News archive March 2005

According to China's official state news agency Xinhua, the Chinese government is planning a new clampdown on over-investment after the latest data showed fixed asset investment during January and February rising 24.5% year-on-year. This compares with YOY growth of 21.3% in December 2004 and stands above the target figure for 2005 of 16%. Meanwhile, China Daily reports that a think tank affiliated to the People's Bank of China predicts the country's economy to grow 8.9% YOY in the 1q05.

Crude oil stocks in the US rose 5.4m bbl last week to 314.7m bbls, up 9% on levels a year ago, and were the highest since July 2002, data released by the US Department of Energy showed. Crude imports were up 298kb/d at 10.6mb/d and have averaged over 10.2mb/d over the past four
weeks. Gasoline stocks fell 2.9m bbl to 214.4m bbl but were still 7.4% higher than stocks a year ago. Gasoline imports dipped 108kb/d to average 870kb/d. Refinery utilization picked up rising from 90.2% to 91% of capacity. Meanwhile, stocks in the US Strategic Petroleum reserve grew by 1.5m bbl to 686.9m bbl.

Japan’s crude oil imports fell in February for the third straight month, down 7.4% from a year earlier to 120.33m bbl, the Natural Resources and Energy Agency said Thursday reports Japan Today. Imports in 2004 had averaged 127.58m bbl. The Middle East accounted for 93.3% of Japan’s total crude imports in February, up 0.7%. Saudi Arabia
remained Japan’s largest oil supplier, with imports from there rising 30.7% to 33.59m bbl. While the United Arab Emirates was the second biggest supplier at 27.93m bbl, its imports were down 21%.

Japan's industrial production fell 2.1% in February from the previous month. Nonetheless, the government remains optimistic about industrial performance in the country, predicting industrial output to grow by 0.9% in March and 3.6% in April, according to the Financial Times. Industrial production and consumer spending in January and February combined were still up on the 4q04.

When tanker markets move with the strength and volatility seen over the last 12 months, the focus tends to be on the larger crude sizes due to the massive differences in dollar earnings that result. But along side the swings in the crude tanker sector, there has been a sustained upward push in rates for the product tanker range and SSY expects considerable support for this sector in the face of the softer fundamentals emerging in 2005.

SSY's latest edition of "World Oil Tanker Trends" (WOTT) reviews the oil and tanker markets for 2004 and examines the factors that are currently driving rates. Of particular importance are the future of Chinese and American oil and tanker demand growth - the two engines that drove freight rates up to the 30-year highs of Q404.

Results from SSY's crude tanker demand model are included in this report as well the factors driving the clean tanker markets and this sector's growing tonne-mile demand.

The latest edition of "World Oil Tanker Trends" is available from SSY Consultancy & Research Ltd for an annual subscription of

Russia plans to ramp up oil exports by 209kb/d to 3.6 mb/d in the second quarter of 2005 as it carries out a shakeup of its trading patterns, reports Energy Intelligence. Most of the incremental exports will be directed to Baltic Sea ports with the bulk of the extra cargo volumes destined for the Lithuanian port of Butinge. Exports via the Baltic are expected to rise 79kb/d to 1.35mb/d in the 2q05 compared with 1.27mb/d in the 1q05, says Energy Intelligence.

Meanwhile, coal exports through Russian ports could reach 60 Mtpa in 2010 compared with the 2004 export level of 39.8 Mt due to the construction of new terminals and a programme of dredging, according to the St Petersburg Times. Russia's Transport Minister, Igor Levitin, bemoaned the lack of modern coal terminals in the country, adding that up to 10 Mtpa are currently shipped from ports in Estonia, Latvia and the Baltic States. In 2004, around 32 Mt of Russian coal exports were bound for Europe with 16 Mt heading into the Asian market.

The latest Chinese customs data show that coal, grain, iron ore and steel product imports in February totalled 23.27 Mt. With the Chinese New Year holiday falling in February this year, the combined total for the first two months of 2005 provides a clearer indication of the current dry bulk import trends: year-to-date imports reached 51.02 Mt, up 12% year-on-year. China's new status as a net steel exporter was underlined by the customs data: in January and February China imported 3.76 Mt of steel products against exports of 4.38 Mt.

Chinese oil imports in February were down 2.3% year-on-year at 3.3mb/d despite a month-on-month recovery in imports of 24.5%, or 650Kb/d,
from January’s low levels, according to the latest Chinese Customs data. For the first two months of 2005, oil imports were down 7% at 3mb/d compared with 3.2mb/d in the same period in 2004. This was due to lower crude imports which dipped 10.6% to average 2.3mb/d in the
first two months of this year compared to the previous year, although they did show a sharp month-on-month rise of 46% in February. Product
imports, though, rose 7.1% in the first 2 months of 2005 to average 693Kb/d but did drop by 17.8% in February compared with January.

According to McCloskey, railings to Richards Bay Coal Terminal resumed on Tuesday a day earlier than anticipated. A collision last Thursday had closed two lines from Witbank to RBCT. Around 800,000 tonnes of coal are estimated lost due to the interruption in service to the terminal. RBCT stocks are thought to be just over 3 Mt, but the week's losses may still cause larger exporters difficulties due to shortages of certain grades of coal.

Three of Spain's nine nuclear power plants (accounting for 3,000 MW of the country's nuclear capacity) have been taken out of operation for safety checks, according to Platts. The Asco-1 plant (near Tarragona) is closed for two weeks, while the Vandellos plant (NE Spain) will be offline for a month, and the Garona plant (Burgos) will also be closed for maintenance work. The leading Spanish utility Endesa reportedly increased its coal burn in January and February by 10% year-on-year.

US crude oil stocks have hit their highest level since July 2002, rising 4.1m bbl last week to 309.3m bbl, according to the latest data from the US Department of Energy. Crude stocks have consistently climbed over the past 6 weeks and are 23m bbl higher than levels the same time last year. The stock build was due in part to an increase in
crude imports of 229kb/d at 10.3mb/d and to ongoing refinery maintenance that has recently lowered refinery utilization rates. Gasoline stocks though, showed a large drop for the second week
running down 4.1m at 217.3m bbl. This was despite gasoline imports averaging 1mb/d.

According to the St Petersburg Times, coal exports through Russian ports could reach 60 Mtpa in 2010 compared with the 2004 export level of 39.8 Mt due to the construction of new terminals and a programme of dredging. Russia's Transport Minister, Igor Levitin, bemoaned the lack of modern Russian coal terminals, adding that up to 10 Mtpa are currently shipped from ports in Estonia, Latvia and the Baltic States. In 2004, around 32 Mt of Russian coal exports were bound for Europe with 16 Mt heading into the Asian market.

Nigerian oil unions are set to embark on a three-day preliminary strike on April 11, which could spiral into an indefinite strike if their demands to halt industry job cuts and downstream deregulation
are not met, reports the Financial Times. Another strike could take place two weeks later. Nigeria is the world’s ninth-biggest oil producer and according to the latest data from the IEA, its output in
February was 2.4mb/d.

The Chinese government's clampdown on the aluminium sector appears to be having some effect, according to the latest output data published by the International Aluminium Institute. China produced 566,000 tonnes in February, down from the monthly output peak of 614,000 tonnes of December 2004, but still up 75,000 tonnes year-on-year. Meanwhile, global aluminium production (excluding China) in February totalled 1.74 Mt, down 52,000 tones YOY.

Russia plans to ramp up oil exports by 209kb/d to 3.6 mb/d in the second quarter of 2005 as it carries out a shakeup of its trading patterns, reports Energy Intelligence. Most the incremental exports will be directed to Baltic Sea ports with the bulk of the extra cargo volumes destined for the Lithuanian port of Butinge. Exports via the Baltic are expected to rise 79kb/d to 1.35mb/d in 2Q compared with 1.27mb/d in 1Q, said Energy Intelligence.

The latest International Iron & Steel Institute data show that world crude steel output in February rose by 3.7% year-on-year to reach 83.9 Mt. Steel production in China during February totalled 24.8 Mt -- up 21% YOY. Outside of China, steel output by the major producing countries slowed last month: US steel output fell by 3.0% YOY to 7.4 Mt, while Japanese production fell by 3.3% to 8.7 Mt. Production in the EU-25 was down by 1.0% YOY to 13.2 Mt.

OPEC will increase oil production by 500Kb/d with immediate effect in an attempt to cool high oil prices, OPEC President Sheikh Ahmad Fahd al-Sabah said after the group’s meeting in Iran. It would be the fourth time OPEC has raised output in a year. Market estimates are that OPEC members are currently pumping around 700kb/d more than their official quota of 27mb/d. The output hike comes after recent bullish forecasts for oil demand in 2005, including the IEA revising its latest forecast up by 330kb/d on strong Chinese and US demand. If oil prices stay high, OPEC plans to hold future talks on a similar output hike.

Data from the US Department of Energy Wednesday showed crude oil stocks were their highest in over 7 months, rising 2.6m bbl
to 305.2m bbl. Crude imports averaged over 10mb/d but were down 58kb/d from the previous week. Gasoline inventories fell 2.9m bbls to 221.4m
bbl as domestic production dipped due to refinery maintenance, but levels remain above the long-term average range. Gasoline imports rose
marginally to 964mb/d.

The Bank of Japan yesterday revised upwards its assessment of the economy for the first time in nine months, saying exports, rising fixed investment and household spending were slowly hauling the economy out of its technical recession, the Financial Times reports. The central bank’s assessment, coupled with more upbeat comments from Heizo Takenaka, economy minister, helped reinforce the impression that Japan was pulling into gentle growth after two quarters of mild decline last year.

OPEC has raised its estimate of world oil consumption in 2Q and for 2005 as a whole due to faster than expected global economic growth, reports Platts. It now projects oil demand will rise by 1.86mb/d to 83.9mb/d, 200kb/d higher than its previous forecast. OPEC lifted demand for its own crude by 40kb/d in Q2 to 27.4mb/d and raised the overall call for 2005 by 170kb/d to 29mb/d. It expects stronger demand in the last half of the year, lifting 3Q demand by 110kb/d to 28.5mb/d and 4Q by 140Kb/d to 30.26mb/d. Despite OPEC's cut in output Wednesday, oil prices have still rallied to record highs forcing the cartel to consider another increase. OPEC President Sheikh Ahmad al-Sabah said: "If prices continue as they are now during the coming 7-10 days we will begin our contacts with our colleagues so we can consult on the additional 500,000(kb/d increase)," reports Reuters.

Brazil’s soyabean production forecasts are being revised down as a result of adverse weather conditions over recent months. The US Department of Agriculture originally predicted a crop for the 2004/05 crop year (Oct-Sep) of 66 Mt in the summer of 2004, but reduced this first to 64.5 Mt in October 2004 and then to 63 Mt in February 2005. This still compared very favourably with the 03/04 crop of 52.6 Mt.

The latest USDA report now has the 04/05 soyabean crop forecast at 59 Mt. Other bodies have even lower forecasts; according to the Chicago Board of Trade, for instance, the German newsletter Oil World has lowered its projection from 58.5 Mt to 53 Mt following drought conditions in southern Brazil.

The US Department of Agriculture has revised down its forecasts for Brazilian soya exports in 2004/05 (Oct-Sep year) as a result of a drought-hit crop. However, it has raised its US soya export forecast, offsetting most of the loss. World soya exports in 04/05 are still expected to increase by 9 Mt on the previous crop year, reaching 109.6 Mt.

A record corn crop has prompted the USDA to raise its 04/05 coarse grain export forecast for Argentina to 14.0 Mt from last month's 13.0 Mt. As a result, the US export forecast has been lowered to 51.5 Mt from 53.0 Mt. World coarse grain exports are now predicted to total 97.8 Mt in 04/05 - down 4.9 Mt on the previous crop year.

Average delays at Australia's main coal and iron ore export terminals have edged up this week to 8.2 days - its highest mid-month level since April 2004. The latest increase is mainly due to greater congestion in West Australia, while the past week has seen some modest improvements at the coal ports of East Australia. Nevertheless, Dalrymple Bay remains worst affected of all with delays of up to 30 days as charterers wait for scarce coking coal cargoes.

According to the latest customs data, China imported 18.2 Mt of iron ore in February. Given the timing of the New Year celebrations in China, year-on-year comparisons at this time of year between individual months can be distorted. The best indication of year-on-year growth therefore is that iron ore imports in January and February were up 23% year-on-year to 39.0 Mt, demonstrating the firmness of the import market.

The International Energy Agency has upwardly revised its forecast for global oil demand in 2005 by 330K b/d to 84.3mb/d. This was due to a
combination of cold temperatures in key consuming areas in late Feb/early March and to signs of further strength in the US economy for 2005 which should offer support to China’s economic growth. The IEA lifted US oil demand by 120Kb/d to 20.82mb/d and China’s by 100Kb/d to 6.88mb/d. On the supply side, world oil production rose 885kb/d in Feb to average 84.3mb/d. OPEC crude supply rose 390kb/d in Feb to average 29mb/d with increases in output coming from Nigeria, Kuwait, Saudi Arabia and Iraq. The rise in non-OPEC supply saw Russian production reverse a 4-month decline with the IEA provisionally showing a 40kb/d
rise in FSU output.