News archive May 2008

According to the latest report published by the International Grains Council, forecast for global grain supplies in 2008/09 has improved from last month, however the situation still remains tight. Total grains production estimate has been raised to 1.712 billion tonnes from 1.706 billion tonnes last month and compares with 1.674 billion tonnes estimated in 2007/08. Meanwhile, consumption is also estimated to rise to 1.714 billion tonnes from 1.710 billion tonnes last month and 1.684 billion tonnes estimated this trade year, largely due to use of grain in ethanol production, which is expected to rise by 31% year-on-year to 124 Mt. Trade is estimated to decline to 224 Mt (-10Mt y-o-y) and stocks are projected to remain very low.

Meanwhile, the IGC reported that world wheat prices fell in the last month by between $10-$80/t because of more favourable outlook for the next crop.

US steel imports in April totalled 2.67 Mt, almost 15% higher than in March and some 3.4% more than during the same month last year, according to the preliminary data from the American Iron and Steel Institute. April shipments from China declined by 36.4% year-on-year, while imports from South Korea (+21.3%) and Japan (+21.6%) increased. US imported 9.6 Mt of steel in the first four months of 2008, compared to 10.4 Mt during the same period last year.

US crude stocks slumped another 8.8m bbl last week to 311.6m bbl, 9% lower y-o-y, due to temporary delays in crude oil tanker off-loadings on the Gulf Coast causing a 278k b/d drop in imports to 8.96m b/d, according to the latest data from the US Department of Energy. Gasoline inventories fell 3.2m bbl to 206.2m bbl but remained 4.1% higher on the year, as imports dropped 120k b/d to just over 1m b/d. Distillate stocks grew 1.6m bbl to 109.4m bbl as imports increased 52k b/d to 250k b/d and demand fell 107k b/d to just over 4m b/d.

Production at Mexico's Cantarell complex fell 33% y-o-y in April, twice as fast as the decline forecast for this year by state-owned Pemex, reports Platts. Output in April was just over 1m b/d, half of its peak of four years ago. The decline is only being partly offset by increased output from other fields. Pemex produced 2.77m b/d of crude in April, down 13% on the year, while exports fell 14.3% to 1.44m b/d. Mexico's crude production peaked at 3.38m b/d in 2004, this year it has averaged 2.87m b/d, while exports have fallen 500k b/d between 2004 and 2008.

Indonesia is to quit OPEC, having been a member since 1962, as being a net oil importer it is not happy with high global crude prices, reports Reuters. Jakarta has recently raised prices as it struggles to bear the cost of importing gasoline and diesel at record prices and selling it at heavily subsidised prices. The country will become a member again if its becomes a net oil exporter again in the future. Output has fallen in recent years due to ageing wells, a lack of investment, and the absence of any major oil finds. As a net importer it would benefit from lower oil prices, whereas other OPEC members favour higher prices. Indonesia's oil output averages 927k b/d this year, down from 950k b/d in 2007, with demand at around 1.2-1.3m b/d, reports Reuters.

A coal export train from one of Cerrejon's mines was derailed by a bomb attack on the way to
Bolivar export terminal, reports Reuters. The incident happened early on 27 May and is likely to affect Colombian coal transportation and exports. No-one was injured and coal haulage operations will restart in the next few days, according to a company spokesman.

According to the latest trade data quoted by the Tex Report, April coal imports into South Korea totalled 9.3 Mt, the highest ever-monthly total, which compares with 7.3 Mt last April. This takes January-April imports to 32.2 Mt, compared with 28.3 Mt during the same period last year. In the first four months, imports increased from Australia to 11.6 Mt (+2.0 Mt y-o-y) and Indonesia to 9.3 Mt (+0.7 Mt). Meanwhile, shipments from China dropped to 5.9 Mt (-0.9 Mt).

Following suspension of the latest farmers strike in Argentina on May 21, a new round of talks between farm leaders and the government over new export taxes has failed. According to the vice-president of the Rural Society, some farmers may decide to resume roadblocks, reports Bloomberg. The failure could lead to deterioration of the two-month dispute, which halted grain exports and resulted in food shortages across Argentina.

US crude stocks dropped 5.4m bbl last week to 320.4m bbl, 6.9% lower y-o-y, as imports fell 696k b/d to under 9.24m b/d, according to the latest data from the US Department of Energy. Refinery utilisation was up 1.3% at 87.9%, resulting in a 124k b/d rise in gasoline output. Despite the increase, and a 228k b/d rise in imports to 1.14m b/d, gasoline inventories fell 0.8m bbl to 209.4m bbl, but remained 6.5% higher on the year. Distillate stocks were up 0.7m bbl at 107.8m bbl, with imports dipping just 18k b/d to 198k b/d.

Coal exports from Indonesia increased to 15.4 Mt in March, compared with 13.5 Mt in the previous month and 14.6 Mt in March last year, according to shipping sources quoted in McCloskey. Shipments to Japan, the biggest export destination in March, totalled 2.4 Mt, up 0.6 Mt y-o-y. Exports to Korea remained strong at 2.4 Mt (+0.6 Mt y-o-y), while shipments to India declined to 1.9 Mt (-0.8 Mt y-o-y).

Farmers in Argentina have suspended roadblocks, which were preventing grain from reaching the country's ports, Bloomberg reports. After two weeks of blockades, farmers' leaders have resumed talks with government officials to resolve the escalating dispute over new grain export taxes.

This was the second such spell of action by Argentina's farmers. The first protests involving roadblocks started after the introduction of the new tax regime on 11 March and lasted until April 2, before a 30-day truce was called to allow talks.

The utilisation rate of Japan's nuclear power sector in April fell below 50% for the first time in almost five years, according to government statistics quoted by McCloskey. This has been attributed to a thorough programme of safety checks and maintenance work. This is likely to keep demand for imported coal high: Japan imported a quarterly record of 27.3 Mt of steam coal in the first three months of the year.

Japan's economy surprisingly grew in the 1q08 for the third straight quarter as exports remained strong, reports Reuters. According to preliminary government data, GDP grew 0.8% in January-March of this year from the previous quarter, exceeding market expectations of 0.6% increase. Economic growth in the 15 nations using the euro was also better than expected in the 1q08. BBC reports that GDP increased by 0.7% from the previous quarter, compared with 0.5% growth expected by analysts.

Meanwhile, Bloomberg reported that construction of single-family houses in the US declined to the lowest level in 17 years. However, total housing starts increased by 8.2% because of construction of multifamily units and building permits, a sign of future construction, increased by 4.9% from the previous month.

World steel prices continue to rise. According to World Steel Dynamics, the US spot price of hot-rolled band has now reached $1,154/t (FOB the mill), in contrast to 2006/07 when the price ranged between $550-700/t.

Meanwhile, the World Export price of HRB (FOB port of export) has also climbed above $1,000/t, reaching $1,024/t compared with $500-600/t during last year.

Chinese steel production in April fell just short of the monthly all-time high in March, according to preliminary customs data. April output reached 44.7 Mt, just 0.2 Mt less than the previous month, but rose 4.4 Mt year-on-year.

Other economic data for last month appear generally positive. Retail sales in China grew 22% annually, while industrial output was up 15.7%. Although industrial production growth slowed from March (17.8%), economists point out that April 2008 had two fewer working days than in 2007, thereby slightly distorting the data, Reuters reports.

US gasoline stocks fell 1.7m bbl last week to 210.2m bbl, but remained 7.6% higher y-o-y, as imports dropped 40%, or 579k b/d, to 915k b/d, according to the latest data from the US Department of Energy. Distillate inventories grew 1.4m bbl to 107.1m bbl, 10.6% lower than the same week last year, as imports rose 29k b/d to 216k b/d and demand fell 64k b/d to 4.1m b/d. Crude stocks were up 0.2m bbl at 325.8m bbl, despite imports falling 695k b/d to 9.9m b/d. Refinery utilisation was up 1.6% at 86.6%.

The latest retail data from the US appears to show greater resilience by US consumers than previously anticipated, according to Reuters. Commerce Department statistics indicate that overall retail sales declined 0.2% in April after registering a small rise in March. However, outside the automobile sector, retail sales grew 0.5%, a significant improvement on many analysts' forecasts. Earlier this week the National Association of Realtors said the average price of US family homes in urban areas fell 7.7% year-on-year.

In its latest monthly report the IEA has revised downward its forecast for oil demand in 2008 to 86.8m b/d, or 0.39m b/d lower than in its report of a month ago. This is due to expectations that OECD oil demand will contract for the third successive year in 2008 as a result of slower economic growth and high prices. Non-OECD demand growth in 2008, led by China and the Middle East, remains strong at 3.7% or 1.4m b/d. Thus, global demand growth is now forecast at 1m b/d, or 1.2%, in 2008 y-o-y. Global supply fell 400k b/d in April month-on-month to 86.8m b/d due to North Sea outages, lower FSU output and weaker OPEC supplies. OPEC supply in April averaged 31.9m b/d, 255k b/d down from March as strike action and pipeline sabotage cut Nigerian supply by 150k b/d to 1.9m b/d. Non-OPEC output growth in 2008 is seen at 680k b/d, up from 550k b/d in 2007. Biofuels will account for 63% of this non-OPEC growth, compared with 49% in 2007, taking global biofuels supply to over 1.5m b/d, 57% higher on the year.

US coal exports in March reached their highest level for over ten years, totalling 5.1 Mt (excluding exports to Canada), according to data from the US National Mining Association. This brings the 1q08 total to 11.7 Mt, marking a rise of 3.5 Mt year-on-year. Quarterly exports to European destinations have risen to 8.4 Mt compared with 5.6 Mt in the same period last year.

China's crude imports fell about 4% in April y-o-y to 3.84m b/d, having dropped 15% from the record high of March, according to the latest data from China's Customs. Jan-April imports are 8.8% higher y-o-y at an average 3.62m b/d. Product imports were down slightly on the year at 881k b/d, but were up 18.9% from March.

China imported a record 42.9 Mt of iron ore in April, up by a massive 9.5 Mt year-on-year, latest customs data reveal. The April total is some 4.7 Mt higher than the previous record, set in February, and helps to explain China’s iron ore port stockpiles rising above 61 Mt for the first time.

Meanwhile, with global steel prices soaring, China’s steel product exports reached 4.8 Mt in April, the highest monthly total since December. Nevertheless this was still down by 3.2 Mt yr-on-yr. Steel imports of 1.5 Mt in April were at a similar level to the previous month and down by 0.2 Mt yr-on-yr.

Argentina's farmers have resumed industrial action with grain directed at the export market reportedly being prevented from reaching the country's ports. According to news agency AFP, talks between the government and farmers' leaders on the introduction of new export taxes have collapsed. Union leader Mario Llambias has declared that grain exports would be halted, but also that this time roadblocks would not prevent food supplies from reaching the country's major cities. The action is planned to last one week.

Nigeria's crude output fell about 15% month-on-month in April to average just under 1.8m b/d, due to militant attacks, output disruptions and a strike, reports Energy Intelligence. This is only 55% of the Nigerian government's stated total capacity of 3.2m b/d, however, other sources put total capacity at around 2.8m b/d. Exports fell to 1.7m b/d in April, with the strike against Exxon estimated to have cut loadings by 130k b/d. Nigeria's refineries, which started processing crude in Jan, has also affected exports, with roughly 120k b/d allocated for domestic use in Apr.

Throughput at Richards Bay recovered in April following a disappointing start to the year. According to trade data quoted by Barlow Jonker, April coal exports climbed to 6.0 Mt, compared with 4.6 Mt in the previous month. This marks a significant rebound from the 3.6 Mt shipped in January, when coal production in South Africa was impacted by power cuts. Despite the higher throughput in April, Richards Bay exports are still running behind last year's pace: in the first four months of 2008 19.2 Mt were shipped, down 2.3 Mt year-on-year.

US crude stocks jumped another 5.7m bbl to 325.6m bbl, but remained 4.6% lower y-o-y as imports rose 413k b/d to 10.6m b/d, according to
the latest data from the US Department of Energy. Gasoline inventories rose 0.8m bbl to 211.9m b/d as imports increased 109k b/d to 1.49m b/d. Demand was up 122k b/d at 9.3m b/d while output fell 287k b/d to 8.68m b/d as refinery utilisation dipped 0.4% to 85%. Distillate stocks were down 0.1m bbl to 105.7m bbl as imports fell 86k b/d to
187k b/d and demand rose 52k b/d to 4.19m b/d.