News archive March 2008

The International Grains Council has revised its estimate for world wheat trade in the current trade year down by 1.1 Mt from last month to 103.3 Mt, which compares with last year's total of 110.2 Mt. Projected exports from Argentina (10.0 Mt), Australia (8.0 Mt) and Ukraine (0.5 Mt) have all been lowered by 0.5 Mt from last month. Estimates for the EU (+0.5 Mt to 10.0 Mt) and the US (+0.4 Mt to 33.2 Mt) have been revised upwards.

Meanwhile the IGC forecasts world corn trade at 99.0 Mt, which is up from last month's forecast of 96.7 Mt and compares with last year's total of 87.5 Mt. The most significant alteration to exporter forecasts from one month ago is that for Brazil, with exports now projected at 11.5 Mt, which is up by 1 Mt over last month and compares with last year's total of 5.9 Mt.

Russia's seaborne crude exports are set to rise 104k b/d in April month-on-month to 2.86m b/d, but with still be below the 2.9m b/d average that was scheduled to be shipped in the 2Q08, reports Energy Intelligence. Volumes from Novorossiysk are expected to drop 52k b/d from March to 764k b/d, well below the 881k b/d projected for the quarter, largely due to a planned 72-hour shutdown for maintenance on the main pipeline feeding the port. Shipments through Odessa are set to rise 40k b/d to 196k b/d while those through Yuzhny are due to increase by 24k b/d to 198k b/d. Exports from Primorsk are due to rise 123k b/d to 1.54m b/d, reports Energy Intelligence.

Soyabeans futures prices this week increased by the most since June 2005 as Argentine farmers have blocked roads and ports to protest higher export taxes, according to Bloomberg. The strike in Argentina, the world's second-largest corn and the third-largest soyabean exporter, started 16 days ago. Argentine officials and the farmers are meeting today in an attempt to end the strike, which have led to exporters diverting vessels away from Argentina and declaring force majeure on shipments. According to the vice-president of Argentina's Private Commercial Ports Chamber quoted by Bloomberg, more than 30 ships are stranded in the River Plate.

According to the latest customs statistics, South Korea imported 7.6 Mt of coal in February, compared to 7.3 Mt in the same month last year. Imports from China have declined to 1.3 Mt from 1.7 Mt in February 2007. Meanwhile, imports from both Canada (+0.3 Mt y-o-y to 0.7 Mt) and the FSU (+0.5 Mt y-o-y to 0.8 Mt) increased. Australia (2.5 Mt, -0.2 Mt y-o-y) and Indonesia (2.2 Mt, +0.1 Mt y-o-y) remained South Korea's largest coal suppliers.

A major oil pipeline in Iraq was damaged in an attack on Thursday, reducing exports from the south of the country for the first time since 2004, reports Reuters. There have been mixed reports as to the extent of the damage to the pipeline from Zubair 1and the effect on exports. Officials in Baghdad have claimed the damage is not severe and that output could return to normal levels later Thursday, whereas an official from South Oil Company (SOC) said the damage was severe and that crude exports would be greatly affected as it is one of two main pipelines transporting crude to the southern terminals. Dow Jones has reported that exports from southern Iraqi terminals have been cut to about 1.2m b/d from a normal rate of 1.56m b/d.

US gasoline inventories fell 3.3m bbl last week to 229.2m bbl, but remained 9% higher y-o-y, while imports rose 62k b/d to 963k b/d, according to the latest data from the US Department of Energy. The drop followed a 139k b/d decline in gasoline output as refinery utilisation fell 1.6% to 82.2%, the lowest since Oct 2005. Demand was up 45k b/d at 9.1m b/d. Distillate stocks fell 2.2m bbl to 111.3m bbl as imports dipped 52k b/d to 242k b/d. However, demand was 115k b/d lower at 4.2m b/d. Crude stocks were relatively unchanged from the previous week at 311.8m bbl despite imports falling 570k b/d to 8.9m b/d.

S. Korea's S-Oil has declared force majeure on April oil products exports, including gasoil and gasoline, as a result of a power outage earlier this week, reports OPIS. The refiner has a total capacity of 580k b/d, producing mostly light and middle distillates. As a result, alternative supplies of diesel and jet fuel could be sourced from the USG, USWC and Caribbean. S. Korea ships gas oil to Chile (it exported an average 6-7 cargoes to Chile a month in Jan-Feb, and about 9-10 cargoes in the 4Q07) so volumes of diesel from the USG and USWC to Chile may rise. Jet fuel from S. Korea usually goes to the USWC so more cargoes may now go from the Caribbean to the USWC, reports OPIS.

According to preliminary data from the American Iron and Steel Institute, US steel imports declined in February to 2.2 Mt from 2.4 in the previous month. China remained the largest supplier of steel to the US, followed by South Korea and Japan. However, shipments from these three countries saw the most significant monthly reductions.

According to shipping sources quoted in McCloskey, Indonesian coal exports reached 13.7 Mt in January, compared with 14.5 Mt in the same month last year. The majority of the annual decline came from lower shipments to China, which fell by 0.4 Mt y-o-y to 1.1 Mt. Exports to Taiwan and India were also lower. Meanwhile, shipments to the biggest export destination, Japan, increased by 0.2 Mt y-o-y to 2.5 Mt.

S. Korea is to cut tariffs on imported oil and petrochemical products to help reduce the burden of high fuel costs on consumers and east inflationary pressure from high crude prices, reports Platts. Import tariffs on gasoline, kerosene, diesel and heavy oil products will be lowered to 1% from the current 3% from 1st April. The rate for crude imports will remain at 1%.

The Organisation for Economic Co-operation and Development has cut its growth forecast for the US economy to just 0.1% in the first three months of 2008, compared with its original forecast of 0.3%, reports the BBC. US growth forecast has also been reduced for the 2q08 from 0.4% to zero growth. Despite such sharp reductions, the OECD said it may be premature to declare a recession in the US.

US gasoline stocks fell 3.5m bbl from their 15 year high last week to 232.5m bbl, but remained 10.5% higher y-o-y, according to the latest data from the US Department of Energy. Imports rose 156k b/d to 901k b/d while demand dropped 60k b/d to just over 9m b/d. Distillate inventories declined 2.9m bbl to 113.5m bbl, the lowest since Jun 2005, as demand grew 322k b/d to 4.34m b/d. Imports were up 161k b/d at 294k b/d. Crude stocks rose 0.2m bbl to 311.8m bbl, despite imports falling 1.1m b/d to 9.5m b/d, as refinery utilisation dipped 1.2% to 83.8%.

Heavy rain has caused production to be suspended at three of Anglo American's opencast coal mines in South Africa, Platts reports. Anglo's Kriel, New Denmark and New Vaal mines in Mpumalanga province supply coal to Eskom, South Africa's power utility. The stoppage coincides with Eskom having to implement emergency load-shedding on Monday because it was unable to meet demand. Anglo was unable to predict when production at the three mines would resume, as this depends on the weather. Meanwhile BHP Billiton said that while its own production in South Africa was so far unaffected, the heavy rain has caused some blockages in its coal handling systems.

China's apparent oil demand rose 8.5% y-o-y in the first 2 months of 2008 to 59.33m tonnes, or 7.2m b/d, while crude throughput of Chinese refiners was up 7.4% on the year at 6.82m b/d, reports Platts. Apparent crude oil demand reached 7.19m b/d in Jan-Feb, up 5.2% from the same period in 2007. Gasoil production jumped 12.5% in the period to 2.65m b/d, while output of gasoline rose 4.1% to 1.49m b/d. Fuel oil output increased 11.2% on the year to 410k b/d, while kerosene production was up 17.3% at 254k b/d, reports Platts.

World steel production rose 5.3% annually to 106.9 Mt in February, according to the International Iron and Steel Institute. Chinese steel output reached 38.9 Mt (+7.0% year-on-year) and strong annual growth was also recorded in the traditional steelmaking centres of Japan (+6.5% to 9.8 Mt) and the US (+5.5% to 8.1 Mt). Production in the EU-27, however, declined from the same month last year (-2.0% to 16.6 Mt).

Chinese coal exports are poised to rebound following the diversion of many cargoes from the international market to domestic users over the last two months. Monthly exports had dipped to 2.8 Mt in February as opposed to 5.8 Mt in January, according to customs data quoted by Reuters. Some 31.8 Mt have been included in the first batch of this year's export quota, which compares with a first tranche of 42 Mt in 2007, however.

Stockpiles at the coal load port of Qinhuangdao now stand at 7 Mt compared with a typical level of around 5 Mt, according to Platts, implying an easing in domestic coal shortages and consequently an increase in export availability.

Growth in fixed asset investment in China remained strong in the first two months of the year, official data show. FAI rose 24.3% annually in January and February, slightly slower than the rate of 25.8% recorded in 2007. Reuters reports that annual investment growth in real estate accelerated to 32.9% during this period.

Tanker market levels through 2007 were relatively subdued compared with recent years, with nominal Worldscale rates showing a lower average for most of the key routes compared with 2006. The factors driving these trades are discussed within the report, but in general terms, there was notable influence from de-stocking in the OECD along oil price structures and a slow-down in tonne-mile demand growth.

The surge in newbuilding deliveries also increased tonnage availability - particularly in the product sector - and added some downside pressure to freight rates. In terms of earnings, the higher running costs, largely due to record high bunker prices, hit most tanker sectors, thereby cutting into profits.

"World Oil Tanker Trends" is available from SSY Consultancy & Research Ltd for an annual subscription of

China produced 38.9 Mt of crude steel, according to preliminary customs statistics. If confirmed this would mark an increase of 2.7 Mt on the same month last year. Although the February total is down 2.0 Mt on January 2008, this still represents robust production given the severe weather in China as well as the lunar New Year holiday period.

US crude stocks surged 6.2m bbl last week to 311.6m bbl, but remained 4.2% lower y-o-y, as imports rose 1.1m b/d to 10.5m b/d, according to the latest data from the US Department of Energy. Gasoline inventories increased for the 18th consecutive week to 236m bbl, 1.7m bbl higher than the previous week, and the highest since March 1993. Gasoline demand was up 60k b/d at 9.1m b/d. Distillate stocks fell 1.2m bbl to 116.4m bbl as imports fell 53k b/d to 133k b/d. Demand dropped 302k b/d to just over 4m b/d while output was down 114k b/d as refinery utilisation dipped 0.9% to 85%.

International steel prices have moved once again to new highs. The world export price of hot-rolled band as measured by World Steel Dynamics has now climbed above $800/t for the first time. This compares with a range of $500-600/t during 2007. In China, the price of wire rod has jumped to $700/t as opposed to $418/t at the same time last year, according to U-Metal.

In its latest monthly report, the IEA revised down its forecast for global oil demand in 2008 by 80k b/d to 87.5m b/d (but 1.7m b/d higher than 2007) due to downward revisions to OECD and non-OECD projections. OECD oil product demand has been lowered by almost 190k b/d to 49.3m b/d in 2008 due to revisions to 4Q07 and Jan figures. Most of this growth is expected to come from transportation fuel use, itself weighed down by weaker economic activity and higher oil prices. Non-OECD oil demand has been revised down by around 60k b/d in 2007 and up by about 120k b/d in 2008. OECD industry stocks grew 32.6m bbl in Jan month-on-month to 2,617m bbl, reaching 52.9 days of forward cover.

China's inflation hit 8.7% in February, the highest rate since May 1996, and up from 7.1% in January, reports the BBC. Food prices soared 23.3% y-o-y in February, whereas non-food inflation rose at an annual rate of 1.6%. The jump was attributed to the severe snowstorms last month that caused widespread disruption and to seasonal price rises over the Lunar New Year holiday. In recent months inflation has continued to rise despite higher interest rates and other measures by Beijing to keep the economy from overheating. Food prices have been rising since last year, partly due to supply problems. Attempts are being made to tackle the problem by freezing prices of key commodities and expanding production of basic necessities. Curbs have been placed on grain exports and subsidies are being given to farmers to rear more pigs. Last year, interest rates were increased 6 times in an attempt to control inflation, reports the BBC.

The US Department of Agriculture has raised its forecast for the 2007/08 world corn trade by 1.3 Mt to 95.1 Mt from February's forecast. The latest forecast is 4.2 Mt higher than last trade year. Brazilian corn exports have been increased by 1.5 Mt from last month's forecast to a record 10.5 Mt, compared with 8.1 Mt in the previous year, on unusually strong demand from the EU-27 (10.5 Mt, +3.4 Mt y-o-y). Meanwhile, Chinese corn exports have been reduced to just 0.5 Mt, 0.5 Mt lower than in January and 4.8 Mt lower than in 2006/07.

Customs data show that Chinese coal exports in February slipped to 3 Mt after severe winter weather led to some coal cargoes being diverted from the international market to domestic users. This represents a fall from the 5.8 Mt exported in January. Tight supply combined with strong underlying demand has held the international spot price of steam coal at historically high levels: spot FOB Richards Bay coal was assessed at $115.5/t today compared with around $100/t at the beginning of 2008.