China's steel demand and consumption promising for the following yearViewThe China Metallurgical Industry Planning and Research Institute said that the global economy is improving and although a major recovery does not seem probable, they expect China’s iron ore imports to rise in 2014, because steel consumption and output are set to expand in the country. The Institute predicts that China’s steel production will increase by 3.8 percent to 810 million tonnes in 2014 and that the country will need to import 850 million tonnes of the commodity to meet its needs, a rise of 6.3 percent from the total projected iron ore imports in 2013. Imports of iron ore are going to be supported the following years from the reform plans that China has agreed to take place and that actually support investment in infrastructure and construction sectors. Our model predicts that Chinese iron ore demand will grow in 2014 by 6.8 percent and comes almost in line with the Institute’s figures. China’s monthly iron ore imports range between 63 and 75 million tonnes and come mainly from Australia that exports to China almost half its monthly imports of the commodity. In addition, Rio and Vale this week also announced that they both expect strong iron ore import demand from China due to already expensive and rising domestic iron ore cost.
Weekly oil price reviewViewOn Monday Brent and WTI futures rose on the back of positive economic statistics from China and the US. Brent futures closed at $111.45 per barrel and WTI futures at $93.82 per barrel. On Tuesday, the spread between the two grades narrowed to $16.58 per barrel as the market anticipated that the opening of the pipeline from Cushing to Port Arthur in early January will decrease inventories at Cushing. The sharp decline in US crude inventories caused the spread to narrow again on Wednesday. Brent futures closed at $111.88 per barrel and WTI futures closed at $97.2 per barrel. On Thursday WTI and Brent futures moved in opposite directions as Brent futures closed at $110.98 per barrel and WTI futures closed at $97.38 per barrel, bringing the spread to $13.60 per barrel.
OPEC production ceiling unchangedViewOPEC agreed yesterday to maintain its current production ceiling at 30m b/d at least until June 2014. United Arab Emirates Oil Minister believes that the current ceiling offers a good balance between demand and supply while the Venezuelan Energy Minister declared that this will ensure price stability. However, some analysts are wondering what the impact of a potential increased production from Iran, Libya and Iraq combined with US shale oil would have on prices. Libyan Oil Minister announced on Wednesday that the country’s output will rise to 1.5m b/d within ten days once the situation has improved and Iranian Oil Minister declared that the country’s production target, once sanctions are lifted, is 4m b/d.
Brazilian farmers consider planting more soybean rather than cornViewA group of farming companies have been planning to switch from their traditional corn crops for the May-to-June harvest period to soybean crops, in order to increase revenue. During the second half of this year, we have seen the international corn prices dropping sharply while soybean prices remained pretty steady. As a result, Brazilian farmers are facing bearish outlook on their corn crops as they expect the prices to fall further. This country usually harvests corn crops in two rounds, one in March-April and one in May-June as the farmers normally plant corn crops soon after they harvest the early soybean crops in the beginning of each year. Facing negative profit margin for corn crops in 2014, it may be the first time to see the Brazilian farmers to do the so called “corn-to-soy” switch. This will likely ensure Brazil to be the largest soybean producer in the world again.
Mexico's oil and gas sector to open to foreign investmentsViewAnalysts believe that the congress will approve a reform that will allow private investment in the oil and gas sector next Monday. In 1917, the constitution declared that oil reserves were owned by the government and nationalization has since then won the support of the population. As a consequence, reversing this long-established situation has caused protests that are expected to continue in the coming weeks. However, experts believe foreign investment could greatly benefit the country and provide funds for projects such as deep-water drilling.
Ukraine will not impose this marketing year any export quotas and restrictions.ViewThe Minister of Agrarian Policy and Food of Ukraine said that Ukraine has decided not to introduce this marketing year export quotas and restrictions, adding also that the country by the new year will start exporting the almost 31 million tonnes of grain that have been planted. According to the ministry Ukraine from the start of the marketing year up to early December had exported 14.3 million tonnes of grain and of these 4 million tonnes were exported in November. The Ministry earlier in November had said that potential grain exports for the current marketing year that ends in June 2014 may reach 30 million tonnes, where in this case monthly average grain exports should be around 2.5 million tonnes. The USDA also has estimated in its latest report that total Ukrainian grain exports will reach this marketing year the 30 million tonnes levels. State customs statistics show that grain cargoes from Ukraine are mainly shipped to Egypt, Middle East countries and to European countries, where it is expected the grain export share from Ukraine to the EU to grow in the future.
China rejected GMO corn cargoes from USViewLocal Chinese media reported that the quarantine officials rejected two corn cargoes shipped from the US due to genetic modification issues. One corn cargo was rejected already back in last month due to the same reason however this month this problem is deteriorating. The state-owned body Grain.gov warned that the corn arrival at Chinese ports in November and December may be lower than their previous estimation (0.6 and 1.75 million tonnes respectively). Another concern is that China may stop corn importing from the US temporarily which will force the local buyers to seek supply from domestic producers. Should it happen, a price arbitrage may be created when China restarts its buying activity from the US shippers.
Kenya crude prospectsViewAlthough some experts have deemed Kenya promising in terms of its potential oil reserves – a major oil company has recently estimated that Kenya’s oil reserves could amount up to 10 billion barrels – considerable issues remain unsolved. First of all, commercial companies still need to determine how profitable extraction projects would be. Then, analysts believe the next step would be to address issues such as the current legal framework, the relations with Kenya’s neighbouring countries, the infrastructure, and how to make the local population benefit from such projects. Finally, there seems to be some uncertainty about what role the National Oil Corporation of Kenya will play.
Japan crude imports drop in OctoberViewJapan has recently published its October crude oil import figures that averaged 504,000 bpd lower than September levels due to lower buying interest from refineries. In addition, imports of Iranian crude also decreased to a six-month low of 127,279 bpd. Japan was one of the countries that needed a renewal of their US sanction waivers this month. The newly reached agreement does not require exempt countries to continue reducing their imported volumes however significant increases to Japan are also unlikely despite the relaxation of insurance hurdles.
Indian government expects Coal India to meet its set production target for the current fiscal yearViewThere are lots of news on India’s coal industry lately. First, the government have asked Coal India to make sure that it meets its production and off take targets of 482 and 492 million tonnes respectively for the current financial year. However, the state owned company missed its production target of 41.93 million tonnes by almost 3 million tonnes once again in November without specifying any reasons why. Coal India’s offtake for April-November period was almost 298.5 million tonnes against an initial target of 310.5 million tonnes. In addition to the above, some frustrated workers for losing their jobs shut one of the company’s major coal fields last Friday driving Coal India to lose 200,000 tonnes of coal output daily, pressing power producers in India that already face a very tight supply. Probably imports of coal are going to increase in the short term in order to secure coal stocks. Meantime, Coal India last week announced that it has identified 126 new projects to be undertaken during the 12th Plan period. Those projects capacity has been measured at 438 million metric tonnes, while around 60 projects of the 126 are likely to contribute around 88 million tonnes to the industry until 2016/17.