News archive September 2006

The International Grains Council has raised its forecast for India's wheat imports for 2006/07 (July-June) to 6.2 Mt compared with last month's forecast of 4.6 Mt. This represents a remarkable jump from the 2005/06 estimate of 0.1 Mt. However, the IGC has also scaled down its projections for wheat imports into the Americas, the FSU and the Middle East, resulting in a world wheat trade forecast of 112.0 Mt in 06/07 (down 0.1 Mt from the August forecast, but up 3.6 Mt from 05/06).

Meanwhile, the IGC has lifted its projection for the global corn trade in the 06/07 trade year to 80.0 Mt from the August projection of 79.0 Mt. This marks the highest world corn trade total since 2003/04.

South Korean crude oil imports averaged 2.54m b/d in August, up 15.1% year-on-year, reports Energy Intelligence. Volumes from top supplier Saudi Arabia rose 14.6% to 763k b/d, while levels from Iran were up 76.3% at 171k b/d. The United Arab Emirates remained the second biggest supplier with imports from the country up 17.9% at 454k b/d. Kuwait and Malaysia also experienced large rises in volumes, up 56.9% and 147.4% respectively year-on-year. These increases were offset by significant declines in levels from Indonesia, Qatar and Brunei, reports Energy Intelligence.

A shiploader at Saldanha Bay has been damaged, causing loading at the South African iron ore port to stop, Reuters reports. A spokesperson from Kumba Resources, Trevor Arran, was quoted by Reuters, advising that loading at the port may be disrupted for up to two weeks. Mr Arran was not able to quantify the amount of iron ore that would be affected by the incident. It is understood that a second shiploader, which was undergoing maintenance checks may be brought back into service.

US gasoline stocks surged 6.3m bbl last week to 213.9m bbl following a 660k b/d rise in imports to 1.46m b/d, the fifth highest weekly average ever, and 21% higher year-on-year, according to the latest data from the US Department of Energy. Gasoline production rose 0.1m bbl to 9.3m bbl while distillate fuel output dipped 0.14m bbl to 4.2m bbl as refiners shifted production. Gasoline demand grew 58k b/d to 9.29m b/d. Distillate inventories rose another 2.6m bbl to 151.3m bbl, the highest since the week ending 8th January 1999, despite a 67k b/d drop in imports to 404k b/d, while demand remained relatively unchanged. Crude stocks dipped 0.1m bbl to 324.8m bbl as imports jumped 491k b/d to reach nearly 11.1m b/d, the third highest weekly average recorded, and 14.3% higher year-on-year. Refinery utilisation fell 1% to 92.4%.

Brazil exported 21.6 Mt of iron ore in August, fractionally below the record July total of 21.7 Mt. August's total was over 2 Mt higher than the monthly average for the 1h06, indicating an acceleration in Brazil's export pace. This brings the year-to-date total to 158.8 Mt, some 15.1 Mt higher than the Jan-Aug total in 2005.

Increasing imports of steel products into Europe have raised the prospect of cuts in steel output at European mills, Metal Bulletin reports. Arcelor Mittal president, Lakshmi Mittal, was reported last week suggesting that producers may be forced to reduce production in order to maintain price stability. According to Metal Bulletin, import orders from Europe for some Chinese and Indian products have been on the rise since the summer. European mills had announced price increases for orders received in the 4q06, but may have to reconsider. Elsewhere, Taiwan has opted to re-impose a ban on imports of bar, rod and wire products from China as a result of oversupply in the domestic market. A similar ban had been removed in April 2005, but a combination of falling sales, growing domestic inventories and output cuts by Taiwanese steel mills prompted a return of the measure. The ban will be effective from September 30.

Shipments from Newcastle fell below target levels last week, while the vessel queue increased further to 36 from 30, according to McCloskey. The port exported 1.1 Mt of coal last week, 40% less than the near record of 1.9 Mt shipped in the previous week, bringing the annualised year-to-date rate to 79.8 Mt. The estimated average waiting time for this week increased to 16.9 days compared with 12.9 days last week. Meanwhile, the SSY Australian Coal Port Congestion Index, which considers delays at all coal ports in Australia, is currently at 7.2 days compared with 7.7 days last week.

BP announced late on Friday it would restore most of its shut-in output at the Prudhoe Bay oilfield in Alaska this week, ahead of a previous target of end-October, after getting clearance from US pipeline regulators, reports Reuters. The oil major will add 150k b/d of output within the next week taking total production to 400k b/d, less than two months after it was forced to halve flows due to a corroded line. Prudhoe Bay is North America’s biggest field, representing about 8% of US output.

Shipments of coal in Russia were 49.9 Mt during Jan-August, 7 Mt more than during the same period last year, reports McCloskey. Shipments from ports in the Baltic and North Russia rose by 4.6 Mt to 29.3 Mt, with Tallinn shipping 4.8 Mt (+2.7 Mt) and Ust-Luga increasing shipments by 1.5 Mt to 1.9 Mt.
In the Far East, Vostochny shipped 9.9 Mt, a rise of 0.6 Mt year-on-year.

Meanwhile, Platts reports from industry sources that there is a severe shortage of railway wagons to transport coal to Baltic and Black Sea ports, possibly resulting from a misallocation of railway wagons to the Far East of Russia and higher-than-expected demand for Russian coal.

Canada remained the largest crude supplier to the US in July having provided 1.6m b/d, while Mexico exported 1.56m b/d to the US, 4.28% higher year-on-year, reports Energy Intelligence. Total volumes were little changed at 10.15m b/d but African suppliers increased their share to 23% from 19% last year. Supply from Angola rose over 200% to 666k b/d in July while Algeria provided 413k b/d, 27% more than last year. The Mideast share dropped to 21% from 24%, mainly due to a 16% fall in levels from Saudi Arabia. Venezuela also saw a 10% decline year-on-year to 1.2m b/d, reports Energy Intelligence.

German coal imports in the January-July period were 21.3 Mt, according to the latest trade data, representing an increase of 4.2 Mt on the same period last year. Excluding imports from Poland and the Czech Republic, Jan-July imports were 11.3 Mt (+1.7 Mt). The hot weather contributed to July imports of 3.2 Mt, the highest-ever July total. If imports maintain their current pace, this year will see a record 36.4 Mt of coal imports compared with 30.4 Mt in 2005.

North Sea crude production dropped 5.4% month-on-month in August to 4.12m b/d having risen 4.7% in July to nearly 4.36m b/d, reports Petroleum Argus. The main decline was seen out of the UK where output fell 152k b/d on the month to 1.27m b/d. This was due to volumes from the Forties field falling a significant 198k b/d as a result of maintenance, reducing output from the North Sea's largest field to an average 294k b/d, more than a 100k b/d lower than in any month since it reached maturity. Production from Norway also decreased by 100k b/d to 2.47m b/d, reports Argus.

US distillate stocks grew another 4.1m bbl last week to reach 148.7m bbl, the highest since the week ending 8th January 1999, and 10.8% higher year-on-year, according to the latest data from the US Department of Energy. An 87k b/d rise in imports to 471k b/d contributed to the growth, while demand grew 86k b/d to nearly 4.14m b/d. Gasoline inventories increased 0.6m bbl to 207.6m bbl, 6.2% higher than the same week last year. The rise came despite a 285k b/d drop in imports to 799k b/d, the lowest since the week ending 25th November 2005, and 14.8% lower on the year. Demand continued to fall by another 139k b/d to 9.23m b/d. Crude stocks fell 2.8m bbl to 324.9m bbl despite import volumes remaining relatively unchanged at 10.6m bbl. Refinery utilisation was 0.4% higher at 93.4%.

Chinese steel exports continue to grow with 5.0 Mt exported in August alone, according to China's Customs Statistics. This made China a net steel exporter of 3.3 Mt in August and 16.7 Mt over the first eight months of the year. This contrasts with 2005, when China's net steel exports were just 0.4 Mt for the entire year. The data also confirm record monthly iron ore imports of 32.8 Mt, over 3 Mt higher than the previous historical high reported in March 2006. August was a record month for cement exports (4.26 Mt), taking the year-to-date total to 25.0 Mt, compared with 12.0 Mt during the same period last year. It was the second-highest month ever for soyabean imports (3.0 Mt), with the YTD total running 1.7 Mt higher on the Jan-Aug total in 2005.

The managing director of the IMF, Rodrigo de Rato, has cautioned that the global economic cycle may be close to its peak, the Financial Times reports. Speaking at a joint plenary session of the IMF and the World Bank, Mr de Rato expressed concern at current account imbalances and described the suspension of the Doha Round of trade talks as "damaging and disappointing." Last week, the IMF's latest World Economic Outlook raised it estimate for global GDP growth to 5.1% and forecast the world economy to expand by 4.9% in 2007.

Russia plans to cut crude exports in the 4Q06 by around 80k b/d from its schedules in the third quarter to 3.85m b/d, reports Energy Intelligence. Russian crude exports via Black Sea ports are scheduled to rise to 1.3m b/d in the fourth quarter, up nearly 200k b/d from the previous one, in order to limit the damage on exports caused by the recent cut-off in supplies to Lithuania. The increase comes despite the inevitable arrival of shorter days, which cause steady traffic jams throughout winter at the daylight-restricted Turkish straits. Primorsk is set to handle a modestly lighter load of 1.35m b/d, but volumes will need to be kept high to cover the Lithuanian shutdown which is expected to continue until at least the end of January, reports Energy Intelligence.

According to the Hunter Valley Coal Chain logistics team chair, Graham Davidson, worsening congestion is in prospect at Newcastle, McCloskey reports. This raises the prospect of a vessel queue of over 40, after the queue reached 31 last week. The congestion has been attributed to recent bad weather (flooding on rail links and high seas), maintenance and an increase in cargoes to be shipped. The SSY Australian Coal Port Congestion Index currently stands at 7.7 days compared with an August average of 6.3 days.

The new VAT rebate on exports of Chinese steel products will take effect from today (September 15), according to Bloomberg. The tax rebate will be cut from 11% to 8%. A report from Bloomberg comments that such a move (similar steps are in place for a variety of other exported goods) will help deflect criticism that China's currency is undervalued in order to boost exports. While the measure will make steel exports less profitable for producers, it may still be more economical for steelmakers to export than sell domestically. According to consultants World Steel Dynamics, the export price of hot-rolled band at Chinese ports is currently $460-470/t, however, the price for domestic deliveries is $390/t. Therefore, a small addition to exporting costs may not reduce exports appreciably. The rebate cut would make more of a difference to export volumes if the differential between exported and domestic prices were to narrow.

New signs that moderate El Ni

Chinese owners of an Argentinian iron ore mine are reportedly restarting operations, hinting that the Chinese steel sector is not oversupplied with iron ore. Metal Bulletin reports that the Hiparsa mine, idled in 1989, is now in the possession of Chinese-owned Minera Sierra Grande (MSG). The as yet unconfirmed reports suggest that there are plans to lift output of 0.6 Mtpa of pellet to 1.8 Mtpa for both domestic and export purposes.

US distillate stocks grew another 4.7m bbl last week to reach 144.6m bbl, the highest since the week ending 1st October 1999, and 8.5% higher year-on-year, according to the latest data from the US Department of Energy. The rise came despite a 138k b/d fall in imports to 384k b/d, partly due to a 117k b/d drop in demand to just over 4m b/d. Gasoline inventories inched another 0.1m bbl higher to 207m bbl, mainly due to a 57k b/d rise in imports to 1.08m b/d and a 254k b/d fall in demand following the end of the main summer driving season. Crude stocks dropped 2.9m bbl to 327.7m bbl (but remained 6.3% higher on the year) despite a 232k b/d rise in imports to 10.6m b/d, 16% above the same period last year. Refinery utilisation dipped 0.6% to
93%.

Preliminary data reveal that China imported a record 32.8 Mt of iron ore in August, a rise of 33% over July and up a massive 42% year-on-year. Reports indicate the growth has come from rising exports from Australia and Brazil rather than India, which would be consistent with the sharp jump in Capesize freight rates during the 3q.

Despite the huge rise in imports, iron ore stock levels at China’s major ports have remained fairly steady, with the current figure of less than 43 Mt compared to 44 Mt towards the end of June. Domestic steel prices appear to have stabilised while the high rate of steel exports from China was also maintained in August, rebounding back to 5 Mt after July’s dip.

In its latest monthly report the IEA revised its forecast for global oil demand down by 100k b/d to 84.7m b/d in 2006 and down by 160k b/d to 86.2m b/d in 2007. The declines came due to a downward revision in OECD demand of 87k b/d to 49.5m b/d, almost unchanged from 2005, largely due to revisions in N. American preliminary data, flat consumption in Europe, and continued low demand in the Pacific. Preliminary July 2006 data indicate that oil product demand in OECD Pacific fell 0.1% year-on-year, mostly due to higher than average rainfall and colder weather. The IEA said that world supply fell 400k b/d in August to 85.8m b/d, underpinned by lower output from the North Sea, Iran and Saudi Arabia, but was up 975k b/d year-on-year. Non-OPEC supply forecasts for 2006 and 2007 have been trimmed by 60k b/d and 145k b/d respectively, to 51m b/d and 52.8m b/d.

The disruption caused by bad weather at Newcastle on Friday has led to a lengthening in the vessel queue. McCloskey reports that the queue reached 31, compared with 25 the previous week. The average waiting time for vessels this week is estimated at 14 days. As a consequence, the load rate is at its lowest since June. This week's SSY Australian Coal Port Congestion Index climbed to 7.9 days, compared with 5.7 days three weeks ago.

China is facing gasoil shortfalls due to disparity between high international oil prices and the state-administered fuel pricing mechanism, reports Petroleum Argus. Chinese refiners' heaviest third-quarter maintenance programme since 2002 is tightening product supplies ahead of a peak demand period. The upcoming harvest season will boost agricultural gasoil demand, while the Golden Week holiday in October will further increase demand for diesel and jet fuel. As refiners are maximising gasoil output, this is maintaining record-high jet fuel imports this year (China imported an average 98k b/d in Jan-July '06 versus 53k b/d in the same period in '05) as refiners divert more of their jet cut into the distillate stream, reports Argus.