Leonard Hockley Dry Cargo A
review of the fundamental demand changes to the global forecast December 2023
Contents
The OECD has released its latest Economic Outlook noting that inflation
is easing, but growth is slowing. Despite stronger-than-expected GDP growth in
2023, tightening financial conditions, weak trade and subdued confidence are
taking a toll. On trade the OECD commented that not only cyclical but also
structural factors are causing a slowdown in the rate at which value chains are
integrating across countries. Global growth is projected to be 2.9% in 2023. It
then weakens to 2.7% in 2024 and is forecast to rebound modestly to 3.0% in
2025.
The Chinese government has asked Ping, an insurance group, to take a
controlling stake in the embattled property developer Country Garden raising
hopes of a recovery in China’s key property sector.
The European Commission said that it
would extend a loosening of state aid rules by three more months to end June
2024 to allow EU countries to compensate companies for high energy prices driven
by Russia’s invasion of Ukraine and tensions in the Middle East.
The IMF has reviewed the Korean
economy noting that growth declined from mid-2022, as global demand for
electronics waned and domestic demand weakened but has started to recover in
recent quarters. Growth is projected to reach 1.4% in 2023 and 2.2% in 2024.The
slowdown in growth of main trading partners and higher-for-longer global
interest rates act as a drag on near-term growth, while improved Chinese growth
prospects are expected to help mitigate impacts on Korean exports.
The OECD has
amended its economic outlook for UK. GDP growth this year is now expected to be
0.5% this year, up from 0.3% in its September forecast. However, GDP growth in
2024 has been downgraded from 0.8% to 0.7%. The outlook for 2025 is for growth
of 1.2%.
The latest October 2023 crude steel
production data from the World Steel Association had global output across 71
reporting countries at 150.0 million tonnes, up 0.6% compared to October 2022. This
included eight countries from the Middle East and North Africa added to the
reporting list. Chinese output for the month was reported as 79.1 million
tonnes, down 1.8% year-on-year. There were other notable year-on-year falls in Brazil (-10.2%)
and the EU (-7.1%). These losses were offset by year-on-year gains in India (+15.1%),
Russia (+9.5%), South Korea (+6.5%), Turkey (+4.2%), Iran (+3.5%). the US (+3.4%)
and Japan (+2.6%). The WSA estimated Chinese crude steel output in the first ten
months of 2023 at 874.7 million tonnes, up 1.4% year-on-year. India’s output over
the same period totalled 116.3 million tonnes, up an impressive 12.1%
year-on-year.
Train drivers working for BHP’s
Western Australian iron ore division are taking ‘restrained’ industrial action
after rejecting an offer from the company.
ArcelorMittal
has said it had temporarily halted output at its Bosnia steelworks and at its
local iron ore mines that supply the plant due to a drop in European steel
demand.
Strategic
Resources has been given permission by the Quebec Ministry of Environment to
build a larger iron ore pelletiser plant at Port Saguenay. The company
originally planned a one million tonne/year plant to process
iron-vanadium-titanium concentrate but has now received confirmation that it
can build up to a 4 million tonne/year plant by modifying the existing
certificate of authorisation to produce iron ore pellets for the steel
industry. Strategic are now looking to secure third party iron ore pellet feed
to be processed for use in the emerging high purity green steel market.
China’s state planner, the National
Development and Reform Commission, said that it would strengthen the
supervision of iron ore at ports to guard against hording and speculation and
to ensure an orderly market. The NDRC also said that it would closely monitor
changes in the iron ore market and further tighten supervision of spot and
futures trading to try and curb the recent iron ore price rally.
The Chinese government has so far refrained from issuing steel output
curbs for the remainder of this year. One result has been a jump in steel
exports. Customs data for the first ten months of 2023 shows exports up nearly
35% year-on-year at 19.29 million tonnes, the highest level since 2016.
Liberty
Steel’s subsidiary Liberty Ostrava has won a court order protecting it from its
energy supplier and has 30 days to prepare a restructuring plan. The 3.6
million tonne/year plant idled its last operating furnace in October citing
poor market conditions.
European
Commission proposals for a 12th package of Russian sanctions are
rumoured to include a potential ban on Russian pig iron imports. In another
report, the Czech government has asked the EU not to include the Russian Novolipetsk Metallurgical Plant (NLMK) in its list of
sanctions as the Czech Republic depends on imports of its steel products for
its domestic automotive industry.
The German Steel Federation reported
that in the first ten months of 2023 crude steel production fell by 4.1 %
year-on-year to 30.11 million tonnes. Over the same period, EAF-based
production fell by 12.9% to 8.4 million tonnes while blast-furnaced-based
production fell by just 0.2% to 21.7 million tonnes reflecting the high energy
price burden faced by EAF producers.
The Material
Recycling Association of India expects the country’s consumption of ferrous
scrap to double to 60 million tonnes/year by the end of this decade, and scrap imports
to also double to 20 million tonnes. However, the association warns that
countries are recycling more scrap domestically and that the EU could impose
restrictions on scrap exports as it moves to reduce its industrial emissions
and that this may make it harder for India to grow its steel sector.
The chairman
of the Steel Authority of India said that it wants to increase purchases of
coking coal from Russia due to cheaper prices and is expecting four shipments
of around 75,000 tonnes in 4Q23. The company is also looking at doubling the
capacity of its Benga coking coal mines in Mozambique to 4 million tonnes/year.
The chairman
of the Indonesian Iron and Steel Industry Association said that the country’s
steel consumption in 2023 is likely to reach 17.7 million tonnes, a rise of 5%
compared to 2022 aided by the construction of major national projects.
JFE Steel
plans to build a new large-scale electric arc furnace capable of producing two
million tonnes/year of high-grade steel to replace the No.2 blast furnace at
its Kurashiki plant in around 2027. The EAF will use directly reduced iron
imported from the UAE which will be produced using natural gas and carbon
capture storage.
JFE Steel also
plans to build a 60,000 tonne/year plastic recycling plant at its Keihin works
to produce plastic pallets that will replace 60,000 tonnes/year of coking coal
consumption. It also has a target to eventually double the recycling plant’s
capacity.
Construction
work has started on a decarbonised iron plant powered exclusively by green
hydrogen. The Oshiveta project is backed by the
German government and will produce 15,000 tonnes/year of reduced iron starting
in 4Q24 with plans to eventually ramp up output to one million tonnes/year.
Tata Steel
Netherlands has announced that it plans to submit a detailed decarbonisation
proposal to the Dutch government covering its 7 million tonnes/year plant in
Ijmuiden. Unlike the UK, Tata is looking at transitioning via gas-based direct
reduced iron with the option to eventually switch to hydrogen usage. One of the
two existing blast furnaces will be shut down and converted to using DRI by
2030.
Vulcan Green
Steel, part of the Jindal Steel Group, is reported to have secured a 30-year
land lease agreement in Oman’s Duqm Special Economic Zone to build a low CO2
emission integrated steel plant using a combination of natural gas and
renewable energy.
ArcelorMittal
announced that it was preparing to put its coke oven battery in Krakow on
standby due to low coke demand (which the company expects to be down 36% this
year) plus coke’s falling premium to coking coal. However, its 4.2 million
tonnes/year capacity Zdzieszowice coke-producing
plant continues to run as normal.
ArcelorMittal
South Africa announced that it plans to close its long steel operations due to
weak demand and persistent infrastructure problems. For now, the longs business
will be placed in care and maintenance.
China’s Jingye Group, owners of British Steel, plan to close its
blast furnaces in Scunthorpe and to eventually replace them with two scrap-fed
electric arc furnaces, one at Scunthorpe and the other at Teesside. Their
construction is expected to take between two and three years. Tata had already
announced plans to close its two blast furnaces at Port Talbot and replace them
with EAFs. The UK’s Department for Business is supporting the proposed
transitions with substantial grants but have conceded that the plans will leave
the UK without the capacity to produce primary crude steel, limiting the range
of steel products that can be manufactured domestically.
The World Coal Association has
rebranded itself as FutureCoal – The Global Alliance
for Sustainable Coal to counter ‘anti-coal’ sentiment.
The World Bank’s latest Commodity
Markets Outlook forecasts that coal prices will continue a downward trend on
rising supply and weakening demand as coal consumption continues to be
displaced in power generation and industry. Its benchmark average Australian
coal price is expected to fall by 25.7% in 2024 and by a further fall of 15.4%
in 2025.
Cambodia is
reported to have abandoned plans to build a 700 MW coal-fired power plant and
is to replace it with an 800 MW natural gas-fired plant to be commissioned
after 2030. The plan will also include a new terminal to import LNG.
China’s coal
production totalled 388.8 million tonnes in October according to the National
Bureau of Statistics which was down 1.1% compared to September as mine safety
inspections limited output. However, this was still up 3.8% year-on-year.
China’s
state planner, the National Development and Reform Commission, has said that
from the start of 2024 coal-fired power producers will be guaranteed payments
based on their installed capacity in a move to ensure stability of supply as
the country transitions to greater use of variable renewable power sources.
India’s coal ministry reported that
the country’s coal production in October totalled 78.65 million tonnes, up 18.6%
year-on-year. In a separate report, the coal ministry laid out plans for a
major boost in domestic coal production from the current level of around 1000
million tonnes/year to 1404 million tonnes by 2027 and 1577 million tonnes by
2030. India is planning to add 80 GW of coal-fired power generation by 2030.
India
produced a record amount of electricity from coal in October to compensate for
a shortfall hydro generation following lower-than-normal monsoon rainfall.
Hydroelectric generation was down 30% year-on-year while coal-fired generation
totalled 111 billion kWh, up 32% year-on-year.
Japan’s
Prime Minister pledged at the COP28 summit to stop building new coal power
plants that do not have emission reduction measures in place. However, the
pledge does not apply to coal-fired power plants currently under construction.
Japan’s
Electric Power Development is to shut two 500 MW coal-fired power units at its
Matsushima power station at the end of March 2025, one of which will be
converted to use gas for a planned restart in 2028.
Japan’s
largest power generator, JERA, aims to start demonstration tests of co-firing
20% ammonia with coal at its 1 GW No. 4 unit in its Hekinan
thermal power station around March next year. Development is also underway to
increase the ammonia use to more than 50% at a commercial power plant in
2028/29 and to start commercial operation in the early 2030s.
International
lenders including the European Bank for Reconstruction and Development and the
World Bank are supporting a 4-billion-euro plan to end North Macedonia’s
reliance on coal-fired power. The country’s two lignite-fired power plants will
be replaced with 1.7 GW of renewable energy in a deal expected to be announced
at COP28 in Dubai at the end of November.
Romania’s
energy ministry announced it had signed a memorandum of understanding with US
firm American Biocarbon Delaware to switch the fuel burnt at the Paroseni power station from coal to biomass. The biomass
would be produced from the byproducts of Romanian agriculture.
Slovakia is
set to close both its existing coal-fired power plants. The Novaky plant is to
be shut down at the end of this year. The operator of the Vojany
plant has now announced that it will close in the first half of 2024 after
deciding that conversion to an alternative fuel to coal was unfeasible.
The
state-owned Transnet said that it was suspending processing trucks carrying
coal to its Richards Bay terminal to restore order after unprecedented traffic
coming into the port. The company has struggled to provide sufficient rail and
port capacity to export coal and other minerals including iron ore, manganese
ore and chrome ore due to shortages of locomotives and spares plus cable theft
and vandalism.
The
International Aluminium Institute reported that global primary aluminium production
in October rose 3.90% year-on-year to total 6.116 million tonnes, with just
under 60% produced in China. Global production in the first ten months of 2023
totalled 58.59 million tonnes, up 2.11% year-on-year. The IAI also reported
that global alumina production over the same period totalled 118.2 million
tonnes, down 0.5% year-on-year.
Chinese
aluminium smelters in Yunnan province are reported to have reduced their
production capacity by an aggregate of 1.15 million tonnes in response to
production curbs issued by China Southern Power Grid. These curbs are expected
to last until April as the province enters its dry season restricting hydro
power generation.
The Shanghai
Metals Market survey reported that China’s aluminium production in October 2023
totalled 3.641 million tonnes, up 6.7% year-on-year. Cumulative production in
the first ten months of 2023 totalled 34.458 million tonnes, up 3.5%
year-on-year. Meanwhile, the country’s metallurgical-grade alumina production
in October totalled 6.842 million tonnes, down 1.6% month-on-month but up by
2.5% year-on-year.
European
Aluminium welcomed the European Commission’s proposed 12th package
of sanctions against Russia which includes a ban on the importation of certain
aluminium products such as wires, tubes, and pipes. However, the association
has also pointed out that the proposed list only covers 12% of EU imports of
aluminium products from Russia and that future sanctions will need strong
anti-circumvention measures to prevent imports of Russian products via third
countries.
The German
aluminium association, Aluminium Deutschland, reported that primary aluminium
production in the first nine months of 2023 was 147,000 tonnes, down from
391,000 tonnes in the same period in 2022. Energy pricing remains the key issue
faced by the sector.
The Ghana
Integrated Aluminium Development Corporation said that the mining of about half
a million tonnes of bauxite from the Nyinahin range
will begin soon following the completion of the Mineral Resource Estimate and
social impact analysis.
The
Rusal-owned Aughinish Alumina located near Limerick
reported a US $167 million loss in 2022 in newly filed accounts, following on
from a US $378 million loss in 2021, raising concerns over its ability to
continue to operate. The business has suffered from EU and US sanctions on
Russia and has written to the European Commission highlighting the crisis in
the European aluminium industry and the need to retain and expand production
within Europe.
The Sanvira Industries carbon anode plant, currently under
construction in the Sohar Free Zone, has signed a long-term supply contract
with Hydro Aluminium to supply anodes that will meet up to 25% of Hydro’s
annual consumption of nearly 600,000 tonnes. The 600,000 tonnes/year Omani
plant is scheduled to be operational in 1Q25.
The Suriname government has launched a process to attract investors to develop bauxite reserves in the Bakhuis area in the west of the country, despite previous failed attempts going back decades. A government official was reported to have said that companies from India, China and the Middle East had informally expressed interest in participating.
The UN’s Food and Agriculture
Organisation’s world food price index declined moderately in October averaging
120.6 points, down 0.5% from the previous month and down 10.9% year-on-year.
This was helped by the sugar index falling 2.2% from September but it was still
up 46.6% compared to a year earlier.
The Panama Canal Authority announced
that it was cutting booking slots to 25 per day starting November 3 from an
already reduced 31 per day due to a continuing severe drought. The PCA also
advised that that slots will be gradually reduced over the following three
months to just 18 per day from the start of February 2024. These restrictions
are causing some US Gulf grain shipments to Asia being rerouted via the Suez
Canal or Cape of Good Hope adding to voyage distance and vessel demand.
The US
Department of Agriculture’s November grain season export updates contained a modest
markdown to 2022/23 trade estimates and a small upward adjustment to 2023/24 trade
forecasts. Looking across export trade forecasts of the principal commodities
(wheat, coarse grains, rice, soyabeans, and soyabean meal), net changes to the
2022/23 season saw an overall trade decrease of 2.21 million tonnes, a fall of
0.30%. In the 2023/24 season overall export trade was increased by 1.96 million
tonnes, a rise of 0.27%.
The change
to USDA forecasts in November has been limited. 2023/24 coarse grain exports
were raised by 2.75 million tonnes, primarily down to increased maize export
estimates for the US, Russia, and Ukraine. This was partly offset by a 1.25
million tonne overall drop in 2023/24 wheat export trade. Individual country
changes included a one million tonne boost in the Ukrainian wheat export
estimate and a 1.5 million drop in the Argentine wheat export assessment as
rains in October came too late benefit the crop. There were very limited
changes made to 2023/24 export forecasts for soybeans, rice, and soybean meal.
The USDA has
also released its latest bi-annual sugar market update. Global sugar production
in the 2023/24 season is estimated up 8.2 million tonnes year-on-year to 183.5
million tonnes with higher output from Brazil and India more than offsetting
declines from Thailand and Pakistan. Global consumption is forecast to rise to
a new record level due to growth in markets including India and Pakistan. Global sugar exports are estimated to
increase by 3.1 million tonnes year-on-year to 67.4 million tonnes, with
increased volumes out of Brazil and Thailand more than offsetting lower
shipments from India and Pakistan. However, the export trade total was down 4.7
million tonnes from the first 2023/24 estimates made in the previous May
report. Lower Indian exports are based on the likelihood that the government
maintains export caps to control inflation and meet demand for domestic
consumption.
The Rosario
grains exchange reported that recent heavy rains came too late for Argentina’s
wheat harvest leading them to cut their forecast for the 2023/24 season to 13.5
million tonnes, down 0.8 million tonnes from their previous estimate.
Following on
from the driest September on record, Australia’s Bureau of Meteorology reported
that the country recorded the driest October in more than 20 years due to the
onset of an El Nino weather pattern. Western Australia, the largest grain
exporting state, saw its driest October on record.
In late
November heavy rainfall swept through southeastern Australia damaging wheat
crops. It was reported that this could shrink production by more than 100,000
tonnes and turn up to I million tonnes of milling wheat into lower quality feed
grain.
According to
commodity trader Louis Dreyfus, logistical snags have trapped sugar in top
producer Brazil meaning world prices need to rise above current 12-year highs
to curb demand and balance the market.
There were
reports in early November that China booked its largest single-day purchases of
US soybeans in at least three months taking around 10 cargoes or about 600,000
tonnes for shipment out of the US Gulf and Pacific Northwest.
The Indonesian
agriculture minister said that the country decided to import 3.5 million tonnes
of rice in 2023 and may need to import an additional 2 million tonnes in 2024,
citing the impact of the El Nino climate phenomenon on its domestic rice
production.
Ukraine’s
Deputy Prime Minister said that its alternative Black Sea export corridor was
still working despite a Russian missile damaging a bulk carrier due to
transport Ukrainian iron ore to China. He said that six ships loaded with
231,000 tonnes of agricultural products had left ports within the Odesa region
heading for the Bosphorus Straight in Turkey and that five other ships were
waiting to enter ports for loading. Later in the month, another official
reported that 151 ships had used the corridor since it was set up, shipping 4.4
million tonnes of cargo including 3.2 million tonnes of grain.
The USDA
reported that weekly US soybean export sales for shipment in the 2023/24 season
hit 3.9 million tonnes in early November following a surge in Chinese buying.
This was the highest weekly total since 2012.
Brazil’s state-run oil company
Petrobras is returning to the fertiliser sector. The company has laid out its
2024-2028 strategic plan which includes new investments in fertilisers and
renewable energy with the CEO noting that green fertilisers will be products of
the future. By the end of 2024, Petrobras will resume operations at one
fertiliser plant and is set to complete construction of a second plant by 2028.
The company will also work with firms that it leased two other fertiliser
plants to, helping them to regain profitability.
The industry group Fertilizer Canada expressed
its relief that the strike that closed St Lawrence Seaway on October 22 ended
with a reopening on October 30 allowing the resumption of fertiliser imports in
preparation for spring planting.
The phosphate producer OCP was
reported to have loaded 100,000 tonnes of fertiliser in a Mini-Cape, apparently
the first time that a Cape has hauled such a cargo. The Patrica Oldendorff departed the port of Jorf
Lasfar on 1 November headed for India.
Cinis
Fertiliser will begin producing potassium sulphate fertiliser at its new
Ornskoldsvik facility in 1Q24. The plant will be powered by fossil-free
electricity following an supply agreement with E.ON
signed back in May.
The
Department of Commerce is to lower duties on phosphates imported from Morocco
from 19.97% to 2.12% but raise countervailing duties on Russian phosphates from
9.19% to 28.5%. The decision to lower Moroccan duties was welcomed by the
National Corn Growers Association.
Saudi-based
ACWA Power and Chinese state-owned PowerChina have
commenced construction of a 3,000 tonnes/year green hydrogen project in Chirchiq that will be powered by a new 52 MW wind farm with
completion set for the end of 2024. The plant has an offtake agreement with Uzbek
state-owned chemicals company Uzkimyosanoat. The
hydrogen will be used to produce around half a million tonnes/year of ammonia
fertiliser.
Brazilian
officials said that new legislation enacted by the EU in April banning the
import of goods linked to deforestation was complicating negotiations of a
trade deal with South America’s Mercosur bloc. The Brazilian Foreign Trade
Secretary reportedly said that, despite the onus on complying with the new
rules being on EU importers, the commercial impact for exporters in increased
costs and bureaucracy cannot be ignored. The rules also apply to agricultural
products as well as wood products.
The Swedish
Forestry Agency reported that stocks of softwood sawnwood
at the end of September were 2.1 million cubic meters, the lowest level since
measurements began in 2013.
US exports
of hardwood lumber has fallen sharply this year according to the US Foreign
Agricultural Service. Exports in the first eight months of 2023 were down
year-on-year by 21% or 1.56 million cubic meters. At this pace, exports are set
to decline to the lowest volume since 2011.
The USDA
Foreign Agricultural Service reported that the US exported 796,988 tonnes of
wood pellets in September, down from 1.01 million tonnes exported in August.
Wood pellet exports for the first nine months of 2023 totalled 7.04 million
tonnes, up 6.2% year-on-year.
Empresa
Publica Productiva Cementos
de Bolivia has commissioned its 1.3 million tonne/year cement plant at Chiutara.
Domestic
cement demand fell 13.9% year-on-year in September 2023 according to the
Chilean construction chamber. It also reported that in the first nine months of
2023 the domestic market contracted by 9.3% year-on-year to 2.578 million
tonnes.
Domicem has
started up a second production line at its Sabana Grande de Palenque cement
plant. Built by China-based Sinoma Construction, it
has a clinker capacity of 3,500 tonnes/day and raises the plant’s cement
capacity to 3.8 million tonnes/year.
Lemi
National Cement Factory reported that the construction of its 8 million
tonne/year Lemi cement plant is 70% complete and is
on schedule for inauguration in March 2024.
The Iranian
Cement Association reported that cement demand in October 2023 increased by
16.3% year-on-year to 6.07 million tonnes. Cement production was up 12.3% on
the same measure.
Saudi
Arabia-based Northern Region Cement Company has contracted Germany-based KHD to
build a 1.32 million tonne/year cement line in Iraq. Construction is expected
to take 16 months from its date of commencement.
Cahya Mata
Sarawak is to expand its Kuching cement plant. The company is reported to have
contracted China-based Sinoma Industry Engineering to
help upgrade the plant’s 1 million tonne /year existing line and build a 1.9
million tonne/year second line.
Fauji Cement
has commission its new 2.1 million tonne/year greenfield cement plant in
Shandan Lund boosting the company’s total cement production capacity to 10.6
million tonnes/year.
The Vietnam
National Cement Association reported that cement sales in October fell 18%
year-on-year to 4.72 million tonnes. Sales in the first ten months of 2023 were
down 17% year-on-year to 46.36 million tonnes.