength of economic growth is driving speculation that interest rates my go up in the near future.

Latest data from the International Iron & Steel Institute show a new monthly record for Chinese crude steel production in August, up by 1.4 Mt compared to July (the previous record) to 23.4 Mt. This represents a yr-on-yr rise of 4.2 Mt. Other major Asian producers recorded slight month-on-month falls in output during August although they were still ahead on a yr-on-yr basis. Japan produced 9.4 Mt (up 0.2 Mt yr-on-yr); Korea 3.8 Mt (up 0.1 Mt); Taiwan 1.7 Mt (up 0.1 Mt).
Steel production by the EU-25 of 14.6 Mt in August was up 1.2 Mt compared to the same month last year. At 8.0 Mt, US output showed a yr-on-yr rise of 0.7 Mt.

After unusually heavy maintenance during 3Q04 North Sea production is forecast to grow by 750kb/d over the next quarter. October loading schedules show an increase of 8.3% over September volumes, indicating the beginning of robust seasonal gains over the balance of this year. Annual average production for 2004 is forecasted to be about 5.3mb/d.

Fixed asset investment in China in the year to August rose 30.3% year-on-year, China Daily reports. The State Council's Development Research Centre declined to give a monthly figure for August, although a senior researcher from the Centre argued that investment growth of around 30% in 2004 would result in GDP growth this year surpassing last year's growth of 9.1%. The official current growth rate is still well down on the first two months of 2004, when fixed asset investment rose 53% YOY.

Despite Hurricane Ivan missing Louisiana as it crossed the US Gulf, it caused a cut in output of at least 1.4mb/d (83% of US production from the Gulf of Mexico) since Monday, according to the US Minerals Management Service. At the same time US crude inventories fell by 7.1mb, and imports fell to an average of 9.9mb/d over the week due to disruptions in discharge of import cargoes. The threat of further Hurricanes approaching is also adding upward pressure to oil prices.

Surging domestic demand for steel in India is behind state-owned Steel Authority of India Ltd's (SAIL) announcement that its steel exports for 2004 will be reduced from 1.2 Mt to 0.6 Mt, the International Herald Tribune reports. As a consequence, demand for coking coal and iron ore is set to increase substantially, with SAIL arguing that Indian steel demand will double by 2012. SAIL plans to increase steelmaking capacity by 54% in the next eight years to 20 Mtpa.

Asian refiners are expected to load up to 1.6mb/d of West African sweet crudes in October. Demand has been supported in part by Japanese utilities taking extra volumes to replace nuclear power, and additionally by Asian winter demand for distillate rich sweet crudes.
High Asian refining margins and China's increasing need for sweet grades to feed gasoline demand have all contributed to the increased demand in Asia. Demand from the US will be limited in the short term due to refinery maintenance taking place between mid September and end October. Once US refineries return to the market after maintenance competition for light sweet crude will be intensified.

According to the latest US Department of Energy figures, crude oil stocks fell over the last week by 7.1 m/bbls, a drop of 2.5%, to 278.6 m/bbls. The imminent landfall of Hurricane Ivan in the US Gulf, which has caused a shut down of several local refineries and mass oil-rig evacuations, has combined to push oil prices higher today.
The announcement by OPEC of a 1mb/d increase in production is in line with expectations, and has done nothing to ease the upward pressure on crude prices.

The US Department of Agriculture has revised its forecasts for several coarse grain exporters in 2004/05 (Oct-Sep) down slightly, while edging its export forecast for Ukraine up. The USDA anticipates that world coarse grain exports will total 101.6 Mt in 04/05 - down 0.6 Mt from last month's forecast, but still marginally higher than last season's total.

Downward revisions were made to export forecasts for Argentina (down 0.5 Mt to 10.6 Mt), Australia (down 0.2 Mt to 5.0 Mt), Brazil (down 0.2 Mt to 3.2 Mt) and Canada (down 0.2 Mt to 3.5 Mt). US coarse grain exports are still expected to reach 59.1 Mt, while the USDA raised its forecast for Ukrainian exports by 0.6 Mt to 5.0 Mt -- almost 2 Mt more than the country exported in 2003/04.

Sabotage on an oil pipeline in northern Iraq and the possible after-effects of Hurricane Ivan in the US Gulf have combined to push crude prices back up again today. However according to sources within Iraq, exports from the southern terminals in the MEG have not been affected by the sabotage and are still running at about 1.9mb/d. In the US Gulf several oil companies have shut in some crude production and evacuated workers at a time of relatively low US stocks, causing nervousness amongst traders.

Japanese coal imports in July hit a record monthly high of 15.9 Mt - up 5.9% year-on-year. Year-to-July imports rose 7.7% to 105.4 Mt. Of that total, combined anthracite and coking coal imports fell 2.1% to 50.1 Mt, while steam coal imports rose 18.4% to 55.3 Mt.

This year's growth in Japanese steam coal imports has mainly been due to an increase in sourcing from Australia; in the year to July, steam coal shipments from Australia rose by over 22% to 35.6 Mt. Over the same period, steam coal shipments from China to Japan edged up 3.4% to 10.0 Mt. Steam coal imports from Indonesia also made gains - up 25% to 6.1 Mt.

Australian coal exports also fared well in August. Coal exports from Australia for the month reached 20.3 Mt, jumping 16.3% on August 2003, McCloskey reports. In the year to date, total shipments totalled 152.7 Mt, marking a rise of 7.3% year-on-year. Most of the year-to-date rise occurred at Dalrymple Bay (up 8.9% to 30.8 Mt), Gladstone (up 8.7% to 28.7 Mt) and Newcastle (up 7.7% to 52.6 Mt).