News archive August 2007

According to the latest trade data, Australia exported 22.5 Mt of iron ore in July. This brings iron ore exports in the first seven months of the year to 147.6 Mt, up 9.9 Mt on the same period last year. During Jan-July 2007, the majority of exports were bound for China (77.4 Mt, +7.9 Mt year-on-year), followed by Japan (44.0 Mt, +1.9 Mt) and S. Korea (16.6 Mt, +1.7 Mt).

US steel imports this year are running around 22% below last year's pace, according to data from the American Iron and Steel Institute. Steel imports into the US in the first seven months of 2007 total 19.0 Mt, a fall of 5.4 Mt on the same period last year. Despite the decline in US imports, Chinese steel exports have risen year-on-year as a result of growing import demand in such regions as NE Asia, SE Asia and the Middle East.

US gasoline stocks slumped 3.6m bbl last week to 192.6m bbl, 6.6% lower year-on-year and the lowest since early September 2005, according to the latest data from the US Department of Energy. Imports rose 66k b/d to 993k b/d and demand dropped 136k b/d to 9.6m b/d. However, due to refinery utilisation falling 1.3% to 90.3%, gasoline production was down 201k b/d to under 9.1m b/d. Distillate inventories grew 0.9m bbl to 129.9m bbl despite imports falling 108k b/d to 320k b/d as demand dipped 89k b/d to 4.2m b/d. Crude stocks declined 3.5m bbl to 333.6m bbl as imports dropped 993k b/d to 9.8m b/d, 12% lower on the year.

The latest steel and iron ore price developments continue to suggest strong iron ore demand in China. The FOB price of Indian iron ore (63.5% Fe content) has jumped almost 30% in the past five weeks. According to data provided by U-Metal, the iron ore price has surged to $101/t compared with $78/t five weeks ago and $55.50/t at the beginning of the year. This brings the delivered cost to $134/t in sharp contrast to $75.50/t at the start of 2007. Meanwhile, steel prices in China have maintained their upward momentum in August. The price of hot-rolled coil has risen 12% from the start of the month, while the medium plate price has climbed 8% over the same period.

The rail and port operator body for Newcastle, the Hunter Valley Coal Chain Logistics Team, projects the queue at the port to decrease to 41 vessels by the end of September from the current level of 47. Significantly, the projected queue at the end of October is now 33 ships, which contrasts with the prediction of 16 made by the HVCCLT two weeks ago. The SSY Australian Coal Port Congestion Index stands at 16.0 days.

The International Grains Council has raised its projections for corn trade in 2007/08 (July-June) to 87.6 Mt from July's forecast of 85.2 Mt. This would represent a 0.2 Mt increase on the last trade year. The IGC lifted its import forecast for North Africa from last month's 9.5 Mt to 10.2 Mt (+0.2 Mt year-on-year), while 2007/08 South American imports are now forecast at 8.1 Mt compared with 7.8 Mt in July (-0.5 Mt). As a result, US corn exports are expected to reach 54.0 Mt in 2007/08 as opposed to the previous projection of 52.0 Mt.

Global aluminium production reached a record monthly level of 3.18 Mt in July, the latest data from the International Aluminium Institute show. Increases in output were driven by China, where monthly production hit 1.07 Mt, up 13% on July 2006. China's share of world aluminium production has increased noticeably over the past few years: in the first seven months of 2007, China accounted for 33% of world output compared with just 22% in the same period in 2003.

India'a crude oil imports in July rose 11.3% year-on-year to 10.63mt, around 2.5m b/d, due to the country's demand for oil products and strong margins for processed exports, reports Reuters. Oil demand grew 3.9% on the year, driven by sales of transport fuels as dealers stocked up ahead of an anticipated rise in state-administered prices. Naphtha demand fell 13.2%for the fourth month of decline, as petrochemical and fertiliser plants move to using natural gas as supplies improved. India expects domestic demand for oil products to grow at a compounded annual growth rate of 2.9% to 132mt (2.65m b/d) by 2011/12. Oil product imports in July rose 7.4% as private refiners shipped in more products to keep their retail outlets running. Product exports rose 14.7% on the year to about 0.8m b/d, due to strong margins abroad and artificially low prices locally, reports Reuters.

US crude stocks rose 1.9m bbl last week to 337.1m bbl, 2% higher year-on-year, as imports increased 942k b/d to 10.8m b/d, according to the latest data from the US Department of Energy. Gasoline inventories slumped 5.7m bbl to 196.2m bbl, 4.6% lower on the year, as imports fell 286k b/d to 927k b/d and demand rose 190k b/d to 9.76m b/d. Distillate stocks grew 1.3m bbl to 129m bbl as imports rose 196k b/d to 428k b/d, but remained 18% lower year-on-year. Demand was also up 130k b/d to 4.3m b/d. Refinery utilisation dipped 0.2% to 91.6% although gasoline and distillate production both rose slightly.

In an interview with the Financial Times, a senior official at the IMF has argued that while economic growth may be dampened by this month's financial market turbulence, the ability of emerging economies "to withstand these strains may be better than in the past." John Lipsky, the first deputy managing director at the IMF, noted that prior to the current market volatility, the global economy had enjoyed strong growth momentum thanks to a large extent to emerging market economies. Mr Lipsky noted that it was still early to assess whether the current instability would be temporary or more extended.

The SSY Australian Coal Port Congestion Index remained above 16 days this week, while average weighted berthing delays at the country's iron ore terminals rose from 4.0 days to 5.8 days. Congestion is still most severe at Newcastle and Dalrymple Bay, although queues at both ports have been trending down over the last two months. The Dalrymple Bay Coal Terminal now anticipates that the vessel queue at the port, currently over 30, will decline to 15 ships in 20 days' time, Platts reports. The falling queue has been attributed to cuts in the number of vessel arrivals in recent weeks.

World steel production expanded by 5.3% year-on-year in July, slightly slower than the 5.6% growth seen in June, according to the International Iron and Steel Institute. Chinese output in July was estimated at 41.3 Mt, representing growth of 14.5% YOY, similar to the 14.6% growth seen in June.

July saw YOY increases in output for some key steel producers, such as Japan (+1.5% to 10.0 Mt), the FSU (+3.6% to 10.6 Mt) and South Korea (+2.7% to 4.1 Mt). In contrast, there were YOY falls in July production in the EU-27 (-1.8% to 17.0 Mt), the US (-0.7% to 8.4 Mt) and India (-7.2% to 3.9 Mt).

A heatwave in Japan (leading to greater usage of air-conditioning units) combined with an ongoing outage at the Kashiwazaki-Kariwa nuclear power station has prompted the generating company for the Tokyo area (TEPCO) to buy in electricity from other utilities to avert a potential energy shortage, Reuters reports. Even before the plant at Kashiwazaki-Kariwa was removed from service after mid-July's earthquake, total nuclear power generation by the country's Federation of Electric Power Companies had slipped to its lowest levels in over two years. These developments are likely to keep steam coal import demand into Japan at high levels.

US housing starts in July fell 6.1% from the previous month to the lowest annual pace since January 1997, Reuters reports. Data from the US Department of Commerce puts housing starts at 1.381 million units, lower than market expectations of 1.405 million units. Building permits, a sign of future construction plans, also declined 2.8% from June to an annual pace of 1.373 million, the lowest since October 1996. New housing starts were down 20.9% and permits down 22.6% compared with July 2006.

The United Arab Emirates will shut around 25% of its oil output, or 630k b/d, for 2-3 weeks of planned maintenance at 2 of its largest fields from the end of October, reports Reuters. Total output reduction would be as high as 810k b/d as a third field would also undergo work. Output in July was around 2.54m b/d. The shutdown would also allow progress on work to expand the supply from the fields. The UAE is planning to boost its capacity to 3.5m b/d by 2011 to 2012, from around 2.8-2.9m b/d. The maintenance will hit production as demand from consumer countries for oil rises ahead of winter. The UAE's crude is a favoured feedstock for Japanese refiners making heating fuels.

China produced a near-record 41.25 Mt of steel in July, according to the latest data. Although this is short of the monthly all-time high of 41.5 Mt in June, the July total is up 14% on the same month last year. Meanwhile, China Daily reports that the country's vehicle production reached 5.01 million units in the first seven months of the year, marking a year-on-year rise of almost 25%.

US crude stocks slumped another 5.2m bbl last week to 335.2m bbl, but still remained 1.3% higher year-on-year, as imports dropped 125k b/d to under 9.9m b/d, according to the latest data from the US Department of Energy. Gasoline inventories fell 1.1m bbl to 201.9m bbl as imports dropped 184k b/d to 1.2m b/d, 12.6% lower on the year. Distillate stocks inched 0.2m bbl higher to 127.7m bbl despite imports falling 71k b/d to 232k b/d, as demand dipped 48k b/d to under 4.2m b/d. Refinery utilisation rose 0.5% to 91.8%.

Industrial action by South African coal miners belonging to the Solidarity union has entered its second day, with the mining companies' representative body, the Chamber of Mines, reporting usual levels of production. Reuters quoted a Chamber of Mines spokesperson who claimed that "very, very few" members of the Solidarity trade union were still taking action.

Other major steam coal-exporting countries continue to experience difficulties. Exceptionally heavy rains in Indonesia have prompted at least two Indonesian suppliers to declare force majeure in recent weeks, according to Reuters. Congestion at Australia's coal terminals remains far above the long-term average, with the SSY Australian Coal Port Congestion Index at 16.6 days, compared with the 2002-06 average of 7.1 days.

The latest Newcastle vessel queue projections from the Hunter Valley Coal Chain Logistics Team show that little change is anticipated during the rest of August. According to the HVCCLT, the end-August queue is predicted to be 49 compared with the current level of 50. The rail and port operator body does, however, expect some reduction in the coming months: the end-September projection is for 38 ships, while a queue of 16 vessels is forecast by end-October.

China's crude imports in July surged 39% year-on-year to 3.5m b/d, the fastest pace since Jan 2006 and the second highest daily rate after April's record, according to preliminary data released by China Customs. In the first 7 months, crude imports averaged 3.32m b/d, 14.8% higher than the same period last year. Product imports in July were down 18% on the year at 727k b/d having dropped 9% from June. Overall in the Jan-Jul period, product imports averaged 730k b/d, down 4% from Jan-Jul 2006. However, product exports in the Jan-Jul period have increased almost 26% on the year to an average 310k b/d.

Global oil supply in July gained 1.1m b/d month-on-month to 85.3m b/d, however, the 2Q07 total of 84.9m b/d was only 0.1m b/d higher on the year, according to the latest IEA monthly report. July OPEC crude supply rose 385k b/d to 30.5m b/d as output from Iraq and Nigeria was restarted. Despite this increase, OPEC-10 production stood 1.6m b/d lower year-on-year. Non-OPEC output estimates for 2007 and 2008 remain largely unchanged from last month's at 50m b/d and 51m b/d respectively. Forecast global oil demand also remains unchanged at 86m b/d in 2007, or 1.8%, and 88.2m b/d in 2008, or 2.5%.

Preliminary customs data from China indicate that iron ore imports reached 33.61 Mt in July, the highest monthly total since March this year. This brings imports for the first seven months of 2007 to 221.7 Mt, representing an increase of 19% on the same period last year. The high Chinese import total in July follows an upturn in iron ore exports from Brazil, which climbed to a new record of 22.7 Mt in June.

Wheat futures prices (benchmark November) at the Chicago Board of Trade reached their highest level in eleven years for the third consecutive day on 9 August, Reuters reports. The new peaks were fuelled by market speculation that smaller-than-expected European crops would lead to additional demand for US wheat.

The Brazilian Wheat Milling Association expects imports of wheat into Brazil to reach 7.1 Mt during 2007, up 9% year-on-year, according to a market report from the CBOT. This would make Brazil the largest wheat importer in the world. CBOT added that, of the remaining 2.7 Mt to be purchased this year, the majority would probably be sourced from the Northern Hemisphere as Argentinian supplies are largely sold out.

Coal imports into NE Asia in the 1h07 have shown significant increases on the same period last year, trade data show. South Korea imported 42.9 Mt in the 1h07, up 2.9 Mt year-on-year, with Indonesia accounting for an additional 2.5 Mt. Meanwhile, shipments of coal into Japan climbed 2.6 Mt YoY to 89.5 Mt in the 1h07. Declining imports of coal from China in this period (-3.2 Mt YoY to 6.9 Mt) were outweighed by increases in Australian imports (+4.0 Mt to 55.2 Mt) and shipments from the FSU (+1.3 Mt to 5.5 Mt).

US crude stocks slumped another 4.1m bbl to 340.4m bbl but remained 2.3% higher year-on-year, as imports fell 167k b/d to just under 1m b/d, according to the latest data from the US Department of Energy. Gasoline inventories dropped 1.7m bbl to 203m bbl, 2.2% higher on the year, despite imports rising 172k b/d to just under 1.4m b/d. The fall comes as gasoline production declined 278k b/d from the previous weeks high as refinery utilisation fell 2.3% to 91.3%. Distillate stocks were up 1m bbl at 127.5m bbl, while imports dipped 36k b/d to 303k b/d. Distillate production also fell over 200k b/d.