News archive November 2006

The vessel queue at Newcastle increased to 51 last week, with estimated average waiting time of 20.7 days, according to McCloskey. The Hunter Valley Coal Chain logistics team is expecting the queue to worsen in December, predicting a queue of 56 by early December. This would equal the record congestion levels experienced in early 2004. SSY's Australian Coal Port Congestion Index has increased for the fourth consecutive week to 9.8 days.

US distillate stocks dropped 1m bbl last week to 132.8m bbl but remained 3.9% higher year-on-year, according to the latest data from the US Department of Energy. Imports were down 93k b/d at 298k b/d, 21% lower on the year, while demand rose 26k b/d to 4.2m b/d. Gasoline inventories also dipped 0.6m bbl to 201.1m bbl, relatively unchanged on the year. Gasoline imports fell 258k b/d to 940k b/d but were 61% up on the same week last year, while demand rose 171k b/d to 9.32m b/d. Crude stocks declined 0.3m bbl to 340.8m bbl but remained 7.3% higher on the year. Imports dropped 732k b/d to 9.8m b/d. Refinery utilisation recovered slightly, up 1% at 88.1%.

US steel imports in October remained above 3 Mt for the tenth consecutive month, reaching 3.47 Mt, according to the American Iron and Steel Institute. The imports declined from September by 2% but were up by 36% from last October. The annualised total from the first ten months of the year would be 42.16 Mt, an annual record high. The latest data shows that the rise in the year-to-date imports is due to increased shipments from Asia -- Thailand (up 165%), China (up 125%) and South Korea (up 61%).

World economic growth is expected to slow to 2.5% in 2007 from 3.2% this year, according to the Organisation for Economic Cooperation and Development. This will be the weakest level in the last four years as a result of a US slowdown. However, the OECD expects strong performance in Europe and Asia to offset US weakness. The group expects US growth to reach 3.3% this year before slowing down to 2.4% in 2007, mainly due to the weak property market, reports the BBC.

Meanwhile, in the US, the price of existing homes sold in October fell for the third straight month, the biggest drop on record, and weakness in prices is expected to carry on into 2007, reports CNN. The median price of a home sold in October was 3.5% lower than in October 2005.

Russia is scheduled to ship 12% more crude oil from its main ports in December as a reduction in export tax encourages producers to increase shipments, reports Bloomberg. Russia is to slash its export tax on crude oil by 24% in December and January from a record $32.55/bbl after oil prices fell. According to preliminary loading schedules, an average of 2.96m b/d will be exported in December, up from around 2.65m b/d in November. The Baltic port of Primorsk is set to increase loadings next month to 1.51m b/d from a planned 1.27m b/d this month while the Black Sea port of Novorossiisk is expected to ship 929k b/d next month, down from the 958k b/d due in November, reports Bloomberg.

According to the latest preliminary figures from Euracoal, the total seaborne coal market increased by just 2% (7 Mt) in the 1h06, reports Platts. Supply of steam coal grew over 5% to 272 Mt compared to the same period in 2005, with majority of the growth emerging from the Pacific market. In the Atlantic, Columbia and South Africa were behind their export targets and Russia was the only major exporter to increase supply (up 2 Mt to 29 Mt), while in the Pacific, shipments from Indonesia, Vietnam and Australia continued to rise. Indonesia remained the biggest steam coal exporter - 69 Mt in the 1h06, compared to 55 Mt in the 1h05. Coking coal exports declined by 7 Mt to 94 Mt during Jan-June 2006, with all major exporters (Australia, Canada and the US), unable to reach last year's export levels.

Oil product demand in Indonesia has slumped this year following the hike in domestic fuel prices in October 2005, reports Petroleum Argus. State-owned Pertamina expects product demand in 2006 to be between 5-10% lower than the 1.044m b/d stipulated in the country's 2006 state budget. As a result, full-year 2006 product imports are forecast to be around 375k b/d, compared with 453k b/d in 2005, reports Argus.

The International Grains Council has lowered its forecast for world wheat trade for 2006/2007 (June-July) by 1 Mt from last month to 109 Mt, however, the new forecast is still higher than the 2005/2006 estimated total of 108 Mt. The IGC further reduced its projections for Australian exports by 0.6 Mt to 12.9 Mt from last month in response to increased domestic use, largely for animal feedstock, due to recent drought conditions. However, it has raised its prediction for Russian exports by 0.4 Mt to 8.4 Mt from earlier forecast due to better than expected yields in Russia.

FSU crude exports fell to 5.76m b/d in October, the lowest since April, but remained 5% higher year-on-year, reports Petroleum Argus. High crude export duties made exports to non-CIS destinations far less attractive than exports to CIS destinations such as Kazakhstan and Belarus in October. This, combined with the continued halt to shipments to Lithuania, has led to pipeline deliveries through the Transneft system dropping to 3.84m b/d. Crude exports from the Caspian region are under pressure due to the shutdown of the 150k b/d Baku-Supsa pipeline, which is due to be offline until the end of January. The closure took exports of Azeri Light through Supsa in October to their lowest levels since July 2004, reports Argus.

China's Customs Statistics show that monthly steel exports from China reached their second-highest level of 5.18 Mt in October. This takes net steel exports for the month to a record high of 3.77 Mt. In the first ten months of this year China's net steel exports have totalled 24 Mt compared with just 0.3 Mt during the same period in 2005.

The US government trimmed its forecast for real GDP growth this year to 3.1%, down from June forecast of 3.6%, stating that the economy is moderating to more sustainable levels, reports Reuters. The GDP growth for 2007 was also revised to 2.9% from 3.3% earlier GDP forecast. According to Edward Lazear, chairman of the White House Council of Economic Advisers, the lower forecast is "primarily a reflection of the housing market". Latest data from the Commerce Department show that US housing activity fell sharply in October to its lowest level in more than six years, with around 1.48m new homes built in October, 27% lower year-on-year.

US crude stocks jumped 5.1m bbl last week to 341.1m bbl, the highest since the week ending 30 June 2006, and 6% higher year-on-year, according to the latest data from the US Department of Energy. The rise came mainly due to a 1m b/d increase in imports to 10.5m b/d. Gasoline inventories were also up by 1.4m bbl at 201.7m bbl due to imports rising 110k b/d to 1.2m b/d. Gasoline demand grew 39k b/d to 9.15m b/d. Distillate stocks fell 1.2m bbl to 133.8m bbl but remained 7.5% higher than the same week last year. Imports dropped 123k b/d to 205k b/d, the lowest since the week ending 4 April 2006 and 52% lower on the year. Demand was also down by 393k b/d at 4.21m b/d. Refinery utilisation dipped slightly to 87.1% as refinery maintenance continues.

The vessel queue at Newcastle increased to 49 last week from 35 the previous week, according to McCloskey. The average expected waiting time now stands at more than 20 days, compared to an actual waiting time of 15.6 days last week. SSY's Australian Coal Port Congestion Index rose to 9.1 days yesterday for the third successive week, the highest level since April 2006.

Crude loadings at the Port of Valdez, Alaska, were halted on Monday due to bad weather, reports Reuters. High winds forced operators to suspend loadings at the port, slowing the 800k b/d Trans Alaska Pipeline to 25% of capacity. Large Alaskan oil fields such as Prudhoe Bay and Kuparuk have been forced to reduce output because of the problems, reports Reuters.

World steel production in October expanded by 7.4% year-on-year to 105.9 Mt, according to the latest data from the International Iron and Steel Institute. This takes the January-October total to 1.01 billion tonnes, up 9.2% on the same period last year. China produced a monthly record of 37.7 Mt (+18.0% YOY), while significant YOY increases were recorded in Japan (10.1 Mt, +4.5%) Russia (5.9 Mt, +3.2%) and the EU-25 (17.4 Mt, +3.5%). Production cuts in the US, however, led to a 4.7% YOY decline in October, with monthly output of 7.8 Mt.

Provisional loading schedules of Angolan crude for January show a 61k b/d rise in liftings month-on-month, a 5.3% increase on December, reports Platt's. Loadings are forecast to total 1.23m b/d, up from 1.16m b/d in December. Meanwhile, output from Equatorial Guinea is set to rise by the end of 2006 due to the start up of the Hess-operated Okume complex, reports Petroleum Argus. Initial production is expected to reach 30k b/d in early 2007, before stabilising at 60k b/d by year-end. Sudan is also set to increase oil output to 600-700k b/d by the end of 2007, up from its year-end production target of 500k b/d, after completing work at its main export terminal near Port Sudan. Dar Blend output -- which began in August and stands at 170k b/d -- is due to rise to 300k b/d when port expansion is finished, reports Argus.

The delayed start to Indonesia's wet season has allowed coal production to beat expectations.
According to producer sources quoted in McCloskey, an additional 2-3 Mt of coal is likely to be mined this year, taking the annual production to around 192 Mt from the original forecast of around 189 Mt. The additional output is likely to raise export availability. Indonesian coal exports totalled 128.6 Mt in 2005.

US housing activity slowed sharply in October as the number of new homes being built fell to a six-year low, the BBC reported. A Commerce Department report showed around 1.48m houses were started in October, down 27.4% year-on-year and 14% month-on-month. The number of permits
awarded for future housing projects fell to its lowest level since 1997. The drop has been blamed on successive interest rate rises and a slowdown in the economy. US economic growth in Q306 slowed to a 3-year low of +1.6%.

Global oil stocks fell 61m bbls or 2 m b/d in October, according to data from Oil Market Intelligence. The OECD accounted for a reduction
of around 35m bbls, or 1.1m b/d. Part of the drop was attributed to Mid East Gulf producers shipping less crude, due partly to earlier supply cuts, but also as refineries needed less oil ahead of heavy
October refinery maintenance, when over 3m b/d was shut in. As a result of the turnarounds, OECD product inventories fell by 41m bbls, or 1.3m b/d, reversing a 6-month trend of rising OECD product stocks.

The Financial Times reports that the latest economic data show that downside risks to economic growth have "diminished a little" over the last month in the words of US Federal Reserve minutes published today. The minutes, from October 25, also indicate that Federal Reserve policymakers described the weaker GDP growth in the 3q06 of 1.6% annually as "broadly as anticipated" and caused by "temporary influences," which would not have an ongoing impact on economic performance. US inflation also slowed in the last month, easing concerns over mounting inflationary pressures.

According to UK Customs Statistics, combined imports of steam and coking coal into the UK in September were 3.97 Mt, taking the year-to-date total to 36.98 Mt, 17% higher y-o-y. Import growth this year has been dominated by Russia, which shipped 17.24 Mt, compared with 12.7 Mt in the first nine months of 2005. Most of the import growth has come from steam coal shipments, which increased by 4.96 Mt to 31.7 Mt in the first nine months of 2006.

US gasoline stocks fell by 3.7m bbl to 200.3m bbl last week, the lowest level since end of April 2006, according to the latest data from the US Department of Energy. Distillate stocks also declined by 3.6m bbl to 135m bbl as refinery inputs were down by 221k bbl/d to 14.9m bbl/d, but remain 12% higher year-on-year. Refinery utilisation was at 87.3%, slightly down from 88.1% the previous week as refineries continue to undergo maintenance. Crude oil stocks rose for the fourth week by 1.3m bbl to 336m bbl, 3.8% higher than a year ago. Crude imports showed further weakness and averaged 9.5m bbl/d, 337k b/d lower last week, partly due to bad weather conditions at LOOP, which have caused discharging delays.

Chinese crude imports fell 3.8% year-on-year to 2.56m b/d in October and were down 22% from September’s record high of 3.3m b/d, preliminary data from China Customs showed. Product imports were up 10% year-on-year at 639k b/d but were down 24% month-on-month.

SSY's Australian Coal Port Congestion Index reached 8.6 days this week (7.6 days last week), the highest level since April 2006. Much of this week-on-week increase has been due to a rise in vessel waiting time at Newcastle. While delays at coal ports have risen, however, SSY calculates that the average delays at Australian iron ore ports currently stand at 3.5 days, compared to mid-April 2006 when delays totalled 11.6 days. This is the lowest level since November 2005.

FSU product exports increased by almost 5% in October to 9.2m t, roughly 2.2m b/d, reports Petroleum Argus. The rise is due to higher fuel oil demand in Europe where fuel oil prices weakened after a prolonged period of oversupply. Shipments of fuel oil totalled 930k b/d, up by 14% mth-o-mth. However, gasoil shipments declined to 720k b/d, 18% lower mth-o-mth, because of high stocks of heating oil and fairly weak demand during a mild October. Gasoline exports were also down to 131k b/d, 2.2% lower mth-o-mth, due to enough supply at refineries in the west Mediterranean.