Shipping rates are poised to rally in the second half of the year as Vale SA, the world’s largest iron ore producer, drives up exports of the raw material, according to Commodore Research & Consultancy.
Vale will sell 321 million metric tons of the raw material used in steel this year, the Rio de Janeiro-based miner said in a July 31 earnings statement. That implies its second half shipments will jump 22 percent compared with the first six months and increase demand for vessels, Jeffrey Landsberg, managing director of Commodore, a New York-based adviser to ship owners, said in an e-mailed report today.
While a global glut of iron ore has driven the price of the commodity to about the lowest for the time of year since 2009, shipping rates are rallying. The raw material averaged $109.09 a ton so far this year at the Chinese port of Qingdao, 19 percent less than in 2013. The cost of booking Capesize vessels to haul the raw material rose almost doubled over the same period.
“A very large surge in Brazilian iron ore shipments is about to begin,” Landsberg said. “Capesize rates will find significant support as a result.”
Capesize rates averaged $13,447 a day this year, compared with $7,424 in the same period of 2013, according to prices from the Baltic Exchange, the London-based publisher of shipping costs on more than 50 trade routes. The ships will earn $24,000 in the third quarter and $32,000 in the fourth, according to analyst estimates compiled by Bloomberg.
Voyage Durations
While Brazil is the second-largest iron ore exporter, after Australia, cargoes from the South American country employ more vessels because of the distance involved in getting the raw material to China, the biggest buyer. A one-way shipment to Qingdao from Brazil takes 38 days, more than three times the duration of a delivery from Australia.
Vale said July 31 that it sold 144.7 million tons of ore in the first half and retained a prior full-year target of 321 million tons. Shipments from the country normally rise in the second-half of the year, Landsberg said.
Capesizes are the largest ships within the Baltic Dry Index, a measure of shipping costs across the dry bulk sector compiled by the Baltic Exchange. The wider gauge averaged 1,122 points this year, a 25 percent increase compared with the same period in 2013.
(Reuters) - China's leading steelmaker has estimated national crude steel output in 2013 at 822 million tonnes, nearly 6 percent above official data, suggesting the country's supply glut is worse than previously estimated.
The figure given in a speech published on Monday by Xu Lejiang, chairman of the state-owned parent of Shanghai-listed Baosteel Corp, would take the annual growth rate for steel output in 2013 from 7.5 percent to more than 13 percent.
China's steel sector, by far the world's biggest, has been plagued by a persistent oversupply that has depressed prices and saddled hundreds of mills with colossal debts. Many are already on the brink of closure.
"The harsh market situation has forced China's steel enterprises to experience firsthand the negative impact that overcapacity is having on the healthy development of the steel industry," Xu told an internal meeting of the China Iron and Steel Association (CISA) last week.
The government has stepped up efforts to crack down on the bloated sector, restricting new capacity growth and forcing outdated and polluting capacity to close, but new plants have continued to go into operation.
According to a transcript of the speech published on CISA's website (www.chinaisa.org.cn), Xu said China's official steel capacity levels reached 1.106 billion tonnes last year, putting utilization rates at 74.3 percent. Total capacity has now risen to 1.14 billion tonnes, Xu said.
He said CISA's 88 members had a total capacity of 842.93 million tonnes last year, and produced 663.8 million tonnes of crude steel. Smaller, non-member firms had a total capacity of 263.29 million tonnes and produced 158.17 million tonnes, putting their average utilization rate at just 60 percent.
Xu said Chinese steel mills would continue to struggle in the second half of the year amid financing difficulties, rising environmental compliance costs and higher tax rates.
"The age of rapid growth in the steel sector has already come to an end and China will gradually see negative growth in steel production," he said.
China produced 412 million tonnes of steel in the first six months of 2014, up 3 percent on the official data, CISA said. But with demand stagnant as a result of downturns in key sectors like construction, apparent consumption rose just 0.4 percent to 376 million tonnes.
Peabody plans to reduce metallurgical coal output at its Burton coal mine in Queensland by ~1.5Mtpa due to cost pressures, and has cut its coking coal sales target by 1Mt to 15-16Mt in 2014. The company also cut its average Australian cost estimate to ~USD70/t.
Commodity prices finished mostly lower as the US dollar strengthened after the US services sector expanded faster than forecast in July. US WTI crude oil also fell on demand concerns as refineries slow operations due to seasonal maintenance and as a refinery shut. Iron ore rose by 0.1% to USD95.50/t (CFR China).
China’s Markit/HSBC Services PMI dropped to 50 in July from 53.1 in June. Services growth is being dragged lower by the property market slowdown. While the HSBC and China NBS manufacturing PMIs are doing better - which will be welcomed by commodity market participants - the stagnation in services sector growth highlights the impact of the property market slowdown and likely need for ongoing government policy ‘fine tuning’ to support growth.
The Reserve Bank of India (RBI) said that it is watching India’s gold imports but is not “overly-worried” by the 65% y/y surge in gold import value in June. The RBI also signalled that it doesn’t intend to sit on gold import restrictions forever, and is willing to unwind measures when it sees an improvement in India’s economy and exports. India implemented a number of measures through 2013 to curb gold imports in order to reduce India’s current account deficit and strengthen the rupee. India is the world’s second largest gold consumer, representing ~25% of global demand.
Norilsk Nickel, the world’s largest nickel producer, said that refined nickel prices are still too low, particularly if nickel markets are to move into a deficit next year on the expectation that Indonesia’s mineral ore export ban remains in effect. The company said the price is still “below production costs at a number of mines worldwide, including our facilities in Australia”, and believes prices need to lift for idled nickel producers to restart operations.
Base metals were mixed despite growing demand concerns in Europe after Germany’s factory orders unexpectedly fell in June and after Italy’s economy unexpectedly contracted in the June quarter. Gold futures advanced on safe-haven demand as tensions escalated in Ukraine. US WTI crude oil fell on demand concerns as US refinery utilisation rates fell last week, adding to expectations this trend will continue as refineries slow operations due to seasonal maintenance. Iron ore rose by 0.4% to UDS95.90/t (CFR China).
Euro zone factory orders fell 10.4%, driven by weakness in Europe's largest economy, Germany, where industrial orders fell by 3.2%, the biggest fall in almost three years. Italian GDP fell by 0.2%, unexpectedly pushing the economy back into recession.
BHP Billiton has said it will try to stop planned industrial action by tugboat engineers at Australia’s Port Hedland export terminal on legal grounds. Port Hedland, which is also used by Fortescue, is responsible for over half of Australia’s iron ore exports and accounts for a quarter of global seaborne iron ore.
North American coal miner, Alpha Natural Resources, said it expects weak metallurgical coal prices to continue until at least early 2015 before inventories sales decline and high-cost coking coal capacity exits the market.
Tug boat engineers in Port Hedland, the country's biggest iron ore port, are launching industrial action over a pay dispute.
There will be four-hour stoppages on August 9, 11 and 13.
The Australian Institute of Marine and Power Engineers has notified the tug operator Teekay.
Teekay, which owns the licence for towage services at the port and employs 166 crew, says it regrets the impact the stop-work will have on customers, which include BHP Billiton and Fortescue.
In a statement Teekay indicated it will not be giving into the demands of the engineers.
"Teekay believes the claims by the AIMPE on behalf of its members are significantly out of step with the current economic environment," it said.
It says the base salary for an engineer at Port Hedland is "already approximately $220,000 a year."
It goes on to say that with housing assistance, penalty rates, meal and travel subsidies and 13 per cent super, the total package averages between $280,000 and $390,000 a year.
However, Teekay says negotiations are continuing with unions representing tugboat workers and it is also considering its legal options.
The total number of drill rigs deployed onshore in the US rose from 1,889 to 1,908 last week. Rigs deployed in oil plays advanced from 1,573 to a record high of 1,588, while rigs deployed in gas plays increased from 313 to 316.
Base and precious metals finished mostly lower, while crude oil benchmarks were mixed. Gold futures traded higher earlier in the day after American airplanes attacked militants in Iraq, boosting safehaven demand. Iron ore fell by 0.3% to USD95.70/t (CFR China).
China’s iron ore imports rose by 12.8% y/y to 82.5Mt in July, while copper imports (unwrought and scrap) fell by 21.1% y/y to 600kt. China’s coal imports declined by 19.6% y/y to 23.0Mt in July and crude oil imports fell by 9.0% to 23.76Mt.. Unwrought aluminium exports rose by 22.5% to 380kt, the highest level in three years. In Chinese economic data, producer prices fell 0.9% over the year to July while consumer prices rose by 2.3%, both as expected.
The first shipment of copper concentrates from Freeport’s Grasberg copper and gold mine resumed last week some eight months after being halted following Indonesia’s mining law changes on 12 January. Indonesia’s approval of Freeport’s copper exports came after the government and Freeport agreed to terms relating to export duties, royalties and downstream processing.
SINGAPORE, Aug 8 (Reuters) - Steel and iron ore futures in China fell on Friday, pulling back from this week's highs because of worries over demand that have kept steel traders and consumers from replenishing stockpiles. Daily crude steel production at China's large mills dropped nearly 3 percent on July 21-31 from the previous 10-day period to 1.757 million tonnes, data from the China Iron and Steel Association (CISA) showed. "There is no strong demand for steel as real estate construction is still in bad shape. Steel traders and end-users are not restocking," said Cao Bo, an analyst at Jinrui Futures in Shenzhen. China's housing market has slowed this year as sales and prices turned south in the biggest pullback in two years, driven in part by the cooling economy and Beijing's campaign to keep prices in check. The weak property sector looks to be the biggest threat to China's economy this year, with recent data pointing to stronger manufacturing and exports. Data on Friday showed China's exports rose far more than forecast in July, leading to a record trade surplus. The most traded rebar for delivery in January on the Shanghai Futures Exchange ended down nearly 1 percent at 3,087 yuan ($501) a tonne, after hitting a session low of 3,076 yuan. Rebar, a steel product used in construction, touched a three-week high of 3,125 yuan on Thursday. Stockpiles of five major steel products held by Chinese traders, including rebar, stood at 12.9 million tonnes last week, the lowest since December 2012, said Helen Lau, senior mining analyst at UOB-Kay Hian Securities in Hong Kong. That has helped push up inventories at large steel mills, which industry group CISA said earlier stood at 14.46 million tonnes at the end of June, showing an increase after three months of decline. Iron ore for January delivery on the Dalian Commodity Exchange lost 1 percent to end at 675 yuan a tonne, after falling as low as 669 yuan. It touched a two-week high of 692 yuan on Tuesday.
CHINA IRON ORE IMPORTS JUMP Cao at Jinrui Futures was bearish on iron ore. "I think the price will go down to 650 yuan in three months. Iron ore supply is abundant, both domestic ore and imported ore, especially imported ore," he said. China imported 82.52 million tonnes of iron ore in July, up 10.7 percent from the previous month and the third highest on record. "We had expected imports to slow down because port inventory remains high. But I think the price decline in June triggered some increase in bookings for seaborne cargoes and steel producers took that opportunity to stock up on some high-quality iron ore," said UOB-Kay Hian's Lau. Iron ore fell to a 21-month low of $89 a tonne in June. While prices have since recovered, they have remained below $100 since that level was breached in May. Iron ore for immediate delivery to China .IO62-CNI=SI gained 10 cents to $96 a tonne on Thursday, a level last seen on July 21, according to data compiled by Steel Index. Adding pressure to spot prices, tugboat engineers at Australia's biggest iron ore port have called off a strike that was due to hit exports from Aug. 9, as the union missed a deadline for filing notice of the industrial action. The union representing the tugboat engineers at Port Hedland filed notice to tugboat operator Teekay Shipping on Tuesday for planned four-hour work stoppages on Aug. 9, 11 and 13. It should have filed that notice on Monday.
According to Japan’s Ministry of Economy, Trade and Industry, spot LNG arrivals averaged USD13.8/mmbtu in July, down from USD15.0/mmbtu in June. The fall in spot LNG prices likely reflects a growing surplus in spot LNG markets, particularly when considering that July usually sees a seasonal lift in LNG demand.
Base metals finished mostly higher as investors returned to risk assets after tensions seemed to ease in Iraq, Gaza and Ukraine. Aluminium also rose marginally to a two-week high as LME aluminium inventories continued to decline. US WTI crude oil rose on views that US crude oil inventories fell last week due to strong refinery demand. Gold futures declined marginally on weaker safehaven demand as geo-political risks appeared to ease. Iron ore fell by 0.4% to USD95.30/t (CFR China).
The strong lift in refined nickel prices following Indonesia’s decision to ban mineral ore exports on 12 January may prompt companies to restart nickel mines. Avebury may restart a mothballed mine in Tasmania, while Poseidon is planning to resume production from its mine in Western Australia. High nickel prices may also incentivise Panoramic Resources to restart mining at its Copernicus deposit.
Chilean miner, CAP Mineria, said it plans to export 14Mtpa of iron ore in 2014, down from an earlier estimate of 15Mtpa. The company expects to ship 18Mtpa of iron ore in 2015.
Coal mine developer, Jameson Resources, has just completed a prefeasibility study of its 2Mtpa Crown Mountain coking coal project in Canada. The study suggests favourable economics, with a life-ofmine average cost of USD100/t FOB.
Coal exports through Canada’s Ridley Terminals fell by 37.2% y/y to 606kt in July. From January to July, coal exports through the terminals have declined 31.3% y/y to 4.28Mt. Ridley Terminals primarily exports coking coal.
The International Energy Agency (IEA) believes oil markets are better supplied today than expected despite the conflict in Libya, Iraq and Ukraine. The agency has cut its world crude oil demand forecasts by 180kb/d to 92.7mb/d in 2014 and by 90kb/d to 94mb/d in 2015 in response to the weaker assessment of the global economy by the International Monetary Fund (IMF). The group reported that OPEC’s crude oil output rose to a five-month high of 30.44mb/d in July, up 300kb/d from June levels.
Base metals finished mostly higher on views that China’s industrial production maintained the same pace through July as June. Gold futures rose marginally on safe-haven demand as tensions escalated between Russia and Ukraine. Crude oil benchmarks fell on surplus concerns after the IEA cut its world crude oil demand forecasts for 2014 and 2015. Iron ore fell by 1.4% to USD94.00/t (CFR China).
The Energy Information Administration (EIA) has lowered its WTI crude oil price forecast to USD100.45/bbl for 2014, down from last month’s estimate of USD100.98/bbl. The EIA also cut its Brent crude oil price forecast to USD108.11/bbl for 2014, down from last month’s estimate of USD109.55/bbl. The group also lowered its crude oil demand forecast for 2014 and 2015 and anticipates that US crude oil production will reach a 43-year high in 2015. US crude oil output averaged 8.5mb/d in July, the highest level since April 1987.
From January to June, Australia’s metallurgical coal exports have increased 18.9% y/y to 59.3Mt. The average realised export price in the same time period has decreased 21.8% y/y to USD119.7/t.
Colombia’s coal exports, which are predominantly thermal coal, rose by 19.8% y/y to 39.4Mt in 1H14.
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