News archive January 2005

Japanese iron ore imports in December reached 12.6 Mt, up 4.8% year-on year, according to the Tex Report. This brought imports for the CY 2004 to 134.9 Mt, a rise of 2.1% on the previous year. The extremely high annual import total reflects the boom in Japanese steel output. International Iron and Steel Institute data show that Japanese steel mills produced 112.7 Mt in 2004, the highest annual total since 1974.

The IGC has raised its forecast for the world wheat trade for 2004/05 (Jul-Jun) by 0.7 Mt from its last forecast made in November to 102.3 Mt. This is 0.6 Mt higher than the estimate for world wheat trade in the 2003/04 crop year. A better-than-expected crop in Argentina prompted the IGC to raise its export forecast for 2004/05 from 9.0 Mt to 10.0 Mt. A high pace of shipments to Egypt means that the forecast for Egyptian wheat imports has been raised from 7.0 to 7.5 Mt. Compared with the last crop year, the 04/05 forecasts show a shift in demand from Europe and the FSU to the Far East.

Infrastructure poses a potential problem to China's oil expansion plans, according to the country's National Development and Reform Commission. The government said transport bottlenecks affecting crude supplies in and product supplies out of refineries are unlikely to be resolved in the short term. The Commission is calling for a diversification in oil imports, as maintaining a stable supply of products is becoming more difficult with refineries running at high rates. In particular, it advised Chinese oil refiners to make efforts "to raise diesel output."

US Crude oil stocks rose 3.4m bbl to 295.6m bbl last week with crude imports up 338kb/d at 10.5mb/d, according to data released by the US Department of Energy Wednesday. Refinery capacity was cut to 91% vs 91.5% the previous week due to refinery maintenance work. Meanwhile, US distillate imports hit their highest level in 11 months at 525kb/d due to the current cold snap in the US. Distillate stocks fell 2.3m bbl to 121.5m bbl, with heating oil stocks down 2.1m bbl. Gasoline stocks fell 2.3m bbl, the first drop for 12 weeks, while gasoline imports rose 53kb/d to 636k b/d.

The strength of the Chinese economy and its importance to Japan’s economic recovery were emphasised in preliminary data released by Japan’s finance ministry. Last year China overtook the US to become Japan’s main trading partner for the first time, with trade totalling the equivalent of $214bn, the Financial Times reports. Imports and exports between Japan and China were fairly evenly matched.

According to preliminary data from the American Iron & Steel Institute, US imports of steel in 2004 rose 54% on 2003, reaching 32.3 Mt. Of this total, finished steel accounted for 25.7 Mt, a rise of 55% year-on-year. In December, total US steel imports increased by a massive 63%.

The Financial Times reports that Chinese GDP rose by 9.5% in 2004, outstripping many analysts' projections. Last year the Chinese economy grew by 9.7% in the 1h04 before slowing to 9.1% in the 3q04, but then growth recovered to 9.5% in the 4q04. This compares with GDP growth of 9.1% in 2003. Fixed asset investment for the year increased at a rate of 25.8%, down on the 1q04 growth rate of 43%, which had alarmed economists earlier in the year, raising fears of economic overheating.

China's customs data show that a new monthly record was set for dry bulk imports in December (28.1 Mt), led by iron ore imports (20.75 Mt). Iron ore imports increased in the 4q04 as buyers anticipated large increases in annual contract prices. Coal and soya imports also had a strong end to the year, both of which totalled over 2 Mt in December.

Chinese oil imports hit record highs in December '04 of 3.7 mb/d, up 32% on a year ago, according to the latest Chinese Customs data. Crude imports were at 2.9 mb/d compared with 2.2 mln in Dec '03 while product imports rose to 819,000 b/d, up from 575,000 b/d a year earlier. Diesel imports registered a sharp climb to 130,000 b/d compared with 19,000 b/d in Dec '03, reflecting increased power generation and vehicle use. For 2004 as a whole, total oil imports averaged 3.2 mb/d.

Metal Bulletin reports that transportation problems have resulted in 37 Mt of iron ore still deposited at Chinese ports, with stockpiles particularly large at Tianjin and Qingdao. An official from a leading Chinese steel manufacturer was quoted saying that steel output in the country has not been affected, however, with no reports of any Chinese blast furnaces being idled. With steel production in China continuing to rise at a robust pace (December output reached a record 26.5 Mt - up 33% YOY), this should mean that an upward trend in imports should resume once the bottlenecks have eased.

OPEC raised its demand forecast for its oil in Q2 '05 by 540,000 b/d to 27.68 mb/d Friday, as production problems in North America and the North Sea has tightened global supply. Demand for Q2, though, is expected to be around 2 mb/d lower than the group's Dec production of 29.72 mb/d, due to the seasonal contraction in demand. Although world oil inventories are continuing to rise, OPEC said stronger-than-expected global oil demand growth means the stockbuild will be smaller than previously thought. But it added: "Global oil supply, particularly OPEC output, remains strong and should easily offset the continued strength in demand growth." The group will meet Jan 30 to discuss cutting supplies ahead of the second quarter.

The US Department of Energy reported late Wednesday a rise in crude oil stocks of 3.4 mb/d to 292.2 mb/d, bringing inventories 8% above year ago levels as refineries slow for seasonal maintenance, which began last week. Refinery utilisation fell over the week from 94% to 91.5%. Distillate stocks rose by 784,000 b/d, but heating oil supplies were down 0.5 mb/d at 49.1 mb/d. Despite the stock build there are still some concerns over heating supplies as a cold snap has hit the US Northeast.

China produced a record 6.6 Mt of aluminium in 2004, marking an increase of 11% on 2003, according to data released by the International Aluminium Institute. By comparison, growth in production in the rest of the world over the same period was just 3%, demonstrating the extent to which China is driving global aluminium output. World production in 2004 reached 29.2 Mt, an increase of just over 6%, thus benefiting the bauxite and alumina trades.

World steel output in 2004 reached 1,035 Mt, registering an increase of 85 Mt on the 2003 total. China's production for the year hit 272 Mt, a YOY rise of 23%, with December's total setting yet another monthly production record of 26.5 Mt, up 1.5 Mt from November 2004 and up a massive 33% on December 2003.

Substantial growth was also in evidence during 2004 in the US (up 5.2% to 98.5 Mt), the EU-25 (up 5.2% to 193.5 Mt) and the FSU (up 5.3% to 111.8 Mt). Japan's steel mills produced the most steel in 2004 since 1974 (112.7 Mt). In Asia as a whole, annual output climbed to 499.3 Mt, an increase of 13.2% YOY. Excluding China, however, production in the continent rose by 3%.

According to the International Iron & Steel Institute, world steel demand in 2004 leapt by 8.8% year-on-year, with demand in OECD countries up 7.5%. The most significant growth in steel consumption occurred in North America (up 15%), the FSU (up 13.5%) and China (11%). In 2005, the IISI predicts further growth in global steel demand of 5% in 2005, driven by Chinese growth of 10.7%. Furthermore, by 2006 China is expected to produce 30% of the world's steel, compared with the current level of just over 25%.

Floods in US rivers have disrupted coking coal supplies to some US steel mills, according to McCloskey. One of the steel manufacturers affected, US Steel, has even declared force majeure to some coke customers. A short-term consequence has been that coking coal FOB prices at US ports have reportedly neared $150/t. Although the floodwaters are receding, sunk coal barges need to be removed before normal operations can be continued. In the meantime, coal is being transported by road.

The US Department of Agriculture has raised its forecast for the world wheat trade in 2004/05 (Oct-Sep) to 107.2 Mt - up 0.6 Mt from its last 04/05 forecast and up 2.3 Mt from the 03/04 crop year.

A near-record crop in Argentina has led the USDA to lift its wheat export 04/05 forecast for the country by 1 Mt to 10.5 Mt. Meanwhile, the strong euro and increased competition from Argentinian wheat have prompted the Department to lower its forecast for EU-25 exports by 0.5 Mt to 15.0 Mt. The US is expected to remain the world's largest wheat exporter at 26.0 Mt despite a fall of 6 Mt from the 03/04 export total.

According to the US Department of Agriculture, the Brazilian soyabean crop is poised to reach a record 64.5 Mt in 2004/05 (up 23% year-on-year) despite concern over the extent of the harmful Asian rust fungus in the country. Both government and private agricultural analysts in Brazil believe farmers are in a better position to combat the spread of the rust this year, so avoiding a repeat of last year's crop damage. Moreover, soyabean planting has risen, even though international prices are falling and production costs are increasing.

Dalrymple Bay and Hay Point were closed on January 9/10 as a result of a cyclone, McCloskey reports. Loading has reportedly resumed, but at a severely restricted pace. The closure of the two terminals will add to the congestion at Australia's coal ports, which has been caused by high cargo volumes and maintenance work. Meanwhile, a loader at Gladstone will be out of operation for three days from January 31.

Latest Chinese customs data shows that the country imported a total of 120m tonnes (2.4mb/d) of crude in 2004, marking an increase of 35% year-on-year. After the US, China is now the world's second largest oil consumer with demand averaging 6.3mb/d in last year. Domestic crude production remained fairly static in 2004, at 3.5mb/d, leading to higher volumes of crude and product imports as a result.

Following the discovery of the Asian rust fungus in southern states of the US in the 4q04, fears spread that US soyabean farmers would experience reduced yields in 2005 as their Brazilian counterparts have done in recent years. However, according to the American Soybean Association, new research from Iowa State University suggests that drier weather conditions in the US may protect the country's soyabean crop to a greater extent, adding that much would depend on thorough use of fungicides in the US this year.

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The China Iron and Steel Association predicts that the country's steel production will hit 300 Mt in 2005. This would represent a significant increase on this year's output; according to the International Iron and Steel Institute, 245 Mt of crude steel were produced by Chinese steel mills in the eleven months to November 2004. The CISA forecasts "strong" demand for steel plate from the shipbuilding and car industries accompanied by a "moderate increase" in demand from the country's construction industry for deformed bar and wire rod.

Richards Bay coal exports for 2004 totalled 65.93 Mt - down 2.4 Mt from 2003 due to infrastructure problems, Platts reports. The terminal's nameplate capacity is 72-73 Mt. While smaller mining companies are expected to add 3 Mt to South Africa's coal output over the next 12 months, however, much still depends on the ability of the rail infrastructure to meet demand.

Latest fleet estimates show the tanker fleet grew by 16.1m dwt (5.6%) in 2004 to 299.5m dwt, with a net addition of 162 vessels. Preliminary data suggests that the Handymax (38k-50k) sector saw the largest volume of ships delivered -- a 15.91% increase totalling 77 vessels - most of which will be added to the clean sector. Fairly heavy deliveries were seen in the Aframax sector at 56 ships but half that number was scrapped, leaving that fleet to grow by 3.5m dwt (5.8%). The VLCC fleet grew by 4.9m dwt (3.9%), as 27 vessels were added and only 9 scrapped. In 2005, fleet deliveries are expected to be heftier at 271 vessels, amounting to 27.3m dwt. The Aframax sector is expected to see the largest number of deliveries with 62 vessels scheduled while around 27 vessels are expected to join the VLCC fleet.