News archive April 2006

The US imported 3.53 Mt of steel in March, the highest monthly total since November 1998, according to data from the American Iron and Steel Institute. This brings the 1q06 total to 7.49 Mt, up 27% year-on-year. Combined imports of finished steel products from China, Japan, South Korea and Taiwan accounted for some 2.23 Mt, marking a 50%YOY increase, and benefitting Handymax demand in the Pacific.

China has raised interest rates for the first time in over a year, the Financial Times reports. The one-year lending rate is now 5.85% compared with 5.58%, and the move has been interpreted by some commentators as a response to rapid GDP growth of 10.2% in the 1q06. Meanwhile, China's National Development Reform Commission is quoted in media reports stating that it "must strengthen adjustments in fixed asset investment and tighten the throttle on land and credit." This follows the announcement that fixed asset investment in the country grew by 27.7% in the 1q06, almost 5 percentage points higher than the growth rate in the 1q05. While these announcements may not affect cargo volumes immediately, they add a downside risk to demand projections.

US gasoline stocks continued to fall by another 1.9m bbl last week to 200.6m bbl despite imports reaching the fourth highest weekly volume ever at 1.34m b/d, up 431k b/d from the previous week, the latest data from the US Department of Energy shows. Crude stocks also inched 0.2m bbl lower to 345m bbl regardless of the 199k b/d rise in imports to nearly 9.9m b/d, 9.2% higher year-on-year. Distillate inventories climbed 1m bbl to 115.6m bbl, helped by a 254k b/d rise in imports to 379k b/d, 124% higher than the same week last year. Refinery utilisation improved, up 2% at 88.2%.

Total world steel demand is predicted by the International Iron and Steel Institute to grow by 7.3% in 2006 to 1,087 Mt. This marks an acceleration in growth from last year, when world demand growth was estimated at 4.1%. China is still driving global steel demand, with growth this year projected to be 13.0%, down from last year’s massive 16.7% growth. However, this year the IISI expects the rise in global demand to be more balanced, with significant boosts in demand from the EU-25 (up 3.9% this year compared with negative growth of 4.6% in 2005) and NAFTA (up 5.0% as opposed to negative growth of 6.0% last year). The IISI attributes some of the increase in demand to stock replenishment by steel companies. Looking ahead to 2007, the IISI expects global demand to rise by 5.8% and Chinese growth to reach 12.1%.

The share of Chinese soyabean imports in the 1q06 sourced from the US fell, according to a market report from the Chicago Board of Trade. Of the 5.41 Mt imported, some 3.884 Mt were purchased from US suppliers, marking a year-on-year drop of 22%, with China buying more from Argentina and Brazil. While the 1q06 import total is the same as the 1q05 total, March saw an upswing in imports to 2.6 Mt, suggesting that the impact of bird flu outbreaks on Chinese demand was below expectations.

President Bush has ordered a temporary halt to deposits to the U.S strategic petroleum reserve to make more oil available for consumer needs and relieve pressure on pump prices, reports AP. Bush has stated that the reserve has enough fuel to guard against any major supply disruption over the next few months. Steps to ease environmental standards governing fuel grades have also been announced. Easing the environment rules will allow refiners greater flexibility in providing oil supplies as they will not have to use certain additives such as ethanol to meet clean air standards. The actions followed increased political pressure on Bush to address the issue of gasoline prices that are expected to stay high throughout the summer, reports AP.

India's crude imports are set to rise this year due to growing refining capacity, reports Petroleum Argus. India's total crude imports are forecast to rise 330k b/d this fiscal year having reached nearly 2m b/d in the Apr '05- Mar '06 fiscal year, of which more than half came from the Middle East Gulf. The country produces 640k b/d of crude and refines about 2.6m b/d. New refinery units will allow India to process more medium and heavy sour Middle East Gulf grades, but refiners will still need to import sweet crude to meet tight domestic sulphur limits for diesel and gasoline, reports Argus.

Production difficulties at South African coal mines have led to seven rail cancellations in the past week, according to Barlow Jonker's "From the Coal Face". Weekly railings in the year to date have declined from an annual rate of 59.6 Mt to 57.5 Mt, while coal stocks at the port now stand at 2.0 Mt compared with 2.4 Mt last week. The report adds that cancelled railings accounted for losses of 1.1 Mt so far this year.

Shell has announced that its Mars production platform, the largest Gulf platform damaged by Hurricane Katrina, will be restarted
ahead of its original schedule. Construction of the platform, which represents about 5% of the Gulf’s daily oil and gas production, will be completed by the end of April, with partial production
restored by mid-May. Pre-Hurricane production rates of 140k b/d oil should be achieved by the end of June. The U.S. Minerals Management
Service stated Wednesday 87 production platforms are still out of commission following hurricanes Katrina and Rita, about 334k b/d or 22% of oil output, reports AP.

China's fixed asset investment rose 27.7% year-on-year in the first three months of the year, according to the country's National Bureau of Statistics. This was almost 5 percentage points higher than the growth rate in the 1q05. Zheng Jingping, a spokesman of the National Bureau of Statistics, was quoted by the People's Daily, arguing that while 1q investment growth was fast, moderate growth was still possible in the rest of the year. China's GDP grew 10.2% in the 1q06.

The latest confirmed trade data from China's Customs Statistics show that Chinese iron ore imports in March reached a record 29.5 Mt, while crude steel production hit a new high of 32.9 Mt. Coal imports into China climbed to their highest-ever monthly total of 3.7 Mt in March. Furthermore, cement exports in March were 3.3 Mt - another monthly record. The coal import and export figures for the 1q06 indicate the trend for lower exports but rising imports. In the 1q06, coal imports totalled 8.9 Mt with exports at 16.7 Mt, making China a net coal exporter of just under 8 Mt, compared with 18 Mt in the 1q03.

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Brent oil climbed to another record high of $74.22/bbl on Thursday, its eighth consecutive session to mark a new peak, after the slump in
U.S gasoline stocks fuelled fears of tight summer supplies at a time of growing anxiety over Iran and Nigeria’s exports, reports Reuters. Nigerian militants killed 2 people in a car bomb attack on an army barracks in the oil city of Port Harcourt on Wednesday night, extending the 4-month assault against the world’s eighth largest oil exporter that has already shut-in 550k b/d of the country’s oil
production. The militants have threatened to carry out similar attacks against relevant oil industry targets and individuals in the coming weeks.

China imported 29.5 Mt of iron ore in March, according to preliminary reports. This marks a rise of 2.2 Mt on the previous monthly high in November 2005. China imported 80.9 Mt in the 1q06, up 28% year-on-year. The 1q06 total was up 6% on the previous quarter.

US gasoline stocks plummeted another 5.4m bbl to 202.5m bbl after a 194k b/d fall in imports to 907k b/d, ending a 10 week streak in which they have averaged over 1m b/d, the latest data from the US Department of Energy shows. Distillate inventories also dropped 2.8m bbl to 114.6m bbl after a 96k b/d fall in imports to 125k b/d, the lowest since the week ending 13 Sept 2002. Crude stocks dropped 0.8m bbl to 345.2m bbl despite imports rising 126k b/d to nearly 9.7m b/d. Refinery utilisation was 86.2%.

Meanwhile, OPEC expects the ’call’ on its own crude production to average 28.5m b/d in ’06, up from a previous projection of 28.43m b/d, reports Platts. The call on OPEC is expected to average 29.9m b/d in 1q06, falling to 27.85m b/d in 2q06, 27.97m b/b in 3q06 and rising again to 28.29m b/s in the final quarter. OPEC has also lowered its forecast for growth in global oil demand in ’06 to 1.43m b/d, reports Platts.

China produced 32.9 Mt of steel in March, the highest monthly total ever, according to unofficial reports. This would bring the 1q06 output total to 92.6 Mt, representing a 20%-increase on the same period last year. The previous record high for monthly steel output was in December 2005, when some 32.0 Mt were produced.

China’s car sales hit nearly one million units in the 1q06, according to the China Association of Automobile Manufacturers. Sales reached three million units for the first time in 2005, and if the current rate of sales continues, China could overtake Japan as the second largest car market in the world this year. This would further boost China’s domestic steel demand.

US gasoline stocks fell 3.9m bbl to 207.9m bbl despite a 14k b/d rise in imports to over 1.1m b/d, the tenth consecutive week levels have been above 1m b/d and the largest such streak ever, the latest data from the Department of Energy shows. Distillate stocks dropped 4.2m bbl to 117.4m bbl, the lowest since the week ending 1 July '05, with imports falling 88k b/d to 221k b/d. Crude inventories rose another 3.2m bbl last week to 346m bbl, the highest since the week ending 29 May 1998, despite imports declining 414k b/d to 9.54m b/d. Refinery utilisation was 85.6%.

On Wednesday, the IEA revised down its global oil demand growth forecast for '06 from 1.49m b/d to 1.47m b/d compared to 1.05m b/d growth in '05. Although robust global economic growth continues to support oil product demand, the IEA said the negative effects of high oil prices are visible in most areas.

The US Department of Agriculture has lowered Brazil's soyabean export total for 2005/06 (Oct-Sep). The USDA now expects Brazil to export 25.5 Mt as opposed to the March forecast of 26.1 Mt. However, Argentina's exports of soyabeans in 2005/06 are forecast to reach 10.5 Mt instead of the 10.0 Mt projected last month. Significantly, combined soyabean and soyameal exports from the two countries are forecast to rise in 2005/06 by 8.0 Mt on the previous trade year.

The price of Brent North Sea crude oil hit an all-time high of $69.70 on Tuesday on concern that the United States might launch a military strike against Iran, the world's fourth-largest producer, despite US comments playing this down, reports AFP. London oil prices on Mon reached the previous record of $68.89 set in Aug '05 after Hurricane Katrina hit the US Gulf. Iran, with an output of 4m b/d, has insisted it will not back down over its controversial nuclear programme, a crisis which traders fear could severely disrupt crude exports from the region. Adjusted for inflation, world oil prices remain below levels reached in the wake of the 1979 Iranian revolution when they surged above $80 in today's money.

Queensland’s Minister for Transport, Paul Lucas, has praised infrastructure improvements which has enabled the port of Gladstone to load approximately 1 Mt/week, Platts reports. The minister added that while demand reached a new peak in March, the vessel queue at the port fell from 29 to 17. "We expect the rate of ship arrivals to remain strong for some time because of the continued worldwide demand for coal", he said. Planned expansion plans will reportedly lift the capacity to 140 Mtpa by 2010.

The Asian Development Bank forecasts Chinese GDP to grow by 9.5% this year, which contrasts with the previous ADB projection of 8.8%. A report from Macquarie Bank notes that the positive outlook for the country's economy should result in another year of growth in the construction sector, benefiting steel demand. According to the Bank, slow growth in 2004 (in the aftermath of new credit control measures) was followed by higher construction activity in 2005 with even higher growth likely this year. The number of residential buildings currently under construction is up by around 25% year-on-year compared with just below 20% at the same point in 2005.

Iraqi oil exports for Apr have been pencilled in at 45.2m bbl, or 1.51m b/d, up from the 1.32m b/d exported in March, reports Energy Intelligence Briefing. Around 667k b/d are heading to the US with the total trans-Atlantic flow reaching 867k b/d, up from 710k b/d in March. Approximately 330k b/d is destined for Europe, up from 258k b/d in Mar, while levels to Asia are expected to be 15k b/d lower than the previous month at 340k b/d. Oil exports were cut by 4m bbl to 41m bbl, or 1.32m b/d in March, down from 1.43m b/d in Feb, due to bad weather in the Persian Gulf forcing a 3 day closure of the Basrah Oil Terminal.