News archive February 2005

The latest Chinese customs data show that combined imports of coal, grain, iron ore and steel products in January reached 27.75 Mt, the second highest total ever. Iron ore imports during the month were a record 20.86 Mt. January also saw a reduction in China's steel exports (from 3.7 Mt in December 2004 to 2.1 Mt), as domestic consumption rose at its fastest pace since before the government's slowdown measures at the end of April 2004.

The China Iron & Steel Association reports that steel prices in China saw moderate growth at the start of 2005, continuing the trend of the 4q04. According to China Securities News, China's steel price index moved up from 125.21 points to 131.10, a rise of 4.7% on end-2004. This indicates that China's steel demand is remaining buoyant into the 1q05.

Japan’s crude imports fell for the second month running in January, down 2.9% from a year ago to 136.3m bbl, or roughly 4.4mb/d, Japan’s Natural Resources and Energy Agency said Monday. Saudi Arabia remained Japan’s largest oil supplier, with imports rising 30.3% to 41.4m bbl but imports from the UAE were down 5.4% at 32.3m bbl and down 1.6% from Iran at 20.5m bbl. However, January’s levels were higher than December’s imports of 128.9m bbl (or 4.2m b/d). Japan’s oil demand has
stabilised in recent months with the latest report from Petroleum Intelligence Weekly showing oil demand at 6mb/d in January.

Japanese industrial production rose by 2.1% month-on-month in January prompting hope that the country's economy is rebounding from the negative growth of the 4q04, the Financial Times reports. Retail sales in January increased 2.2% from a year earlier, while the Purchasing Managers' Index also climbed - adding to the positive signals. The negative growth of the 4q04 had been attributed to disappointing household consumption levels, however, the recent data indicate that the "soft patch" may be drawing to a close.

The China Iron & Steel Association reports that steel prices in China saw moderate growth at the start of 2005, continuing the trend of the 4q04. According to China Securities News, China's steel price index moved up from 125.21 points to 131.10, a rise of 4.7% on end-2004. This indicates that China's steel demand is remaining buoyant into the 1q05.

A fire at the US coking coal mine of Buchanan, Virginia, has prompted mine owner Consol to declare force majeure on coal deliveries, McCloskey reports. The mine, which had an output last year of 4.4 Mt, produces low-vol coal for many European steel mills. With only two to three weeks of production available in stockpiles, the owners have now warned that the mine may not be operational for "a few months."

US weekly crude imports hit a 5-month low of 9.6m/d for the week ending Feb 18, the latest statistics from the US Department of Energy
show. Refinery runs fell from 91.7% to 90.2% of capacity due to refinery maintenance work. Crude oil stocks rose marginally by 0.6m bbl to 297m bbl. Gasoline inventories climbed 1.8m bbl last week to
223.5m bbl keeping inventories above the average range for this time of year. Gasoiline imports, though, fell by 399Kb/d to 776Kb/d.

The latest Chinese customs data show that combined imports of coal, grain, iron ore and steel products in January reached 27.75 Mt, the second highest total ever. Iron ore imports during the month were a record 20.86 Mt. January also saw a reduction in China's steel exports (from 3.7 Mt in December 2004 to 2.1 Mt), as domestic consumption rose at its fastest pace since before the government's slowdown measures at the end of April 2004.

Chinese crude oil imports fell to a 15-month low in January, with volumes averaging just 1.85mb/d for the month as a whole - a decrease of 25% year-on-year. This compares with an average of 2.2mb/d for 2004 and record crude imports of 2.87mb/d for December. The sharp fall in Chinese crude imports for January corresponds with the slump in crude
tanker freight rates discharging East, over this period. Product imports, however, did not show much decline from December levels, averaging 0.8mb/d for January - just 3% lower than a month earlier.

Total steam coal imports in to the UK hit a record 29.7 Mt in 2004, McCloskey reports. Trade data show that UK steam coal imports from Russia rose an impressive 84% year-on-year to 9.8 Mt, while imports from South Africa declined to 10.1 Mt - a fall of 17%. Meanwhile, steam coal imports from Colombia were up 0.2 Mt to 3.6 Mt in 2004, imports from Australia rose from 1.3 Mt to 2.0 Mt with imports from Indonesia totalling 1.5 Mt, an increase of 1.1 Mt on 2003.

Canada overtook Mexico and Saudi Arabia to become the largest crude supplier to the US in 2004 according to the latest Petroleum Intelligence Weekly. The US imported 1.61mb/d from Canada in 2004, up 4% year-on-year, and 1.6mb/d from Mexico, an increase of 1.8%. Saudi Arabia -- who was the main supplier for the past six years -- supplied the US with 1.4mb/d compared with 1.7mb/d in 2003, a fall of 19%. US crude imports averaged 10mb/d, according to PIW.

US crude oil oil prices have hit $50/bbl due to the current cold snap in the US northwest and in Europe that has driven up demand for heating fuels. Speculation that a falling US dollar will boost global fuel consumption has also boosted prices, Bloomberg reports.

The latest International Iron & Steel Institute data show that world crude steel output in January rose 8.5% year-on-year to reach 89.8 Mt. Steel production in China during January totalled 25.1 Mt - up 24% YOY, the second highest Chinese monthly output total ever. US steel output in January rose 5.3% YOY to 8.3 Mt, while Japanese production moved up 1.9% to 9.5 Mt.

Berthing delays of up to 30 days with a vessel queue of 40 are still being reported at Dalrymple Bay, according to McCloskey. McCloskey comments that a "more stringent" tonnage allocation scheme is under consideration in a bid to ease the congestion. Earlier this week, both Dalrymple Bay and Hay Point were closed due to bad weather.

OPEC has raised its forecast for world oil demand growth this year by 80Kb/d to 1.7mb/d, Reuters reports. "The world oil demand forecast for the present year has been revised upwards in line with projections of stronger world GDP growth," OPEC said in its monthly Oil Market Report. OPEC lifted its estimate for demand of its own oil in Q1 by 270K b/d to 29m b/d, but the second quarter ’call’ on OPEC oil was left at 27.7mb/d. In January, OPEC’s production fell 610Kb/d to 29.2m b/d, the report said, but less than the groups self-imposed 1m b/d cut. OPEC’s acting Secretary-General said on Wednesday that the group was leaning towards a plan to reduce oil production at its mid-March
meeting in Iran. "There is a general tendency among OPEC members to reduce production at the meeting and we will find out during the meeting whether there is a need to cut," Adnan Shihab-Eldin told Reuters.

Chinese energy production increased 14.8% to 21.9 trillion kWh in 2004, according to China's National Development and Reform Commission. According to The People's Daily, the Commission's deputy director commented that there remained tightness in energy supply last year despite the "high growth rate" of new projects coming on stream. Meanwhile, a report released by the Earth Policy Institute today (Feb 17) indicates that China has overtaken the US in the consumption of agricultural and industrial goods.

Crude and gasoline stocks in the US rose last week, the latest data from the US Department of Energy shows. Crude oil inventories climbed
2.1m bbl to 296.4m bbl despite an increase in refinery runs from 90% to 91.7% of capacity. Crude imports, though, were up 520k b/d to 10.4m
b/d. Meanwhile, gasoline stocks continued to build, rising sharply by 4.9m bbl to 221.7m bbl. This was due to a 275k b/d increase in imports to 1.2mb/d, by far the largest weekly average ever during the month of February, according to the DOE. Distillate stocks fell by 3.1m bbl to 112.5m bbl.

Reuters reports that China is to issue import licences for iron ore in an attempt to control the amount being imported into the country. The Ministry of Commerce has announced that the licences are effective from March 1, but no other details have been announced. The report by Reuters suggests that small steel mills may be most affected by the new system.

Economic growth in the eurozone in the 4q04 slowed to a disappointing 0.2% quarter-on-quarter, Bloomberg reports. German and Italian GDP contracted for the first time in over a year by 0.2% and 0.3% respectively. However, a recent NTC Research survey indicated growth in eurozone manufacturing accelerated again in January with growth in the services sector at the fastest in three months.

China will rely on oil for more than half its energy by 2010 when net imports are expected to rise to between 180-200m tons, reports Bloomberg. By 2010, oil will account for between 51.4%-52.6% of
China’s energy needs, up from 29.1% in 2000, Gao Shixian, director of energy economics and development strategy at China’s National
Development and Reform Commission said at a conference in London Monday. In 5 years the country’s oil demand will probably be between
350-380m tons. Last year, China’s net import of oil was more than 100m tons, of which about half came from the Middle East.

Australia consolidated its position as the principle source of Chinese iron ore imports in 2004, according to The Tex Report. China imported 78.1 Mt of Australian ore last year, 20 Mt more than in 2003. India's emergence as a major iron ore exporter was underlined by the fact that it overtook Brazil to become the second largest source of Chinese iron ore imports. Imports from India reached 50.2 Mt (a rise of almost 18 Mt), while imports from Brazil climbed to 46.0 Mt (an increase of 7.6 Mt). Total iron ore imports into China in 2004 were up 59.8 Mt to 208.0 Mt.

The US Department of Agriculture has lifted its forecast for wheat exports in the 2004/05 crop year (July-June) by 0.8 Mt from last month to 108.0 Mt - up 2.7 Mt on 2003/04. The exports forecast for Argentina has been raised following an unexpectedly strong pace of export sales in January due to very competitive pricing. As a result, the USDA now forecasts Argentina to export 11.5 Mt in 2004/05 - up 0.5 Mt from last month's forecast and up 4.2 Mt from the last crop year.

An upward revision in Chinese oil demand growth has led to the IEA raising its 2005 outlook in a report released this week. This is partly due to greater expectations for more Chinese naphtha demand for the new ethylene plants scheduled to come on line this year. This would suggest greater demand for product imports although crude oil imports are also expected to expand robustly.
While the Middle East accounted for about 45% of China's crude imports in 2004, this market share is lower than seen in 2003, although there was rapid growth in the crude volumes from West Africa and the FSU. Meanwhile, China's State Council Development & Research Centre has predicted growth of 8% in the country's economy for 2005 -- slightly higher than the 7.5% forecast made by the IMF.

Metal Bulletin reports that Indian iron ore prices have risen 15% since the beginning of 2005 as a result of increased purchases from China. Fines with 63.5% Fe content from New Mangalore are going for $63-64/t FOB as opposed to $55/t in the first week of the year. The report in Metal Bulletin comments that some sellers have even quoted $70/t in anticipation of greater enquiry after the Chinese New Year holidays. Fines with 62-63% Fe are attracting $50-55/t (FOB New Mangalore) compared with $48/t in early January, whereas 58% Fe fines are reportedly on the market at $28-29/t.

The International Energy Agency has upwardly revised its 2005 global oil demand growth forecast by 80kb/d to 1.52mb/d, estimating oil demand this year at 84 mb/d. The IEA based this on stronger growth in China and Southeast Asia. And demand for OPEC crude in 1Q05 is set to exceed supplies from the group for the first time in more than two years, the IEA said. Meanwhile, the IEA cut its forecast for non-OPEC supply growth by 175k b/d to 910kb/d due to disruptions to Canadian and US production and a possible slowdown in Russian supply growth.

The US Department of Energy Wednesday reported a fall in US crude oil stocks of 1m bbl to 294.3m bbl, surprising market expectations of a build, although inventories are still 8% higher than a year ago. The decline was in spite of a cut in refinery runs of 1.6% to 90% of capacity. Although crude imports rose by 28K b/d to 9.9mb/d, they were below 10mb/d for the second week running. Distillate stocks posted a large draw of 3m bbl to 115.6m bbl following the recent cold spell. Meanwhile, gasoline stocks climbed 500k bbl to 216.8m bbl as gasoline imports rose 119k b/d to 900k b/d.