News archive June 2011

Japanese domestic steel demand in the 3q11 is forecast to grow 8.1% from the estimated 2q level to 14.9 Mt, according to the Ministry of Economy, Trade and Industry (MITI). This is primarily due to rebounding activity in the car industry, but will not prevent a 5.65 year-on-year fall in domestic steel consumption. By contrast, the government predicts that the country’s steel product exports will show positive quarter-on-quarter (5.4%) and year-on-year (2%) growth to 8.7 Mt in the 3q11. However, the benefits for Japan’s crude steel production are expected to be diluted by high existing inventories with a 1.5% quarter-on-quarter increase in output forecast by MITI to 26.9 Mt

Crude runs at Indian refineries averaged 3.40 mb/d during May, compared with 3.42 mb/d in April, and 3.25 mb/d a year earlier. The government data does not include processing at either Reliance’s second, 580 kb/d, export-based Jamnagar refinery, or BPCL’s 120 kb/d Bina plant, which commenced operations in April.

According to Transneft loading schedules, Russian seaborne crude exports will average 2.58 mb/d next month, down 51 kb/d from June’s scheduled shipments and 264 kb/d lower year on year. Baltic exports are set to drop 117 kb/d mom, and 118 kb/d yoy, to 1.30 mb/d, whilst Black Sea loadings are planned at 969 kb/d, down 134 kb/d yoy, but up 76 kb/d from this month. Shipments from the Pacific port of Kozmino are set to remain fairly stable, dropping just 10 kb/d from June, and 12 kb/d yoy, to 307 kb/d.

China will remove import duty from diesel and jet fuel from Friday, in a bid to encourage shipments from abroad and avoid potential shortages, Reuters reports. Some analysts have predicted this could turn China into a net-importer of diesel next month, although warn that, at current prices, refiners may be reluctant to take volumes that would still incur losses when sold domestically.

According to the latest data from the EIA, U.S. crude inventories dropped by 4.4 MB last week, to 359.5 MB. Imports were 271 kb/d lower than the week before, at 8.88 mb/d, and were 603 kb/d (6.4%) down from the equivalent week in 2010. Crude throughputs at U.S. refineries were fairly stable, dropping just 31 kb/d, to 15.25 mb/d. Overall refinery utilisation stood at 88.1% of total capacity, down from 89.2% a week earlier. Meanwhile, mogas inventories fell by 1.4 MB, to 213.2 MB, and ended the week 4.9 MB (2.2%) lower yoy. Imports of the product fell for the fifth consecutive week, down by 184 kb/d, to 683 kb/d. Distillate inventories rose by 0.3 MB, to 142.3 MB, whilst imports declined by 42 kb/d, to 80 kb/d. Today sees bidding close on the 30 MB of crude oil being made available from US strategic reserves, as part of the IEA’s collective action announced last Thursday.

World Steel Dynamics’ SteelBenchmarker puts world export prices for hot rolled band at $718/t at end-June, the lowest point over the past five months and down $55/t or 7% on the year-to-date peak at end-February. HRB steel prices lost momentum in all regions. China’s HRB price fell to a 3-month low of $620/t, down $14/t or 2% from one month ago. The US prices fell for the third consecutive month to $834/t, down $43/t or 5% from end-May. In the EU, the HRB price was $798/t, with a decline of $17 or 2% month-on-month.

The International Energy Agency (IEA) has released details of individual countries’ contribution to the recently announced 60.6 MB (2.0 mb/d) emergency stock release. The U.S.A. is the largest individual contributor, making available 30 MB (1.5 mb/d) of crude oil. Pacific members, Japan and Korea, will offer a combined 11.4 MB (380 kb/d), of which 7.4 MB (247 kb/d) will be crude, and 4.0 MB (132 kb/d) will be product. Nine European members will contribute 19.2 MB (641 kb/d), 4.2 MB (139 kb/d) in crude, and 15.1 MB (502 kb/d) in product. Overall, 38.9 MB (1.3 mb/d) of the crude and product made available will come from publicly held inventories, with 21.7 MB (723 kb/d) released from industry stocks.

According to data from the China Iron & Steel Association quoted by Reuters, national daily crude steel production in the second ten days of June edged lower to 1.96 Mt, down 0.7% from the first ten days of June. However, daily average output has accelerated to above 1.9 Mt since February, compared with an average of 1.7 Mt last year.

Eastbound shipments of West African crude will average 1.38 mb/d in July, down 140kb/d from already depressed levels in June, Argus reports. High premiums to Middle East grades are deterring Chinese refiners, who are set to take 735 kb/d of West African crude next month, down almost 340 kb/d from the same month in 2010, although up slightly from June. A wide spread between Atlantic basin and Middle East benchmarks, Brent and Dubai, has led Chinese buyers to increase their purchases of Saudi crude, at the expense of Angolan grades. Angolan crude made up 12% of China’s imports between January and April, down 19% yoy, whereas Saudi grades constituted 19% China’s purchases, up from 17% a year earlier. Indian demand for West African grades in July has also been sluggish, as weak mogas refining margins have deterred buyers from taking light-sweet Nigerian grades. A period of heavy maintenance at IOC’s refineries has also taken its toll.

The price of Chinese wire rod continued to fall last week, down $22/t from one month ago to an 11-week low of $724/t on June 24, according to World Steel Dynamics. However, the current price marks a gain of $142/t from the year-ago level.

The latest data from KNOC reveals that South Korean crude imports averaged 2.33 mb/d in May, down 5% from the 2.45 mb/d imported during the same month in 2010. Meanwhile, the country exported 1.14 mb/d of petroleum products, up 28% yoy. Crude runs at South Korean refineries last month increased by 9.6% yoy, to 2.49 mb/d.

Trade data show a strong rebound in coal imports from all sources into China in May. Shipments from China’s largest supplier Indonesia rose to its second highest level of this year, with a massive 81% increase month-on-month to 5.6 Mt. Imports from Australia rose for the second consecutive month by 25% on April to 1.2 Mt. However, the volume from Australia last month is still 50% lower than the year-ago level. There were gains in long-haul imports: South Africa (+19% MoM to 0.4 Mt) and the USA (+32% MoM to 0.5 Mt). However, there were no shipments from Colombia in May, unlike May 2010 when 0.5 Mt were imported.

At a press conference in Paris this afternoon, the International Energy Agency announced an agreement between its 28 member states to release 2 mb/d from emergency stockpiles over a period of 30 days, which will begin to arrive in the market around the end of next week. The move comes in response to the disruption of Libyan supplies, and in anticipation of a shortfall during the summer period of peak demand. The agency expressed its concern that further rises in the price of oil could ‘undermine the fragile global economic recovery’. The IEA described its ‘close consultation with major producing countries’ prior to today’s announcement, and cited the delay in increased output hitting the market as another reason behind the decision to release stocks. The agency intends to reassess the oil market, and its response, in 30 days’ time. The stock-release will be only the third since the founding of the IEA in 1974, the previous two coming in response to Hurricane Katrina in 2005, and the Iraqi invasion of Kuwait in 1990/91.

According to the latest data from the EIA, crude throughputs at US refineries rose by 409 kb/d last week, to 15.28 mb/d and the highest level since the last week of July 2010. This helped take overall refinery utilisation to 89.2% of total capacity, up from 86.1% the week before. Crude inventories dropped 1.7 mb/d, to 363.8 MB, whilst imports rose by 511 kb/d, to 9.15 mb/d. Meanwhile, mogas stocks fell for the first time in seven weeks, dropping by 500 KB, to 214.6 MB. Imports of the product slowed by 248 kb/d, to 867 kb/d. Distillate inventories rose by 1.2 MB, to 142.0 MB, with imports stable at 122 kb/d, down just 3 kb/d from the week before.

Iron ore shipments from Australia to China rebounded to a 4-month high of 22.3 Mt in May. Imports from Brazil also showed a gain of 1.2 Mt from a 10-month low in April to 10.9 Mt. China imported 6.8 Mt of Indian iron ore in May, posting the lowest level since November 2010 and down 35% year-on-year. Total imports in the first five months of this year from these three sources were virtually unchanged from the year-ago level, at 214 Mt. By contrast, shipments from the rest of the world in the same period saw a massive 22.4 Mt or 47% increase year-on-year to 69.8 Mt.

South Korean coal imports in May were 10.3 Mt, comprising 8.1 Mt of steam coal coal (including anthracite) and 2.2 Mt of coking coal. Total coal imports in the first five months of this year were 13% higher than the corresponding period last year at 53 Mt. Strong annual increases in imports from long-haul suppliers in Jan-May: Canada (+51% to 5.5 Mt), the US (+115% to 2.9 Mt) and South Africa (+341% to 1.9 Mt). Australia (+14% to 17.9 Mt) overtook Indonesia (-6.3% to 16.1 Mt) to bigger the largest coal supplier to South Korea.

The latest trade data from Chinese customs reveals that the country exported 43 kb/d of diesel last month, down 91 kb/d yoy and 11 kb/d lower than during April. Imports averaged 31 kb/d in May, compared with 32 kb/d the month before, and 26 kb/d in May 2010. Meanwhile, mogas exports dropped to 71 kb/d, down 36 kb/d mom and 76 kb/d yoy to their lowest level since February 2010. China typically does not import any mogas. Fuel oil imports were up 12 kb/d mom, and 38 kb/d yoy, at 482 kb/d. Exports rose 36 kb/d mom, and 59 kb/d yoy, to 238 kb/d.

According to the latest data from the country’s finance ministry, Japan imported 3.14 mb/d of crude oil in May, up 6.9% yoy, but down 13.4% from April, Reuters reports. The year on year rise represents increased demand from utilities struggling to replace lost nuclear power generation after March’s earthquake and subsequent tsunami. With just 19 of Japan’s 54 nuclear power plants operational, the country’s ten main utility companies imported 98 kb/d of crude for power generation last month. This is more than double the volume imported during the same month in 2010.

Global steel production grew 4.2% year-on-year in May to 129.9 Mt, according to the latest data from the World Steel Association. China enjoyed output growth of 7.8% year-on-year to a record volume of 60.2 Mt, while production in the rest of the world was virtually unchanged from the year-ago level at 69.7 Mt. Of the major steelmaking centres, annual declines in May were led by Japan (-7% to 9.0 Mt), mainly due to the disruption to production caused by the natural disasters in March. Declines were also seen in the US (-0.1% to 7.3 Mt) and the EU (-1.3% to 16.3 Mt). By contrast, strong annual growth was recorded in South Korea, up 12.8% year-on-year to 5.9 Mt, although down fractionally on the April level. The May production totals bring global steel output in the first five months of this year to 629.6 Mt, some 42.6 Mt (+7.3%) above the corresponding period last year.

According to the latest data from state oil firm, Petrobras, Brazilian oil output averaged 2.00 mb/d during May, unchanged from the month before. Despite maintenance at some offshore platforms, production from a number of new fields ensured the production was stable.

According to the latest loading schedules, CPC Blend exports are scheduled to average 663 kb/d during July, down 25 kb/d from planned shipments in June.

Colombian coal exports in May rose 36% year-on-year to an all-time high of 6.8 Mt, trade data shows cited by McCloskey. Most shipments went to EU, with an increase of 31% on April to 5.5 Mt. Exports to America remained at a low level of 1.3 Mt. There were no shipments to Asia in May.

In its June Oil Market Report, the IEA has increased its global oil demand forecast for 2011 by 120 kb/d, to 89.3 mb/d. The upward revision was attributed to higher Indian baseline demand, and the possibility of a power-shortage induced rise in Chinese gasoil demand. Demand for 2010 is now seen at 88.0 mb/d, a 130 kb/d upward revision. The IEA places OPEC crude production at 29.18 mb/d during May, a 210 kb/d increase from April, but still 1.25 mb/d lower than before the disruption to Libyan supply. Effective spare OPEC activity is seen at 4.01 mb/d. The agency has revised up its forecast for the 2011 call on OPEC crude by 400 kb/d, to 30.1 mb/d, and anticipates a 1.0 mb/d increase between 2q11 and 3q11.

UK coal imports in April were virtually unchanged on the previous month to 2.6 Mt, according to data from customs statistics. This marks the highest monthly volume since October 2010. Shipments from the largest supplier Russia in April rose to 1.1 Mt, the highest level since December 2009. Imports in the first four months of the year of 9.6 Mt were 16.8% higher than the corresponding period last year.

According to the latest data from the EIA, US crude inventories dropped by 3.4 MB last week, to 365.6 MB. The decline came as imports remained depressed, at 8.64 mb/d, up just 38 kb/d from the week before, and down 10.9% from the equivalent week a year earlier. Crude throughputs at the country’s refineries dropped by 243 kb/d from the week before, to 14.87 mb/d. Overall refinery utilisation fell from 87.2% of total capacity, to 86.1%. Meanwhile, mogas stocks saw a 0.6 MB build, to 215.1 MB, with imports slipping by 43 kb/d, to 1.12 mb/d. Distillate inventories dropped 0.1 MB, to 140.8 MB, after imports declined by 30 kb/d, to 125 kb/d.