News archive September 2007

As a result of dry conditions in Australia, the International Grains Council has sharply cut its wheat export forecast for the country in 2007/08 (July-June). The IGC now expects 10.3 Mt to be exported from Australia in this trade year as opposed to last month's projection of 14.0 Mt. This would be even lower than the weather-affected export estimate of 11.4 Mt for 06/07. Meanwhile, the IGC anticipates that exports from the US in 07/08 will be higher than previously thought, reaching 31.7 Mt, compared with the August forecast of 29.1 Mt and the 06/07 estimate of 24.7 Mt.

World wheat trade in 07/08 is projected at 105.3 Mt, down from 110.6 Mt in 06/07.

Asian refiners are set to cut imports of W. African crude in October by about 15%, or 230k b/d, to 1.1m b/d, as prices of benchmark Brent rose, reports Bloomberg. The decline came as prices were considered too high by Chinese buyers, Pertamina opted for Brunei crude instead, and refineries were undergoing maintenance. Brent has gained more than 14% in relation to Dubai crude in the past month, making W. African grades more expensive for Asian refiners. Asian refiners also bought more crude from Vietnam, Malaysia and Australia, reducing the demand for W. African crudes. China, which has Asia's biggest refining capacity, reduced W. African crude imports by 210k b/d for October loading, reports Bloomberg.

The latest trade projections from the International Grains Council forecast a record world corn trade in the 2007/08 crop year (July-June) of 91 Mt. If realised, this would be 4 Mt higher than the 06/07 total and would be up 3 Mt on the IGC's August forecast. US corn exports are projected to reach an all-time high of 57 Mt. In comparison, the global wheat trade in 07/08 is now expected to total 102 Mt, representing a fall of 6 Mt from last year.

The US imported 2.3 Mt of steel in August, the lowest monthly total since November 2005, according to data from the American Iron and Steel Institute. This represents a decline of 22% on the previous month and brings the year-to-date imports to 21. 3 Mt, 24% below the same period last year. In August, supplies from China declined 26% month-on-month to 0.33 Mt, but China continues to be the largest supplier of finished steel to the US and year-to-date finished steel imports from China on an annualised basis (4.7 Mt) are running only slightly lower last year's record total. According to the president of the American Institute for International Steel, the weak showing for August reflected market conditions three to five months prior, when prices in many other markets were more attractive than in the US and US demand was weak due to high inventories.

US crude stocks recovered with a 1.8m bbl rise last week to 320.6m bbl as imports increased 637k b/d to 10.4m b/d, according to the latest data from the US Department of Energy. Gasoline inventories grew 0.6m bbl to 191.4m bbl but remained 10.5% lower year-on-year as imports stayed 28% lower on the year at just over 1m b/d, only 41k b/d up from the previous week. Distillate stocks increased 1.6m bbl to 137.1m bbl, 9.4% lower on the year, as imports were relatively unchanged at 314k b/d, 22% down on the year. Distillate demand rose 37k b/d to nearly 4.1m b/d. Refinery utilisation dropped 2.7% to 86.9%, the lowest since mid-March, causing gasoline production to fall 348k b/d to 8.7m b/d.

India's crude imports increased 9.7% in August year-on-year to 2.38m b/d as strong margins overseas made oil product exports attractive while domestic demand grew at a modest rate, reports Reuters. Indian refiners processed 3.1m b/d of crude in August, up 8.2% year-on-year. Oil demand rose 3.5% on the year, largely due to higher consumption of transport fuels. Total oil product demand in India is expected to rise 4.3% in 2007 to almost 2.8m b/d but growth should slow down to 2.3% in 2008.

During Q307 tanker rates across most sectors fell to multi-year lows while global oil prices surged to record highs and concerns emerged about the pace of the global economy in the wake of the US "sub-prime" mortgage crisis.

In its latest publication of World Oil Tanker Trends (WOTT), SSY highlights the factors that contributed to the weaker tanker market conditions and examines the direction and future trade patterns for the sector. The report leads with a focus on the growth in new refinery capacity globally and its potential impact on trade.

The WOTT also reviews activity in the chemical tanker, LNG and LPG markets during 1H07 including developments in the sales and purchase market for these vessel types.

World Oil Tanker Trends is available from SSY Consultancy & Research in hard copy and email format for an annual subscription of

Indonesian product imports have risen this year, increasing the subsidy burden on the state, reports Petroleum Argus. Gasoil imports have grown to nearly 300k b/d so far this year, up from 250k b/d in 2006, with October gasoil imports set to rise to 345k b/d. Gasoline imports are predicted to hit a high of almost 180k b/d in October, but are estimated to average only 130k b/d this year, versus 125k b/d last year. Just under half of the domestic product consumption is in the transportation sector, as higher economic growth has translated into rising car and motorbike sales. GDP now looks set to exceed previous forecasts by growing 5.5% in 2007. Product imports have increased partly due to unexpected shutdowns at the 170k b/d Dumai refinery, and lower than expected production at other refineries. Higher imports are a problem for Indonesia's government, which will have to pay $6.2bn in subsidies this year. It is hoped that a plan to reduce kerosine imports by replacing them with domestically produced LPG will help, but it is unlikely to be successful in the short term, reports Argus.

Indian iron ore exports to China in August declined from the same month last year, according to the latest customs data quoted by Metal Bulletin. China imported 29.3 Mt during the month, with shipments from India down 31% year-on-year to 4.6 Mt. Australian exports to China registered a more moderate YoY decline of 17% to 11.3 Mt, whereas shipments from Brazil were up 8% to 8.3 Mt. While the decline in volumes from India to China may partly be due to price resistance, it may equally reflect lack of iron ore supply.

The Baltic Exchange Dry Index recorded the biggest daily gain in its history on 21 September 2007, leaping 337 points to within 45 points of the 9,000-point mark. This surpassed the previous record daily jump of 250 points on 22 June 2007.

The dramatic rise in the BEDI was primarily driven by massive gains in the Capesize spot market. The Baltic Capesize Index leapt 780 points in one day to 12,550 points, compared with the previous largest daily rise of 640 points seen on 22 June this year.

At the same time, the Baltic Panamax Index surged above 9,000 points for the first time, while the Baltic Supramax Index stood at 5,494 points, hovering near its all-time high of 5,500 points.

Throughput quotas at Newcastle are to be reduced in the 4q07 in an attempt to alleviate port congestion, according to Reuters. The report quoted Graham Davidson, general manager at port operator Port Waratah Coal Services, who stated that voluntary reductions would first be sought from coal producers, but that cuts would be imposed if no such arrangement could be agreed. There was no indication as to the quantity under consideration as yet. The vessel queue at Newcastle was reported at around 50 earlier this week, with the Hunter Valley Coal Chain Logistics Team forecasting a queue of 32 by end-October.

Earlier today, reports emerged from Australia that a derailment around 20 km from Newcastle had blocked rail traffic in both directions, placing further strain on throughput in the near term.

Australia's wheat output forecast for 2007/08 has been reduced by 31% from the June projections to 15.5 Mt as a result of persistent drought, according to the Australian Bureau of Agricultural and Resource Economics. This lower forecast follows last week's projections from the US Department of Agriculture of 21.0 Mt for Australian wheat output this marketing year and has added to the tight global supply situation. It is likely that more pressure will be put on the US to meet upcoming shortfalls of wheat. US exports from June 1 to September 13 have been running 53% above the same period last year at 9.8 Mt.

According to the latest forecast from the Portland Cement Association, cement consumption in the US is expected to fall 6.8% in 2007 and 1.8% in 2008, compared with -4.4% and +2.2% in the summer forecast. The latest revision has been caused primarily by the sub-prime crisis, which has already affected the residential sector and is expected to extend to non-residential construction. Weaker US cement markets plus high inventory levels and high freight rates have already led to massive decline in cement imports so far this year. In the 1h07, US cement imports declined 6.9 Mt year-on-year to 11.8 Mt.

Meanwhile, US housing starts and building permits continued to fall in August, reports Bloomberg. According to data from the US Department of Commerce, housing starts declined to an annual rate of 1.331 million, the slowest since June 1995, while building permits, a sign of future construction plans, also dropped to a 12-year low of 1.307 million.

US crude stocks fell another 3.8m bbl last week to 318.8m bbl as imports rose 242k b/d to 9.8m b/d, down 7.4% year-on-year, according to the latest data from the US Department of Energy. Gasoline inventories rose 0.4m bbl to 190.8m bbl but remained 8% lower on the year. Imports remained relatively unchanged at just over 1m b/d but 26.5% higher on the year while demand dropped 146k b/d to 9.2m b/d. Distillate stocks grew 1.5m bbl to 135.5m bbl, despite imports rising 45k b/d to 307k b/d, as demand fell 37k b/d to just over 4m b/d. Refinery utilisation dipped 0.9% to 89.6%.

Oil prices topped $81/bbl for the first time on Tuesday, setting another record high amid fears of critically tight supplies for the winter season in the US, reports AFP. October WTI futures hit a high of $81.24/bbl early on Tuesday. October WTI closed at a new record settlement high of $80.57/bbl on Monday, after gaining $1.47/bbl, following an earlier intra-day high of $80.70/bbl. Crude prices have also been buoyed by expectations that the US Federal Reserve may cut interest rates later on Tuesday, a move the market believes would bolster the economy and strengthen petroleum demand in the US, reports AP.

According to the International Iron and Steel Institute, world steel production expanded by 5.3% year-on-year in August, the same rate as in July. Chinese output in August was estimated at 41.6 Mt, representing growth of 13.6% YOY, but slightly slower than 14.5% growth seen in July. August also saw YOY increases in output for some key steel producers, such as Japan (+3.7% to 10.0 Mt) and South Korea (+2.9% to 4.1 Mt). Meanwhile, YOY production declined in the EU-27 (-2.2% to 15.2 Mt), the FSU (-0.1% to 10.2 Mt) and India (-5.5% to 3.9 Mt). Production by US steel mills was estimated at 8.5 Mt, 0.5% higher YOY and 2.7% more than in July.

According to the SSY Australian Coal Port Congestion Index, congestion at Australia's coal ports returned to above 15 days (15.4), following a brief reduction to 13.6 days last week. Congestion increased at Gladstone and Dalrymple Bay (Capes restrictions remain until at least end-October) due to maintenance and expansion related shutdowns. Meanwhile, the Hunter Valley Coal Chain Logistics Team, the operator body that co-ordinates rail and port cargo movements through Newcastle, has reduced its forecast for the end-September queue at Newcastle to 37 from 40 last week. However, it has revised the end-October queue to 31, compared with 25 forecast last week. The current vessel queue at Newcastle has risen to 51 from 47 last week.

Asian demand for W. African crude in October fell 230k b/d month-on-month to 1.07m b/d, as China reduced its buying due to record high oil prices, reports Reuters. Asian refiners bought mostly Nigerian and Angolan crude. The spread between Brent and Dubai grades has also widened, making W, African crude less attractive compared to Middle East and Asian grades. China bought 552k b/d of W. African crude, down from 760k b/d in September. Indonesia moved away from the W. African crude market in October, buying its supplies from Brunei instead. The state's oil firm Pertamina had bought at least 1.8m bbl of W. African crude each month since June. India bought 306k b/d in October, although only 21k b/d more than September, it was 122k b/d higher than August, reports Reuters.

China's fixed asset investment grew 27.3% year-on-year in August, according to the country's National Bureau of Statistics. This is higher than the annual rate of 26.6% anticipated by a Bloomberg survey of analysts and brings annual growth in the first eight months of 2007 to 26.7%. Earlier this week official data indicated industrial production annual growth of 18.4% for January-August this year compared with a rate of 16.6% for the 2006 calendar year.

According to the US Department of Agriculture, global wheat stocks are projected to fall to their lowest levels for 30 years by May 2008. Ending stocks for 2007/08 have been reduced to 112.4 Mt, compared with last month's forecast of 114.8 Mt and the 2006/07 estimate of 125.1 Mt, as a result of reduced output among major producers and strong overseas demand. The USDA forecasts 2007/08 world wheat output to fall by 4.2 Mt from last month's estimate to 606.2 Mt.

Following the release of the USDA report, US wheat prices reached new records yesterday. US wheat prices have soared this year from $203/t fob at the start of 2007 to $334/t fob at the beginning of September. Furthermore, US wheat export sales in June-August have climbed to 8.9 Mt, compared to 5.9 Mt over the same period last year.

China is planning to have 12 Mt of strategic oil reserves by the end of 2010, compared to current reserves of 2-3 Mt, reports China Daily. Oil reserves will be quadrupled to cover one month of China's net import of crude oil and that could further be raised to an equivalent of three months of imports by 2020. The national strategic oil reserve plan was launched in 2003 and consisted of construction of four oil reserve bases. Two (Zhenai and Zhoushan) bases are already being used, while construction of the third base will be completed by end of 2007, becoming operational by 2008.

The Organisation of Petroleum Exporting Countries has agreed to increase production for the first time in a year by 0.5m b/d from November 1, reports Bloomberg. However, more significantly, the effective growth in cargo supply from OPEC members is set to be somewhat greater, at around 1.45m b/d. This is because the new target for "OPEC 10" production (i.e. OPEC, excluding Iraq, Angola and NGLs) will be 27.253m b/d. In other words, apart from the 0.5m b/d rise in agreed output, OPEC is in practice legalising the 0.95m b/d of over-production that is already coming from these 10 countries.

Meanwhile, the International Energy Agency has reduced its forecast for global oil demand to 88.02m b/d for 2008 from its earlier prediction last month of 88.18m b/d due to lower estimates for US economic growth. Forecast for crude oil demand over the rest of 2007 has also been lowered by 90k b/d to 85.9m b/d.

According to the latest data from the US Department of Energy, US gasoline stocks dropped further by 700k bbl last week to 190.4m bbl, 9.6% lower year-on-year and are well below the lower end of the average range. Refinery utilisation fell by 1.6% to 90.5% as gasoline imports declined by 298k b/d to 1.0m b/d and crude oil imports fell by 674k b/d to 9.6m b/d. Crude stocks fell by 7.1m bbl (against analyst expectations of 3.0m bbl fall) to 322.6m bbl, but remain above the upper end of the average range for this time of the year. Distillate inventories rose 1.8m bbl to 134.0m bbl, despite imports falling by 37k b/d to 352k b/d.

Iron ore imports into China in August totalled 29.29 Mt, according to the latest customs data. Although this marks a fall from the July total of 33.61 Mt, imports in the first eight months of this year still show significant year-on-year growth. January-August iron ore imports this year reached 251.0 Mt, up 14.6% or 32 Mt on the same period last year.

China’s crude imports were up 19% year-on-year at 3.5m b/d but down 5.3% month-on-month, preliminary data from China Customs showed. The imports were said to be lower on the month due to a fall in domestic refinery throughputs in China following a weakening in margins. Product imports were down sharply by 33% year-on-year and 31% month-on-month at 0.6m b/d.