Latest News
27.01.12
Coal export terminals in Oregon?View
Commissioners with the Port of St Helens in Oregon have approved lease options for two new coal terminals, a decision that could give Powder River Basin (southeast Montana and northeast Wyoming) coal producers their first major export terminals on the US West Coast. Up until now, the main terminal for any exports from the west coast of North America was Vancouver, with patchy shipments elsewhere. Kinder Morgan has proposed a $200 million facility to export around 15 million short tons (13.6 million mt) of coal annually. The second interested party is Australia’s Ambre Energy, which says it initially plans to exports 3.5 million st (3.18 million mt) starting in 2013, with subsequent expansion plans boosting the total to 8 million st (7.26 million mt). Both projects still require building permits, and the proposals are described as being in the preliminary stages. The goal is clear: Power River Basin coal is low in sulphur and ash, and decent in energy content, whilst coal demand in Asia (especially China and South Korea) is expected to continue strong growth. Producers from the Powder River Basin clearly feel they can compete internationally with Australia and Indonesia (which is gradually looking to rein in exports of its generally low quality coal), and if these plans materialize, the biggest beneficiary would likely be the Pacific Panamax market.27.01.12
Weekly oil price reviewView
Confirmation that the EU would ban Iranian crude from 1st July and a reiteration of the threat to close the Strait of Hormuz saw prices rise on Monday before falling slightly on Tuesday amid fears that the European economy could drag down growth for the rest of the world. The US Federal Reserve’s announcement on Wednesday that interest rates were probably going to stay close to zero until late 2014 saw futures in crude rise slightly due to the weakening of the dollar and a rush of foreign interest – front month Brent hit a high of $111.89 on Thursday to then close at $110.79. Nymex front month closed at $99.70 after seeing a high of $101.09.26.01.12
A pipeline linking South Sudan’s oil fields to Kenya’s Lamu port will be built “as soon as possible”View
A pipeline linking South Sudan’s oil fields to Kenya’s Lamu port will be built “as soon as possible” according to South Sudan’s deputy minister for petroleum and mining. The new agreement between the two countries follows the halt to exports via the pipeline through Sudan due to a breakdown in relations over $36/bbl transit fees, equating to nearly $13m per day, and other allegations of the siphoning oil and withholding of revenues. The only exit point currently available for South Sudan, which holds the majority of oil between the two countries, is the Sudanese town of Port Sudan on the Red Sea – it is also the location for the processing facilities which would have to be relocated. It will be difficult to see when the pipeline can be completed by as it is likely to cost several billion dollars and navigate difficult terrain; however South Sudan relies on oil for 98% of its budget meaning a solution has to be found soon. China’s CNPC, India’s ONGC and Malaysia’s Petronas are currently the main developers in the region.26.01.12
Japan posted annual trade deficit for first time since 1980; strong yen affecting exportsView
Japan posted a trade deficit for the third straight month in December, contributing to an annual trade deficit for 2011 for the first time since 1980. Japan’s export-heavy economy has been affected by the strength of its currency, which rose last year as investors sought “safe havens” outside of the Eurozone. At the same time, the shutdown of much of Japan’s electricity production capacity after the nuclear disaster has increased the country’s dependence on energy imports, which has also tipped the trade balance in the direction of deficit. Unfortunately for the dry freight market, most of this buying has been in oil and gas instead of coal. Full 2011 import data, released yesterday by the Ministry of Finance, shows that thermal coal imports fell 0.4% year-on-year to 101.2 MT, while imports of LNG rose by more than 12% over the same period. Additionally, the slowdown in Japanese steel production, a function both of the stronger yen and global economic concerns, seems to be affecting coking coal demand as well. 2011 imports of all coal were 175.2 MT, a 5.1% year-on-year decline; before 2009, the last time annual coal imports were this low was 2004.25.01.12
Brazil's iron ore production/exports to get back on trackView
At the start of this week Brazil’s Vale announced that it had suspended a force majeure on some of its supply contracts declared on Jan 11th, after the heavy rains which had hindered output finally subsided. On January 11th, Vale announced that it will lose 2 million tonnes of output, which amounts to around 20% of its total January production of iron ore from southern Brazil. The lost production has obviously had a negative affect on exports, with our latest port data showing that overall exports from Brazil in the first two weeks of the year averaged around 3.3MT only. This is by far the lowest figure we have seen since a period back in 2009, and obviously was not helped by very weak demand during the Far Eastern Lunar New Year celebrations. We are obviously now looking for a pickup of both iron ore production and exports going forward, and hopefully more support for the Capesize market.25.01.12
Global GDP growth has been cut to 3.3%View
Global GDP growth has been cut to 3.3% by the International Monetary Fund (IMF) this week, adding even more uncertainty to the recovery of the European economy for 2012. Although it projects 2013 picking up to 3.9%, this is still lower than the 4% figure it depicted for 2012 back in September. The numbers are buoyed by non-OECD Asia, which more than offsets the forecast 0.5% decline in Europe. The International Energy Agency, which has already recently revised down its global oil demand growth prediction for 2012, had done so on the previous 4% GDP growth figure – the IMF revision opens up the possibility of further cuts in upcoming reports. The IMF has also estimated the average price of oil will decrease 4.9% from the 2011 level due to the slowing world growth.24.01.12
Very high levels of congestion in dry bulk fleet; led by CapesView
Congestion of the dry bulk fleet at Australian, Brazilian, Indian and Chinese ports combined at the end of last week stood at 67.74 Mdwt; equivalent to more than 11.5% of the entire dry bulk fleet. Both of these figures are higher than anything seen in 2011. The Capesize sector, which is the most significant contributor by a very large distance, has queues which amount to 47.6 Mdwt. To understand the numbers for Capes it is sufficient to look at Australia and Brazil only, where it has risen by close to 5Mdwt in just one week – an obvious consequence of the cyclone and floods respectively. Provided all other factors remain unchanged, increased port congestion for Capes would be seen as a welcome factor providing support to rates; unfortunately we have not yet seen this materialise. This is precisely because other factors are not unchanged; the Far Eastern Lunar New Year holidays have obviously had a major negative affect on demand for tonnage.24.01.12
Iraq’s oil exports averaged of 2.17m bpdView
Iraq’s December oil exports increased by 2.4m bbl over November’s figure to reach 66.5m bbl for the month, the equivalent of 2.15m bpd, giving a yearly average of 2.17m bpd, which falls short of the mid-year stated target of 2.5m bpd. Iraq’s export potential remains strong however with planned growth for 2012 targeting 2.6m bpd, stemming from increased production levels and additional export capacity through the use of Basrah’s new offshore single-point mooring buoys (SPMs). As part of the ‘Crude Oil Export Facility Reconstruction Project’, three of the SPMs should be commissioned by March this year, each adding a potential 900,000 barrels per day. OPEC’s third largest producer plans to hold a new round for oil and gas exploration licenses this April to further open their production and export capabilities.23.01.12
Pacific Supramax market still facing signs of weaknessView
Supramax earnings have been in near freefall since the end of October, and the Baltic time charter average is currently 50% lower than it was three months ago. For the index routes that originate in the Pacific basin, the performance has been even bleaker. Back-haul has been the worst-performing route, falling more than 80% from earnings of $8,800 per day three months ago. The second worst has been the Pacific round voyage, which has dropped by two-thirds to around $4,700 per day – the lowest level since February 2009. Over the same period, we have seen a steady rise in the number of open Supramax vessels in the Pacific. The average number of open spot vessels in Q4 2011 was about 13% higher than during the same period a year earlier. Although the number of spot vessels so far in January has declined, the lack of cargoes has contributed to the weakness in earnings. In the first three weeks of January, average Supramax utilization in the Pacific – that is, the number of cargo stems compared to the number of open ships – was a 21-month low. With a rise in cargo volumes unlikely until after the Lunar New Year celebrations, all signs point towards continued short-term weakness in the Pacific Supramax market.23.01.12
2011 saw US exports of refined oil products exceeded importsView
Last year, for the first time in over 60 years, US exports of refined oil products exceeded imports, according the US Energy Information Administration. A relatively weak economy which reduced consumer spending, a greater swing towards fuel efficient vehicles and the increase in percentage of biofuels used for fuel have seen demand fall domestically. Exports were buoyed by strong demand from Latin America, fed by high utilisation rates in the US Gulf refineries, as well as an increase in backhaul cargoes of distillate to Europe. The rare net export situation however is unlikely to last with several US Atlantic Coast refineries closing last year, cutting capacity by a reported 27% leading to a potential increase in products imports into the Atlantic Coast as pipeline capacity from the US Gulf Coast is at full capacity. A narrower Brent-WTI spread, partly due to the reversed Seaway pipeline commencing operations on 1st June (to be expanded to 400,000 bpd by 2013), may lower US Gulf Coast utilisation, whilst tentative signs of a recovery in the US may see stronger domestic demand, lowering exports.
