News archive October 2007

Further indication of the current strength of iron ore import demand is provided by news that the fob price of Indian iron ore fines has leapt to $142/t, marking a jump of around 70% in the last three months, according to data from U-Metal. The latest price jump takes the delivered price at Chinese ports to $192/t, which compares with an end-July level of $113/t.

Meanwhile, China's customs data show a year-on-year decline in iron ore shipments from India. Of the 33.2 Mt of iron ore imported into the country in September, some 13.6 Mt were shipped from Australia (+2.1 Mt year-on-year), around 9.6 Mt were supplied by Brazil (+2.6 Mt YoY) and a further 4.8 Mt were purchased from India (-0.3 Mt YoY).

US crude stocks slumped another 3.9m bbl last week to 312.7, the lowest since the week ending 21 October 2005, and 6.5% lower year-on-year, according to the latest data from the US Department of Energy. The fall came despite imports rising 278k b/d to 9.38m b/d. Gasoline inventories rose 1.3m bbl to 195.1m bbl as imports increased 400k b/d to 1.24m b/d. Distillate stocks grew 0.8m bbl to 135.3m bbl as imports rose 90k b/d to 325k b/d and demand fell 120k b/d to 4.1m b/d. Refinery utilisation dropped 0.9% to 86.2%.

Iraqi crude exports are set to reach a new high of 1.85m b/d in October, 45k b/d up on the month, due to increased tender sales from Iraq's northern fields, reports Energy Intelligence. Exports from the southern Basrah Oil Terminal were kept constant at 1.5m b/d, while those through the northern pipeline were seen growing well beyond 300k b/d as the number of attacks fell. Volumes to N. America are expected to grow 429k b/d month-on-month to 960k b/d while those to Asia and Europe are set to drop to 531k b/d and 360k b/d respectively.

Indian iron ore exports are likely to be limited by operational difficulties at two of the country's key load ports, Reuters reports. The Federation of Indian Mineral Industries reportedly advised that a damaged shiploader at Mormugao and problems with an ore handling plant at Paradip have reduced throughput by 1.0-1.5 Mt per month. With high iron ore import demand from such countries as China and Japan, this development is likely to increase pressure on Australian and Brazilian supply.

US wheat exports are continuing at a historically high pace, according to the latest US Department of Agriculture data. Weekly exports since the beginning of September this year have averaged 939,000 tonnes compared with 405,000 tonnes during the same period in 2006. The atypical strength in wheat cargoes has been one of the supporting factors for the freight market ex-US Gulf in recent weeks.

China is rationing diesel at service stations in at least 4 coastal provinces in the widest-scale rationing seen since 2003, as record high global oil prices cut output at loss-making Chinese refiners, reports Reuters. The rationing, which started a week ago, came as China's apparent oil demand growth nearly halted in September, growing at just 0.3% year-on-year, the slowest rate in 20 months. In the 9-months through September, implied demand rose 3.9% to 6.92m b/d. China's crude imports last month rose at their lowest rate in nearly a year (although still over 3m b/d), while net imports of oil products halved from the same month in 2006-exacerbating domestic shortfalls. As a result, Sinopec has imported 60,000t of diesel for November to make up for tightening domestic supplies, and may seek more, reports Reuters.

The International Grains Council has again increased its projection for the world corn trade in 2007/08 (July-June). The IGC expects global trade to reach a record 93 Mt, up 2 Mt from the previous 07/08 forecast and up 6 Mt from last year's trade estimate. Higher expectations for import demand from the EU, Brazil and Canada combined with a record US crop forecast prompted the latest upward revision to projected world trade to projected world trade.

US steel imports in September declined to the lowest monthly level for three and a half years, according to data from the American Iron and Steel Institute. September imports totalled 1.99 Mt, under 2 Mt for the first time since February 2004. This brings January-September imports to 23.3 Mt, down 8.2 Mt on the same period last year.

Despite the slowdown in US steel imports, latest customs data showed Chinese steel exports at 55.5 Mt in Jan-Sep 2007, with demand from other regions around the world accounting for the substantial increase.

US crude stocks slumped 5.3m bbl last week to 316.6m bbl, the lowest since the start of the year and 4.7% lower year-on-year, as imports fell 1.3m b/d to 9.1m b/d, according to the latest data from the US Department of Energy. Gasoline inventories dropped 2m bbl to 193.8m bbl, 6.5% lower on the year, due to imports declining 255k b/d to 838k b/d and demand growing 120k b/d to 9.37m b/d. Distillate stocks fell 1.8m bbl to 134.5m bbl as imports dipped 67k b/d to 235k b/d and demand rose 113k b/d to almost 4.28m b/d. Refinery utilisation inched 0.2% lower to 87.1%.

Chinese exports of steel (semi-finished and finished steel products) in the first three quarters of 2007 climbed to 55.5 Mt, an increase of over 20 Mt on the same period last year, according to China's Customs Statistics. With steel imports in January-September at 13.2 Mt, this puts China on course to be a net steel exporter of over 50 Mt in 2007. As recently as 2004, China was a net steel importer (of around 13 Mt over the twelve months).

FSU crude exports in September totalled 6.15m b/d, the lowest since January, reports Petroleum Argus, as the Sakhalin project and BTC pipeline underwent maintenance. Exports dropped 73k b/d month-on-month but remained 270k b/d higher on the year. The BTC pipeline saw volumes drop 44% from August to 380k b/d, while levels from Sakhalin dipped 37% to 57k b/d. These falls were partly offset by a combined increase of 293k b/d from the Black Sea, Baltic and Druzhba pipelines, which reached a total 4.25m b/d.

The SSY Australian Coal Port Congestion Index rose to 15.3 days, the highest level for five weeks. Meanwhile, McCloskey reports that "worse-than-expected system performance issues" have caused some 880,000 tonnes to be removed from the declared capacity at Newcastle, lowering the 4q07 capacity to 23.1 Mt.

At the end of last month it was announced that some 2.2 Mt would be cut from the 4q07 Newcastle throughput allowance under the tonnage quota system in an attempt to cut port congestion. The queue is currently reported at 37 vessels.

Japan is sourcing more coal from Australia, Canada and the former Soviet Union, as coal imports from China decrease, according to Japanese Ministry of Finance data. In January-August this year shipments from China totalled 10.0 Mt, down 3.4 Mt from the same period last year. Conversely, imports of Australian coal rose 4.3 Mt year-on-year to 74.3 Mt in Jan-Aug, while shipments from Canada were up 1.3 Mt to 6.9 Mt and imports from the FSU climbed 1.8 Mt to 7.6 Mt, stretching tonne-mile demand in the process.

Total coal imports into Japan in the first eight months of 2007 reached 122.4 Mt (+3.8 Mt).

Asian demand for W. African crude in November rose 100k b/d month-on-month to 1.17m b/d as China boosted its purchases, taking advantage of arbitrage opportunities, reports Reuters. China's buying was above average this month at 760k b/d as the arb opened temporarily, up from 552k b/d in October. India reduced its buying, taking eight 950k bbl cargoes, down from 10 stems in October. Taiwan halved its monthly purchases, while Indonesia didn't buy any W. African crude for the second consecutive month. The widening Brent/Dubai spread has been attributed, which has made Middle East crudes more attractive than W. African grades, reports Reuters.

World steel output grew 6.2% year-on-year during September to 110.1 Mt, according to the latest data from the International Iron and Steel Institute. Sound annual rates of growth were recorded among key Asian steel producers, such as China (+14.8% to 41.5 Mt), Japan (+3.4% to 9.9 Mt) and India (+6.9% to 4.3 Mt). However, production in the US in September was down 3.0% on the same month last year, bringing the January-September total to 73.3 Mt (-3.6% YoY).

US crude stocks grew 1.8m bbl last week to 321.9m bbl, as imports rose 539k b/d to 10.4m b/d, but remained 4% lower year-on-year, according to the latest data from the US Department of Energy. Gasoline inventories rose another 2.8m bbl to 195.8m bbl, 7% lower on the year, despite imports falling 230k b/d to under 1.1m b/d and demand increasing 53k b/d to 9.3m b/d. Distillate stocks grew 1m bbl to 136.3m bbl due to a 304k b/d fall in demand to less than 4.2m b/d, while imports dipped 83k b/d to 302k b/d. Refinery utilisation dropped 0.5% to 87.3%.

The SSY Australian Coal Port Congestion Index rose for the second successive week to 14.0 days. Although this is substantially below the all-time high of 22.9 days recorded in July, it is still almost double the year-ago level, with queues of over 40 vessels at both Dalrymple Bay and Newcastle.

Quoting statistics from port operator Port Waratah Coal Services, Reuters reports that the week to 8th October saw the lowest weekly throughput total (1.26 Mt) since the storm-related disruption to throughput in June. Port maintenance work was cited as a contributing factor behind lower exports at the beginning of the month. Meanwhile, the Hunter Valley Coal Chain Logistics Team currently predict a vessel queue at Newcastle of 47 at end-October and 45 at end-November.

Angola's crude production is set to rise above 2m b/d for the first time in December, as new fields come online and others increase output, reports Reuters. The country has set fresh record output highs in 6 of the last 7 months. Angola is forecast to export a record 1.95m b/d of crude in December, up 150k b/d from its forecasted peak in November according to the latest loading schedules. It exports nearly all of its oil production, consuming about 62k b/d domestically, reports Reuters.

The quantity of corn forecast by the US Department of Agriculture as required for ethanol production this year has been reduced due to the high price of corn eroding manufacturers' profit margins. As a result of this development - together with a high US corn crop - the USDA now projects US corn exports at 60 Mt in 2007/08 (Oct-Sep), up 3 Mt from the previous forecast made last month and some 6 Mt above the estimate for 06/07. World corn trade in 07/08 is now forecast at 92.4 Mt, compared with the September projection of 90.4 Mt and the 06/07 trade estimate of 89.6 Mt.

Asia-Pacific refinery turnarounds are set to peak this month, as China continues its heavier maintenance schedule from the 3Q07 into October, reports Petroleum Argus. Total shutdowns in the region are forecast at over 1m b/d in October as China closes 440k b/, up from 400k b/d in September and none in October a year earlier. The intensive Chinese shutdown during 3Q07 turned the country into an active gasoline importer in August and September. Chinese refineries have opted for maintenance shutdowns to avoid negative refining margins caused by stagnant state-controlled retail prices and rising global crude prices. Lighter 4Q07 maintenance is scheduled in Japan and S. Korea this year, with a combined 237k b/d due offline in October. Mideast Gulf refineries are not planning heavy shutdowns in the 4Q07, but a month-long shutdown of Iran's 400k b/d Abadan refinery in November will further squeeze the regions already tight fuel oil market, reports Argus.

Chinese iron ore imports reached 33.24 Mt in September, according to preliminary customs data. This marks a rebound of 4 Mt from August's total and is up 5.1 Mt year-on-year. The import total for the first three quarters of 2007 is 284 Mt, some 15% higher than the same period last year. The high September import total follows record months for iron ore exports from both Australia and Brazil.

China's crude imports rose 1.5% y-o-y in September to 13.66mt, or 3.34m b/d, preliminary data from China Customs show. However, volumes were down slightly from August. From Jan-Sept, imports totalled 124.07mt, up 13.6% on the year. Imports of oil products were up 4.5% on the month at 626k b/d, but down 25% y-o-y. In the Jan-Sept period China imported 8% less oil products versus a year ago. Product exports surged 74% y-o-y to 389k b/d having risen 27.5% from August. Volumes in the first 9-months of this year were up 30.6% from the same period in 2006.

US crude stocks fell 1.7m bbl last week to 320.1m bbl, 3.2% lower year-on-year, as imports dropped 384k b/d to under 9.9m b/d, according to the latest data from the US Department of Energy. Gasoline inventories grew 1.7m bbl to 193m bbl, but remained 10.3% lower on the year, as imports increased 169k b/d to over 1.3m b/d, 23.6% higher than the same week last year. Distillate stocks dropped 0.6m bbl to 135.3m bbl despite imports rising 193k b/d as demand grew 192k b/d to almost 4.5m b/d. Refinery utilisation inched another 0.3% higher to 87.8%.

In the IEA's latest monthly report, preliminary data show OECD industry stocks fell 21m bbl in August and 27.4m bbl in September, implying a counter-seasonal 3Q stock draw of 360k b/d. As a result end-August forward cover fell below the 5-year average to 53.5 days. Although global oil demand remained virtually unchanged at 85.9m b/d in 2007 (1.5% over 2006) and 88m b/d in 2008, there were downwards revisions made to N. America and the Pacific that were offset by upward adjustments in the FSU. World oil supply grew 415k b/d in September to 85.1m b/d as rising output from N. America, China and OPEC offset Caspian maintenance.

Saudi Arabia plans to increase crude exports to China by at least 9% this year to over 26mt to meet rising demand from refiners in the world's fastest-growing major economy, reports Bloomberg. Last year Saudi Arabia's exports to China rose 7.6% to 23.87mt. In Jan-Aug Saudi Arabia shipped 16.91mt to China, 8% higher year-on-year, accounting for 15% of the nations total overseas crude purchases. China's imports of Saudi crude rose to 2.6mt (0.6m b/d) in August, the highest since at least 2004. Sinopec started upgrading a 215k b /d refinery in Shanghai in October to enable the plant to process cheaper high-sulphur oil. It will shift to using crude from regions such as the Middle East to cut costs instead of the low-sulphur crude it currently processes from Asia, N. America and Africa, reports Bloomberg.