26 September 2013
Record US Corn Harvest, Chinese construction boost dry bulk shipping rates
The rally behind the cost of shipping dry bulk industrial materials continued this week and is expected to carry on for most of the next quarter. Shipping rates were not only rising due to increased Chinese iron ore and coal imports, but also US grain exports after expectations for a record-breaking season remained high.
The Baltic Dry Index (BDI) increased to 2,127 on 25 September compared with 1,822 on 18 September.
"Dry freight rates have rallied over the past few weeks. We believe this has been based on rising Chinese iron ore imports," Deutsche Bank commodities strategist Michael Lewis said.
Sep 25, 2013 8:55 PM ET
Commodity supply constraints and demand from emerging markets mean it’s premature to talk about the death of the super cycle that brought a longer-than-average period of rising prices, McKinsey & Co. said.
Energy, metal and agricultural prices that more than doubled since 2000 are still close to highs reached before the financial crisis, even after commodities from gold to wheat dropped into bear markets, McKinsey said in a report today.
The surge in raw-material output in the past two years and signs of cooling economic growth in China, the world’s biggest consumer of everything from cotton to zinc, prompted Goldman Sachs Group Inc. and Citigroup Inc. to say the super cycle ended. McKinsey said producers are being forced deeper into remote areas to secure supplies that require increasingly sophisticated technology to extract as consumption expands.
“When we look forward, we see a separation between new technology and productivity on the one hand, and emerging-market demand and supply constraints on the other,” Fraser Thompson, a senior fellow at the McKinsey Global Institute, said in a telephone interview from London. “We don’t want to bet against technology, but what we think often gets overlooked is the scale of the challenge we’re facing.”
The Standard & Poor’s GSCI Spot Index of 24 raw materials has dropped 2 percent this year. Since 2000, the gauge posted only two annual declines.
Production expenses continue to escalate for many commodities, according to the report.
Arable land in China is being built over as the nation urbanizes while in Brazil prices for farmland have jumped as much as sevenfold in some regions over the past decade because of rising global food demand, stricter environmental laws and expansion of protected areas.
McKinsey cited offshore oil fields that require more sophisticated equipment and mineral resources developed in politically unstable regions.
While there are no imminent shortages, higher marginal costs “appear to be pervasive and put a floor under the prices,” McKinsey said. Volatility is increasing amid evidence of a “structural supply issue,” according to the report.
“Supply appears to be progressively less able to adjust rapidly to changes in demand because new reserves are more challenging and expensive to access,” McKinsey said.
The inflation-adjusted average cost of starting a new oil well doubled in the past decade, according to McKinsey. Metal mines now take as much as 20 years to develop, from six to 10 years in the 1980s and 1990s, Thompson said.
Natural gas extracted from shale is an exception as new technology lowered costs, McKinsey said. Increased efficiency in drilling and hydraulic fracturing make it economical to tap gas trapped in shale formations, such as the Marcellus in the U.S. Northeast. Gas futures on the New York Mercantile Exchange have dropped to $3.493 per million British thermal units from a record $15.78 in 2005.
Slower growth In China may do little to alleviate the outlook for tight supplies in other materials because the size of the Asian nation’s economy means that it is using more resources than a few years ago, Thompson said.
Population shifts to cities will also drive consumption, according to McKinsey. The firm estimates that 750 million more people will live in cities by 2030 in China and India. As incomes increase, China may add floor space every year that amounts to 2.5 times the entire residential and commercial square footage in Chicago, according to the report.
“Even if China’s economic growth rate slows down from where we originally thought it would be, it matters less for resource demand than many people assume,” Thompson said. “China and India are a lot bigger than they were at the start of the century.”
McKinsey, founded in Chicago, has 102 offices around the world. The consulting company didn’t provide price forecasts.
Wednesday September 25, 2013, 4:47am PDT
Copper demand in China helped boost prices of the metal September 25, marking the first time in three days copper prices increased. On the London Metal Exchange, three-month copper3 prices hit $7,193.25 a tonne, a rise of $45.32 from the previous session, Reuters reported.
In New York, copper futures for December delivery rose4 $0.01 to $3.27 a pound, The Wall Street Journal reported.
Sep 25, 2013 11:58 AM ET .
Wheat futures jumped to a four-week high on speculation that China, the world’s biggest consumer, may increase imports to curb record prices. Corn and soybeans also rose.
China may sell grain from stockpiles and ask state-owned companies to import more to curb rising prices, Shi Wei, an analyst for Shanghai JC Intelligence Co., said today. Wheat in central Henan province rose 3.4 percent this month to a record 2,760 yuan ($451) a metric ton, data from China National Grain & Oils Information Center show. China may triple imports this year, the U.S. Department of Agriculture said Sept. 12.
“Record prices in China may increase demand” for U.S. wheat exports, Jason Britt, the president of Central States Commodities Inc. in Kansas City, Missouri, said in a telephone interview. “It looks like China may become more aggressive importing wheat.”
Wheat futures for delivery in December jumped 2 percent to $6.67125 a bushel at 10:56 a.m. on the Chicago Board of Trade after earlier reaching $6.7275, the highest since Aug. 26.
Prices are headed for a third consecutive gain on speculation that the USDA will say Sept. 1 inventories fell 7.6 percent from a year earlier. Traders surveyed by Bloomberg said supplies at the start of this month fell to 1.945 billion bushels, on average, from 2.105 billion a year ago. The government is scheduled to update quarterly grain supplies at noon on Sept. 30.
“Demand is sneaking up, and supplies are getting a little smaller,” Britt said.
Corn futures for December delivery added 1.3 percent to $4.545 a bushel in Chicago. The most-active contract yesterday dropped to $4.48, the lowest since Aug. 14.
Soybean futures for November delivery rose 0.2 percent to $13.155 a bushel on the CBOT.
Imported iron ore stockpiles decline in China
Wednesday, 25 September 2013 03:00
Stockpiles of iron ore at 25 major Chinese ports declined last week, according to Tuesday's Xinhua-China iron ore index report.
Inventories of imported iron ore stood at 74.32 million tonnes from Sept. 17 to 23, down 990,000 tonnes or 1.33 percent week on week, the report said.
The country celebrated its Mid-Autumn Festival last Thursday and Friday and the holiday impacted iron ore prices, the report said.
The price index for 62-percent-grade iron ore dropped 3 points from the previous week to 132. The index for 58-percent-grade iron ore shed 4 points to 121.
The report forecast that iron ore prices would rebound this week.
September 25, 2013
THE world's major miners are forecasting China's steel consumption has yet to hit its peak, indicating that iron ore prices will remain strong.
The China Iron and Steel Association conference, under way in Qingdao today, has heard the nations projected economic growth will support iron ore demand in the next few years.
Vale executive director Jose Carlos Martin said the world's largest iron ore exporter expected China's rapid rate of urbanisation would be maintained as the nation industrialised unfolded.
There have been concerns China would miss its 7.5 per cent official growth target in 2013, prompting volatility in the iron ore price.
"There is a lot of space for consumption growth in China," Mr Martin said.
"As China moves forward there is a lot of space for increased urbanisation, and a lot of space for steel consumption growth."
Mr Martin said Vale predicted China was yet to hit its steel consumption peak.
The Metallurgical Mines Association executive Liu Xiaoliang said while Chinese miners were ramping up iron ore output, the market would remain dominated by Australia and Brazil.
Wednesday, 25 September 2013 04:27
The recent rise in capesize earnings may well hold as China still has a way to go to restore its ore stocks, according to Khalid Hashim, managing director at Precious Shipping.
"If you asked any shipowner in the month of June, when ships were earning a few thousand dollars a day, that they would be earning $40,000 today, they would say you were stark raving mad. And yet here we have $40,000, at this moment in time. Its all because of one country, and one commodity, iron ore and China."
The Baltic Dry index has risen from 1,139 points at the start of September to 1,947 points as Hashim gave his speech yesterday at the Marine Money Asia conference.
"The restocking story is not yet over, if you look at the inventory in Chinese ports, it's running at 35% below last year, whilst steel production in China is running at 10% above last year. The restocking story may still have some legs to run."
September 25, 2013
Due to a recovery in the global economy and reform at home, Y 2013 is likely to see China replace the United States to become the world’s largest trader, a Ministry of Commerce spokesman said Tuesday.
“The primary force for trade improvement comes from the government’s efforts at stabilizing the economy and boosting foreign trade with supportive measures,” Shen Danyang said at an economic seminar in Beijing.
He added that China’s share of global exports will keep increasing after expanding from 10.3% in Y 2010 to 11.5% in 1-H of this year.
Data from the General Administration of Customs showed that the nation’s total volume of imports and exports in Y 2012 amounted to $3.86-T, 2nd only to the US, which it trailed by just $15.64-B, according to the World Trade Organization (WTO).
China’s foreign trade has regained steam in recent months. The 1st 8 months saw China’s trade rise 8% from a year earlier with exports up 9.2% and imports increasing 7.3%, according to the Ministry.
“The trade improvement will extend into the fourth quarter of this year, though fluctuations from the holidays, such as September and October, may technically distort the monthly trade figures,” Shen said.
At the end of July, the State Council introduced measures to simplify customs clearance, cut administrative fees and increase financial aids.
The recovery of the world economy as well as the US economy improved the external environment while China’s efforts on upgrading its foreign trade “enhanced the comprehensive competitiveness of enterprises”, Shen noted.
He added that China’s foreign trade was “splendid” in the first half of the 12th Five-Year Plan period (2011-15) with export structure significantly optimized, export markets diversified, trade pattern improved and imports grew.
Markets outside the US, the EU and Japan accounted for 62.1% of China’s overall exports in Y 2012, compared with 54.6% in Y 2010.
Private enterprises made up 41.7% of China’s total exporters in export volume in the first half of this year, compared with 31.7% in Y 2010.
Trade with major partners are more balanced as imports registered $1.8-T in Y 2012, + 30% compared with Y 2010.
Reforms and opening-up were the major reasons for the strong performance of China’s foreign trade in recent years, Shen said.
China signed free trade agreements with 18 economies to reduce tariffs and facilitate trade and investment, which greatly boosted the country’s trade.
The special economic zones, including the free trade zone (FTZ) opening in Shanghai, also helped drive trade growth, according to Shen.
“In the following two years, China’s foreign trade will be more splendid than the first half of the 12th Five-Year Plan,” Shen said.
“The domestic economy will bring more support to the country’s trade development as the government deepens reforms and further opens up the market. Policies of stabilizing trade and encouraging the strategic emerging industries will also be in favor of trade development,” Shen added.
The country’s drive to establish a global free-trade network, including the China/Japan/South Korea FTA, the Regional Comprehensive Economic Partnership, and the China/Australia FTA, which is in negotiations, will speed up the country’s trade growth, according to Shen.
“It’s sure that China will be the world’s largest trader, but the added value of its exports is still much lower than the US,” said Wang Haifeng, a researcher with the Institute for International Economic Research of the National Development and Reform Commission.
“We need to invest in talent, technology and to improve the trade mechanism.
in Metal Bulletin -
24 September 2013 20:18
Finished steel imports to Central American and Caribbean nations increased by 68.5% year-on-year in July this year.
September 25, 2013
The shipping industry hauling commodities from coal to crops to iron ore is poised to return to profit for the first time since 2010 as the biggest capacity glut in its history diminishes.
Trade in the three largest dry-bulk cargoes will expand 10 per cent to a record 2.91 billion metric tons in 2014, according to ACM Shipping Group, a listed shipbroker.
Rates will exceed owners' break-even levels in 2014 for each of the four main vessel classes, according to analyst estimates. Investors can profit by buying freight swaps, which are mostly trading below the analysts' forecasts.
The industry is emerging from its largest-ever glut after record rates five years ago spurred owners to order an unprecedented number of vessels. Shipyards have built about 4300 carriers since then.
Deliveries are now slowing after earnings that fell as much as 84 per cent since 2008 curbed orders.
''We're starting on the path to recovery,'' said Erik Folkeson, an analyst at Swedbank First Securities in Oslo, whose recommendations on the shares of shipping companies returned 37 per cent in the past two years. ''Fleet utilisation will tighten, and that's reflected in higher earnings.''
The Baltic Dry Index, a measure of freight costs, almost tripled to 1947 points this year, according to the Baltic Exchange. Rates for iron ore-carrying Capesizes led the surge, jumping more than sevenfold to $US38,397 a day as China bought record amounts of the raw material used to make steel.
Shares of Nippon Yusen KK, the largest owner of the vessels, rose 57 per cent in Tokyo this year. They will advance another 4.3 per cent in 12 months. The Bloomberg Dry Ships Index of 14 transport companies added 32 per cent in 2013.
Rates for Panamaxes, the largest to navigate the Panama Canal, averaged $US7770 since the start of the year. Earnings are forecast to rise to $US12,000 in 2014, compared with a break-even level of $US11,300.
Supramaxes, the largest dry-bulk vessels equipped with cranes to move cargo, will earn $US12,000 in 2014. They need $US10,500 to break even. Rates for Handysizes, the smallest vessels in the fleet, will average $US9800. Forward freight agreements are at $US8081 and the carriers need $US9300 to be profitable.
The anticipated rally in rates depends on China because the country's imports represent 38 per cent of all iron-ore, coal and grain shipments. Japan, the second-largest destination, accounts for 13 per cent of cargo demand.
September 24, 2013 - 07:46 GMT Location: Shanghai
China’s cobalt ore and concentrate imports were up 35% month-on-month in August with market participants attributing the rise to increase in cobalt prices in June.
“It normally takes at least 45 days to ship cobalt concentrate from the Democratic Republic of Congo to China. The August inbound shipments are upon deals signed in June or early July,” a major cobalt concentrate importer said. The August imports were up 59% year-on-year
China's Aug iron ore imports from India climb 49% on month
--23Sep2013/757 am EDT/1157 GMT
China imported 755,939 mt of iron ore from India in August, up 49% from 506,322 mt in July, according to data released Monday by the General Administration of Customs.
The increase comes on the back of Indian government talks of a possible reduction in iron ore export tariffs -- to about 20% from 30% currently -- with the aim of reviving ore export volumes and boosting dollar inflows into India, in the face of increasingly serious current account deficit problems.
Several market participants also said they expected mining restrictions in the major ore-producing western Indian state of Goa to be lifted as soon as October, a marked change from earlier estimates that it would take at least three years for mining activity to resume there.
Monday September 23 2013
Chicago Board of Trade (CBOT) December wheat futures rose by 1.1% to USD6.53 a bushel by 1700 GMT on Monday, having lost 1.6% on Friday, following a revision in China's forecasted imports.
The China National Grain and Oils Information Centre (CNGOIC) on Monday increased its projections for Chinese import demand to 7.5 million tonnes, having previously pegged imports at 6.5 million tonnes.
Sep 23 (China Knowledge) - China saw its coal imports rise 27.4% year on year to 25.96 million metric tons in Aug this year, according to statistics released by the General Administration of Customs.
In the first eight months of this year, the country's coal imports amounted to 213 million tons, 15.5% more than in the same period of last year.
China has already ordered 3.7 million tonnes from the United States and 2.2 million tonnes from Australia, as well as 220,000 tonnes from France, the China National Grain and Oils Information Center (CNGOIC) said in a report.
CNGOIC has revised up its import forecast from an earlier 6.5 million tonnes for the year ending May 2014. The revised figure represents the highest imports for China in a decade after bad weather damaged wheat harvested in May and June.
BEIJING, Sept 23 | Sun Sep 22, 2013 10:19pm EDT
BEIJING, Sept 23 (Reuters) - China, the world's top wheat producer, is likely to purchase a total of 7.5 million tonnes of wheat from overseas markets in 2013/14 after bad weather damaged domestic crops, an official think tank said on Monday.
September 23, 2013 - 16:15 GMT Location: London
Manganese prices held firm last week, but sources expect upwards movement when China returns to the market after the moon festival.
In-warehouse Rotterdam manganese flake prices held at $2,180-250 per tonne but prices are expected to rise this week once the moon festival ends and Chinese prices jump, sources said.