News archive June 2008

According to the latest report from China's National Bureau of Statistics, the Jan-May 2008 profits of industrial companies above designated size (firms which have more than $0.7 million in annual sales) recorded a 20.9% increase on the same period last year to total $158.6 billion. The profits of the coal mining sector grew by 97.8%, while those of the steel industry rose by 25.6%.

Brazil's Petrobras will start pumping oil from Nigeria's offshore Agbami oil field on 21 July, in partnership with Total and Chevron-Texaco, reports AFP. Initially it is set to produce 100k b/d, but is expected to rise to 250k b/d next year. The Petrobras/Total/Chevron-Texaco consortium expects Nigeria's Akpo oil field to start-up next year with 185k b/d.

DRY: The first six months of 2008 have included not only fresh all-time highs for the Baltic Exchange Dry Index and Baltic Capesize Index, but also the most volatile six months on record for the Capesize market. The BDI climbed to a new record high of 11,793 points on 20 May. The gains were powered to a large extent by the booming Capesize market. The BCI hit 19,687 points on 5 June, with average earnings at $233,988/day, more than 20% above the November 2007 peak.

Volatility reached new heights in the 1h08. The Capesize 4TC moved by an astonishing 15% in one day on two occasions (30 January and 12 June), while daily movements of 5%+ have occurred 21 times since the turn of the year. The average daily movement during the 1h08 to date was 2.86%, virtually double the 1.46% average daily movement in 2004-07 inclusive.

Although the Baltic Panamax and Supramax Indices did not climb to record levels, both markets experienced volatility: the Panamax 4TC ranged between $44,363/day and $91,710/day, with the Supramax 5TC moving between a low of $39,976/day and high of $70,507/day.

TANKERS: Crude tanker markets for the first half of 2008 traded at very firm levels on average -- particularly the VLCC market through the second quarter. The BITR quoted TD3 edged towards the high of W252 seen at the start of the year and reached W241 at the end of June. Buoyant crude import demand from the Asia Pacific at a time of only modest net fleet growth for the VLCC sector was the major driver of this expansion. China has raised its refinery throughput ahead of the Beijing Olympic Games leading to record crude import volumes and Japan is increasingly using alternative sources of energy (including fuel oil and crude) to help meet the shortfall in electricity generation as its nuclear power sector falls short.

Downside pressure on the clean markets was evident in the first part of 2008, but in the second quarter, rates were supported by a rise in tonne-mile in the Atlantic due to a surge in US product exports as import demand for gasoil in Europe and Latin America expanded. BITR quoted TC2 rose to W286.25 in late June. In Asian trades, a more recent rise in rates followed the ramping up of product imports into China ahead of the August Games, plus a pick up in Australian gasoil imports and naphtha into the East Asian market.

S. Korea's crude imports fell 2.6% in May y-o-y to average 2.45m b/d despite volumes from Saudi Arabia, the country's top supplier, increasing 10.7% to 796k b/d, reports Energy Intelligence. Shipments from the UAE were also up 14.3% at 399k b/d while those from Qatar doubled to 211k b/d and Omani supplies more than tripled to 94k b/d. However, imports from Iran and Russia each fell nearly 60% to 92k b/d and 73k b/d respectively. Volumes from Kuwait fell 22% on the year to 255k b/d.

According to the latest report from the international Grains Council, the world grain market supply / demand balance for the 2008/09 marketing year remains as tight as in the previous season, with record prices caused by severe weather conditions impacting production as well as the increased use of grain for livestock feed. Due to greater use of corn to make ethanol, total grains consumption is set lower than previously. The production forecast has dropped to 1,711 Mt from 1,721 Mt last month, but still shows an increase over 2007/08.

Meanwhile, the world grains trade forecast has risen by 3 Mt to 227 Mt, but is still lower than the 233 Mt which is estimated for 2007/08.

Ukraine may export 13.5-14 Mt of grain in the 2008-09 marketing year (July-June), according to the country's agriculture minister. He estimated that exports would rise triple from 3.7 Mt this year, Bloomberg reports.

The US Department of Agriculture (USDA) has raised its forecast of 2008/09 Ukraine grain exports. Wheat exports are predicted to increase to 6.0 Mt from 0.7 Mt for the July/June marketing year. Barley exports are expected up from 1.7 Mt to 4.0 Mt for the year ending September, while corn are forecast to reach 2.5 Mt from 1.0 Mt during the same period.

US crude stocks grew 0.8m bbl last week to 301.8m bbl, but remained 14% lower y-o-y, while imports dipped just 8k b/d to 10.25m b/d, as refinery utilisation dropped 0.7% to 88.6%. according to the latest data from the US Department of Energy. Gasoline stocks were down 0.1m bbl at 208.8m bbl despite imports increasing 120k b/d to 1.16m b/d. Gasoline demand was up 83k b/d at 9.33m b/d. Distillate stocks were up 2.8m bbl at 119.4m bbl despite imports dropping 150k b/d to 107k b/d, the lowest level since Apr 2000.

Port operator Transnet announced the disrupted rail link to Richards Bay Coal Terminal resumed operations this morning following clearing and repairs after a derailment on Saturday morning, Reuters reports. Transnet has reportedly advised that 26 carriages of export coal out of a 100-carriage train derailed last weekend at Halfgewonen in the Mpumalanga province.

Meanwhile, coal FOB prices at Richards Bay remained firm this week due to continued strong demand.

Iron ore miner Rio Tinto's subsidiary Hamersley Iron has reached agreement on a new price settlement for the contract year beginning April 1, 2008 with China's Baosteel, according to a statement from Rio Tinto. Baosteel will pay 96.5% more for Pilbara blend lump and 79.9% more for fines shipped from Australia. The new prices are 144,66 US cents per dry metric tonne of fines and 201.69 US cents per dry metric tonne of lump. Rio Tinto and BHP Billiton have been negotiating for months with Chinese steelmakers in an attempt to secure higher price increases than the 65-71% awarded to Brazilian ore supplier Vale earlier this year, in order to reflect the freight differential between Brazilian and Australian supplies. The new prices will be the benchmark for all Rio's long term contract sales for 2008-09.

Oil rose by almost $3/bbl on Friday after views on China's fuel price increase reversed, it is now thought it may boost rather than lower demand for fuel in the world’s second-largest oil consumer, reports Reuters. Oil fell nearly $5 in the previous session after China raised pump gasoline and diesel prices by up to 18%. Initial forecasts suggested the increase would reduce demand, but some analysts now say consumption will rise as the price increase will encourage healthier supply at the pumps. Fuel pumps in China have faced long queues and rationing as refiners cut output to limit losses made by selling discounted fuel, reports Reuters.

Corn prices continued to rise this week to new record levels after the worst flood in the US Midwest in 15 years. The severe weather conditions hit two major corn plants, and have delayed export shipments. Associated Press reported that estimates of destroyed corn acres vary from 2 million to 5 million and there are concerns that destruction could be worse. It has led to an increased risk of lower production as global demand for food increases, Reuters reports

Platts reports that coal producers' export capacity allocation for the remainder of the year may be cut by Newcastle port authorities. The vessel queue off Newcastle lengthened to 40 as of 16th June, compared with 32 a week earlier. Continued strong demand for coal has let to FOB price soaring to around $160/mt at Newcastle and more cuts in export allocations would help to tighten supplies further.

Crude prices fell Thursday following news that China will raise retail gasoline and diesel prices for the first time in 8 months to help refineries recoup losses from record oil prices, reports Reuters. China is to increase fuel prices by $145.50/t from Friday. Jet fuel and power prices will also increase. It is thought the move could dampen the country's oil demand. Earlier, oil prices had risen after Nigerian rebels attacked Royal Dutch Shell's 220k b/d Bonga oilfield off the coast of Nigeria, shutting down a tenth of the country's oil output in a rare attack on a deepwater facility, reports Reuters. Rebels also warned oil and gas tankers to avoid the region or risk being attacked.

July loading schedules for the 8 principal Norwegian and UK crude systems show a 111k b/d, or 5.3%, rise in oil output to almost 2.22m b/d, reports Energy Intelligence. The increase comes as shipments from Gullfaks and Ekofisk are expected to rise 76k b/d and 50k b/d respectively. Loadings from Statfjord and Troll are both set to increase 20k b/d. However, these are partly countered by a decline of 39k b/d from Forties and 24k b/d from Flotta.

SSY are to speak at the inaugural "Biofuels: A New Shipping Market conference on 25th June in London, organised by Lloyd’s List Events. Thor Emil Brandrud from SSY’s Bioenergy department will present on Biomass from a Dry Bulk Perspective. His paper will identify some of the key features of the current biomass trades, including the main cargoes carried in bulk, the predominant routes and vessel types deployed. He will also comment on future prospects for the biomass dry bulk trades.

SSY’s Bioenergy department is based in our Oslo office, covering both liquid and dry bulk cargoes.

US crude stocks fell another 1.2m bbl last week to 301m bbl, 13.8% lower y-o-y, despite imports rising 571k b/d to 10.26m b/d, as refinery utilisation rose 0.7% to 89.3%, according to the latest data from the US Department of Energy. Gasoline inventories also fell 1.2m bbl to 208.9m bbl as imports dropped 153k b/d to just over 1m b/d. Demand was down 160k b/d at 9.25m b/d. Distillate stocks grew 2.6m bbl to 116.6m bbl as imports rose 130k b/d to 257k b/d.

Asian imports of W. African crude will fall 36% to 830k b/d this month, the lowest in 10 months, as buyers reduced purchases due to weaker refining profit and higher shipping costs, reports Bloomberg. Shipments to China from W. Africa in July are set to increase 8.5%, while total Asian imports may rise 46% from June to 1.2m b/d. Refiners cut imports of the more expensive W. African crudes as fuel-price controls lead to lower refining margins when raw material costs rise. Indian refiners turned to Malaysia and Azerbaijan for cargoes due to supply disruptions in Nigeria, but bought more in July as demand for diesel and gasoline rose.

Steel production in May increased by 5.8% y-o-y to a monthly record of 120 Mt, according to international Iron and Steel Institute data released today. Production for the first five months of 577 Mt was up by 5.6% y-o-y and was led by growth in China, where production was up by 9.4% to 216 Mt. Other regions contributing to the growth included the US (Jan-May output 42.4 Mt, +5.4%), Japan (51.5 Mt, +4.2%), India (22.9 Mt, +4.1%), and Russia (31.6 Mt, +3.8%).

China produced a record 46.01 Mt of crude steel in May, according to the latest data from the Natiional Bureau of Statistics. May’s output was up by 1.34 Mt from the previous month and represented a 10.5%-increase on the same month last year, China’s steel output in the first five months of the year was up by 9.4% from a year earlier to 216 Mt.

China became a net importer of gasoline for the first time in May as imports reached 339k tons (about 87k b/d), the highest in at least 29 months and up from zero imports last year, reports Shanghai Daily. Exports were 160k tons, down about two-thirds y-o-y. Sinopec and China National Petroleum Corp. increased imports to keep the country supplied after refiners cut output to avoid losses due to government capped prices in a market of ever increasing crude prices. Crude processing fell 1.1% (partly due to the year-ago high) to 27.78m tons in May, marking the first drop in refinery runs in 5 years. The drop in utilisation comes at a time when the summer harvest and preparations for the Olympic Games are increasing gasoline demand. Diesel imports also hit a record high of 700k tons in May, 35% higher on the month, as exports fell by a third to 40k tons. The rise in imports comes as the country diverts fuel to Sichuan following the earthquake reducing supplies in other regions. In June, Sinopec and CNPC are forecast to import 600k tons of gasoline and 1m tons of diesel, pushing China's importing volume to a new high, reports Shanghai Daily.

India has raised the rate of duty on iron ore exports to a uniform 15% in order to preserve more of its resources for domestic use, the finance ministry said in a statement on 13th June, according to Reuters. The current FOB price for 63.5% Indian iron ore fines of $135/tonne is down from the end-March peak of $150/t, according to SSY sources.

Meanwhile export taxes on long steel products have been raised to 15% from 10%, although flat-rolled products have been exempted from export duty.

Crude prices hit another record high on Monday of $139.89/bbl for US light sweet crude for July delivery, reports Reuters. Prices jumped as the dollar fell following the publication of data from the New York Federal Reserve that showed manufacturing in the state of New York contracted in June for the fourth time in 5 months. The surge came despite Saudi Arabia announcing on Sunday it would increase its oil output by 200k b/d in July to 9.7m b/d, its highest monthly rate since Aug 1981. The rise would take output 550k b/d, or over 6%, higher than May. Saudi's plans come ahead of a meeting of oil producers and consumers 22 June to find a solution to the record prices. Oil had doubled in the last year and risen 40% since the start of this year. Saudi Arabia is the only member of OPEC with the spare capacity to boost supplies quickly and significantly, it could increase output by about 2m b/d, reports Reuters.

China's ports should submit clearance plans by 20th June to keep cutting iron ore inventories in order to reduce berthing delays and release the pressure from port operations and railway transportation, according to the latest statement issued 12th June by the Chinese authorities (NDRC).

China's stockpiles of iron ore have risen by almost 17 Mt since the start of the year, according to weekly data from the main Chinese iron ore ports.

According to data from the US National Mining Association, US coal exports (excluding exports to Canada) in the first four months of the year rose 6.2 Mt (up 58%) from a year earlier to 16.8 Mt. US April coal exports of 5 Mt were down slightly from a 10 year-record of 5.1 Mt in March.

Meanwhile, April exports to European destinations have risen significantly to 3.5 Mt compared with 1.7 Mt in the same month last year, marking a rise of over 100% y-o-y.

China's iron ore imports in the first five months of the year rose 19% from a year earlier to 192 Mt, latest customs data reveal. China's May imports of 38.9 Mt were down from a record 42.9 Mt in April.

Meanwhile, with global steel prices soaring, China's steel product exports reached 5.6 Mt in May, the highest monthly total since Jul 2007. However, the first five months total was still down by 5.7 Mt y-o-y.