Latest News
17.05.12
India's monsoon approaches - effects likely more muted on dry freight this yearView
17.05.12
Camac Energy has entered into East African exploration operationsView
US based firm Camac Energy has entered into East African exploration operations though the signing of production sharing contracts for four blocks in Kenya’s deepwater Lamu Basin. Camac joins several much larger oil majors in the region after discoveries offshore of Tanzania and Mozambique came up with large gas and light oil reserves. The US company will hold a 90% operating stake in the blocks with the government holding the rest. Kenya now has 34 out of a total of 46 on and offshore blocks licensed out. On a similar move, UK based Aminex Plc. has said that it is pulling out of their North Korean operations to concentrate on the booming East African upstream operations within which they have been involved in since 2001 operating several exploration wells in Tanzania.16.05.12
Indonesia plans coal export tax as domestic customers face shortagesView
After restricting exports of mineral ores, the Indonesian government is now working on a coal export tax, as domestic political and economic issues are making the government reassess the industry’s role. 80% of Indonesia’s coal is produced in the Kalimantan region, yet businesses in the area claim that a lack of state-subsidized fuel is affecting their profitability. Following a threat from Kalimantan’s local governors that they would physically block all mineral and fuel shipments from May 31 in protest, the Energy Ministry this week agreed to raise the region’s fuel quota. This puts the speed with which mineral export restrictions have been enacted in Indonesia this year into context; domestic groups are fighting for more access to the coal that countries like China and India have become dependent on. Even the Indonesian Coal Mining Association has said that restrictions will be necessary to preserve domestic supplies and has suggested that an export quota instead of a tax. While a quota would provide more clarity about trade volumes than an export tax, the removal of millions of tonnes worth of Indonesian coal stems could have a sizable impact on the Pacific freight market, and the Supramax sector in particular.16.05.12
BP has signed an agreement to explore the deep Atlantic waters off Trinidad and TobagoView
BP Trinidad and Tobago, a wholly owned subsidiary of BP, has signed an agreement with the Caribbean country to explore its deep Atlantic waters for new potential oil and gas production sites. The exploration site is over 3.5 square km in size with an average depth of 2,000m – the deal, according to BP, is the first major one signed for deep sea drilling in the country for over 10 years. BP is currently the largest producer of oil and gas in Trinidad and Tobago with around 408,000 boe/d in 2011, accounting for half of the country’s natural gas production and 12% of BP’s total worldwide gas production. Oil and gas accounts for over 42% of total GDP in the country and is the leading exporter of LNG to the US, something which is under pressure given the rise in domestic supply.15.05.12
Germany’s steel industry turns cloudyView
Early in March, the German Steel Federation estimated that steel demand in Germany would remain robust during this year, and Germany’s annual crude steel production could remain around 44 million tonnes, the same level of last year. However the situation for the country’s steel industry may be worse than expected. ThyssenKrupp and Salzgitter, Germany’s two biggest steelmakers, have shown a grim outlook for the remainder of this year. ThyssenKrupp published a net loss in its fiscal second quarter (through the end of March), in light of a slump in prices in Europe and the costs at its Brazilian plants, while Salzgitter also posted a quarterly loss, and stated that it would be difficult to meet last year’s performance. The World Steel Association forecasted in late April that steel use in Europe is likely to fall 1.2% to 151 million tonnes this year due to the prolonged European sovereign debt crisis. Meanwhile the hope for an improvement of Europe’s economy in the 2H of this year is becoming somewhat cloudy. On top of the issues in Spain and Italy, today it has been announced that Greece is headed for another fresh general election, as its political leaders failed to form a coalition government.15.05.12
Latest global oil demand forecastView
The latest Oil Market Report from the International Energy Agency (IEA) has estimated that global oil consumption is set to grow by 0.9% in 2012 versus 2011. The report has revised growth up marginally to 790,000 bpd versus 2011 with predictions for the fourth quarter of this year showing an annual increase of 1.2m bpd after seeing an increase of just 0.3m bpd for the first quarter. All the growth is expected to stem from the non-OECD countries increasing their demand by 1.3m bpd to 44.8 million bpd. In comparison, OECD demand is expected to fall by 400,000 bpd to 45.2m bpd, although Japan is the exception – set to increase demand by 40,000 bpd this year to 4.5m bpd.14.05.12
Iron ore prices continue to fallView
Spot iron ore import prices into China (62% Fe fines, CFR Tianjin) have fallen to $136.7 per tonne based on benchmark figures from The Steel Index – the lowest level since the 22nd of February. On the supply side, one factor that is likely to have had an impact is the lack of European demand which has increased the availability of iron ore in the market, primarily from Brazil. Indeed Brazilian iron ore exports to the EU in the first four months of this year having fallen more than 5% y-o-y. At the same time, the growth of domestic steel demand in China appears not be as strong as people were hoping for. A seasonal springtime pickup was of course expected, and crude steel production reached extremely strong levels – average daily production in April was at a record high 2.019 million tonnes. However, it is also the case that prices on both flat and long steel products have been falling since the middle of April, and steel product inventories are now declining at a slower pace than the equivalent period last year. Domestic steel demand has clearly felt the consequences of the slowdown in the Chinese economy, and last week we saw figures showing that Chinese industrial production growth fell to its lowest level in almost 3 years. With expectations for strong steel demand growth not entirely being met, it is perhaps no surprise that China’s iron ore imports also fell (to a six-month low) in April, to 57.69 mn t. We now wait to see what impact the 50bp reserve ratio cut by the Chinese central bank has going forward, and in particular what impact it has on the demand side, since this appears to be the main sticking point. China’s Baosteel has remained cautious however and has kept prices of its main steel products unchanged for June – the third consecutive month of unchanged prices.14.05.12
Colombia has signed a feasibility study with China National Petroleum Corp. for a Colombia/Venezuela pipelineView
Last week saw the President of Colombia sign a feasibility study with China National Petroleum Corp. for a 1,000 mile crude pipeline linking Venezuela with the country’s Pacific coast, putting Venezuelan exports closer to the Far East. The 600,000 bpd pipeline would cost an estimated $8 billion and be part funded by China Development Bank – the deal is believed to be part of further talks by the Colombian government to increase their exports of oil to the Asian market. At present Venezuelan crude is exported to China via the Panama Canal over 9,500nm (30.5 days at 13kts) or via the Cape of Good Hope over 13,250nm (42.5 days at 13kts) – the former will soon be able to handle near-fully laden Suezmaxes after the expansion in 2014, but VLCCs must take the longer route. If the Colombian pipeline goes ahead and VLCCs are able to load at the terminus, a VLCC could export Venezuelan crude to China over 8,500nm (27 days at 13kts), a saving of 15 days and damage to a potential growth source of tonne-miles in the coming years.11.05.12
2012/13 corn exports to reach record 101.4 MTView
The US Department of Agriculture (USDA) released its first set of forecasts for the 2012/13 marketing year yesterday. World corn exports are forecast to reach a record high of 101.4 MT, which would be the first time that marketing year shipments have topped 100 MT. Nearly all of the growth in exports will come from the United States, which should be good news for the freight market considering that the world’s largest seaborne corn importers are in the Far East. A sharp rise in Chinese corn imports, which are set to reach 7 MT in 2012/13, will have the largest impact on tonne-miles for US corn exports. In Q1 2012, China imported 1.7 MT of corn, equal to its total imports in 2011. Of this, 99.5% was from the US, unlike Japan and South Korea which made sizable purchases from Ukraine during the same period. With second-largest exporter Argentina still unable to ship corn to China due to issues with its genetically modified crops, it is becoming increasingly likely that Chinese corn demand will have to be met by US output later on in the year.11.05.12
Weekly oil price reviewView
Higher global crude oil production, weaker than expected Chinese trade data, positive US job numbers combined with easing fears from the eurozone following the political implications from earlier in the week sent mixed messages to Thursday’s crude prices. WTI for delivery in June closed at $97.08/barrel, up $0.27. Though small, it marked the first gain following six straight losses for the WTI futures contract. In London, Brent for June fell $0.47 to settle at $112.73/barrel. The Brent/WTI spread narrowed to $15.65/barrel and the trend of narrowing is likely to continue in the near future due to Seaway pipeline reversal, scheduled to deliver the first crude to the US Gulf next week, which will ease the glut of crude in Cushing inventories.
