![Text Box: Leonard Hockley
[Email address]](202309_forecast_report_files/image002.png)
Contents
ECONOMIC NEWS
CHINA
China’s imports
and exports fell further than expected in July. According to customs data,
imports fell 12.4% year-on-year while exports were down 14.5% year-on-year.
Other indicators also pointed to a weakening economy. Construction,
manufacturing and services activity, foreign direct investment and industrial
profits were all down.
China’s
property sector continues to struggle following on from the high-profile financial
problems of major property construction groups Evergrande and Country Garden
Holdings. The floor space of new home construction starts fell 30.2%
month-on-month in July according to the National Bureau of Statistics. Over the
first seven months of this year new home starts were down 24.5% year-on-year
and down 52.1% on the same period in 2021.
INDIA
India’s GDP
grew by 7.8% year-on-year in 2Q23, the highest rise in a year helped by strong
services activity and robust demand according to government data.
STEEL
WSA
The latest July
2023 crude steel production data from the World Steel Association had global
output across 63 reporting countries at 158.5 million tonnes, up 6.6% compared
to July 2022. Chinese output for the month was reported as 90.8 million tonnes,
a rise of 11.5% year-on-year. There were notable year-on-year falls in South
Korea (-9.0%), the EU (-7.1), Brazil (-4.7%), and Iran (-1.5%). These losses
were offset by year-on-year gains in India (+14.3%), Turkey (+6.4%), Russia (+5.8%),
Japan (+0.9%) and the US (+0.5%). The WSA estimated Chinese crude steel output
in the first seven months of 2023 at 626.5 million tonnes, up 2.5%
year-on-year. India’s output over the same period totalled 79.9 million tonnes,
up 9.0% year-on-year.
AUSTRALIA
BlueScope is
to spend 1.15 billion Australian dollars to reline and upgrade its No.6 Blast
Furnace at its Port Kembla Steelworks. The relined furnace is expected to be
commissioned in mid-to-late 2026 and replace the company’s current blast
furnace.
BOLIVIA
Empresa
Siderurgica del Mutun says that it has completed 75% of the work in
constructing Bolivia’s first integrated steel plant. The project includes iron
ore concentration and direct reduced iron units which will process locally
produced iron ore. Startup of the
200,000 tonne/year steel plant is set for 2024.
CHINA
Baosteel
reported at the end of August that China will continue to implement a cap on
growth of steel output this year. The state-owned company confirmed that China
will need to cut back on steel production over the remainder of the year to
match last year’s output.
FINLAND
Sweden’s
SSAB said that it will furlough steel workers at two plants in Finland which
produce paint-coated steel products due to weak demand in the construction
sector.
GERMANY
Salzgitter
has taken its 2 million tonnes/year unit A blast furnace offline for relining
work which is expected to take 100 days. The company has three blast furnaces
and is planning to decommission one of these by 2026 as it moves its
steelmaking over to using the direct reduction/electric arc furnace route.
The German
government has pledged 2.5 billion euros in funding to decarbonise steelmaking
at ArcelorMittal’s Bremen and Eisenhuttenstadt plants subject to approval by
the European Commission. The project aims to start using green hydrogen-based
direct reduced iron feedstock initially produced at Bremen.
GUINEA
Rio Tinto
and a consortium of Chinese state-owned enterprises have announced that they
had reached key agreements with the government of Guinea to build a
trans-Guinean railway. Over 600 kilometres of rail with port facilities would
unlock the world’s largest undeveloped deposit of high-grade, low-impurity iron
ore in the Simandou mountain range. It has been agreed that the cost of the
railway will be shared equally between the groups developing blocks 1 and 2 in
the north and blocks 3 and 4 in the south. The Chinese decision to support the
plan can be seen as a move to wean itself off reliance on Australian iron ore
supply and signals a long-term boost to Capesize bulk carrier demand.
HUNGARY
Liberty
Steel is reported to be planning to idle the last operational blast furnace at
its recently acquired Dunaferr mill for at least three months. The Dunaferr
plant has two blast furnaces with a total capacity of 1.2 million tonnes/year.
The takeover has still to be approved by the European Commission and the plant is
currently under the control of the liquidator. The plant’s rolling mills
continue to process steel slab stocks.
ITALY
Acciaierie
d’Italia is to idle its blast furnace 1 for the month of August to install
filters. The company also plans to start refurbishment work on its blast
furnace 5 which has been idled for several years and to begin construction of
an electric arc furnace.
MEXICO
The Federal
Government has raised tariffs on steel product imports from countries without a
trade agreement with Mexico from 15 to 25 percent. The move is expected to hit
shipments from South Korea, which unlike the US, Canada and Japan, has no such
deal.
POLAND
ArcelorMittal
Poland has completed the revamp of its Dombrova-Gurnych plant’s blast furnace
no.2 which started in March. The company plans to operate both its blast
furnaces which have a combined capacity of 2.3 million tonnes/year.
SAUDI ARABIA
The Essar
Group has signed an agreement with Bahrain Steel to source high-grade iron ore
pellets for its greenfield integrated steel plant being set up in Ras Al Khair,
Saudi Arabia. Bahrain Steel will deliver 4 million tonnes/year of direct
reduction-grade pellets. Essar’s Green Steel Arabia project will have two direct
reduced iron plants with a combined capacity of 5 million tonnes/year.
SPAIN
ArcelorMittal
has taken the decision to go ahead with its plan to partly decarbonise its
Spanish steel operations in Gijon. The project will include the construction of
a 2.3 million tonnes/year green hydrogen-based direct reduced iron unit and a
1.1 million tonne/year hybrid electric arc furnace which will replace one of
its two existing blast furnaces. The EAF plant is expected to be operational in
the second half of 2025. The project includes a financial contribution from the
Spanish government approved by the European Commission.
SWEDEN
Sweden’s H2
Green Steel said that it has signed multi-year deals with Rio Tinto and Vale to
supply iron ore pellets from Canada and Brazil to its low-carbon steel plant in
Boden in northern Sweden which is due to start production in 2025. The company was
unable to secure long-term pellet supplies from the nearby LKAB iron ore mining
operations. LKAB is planning its own green hydrogen-based directly reduced iron
plant and aims to eventually cut out supplying pelletised ore in a switchover
to supplying directly reduced iron.
UNITED KINGDOM
The UK
government is reported to be in advanced talks with Tata Steel to provide a
rumoured £500 million aid package to build electric arc furnaces to replace
blast furnace operations at the company’s Port Talbot steelworks. The deal is
also expected to result in major job losses.
USA
Grupo Simec
has announced that it is to idle steelmaking operations at two Republic Steel
mills in Canton, Ohio, and Lackawanna, New York. During the shutdown, Republic
Steel’s customers will be serviced via Grupo Simec’s steel plant in Tlaxcala,
Mexico.
POWER COAL
IEA
The
International Energy Agency has released its latest Coal Market Update which
noted that trade is approaching record levels seen back to 2019 led by Chinese
imports. The resurgence in coal trade is aided by the decline in coal prices
and the end of the La Nina weather pattern which hampered coal production in
Australia. China and India are projected to use almost 75% of the world’s coal
in 2023. The IEA expects a decrease in global coal-fired power generation in
the second half of 2023 more than offsetting the first half gains. Global coal
demand is projected to remain flat in 2024, with declines in power coal for the
electricity sector offset by increases in industrial sector coal demand as
economic conditions improve.
CHINA
The National
Statistics Bureau reported that China’s coal production totalled 377.54 million
tonnes in July, down 6.3% month-on-month when measured on an average daily
tonnage basis and the lowest level since last October. The drop in output has
been attributed to increased government mine safety inspections and to pricing
of seaborne coal imports remaining competitive.
COLOMBIA
Coal exports
have been hit by a rail blockade on the route linking the Glencore-owned
Cerrejon mining complex with its ship export hub at Puerto Bolivar.
CZECH REPUBLIC
The Czech
Republic produced 35.2 million tonnes of hard coal and lignite in 2022, up 10%
year-on-year due to the energy crisis and the industry’s recovery from the
Covid-19 pandemic. A spokesperson for the coal producer said that coal
production is falling again this year and is likely to return below 2021
levels.
FRANCE
The Energy
Transition Ministry has announced that it is extending a plan to allow
electricity producers to burn more coal this coming winter at the county’s two
remaining coal-fired power plants. The coal plants will be able to operate for
up to 1,800 hours this winter, down from the maximum of 2,500 hours last
winter.
GERMANY
Germany’s
economy minister said it had made a breakthrough in its talks with the European
Commission on plans for new hydrogen and gas power plants, although it has yet
to agree on how they will be subsidised. Germany will tender 8.8 gigawatts (GW)
of new hydrogen plants and up to another 15 GW of plants initially running off
natural gas before being converted to hydrogen by 2035 at the latest. The
tender process for 10 GW of gas/hydrogen-ready plants is set for 2026.
INDIA
The power
ministry has further extended the directive to imported coal-based power plants
to operate at full capacity up to October 31 due to rising power demand.
The coal
ministry has announced an ambitious plan to almost double India’s coal
production by fiscal year 2030, with a compound annual growth rate of around
7.7%. The plan includes the promotion of rail-sea and rail-sea-rail
transportation. The use of coastal shipping is seen as a means to reduce
logistics costs and to enable efficient transportation of more coal to power
stations in Gujarat, Maharashtra, Karnataka, Goa, Tamil Nadu, Kerala, and
Andhra Pradesh.
SPAIN
Spanish
utility Endesa has received government approval to shut down and close the
company’s last remaining coal-fired power plant, the As Pontes station in
Galicia.
ALUMINIUM
IAI
The
International Aluminium Institute reported that global primary aluminium production
fell 0.48% year-on-year in July to total 5.861 million tonnes, with 59%
produced in China. However, global production in the first seven months of this
year totalled 40.07 million tonnes, up 1.5% year-on-year.
AUSTRALIA
Alcoa
reported that it has signed a new nine-year agreement with AGL Energy Limited
to supply Victoria’s Portland Aluminium Smelter with around half its necessary
power requirements from mid-2026 when existing contracts end.
CHINA
China’s
National Bureau of Statistics reported that the country’s primary aluminium
production in July totalled 3.48 million tonnes, up 1.5% year-on-year. Output
in first seven months of 2023 totalled 23.62 million tonnes, up 2.8%
year-on-year.
VIET NAM
The Ministry of Industry and Trade announced plans to establish bauxite mining at three sites in the country’s northern region with the aim of producing 1.55 to 2.25 million tonnes/year by 2030. In addition, two currently operational mines in the central highlands are set to raise their production capacity. The government is looking at the potential to extract between 6.8 and 11.2 million tonnes/year from four provinces in the central highlands.
AGRIBULK
FAO
The UN’s
Food and Agriculture Organisation’s world food price index fell in June to its
lowest level in more than two years but rebounded in July by 1.3% influenced by
the termination of the Black Sea Grain Initiative and India’s trade
restrictions on rice exports. The FAO’s world rice price index in July jumped 2.8%
month-on-month and 19.7% year-on-year to reach a near 12-year high.
ISO
The
International Sugar Organization issued its first estimates for the upcoming
2023/24 season (October-September) with a forecast deficit of 2.12 million
tonnes. Global sugar production was projected to fall to 174.84 million tonnes,
down from 177.02 million tonnes in the current season primarily due to a
decline in Brazilian output. Global sugar consumption was expected to grow by
just 0.3% to 176.96 million tonnes.
USDA
The US
Department of Agriculture’s August forecast updates contained a notable
downward adjustment to 2023/24 grain season trade forecasts. Looking across
export trade forecasts of the principal commodities (wheat, coarse grains,
rice, soyabeans, and soyabean meal), net changes saw an overall trade decrease
of 8.62 million tonnes, a fall of 1.16%. 2023/24 wheat export trade was marked down
by 2.23 million tonnes with lower shipments out of Canada and the US only
partially offset by a rise in the estimate for Russian exports. Ukrainian wheat
exports were held at 10.5 million tonnes despite the ending of the Black Sea
Grain agreement. Ukrainian wheat supply was marked up by 3.5 million tonnes due
to a higher area harvested and increased yields (the second highest on record).
However, most of this additional supply was added to storage.
2023/24
season global exports of coarse grains were reduced by 2.63 million tonnes with
forecast reductions in exports from the US, the EU and Canada. Following government restrictions on Indian
rice exports announced in July, the USDA reduced its export forecast by 4
million tonnes, only marginally offset by small increases in shipments from
other suppliers. There were only minor adjustments made to soyabean and
soyabean meal trade forecasts.
BRAZIL
Brazil has
overtaken the US as the world’s top maize exporter, as reflected in the USDA’s
latest market forecasts. The continued expansion of exports through Brazil’s
northern ports utilising the waterways of the Amazon River basin has eased the
bottlenecks to shipping out of southern ports.
Brazil’s
food supply and statistics agency Conab raised its 2023/24 sugar production
estimate to 40.9 million tonnes, up from 38.8 million tonnes in its April
forecast.
CHINA
China’s
Ministry of Commerce said it would drop anti-dumping and anti-subsidy tariffs
on Australian barley imports in another sign of an improving relationship
between the two countries. The tariffs had been in place for three years. China
and Australia agreed in April to try and resolve their dispute over barley
imports.
Floods caused
by storms that followed typhoon Doksuri have damaged corn and rice crops in
China’s key northern grain-producing belt.
INDIA
Following on
from its recent partial ban on rice exports, there were recent reports that the
Indian government is now considering imposing a ban on sugar exports in the new
marketing season starting in October. Back in May, the US Department of
Agriculture forecast Indian sugar exports in the 2023/24 season at 7 million
tonnes. TradeViews estimate that sugar exports in the current marketing season
is likely to be just over 11 million tonnes. A decision on sugar exports will
be taken when firm estimates of sugar production become available.
The Indian
government was also reported to be mulling importing Russian wheat at
discounted prices to boost supplies and curb food inflation ahead of state and
national elections next year.
RUSSIA
Ukraine
retaliated to Russian attacks on its ports by sea-drone strikes on a Russian
tanker and a Russian warship at the Novorossiysk naval base next door to a
major grain export terminal. This will make it more difficult for Russia to
arrange vessels to export its grain out of the Black Sea and add to its freight
costs. With grain traders growing reluctance to do business with Russia, the
record pace of Russian grain exports may well slow putting more upward pressure
on grain prices.
UKRAINE
Russia
attacked Ukraine’s main inland port of Izmail across the Danube River from Romania
in early August further restricting Ukraine’s ability to export grain following
on from the termination of the Black Sea grain deal in July. Later in the month
a Russian warship fired warning shots at a Turkish cargo ship heading for
Ukraine. This was followed up by further Russian drone strikes on Ukrainian
grain infrastructure near the Danube River.
Ukraine’s
grain harvests this year are exceeding expectations and could be 5% higher than
in 2022, according to a senior agriculture ministry official. On August 21, the
Agriculture Ministry reported that Ukraine’s grain exports have totalled 3.6
million tonnes so far in the 2023/24 July-June season.
The
Ukrainian government has expressed its opposition to bordering EU member states
(Slovakia, Bulgaria, Poland, Romania, and Hungary) reportedly planning to
extend the ban on Ukrainian grain imports to the end of 2023. The ban was due
to end on September 15. The extension of the ban has now received support from
the EU commissioner for agriculture.
VIET NAM
Viet Nam’s
agriculture minister was reported to have said that the country has 7 to 8
million tonnes of rice for export this year after putting aside sufficient for
national food security.
FERTILISER
ANGOLA
Minbos
Resources announced that it has signed a 60-year lease for the site of the
Capanda green ammonia project located in Malanje Province, Angola. The project
plans to produce 112,000 tonnes/year of green ammonia to be used to provide
255,000 tonnes/year of high-density ammonium nitrate.
BRAZIL
Petrobras
has announced that it aims to resume operations at its Araucaria Nitrogenados
(ANSA) fertiliser plant in the first half of 2024. The plant can produce 1,900
tonnes of urea per day and 1,300 tonnes of ammonia per day. The plant was
deactivated in 2020.
Unigel has
suspended operations at its nitrogen fertiliser plant in Laranjeiras. The plant
was idled for 90 days from 1 June, but the company has now decided to suspend
operations until financial condition improve as it tries to negotiate lower
natural gas prices. The plant has the annual capacity to produce 650,000 tonnes
of urea, 450,000 tonnes of ammonia and 320,000 tonnes of ammonium sulphate. The
company has another fertiliser plant in Camacari where production of urea has
also been idled.
GERMANY
Yara
Germany, the Bindewald & Gutting Milling Group and the bakery Harry-Brot
have signed a cooperation agreement aimed at decarbonising German cereal
production using green fertilisers on an area of around 1,600 hectares. The
deal will see Norwegian ammonia produced using hydropower being processed into
fertiliser at the German port of Rostock.
NORWAY
Last month
we reported that Norge Mining had assessed the extent of its phosphate rock
deposit in Norway as a massive 70 billion tonnes, just below the 71 billion
tonnes of proven world reserves assessed by the US Geological Survey. The company
has now appointed ABB to design the complete electrification of a new phosphate
rock mine and its downstream operations scheduled to start up in 2028.
UNITED KINGDOM
CF
Fertiliser announced the permanent closure of its ammonia plant in Billingham,
citing rising energy costs. Production of ammonia was paused ten months
earlier. The company will now rely on imported ammonia. The National Farmers
Union expressed its concern over the decision.
USA
Nutrien
decided to indefinitely pause work on its 1.2 million tonne/year clean ammonia
project at Geismar, Louisiana citing elevated costs and uncertainty on the
timing of emerging uses for clean ammonia. As we have been reporting,
fertiliser companies have been building ammonia plants along the US Gulf coast
to take advantage of Inflation Reduction Act subsidies and existing port
infrastructure.
FOREST PRODUCTS
EU
The USDA has
released its annual assessment of the European Union wood pellets market. EU
wood pellets consumption hit a record 24.8 million tonnes in 2022 and is
expected to rise by 3.2% to 25.6 million tonnes in 2023. The growth in
consumption has outpaced domestic production resulting in growing imports
mainly from the US, Russia, Belarus, and Ukraine. The EU banned imports from
Russia in summer 2022 creating an opportunity increased transatlantic trade. EU
wood pellet imports from the US jumped 75% in 2022 to 3.125 million tonnes.
IRELAND
The
government has launched a 1.3-billion-euro forestry programme aimed at new tree
planting and expanding supplies of timber. The European Commission has approved
308 million euros of state aid targeting the planting of new forests. EU
officials said the aid would support planting of 8,000 hectares of new forests
every year, increasing tree cover in the Republic to 18% of its land by the end
of 2027, up from 11.6% today.
VIET NAM
Vietnam’s
forestry sector has reduced its export target from 18 to 14 billion dollars due
to a slump in prices for wood materials and products.
CEMENT
AUSTRALIA
The federal
government is considering whether Australia should follow the European Union
and impose tariffs on some imports from nations with less ambitious climate
goals. Steel and cement would be the first two products to be considered for
the imposition of a cross-border adjustment mechanism. The government is to
consult on the matter.
EU
The European
Union has enacted the implementing regulation for the carbon border adjustment
mechanism (CBAM) under its emissions trading scheme. Under the CBAM, importers of cement into the
EU will eventually pay taxes on embedded CO2 emissions equivalent to those
levied on EU producers. Importers are required to start collecting emissions
data in the interim period ahead of the startup of CBAM at the beginning of
2026.
MALAYSIA
Borneo
Cement (Sabah) has contracted Sinoma Industry Engineering to build a 1.75
million tonne/year integrated cement plant at Pinangah, Malaysia for completion
in the third quarter of 2025. The plant’s capacity exceeds local Sabah cement
consumption leaving room for exports to other markets.
NIGERIA
BUA Cement
said that it expects to inaugurate its Okpella and Sokoto cement plants in
early 2024. The two new plants will have a combined capacity of 6 million
tonnes/year, raising the company’s total Nigerian cement production capacity to
17 million tonnes/year.
PHILIPPINES
Taiheiyo
Cement Philippines plans to install a second production line at its 0.8 million
tonnes/year San Fernando cement plant in Cebu raising the plant’s capacity to 3
million tonnes/year. The company will also build a new cement terminal in
Calaca to service the Luzon market from San Fernando.
UAE
Pure Cement
UAE and Thyssenkrupp Industries India signed a contract for a clinker
production facility in Al Tawyeen, Fujairah. The contract covers the design,
engineering, and supply of equipment.
UZBEKISTAN
Anhui Conch
Cement has inaugurated its new 2.3 million tonne/year Tashkent cement plant at
Kiziloy. The company plans to target 30% of production for export.
The Agency
for Statistics of Uzbekistan reported that cement production in the first half
of 2023 totalled 5.7 million tonnes, up 10% year-on-year.