Daily international freight rates and market commentary
CONTENTS
Tankers 1-8LPG 8Dry Bulk 9News 10-18
Mideast Gulf VLCC rates edge lowerChartering demand VLCC's out of the Mideast Gulf remained muted during Monday’s session, with Opec members' an-nouncement that they have agreed a one-month extension of production cuts increasing uncertainty.
The Mideast Gulf to east Asia rate edged WS1.5 lower to close at WS57.5. Early in the day Korean refi ner GS Caltex and trader Koch — which had outstanding cargoes from last week — withdrew cargoes without fi xing. Demand for the class out of Mideast Gulf remained muted for the rest of the session.
Opec members agreed on a proposal to extend with the wider Opec+ group's 9.7mn b/d cuts for another month. The proposal is subject to approval by the non-Opec members, but has added to uncertainty among shipowners. In addition, some vessels that were previously engaged in fl oating stor-age activities have been reportedly spotted seeking employ-ment in the spot market, according to market participants. Demand is typically lower during the summer period, causing a seasonal lull in freight rates, and VLCCs could face a weak-er than usual market this year due to prolonged production cuts, a market participant commented.
The west Africa to China rate closed at WS57.5, down by WS2.5. ExxonMobil made available the only cargo in the area for the class during the session. The charter sought a VLCC from west Africa to east Asia and loading from 25-27 June, but negotiations did not materialise in a fi xture before London closing time.
European and African Suezmax rates holdElevated chartering demand for the Suezmax class on Monday did not lead to fi xtures, and freight rates for vessels loading out of Europe and west Africa remained unchanged.
The west Africa to the UK continent/Mediterranean rate closed fl at at WS52.5. Tonnage availability was enough to absorb any upward pressure on freight rates despite several
East of Suezmax Aframax rates declineRates fell across all Aframax routes east of Suez at the start of the trading week, amid limited fi xing activity and growing tonnage availability in the region.
Aframax activity for the southeast Asia region was lim-ited to short voyages within southeast Asia. Amid muted fi x-ing activity for the longer southeast Asia-east coast Australia and Indonesia-Japan routes, market participants indicated that fair value rates fell by WS2.5 points to WS82.5. Aframax cargoes from the Mideast Gulf to east remained absent on Monday. There were no reports that last week's competition from Suezmax vessels for Aframax cargoes was continuing, but inactivity in the market continued to weigh on rates. The Mideast Gulf-east Asia rate fell to WS85, from WS87.5 on Friday, and the Red Sea-China rate fell by the same amount to close at WS87.5.
The lumpsum for Kozmino cargoes took a sharp drop, taking direction from two Kozmino-north China runs booked late Friday and both brokered by Russian shipping company Sovcomfl ot. Multinational trader Trafi gura booked a 100,000t Kozmino-north China cargo on the 2010-built Aframax Olympiysky Prospect at $525,000, loading from 20 June, and Russian oil company Lukoil booked a 100,000t cargo with the same route and rate, but with a vessel that is yet to be nominated. There are some confl icting reports about the loading dates for the second booking, which has been reported as either from 19 June or from 23 June.
charterers splitting VLCC cargoes into Suezmax vessels last week. But demand for the class remained elevated on Mon-day, with at least four cargoes available in the region, and shipowners are targeting higher rates. Charterers pushed for a variety of options as potential discharge destinations and shipowners were reluctant to agree at current levels, a market participant commented. None of the cargoes were covered before London closing time.
Charterers sought at least fi ve Suezmax vessels from the Mediterranean and Black Sea, mostly for voyages to east Asia. India's state-owned BPCL took the Marathi from Ceyhan to west coast India, loading from 23 June at $1.875mn. No regional voyages were booked during the session and the cross-Mediterranean and the Black Sea to the Mediterranean rates closed fl at at WS55 and WS60 respectively. Tonnage availability in the area remains elevated and has the poten-tial to absorb increased demand in the short term before fundamentals shift enough to aff ect freight rates, a market participant highlighted.
European Aframax rates edge lowerEuropean Aframax trade remained dormant on Monday, and increased vessel availability weighed further on freight rates.
The Baltic to the UK continent rate closed at WS52.5, down by WS5, with the cross-UK continent rate also WS5 lower at WS70. Demand for Aframaxes from Northern Europe was limited during the session. Trading fi rm Petraco put an ST shipping unnamed vessel on subjects from Primorsk, loading from 14 June at WS37.5, but with a Mediterranean, rather than UK continent, destination. Tonnage availability weighed on freight rates in the area with over 20 promptly available vessels looking for employment, according to mar-ket participants. The increased tonnage availability could further weigh on freight rates this week if demand stays at current levels, some said.
The cross-Mediterranean rate slipped by WS5 to WS62.5 and the Black Sea to the Mediterranean rate fell by WS2.5 to WS70. Chartering activity in the Mediterranean and Black Sea areas was muted during the session. A few fi xtures that were agreed during the weekend were reported today, such as Spanish fi rm Cepsa taking the NS Consul from Algeria to Spain, loading from 12-13 June at WS75. The fi xture was negotiated on a premium due to the short duration of the voyage and the prompt loading dates, a market participant commented. The El Sharara and El Feel oil fi elds in Libya
Dirty: Cross Med 80kt vs Black Sea-Med 135kt Worldscale
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VLCC FREIGHT RATES
Caribbean-Singapore 270,000t
Daily nc
Week-on-week +19.45%
Year-on-year +45.02%
West Africa-China 260,000t
Daily -4.16%
Week-on-week -0.22%
Year-on-year +62.73%
Mideast Gulf-East 270,000t
Daily -2.60%
Week-on-week -7.57%
Year-on-year +69.56%
restarted their operations during the weekend as the force majeure was lifted. The restarts could add up to 400,000 b/d and boost fundamentals for the class in the Mediterra-nean when completed, although the portion of the crude oil that will be exported remains unclear.
Dirty Americas tankers: Aframaxes riseRates for Aframaxes in the dirty Americas tanker market fi rmed slightly amid an uptick in demand for the vessel class.
Phillips 66 booked the Victory Venture Aframax for an east coast Mexico-US Gulf coast voyage from 15 June at WS65, lifting the rate on the route by WS2.5 to the level of the deal. Additionally, Marathon sought a Suezmax for a voy-age on the route from 12-13 June.
BP and Valero each sought an Aframax for a US Gulf coast-Europe voyage from mid-June. The US Gulf coast-Europe Aframax rate fi rmed by WS2.5 to WS50.
Balanced fundamentals held VLCC rates steady in the US Gulf coast amid a day of muted chartering activity for the vessel class.
A charterer booked the Azure Nova VLCC for a US Gulf coast-Asia voyage from 8-10 July.
The US Gulf coast-China VLCC rate stayed at $7.75mn lump sum, and the US Gulf coast-Singapore VLCC rate re-mained at $6.75mn.
The Brazil-China VLCC rate was unmoved at WS56.5, as no fresh activity was heard on the route.
Glencore booked the Marvin Star Suezmax for a US Gulf coast-Singapore voyage from 4-5 July for $3mn, lowering the rate on the route by $250,000 to that level. The US Gulf coast-China Suezmax rate fell by the same amount to $3.25mn.
The US Gulf coast-Europe Suezmax rate was fl at at WS46.5, and the Caribbean-US Gulf coast rate for 130,000t cargoes held steady at WS75, as no fresh activity was heard on either route.
Dirty: Cross UKC 80kt vs Cross Med 80kt Worldscale
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Dirty: Cross Med 80kt Worldscale
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125
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Handysize fuel oil rates remain fl atFreight rates for Handysize tankers carrying fuel oil re-mained steady on Monday, in a market where the supply/de-mand balance remained fragile as there were suffi cient ships and only moderate demand.
The Black Sea to Mediterranean rate closed fl at at WS140. One charterer reportedly put a ship on subjects at this level. But booking activity still remained relatively slow, a market participant said.
And in northwest Europe, the cross-UK continent rate also closed fl at at WS140. But charterers might only agree to this level for newer or more fuel-effi cient ships, one shipbro-ker said. If the charterer was willing to take an older vessel, then it might be able to secure it slightly below the current level.
In the Panamax market, the UK continent to US Gulf rate remained steady at WS80, in line with the last booking of the Stena Paris at this level.
East of Suez tanker rates mixed East of Suez LR1 and MR tanker rates, fell again on Monday, owing to limited demand, whereas LR2 tanker rates ticked up as trading activity picked up compared with last week.
The Mideast Gulf-Japan LR2 rates increased to WS80 from WS76. Over the weekend, more LR2 shipments heading to the west of Suez were reported, depleting the current tonnage in the Mideast Gulf. Shipowners were not willing to lower the freight below WS80, with more cargoes released to the market since last week, one shipbroker said. But some others argued that more cargoes would be required to boost the market further.
While LR2 rates picked up slightly, the Mideast Gulf-Japan LR1 market remained sluggish, and rates slid to WS80 from WS82.5. Vessel availability, particularly considering that some LR1 tankers are ballasting from Asia Pacifi c to the Mideast Gulf, outweighed the demand for cargoes, pressing down the market rates further.
MR rates from the Mideast Gulf decreased by WS2.5 points across the board, based on the bid and off er levels from the market. Focus was on short-haul bookings within the Mideast Gulf, rather than trips to the Asia-Pacifi c, owing to lower time charter equivalent (TCE) rates for the Asia-Pacifi c market. The focus on shorter voyages means fewer tonne miles and a quicker turnaround of vessels. Trader Vitol booked the Torm Astrid at $215,000 for a 35,000t gasoil ship-ment from Jubail to Pakistan, loading from 9 June.
In the Asia Pacifi c, the cost to ship a 30,000t cargo from southeast Asia to east coast Australia stabilized. Australian refi ner Ampol placed the STI Dama on subject at WS130 for a 35,000t shipment from Singapore to Australia, loading from 23 June, and BP followed the same rate when booking the Kourous for a 35,000t shipment from Malacca to Aus-tralia, loading from 19 June. In north Asia, the lump sum to
Clean UKC-USAC 37kt vs Caribs-USAC 38kt Worldscale
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Clean freight rates - AmericasSize
’000t Rate ± $/t
Worldscale
Caribbean-USAC 38 130 nc 13.57
USAC-UKC 38 80 +5 12.60
USGC/Caribbean-UKCM 38 90 +5 16.34
USGC-east coast South America 38 135 +5
USGC-north Brazil 38 22.75
USGC-south Brazil 38 30.16
USGC-Argentina/Uruguay 38 35.24
USGC-east coast Canada 38 130 nc 17.16
Lump sum
EC Canada – USAC 38 400,000 nc 10.53
USGC-Chile (not south of Coronel) 38 1,375,000 +75,000 36.18
Quintero diff 38 -50,000 nc -1.32
Caldera diff 38 -100,000 nc -2.63
Mejillones/Antofagasta diff 38 -125,000 nc -3.29
USGC-Dominican Republic 38 435,000 +20,000 11.45
USGC-east coast Mexico 38 265,000 nc 6.97
USGC-Ecuador 38 1,075,000 +75,000 28.29
USGC-Guaymas 12 - - 34.61
USGC-Japan 38 1,550,000 nc 40.79
USGC-Las Minas 38 435,000 +20,000 11.45
USGC-Lazaro Cardenas 38 1,125,000 +75,000 29.61
USGC-Peru 38 1,175,000 +75,000 30.92
Callao/Conchan diff 38 -50,000 nc -1.32
USGC-Pozos 38 485,000 +20,000 12.76
USGC-Rosarito 38 1,275,000 +75,000 33.55
USWC-Chile (not south of Coronel) 38 900,000 nc 23.68
Quintero diff 38 -50,000 nc -1.32
Caldera diff 38 -100,000 nc -2.63
Mejillones/Antofagasta diff 38 -125,000 nc -3.29
USWC-Guaymas 12 - - 17.54
USWC-Lazaro Cardenas 38 500,000 nc 13.16
USWC-Rosarito 38 350,000 nc 9.21
USWC-Topolobampo 19 - - 12.37
Demurrage $/day
Atlantic coast Americas MR 38 - - 20,500
transport a 35,000t shipment from South Korea to Singapore declined to $323,000 from $326,000.
Clean Americas tankers: Rates riseRates in the clean Americas tanker market increased on the back of tight tonnage supply amid a day of muted chartering activity.
BP booked the Silver Hessa for a US Gulf coast-Chile voy-age from 8-10 June for $1.375mn lump sum, lifting the rate on the route by $75,000 to the level of the deal.
A charterer fi xed the Maersk Torshavn for a US Gulf coast-Caribbean voyage with prompt loading. The US Gulf coast-Pozos rate fi rmed by $20,000 to $485,000.
BP’s booking of the Aquila L for a US Atlantic coast-Europe voyage with prompt loading at WS80 failed, and the rate on the route fi rmed by WS5 to the level of the failed deal. The US Gulf coast-Europe rate increased by the same amount to WS90.
The US Gulf coast-east coast South America rate in-creased by WS5 to WS135, although no fresh activity was heard on the key route.
Chartering inactivity persisted on the Pacifi c coast of the Americas, but rates were supported by tight tonnage supply. The US west coast-Chile rate increased by $50,000 at $950,000, and the US west coast-Rosarito rate was fl at at $350,000.
MR demand continues to slow downDemand for MR tankers slowed down further on Monday with around two cargoes seen left in the northwest European market, but no ships at all on subjects according to market participants.
The UK continent to US Atlantic coast rate softened by WS7.5 points to WS112.5, as did the transatlantic rate from the Mediterranean, as lacklustre demand led to pressure on rates. In the Mediterranean, Saras booked a ship from Sarroch, Italy to the US Atlantic coast at WS115, with several
other destination options. There was just one cargo for a voyage left in the market at the end of the day and one other for storage. Northwest Europe was even quieter, with no ships on subjects at the end of the trading session, ac-cording to market participants.
In the Handysize market, demand was moderate, but insuffi cient to stop rates from sliding further as the weak-ness in the MR market has also allowed charterers to remain fl exible with the size of ship they choose. The cross-Medi-terranean rate fell by WS5 points to WS125. The Black Sea
LPG market subdued A muted start to the week saw no fi xtures, but discussions ongoing across the vessel classes.
On VLGC's a Bharat Petroleum fi xture was discussed for a 26-27 June loading in the Mideast to India. The Clipper Wilma and one other VLGC were reportedly put on subs for employment out of the Mideast Gulf, but further details were kept under wraps.
In the northwest European coaster market, Essar was heard to be looking for coverage for a 13-15 June loading split cargo out of Stanlow. No further information was heard on the potential deal, with discussions understood to be roll-ing into Tuesday.
Crude and product tankers scrapped in 2020Class Total Average age Total DWT
Very Large Crude Carrier (VLCC) 2 600,722 23.50
Suezmax 2 253,056 21.00
Aframax/Long Range 2 (LR2) 2 203,960 22.50
Panamax/Long Range 1 (LR1) 0 0 0.00
Handymax/Medium Range (MR) 3 136,756 24.33
Handysize 3 103,965 25.00
Total 12 1,298,459 23.50
Last updated 19 May 2020
to Mediterranean rate was an exception, as it rose by WS2.5 points to WS147.5. Vitol booked the Aegeas on the route at this rate. Coral Energy booked the Allegra from Eleusis, Greece to the Ukraine for $260,000.
In the LR markets, demand picked up substantially for both LR1s and LR2s. But slight oversupply in the market still caused rates to drop. The Mediterranean to Japan rate fell by $50,000 to $1.65mn. One charterer reportedly booked a ship from the Black Sea to Japan at $1.8mn.
Clean 37,000t UK continent-US Atlantic coast freight $/t
Dry bulk vessels scrapped in 2020Class Total Average age Total DWT
Very Large Ore Carrier (VLOC) 7 1,994,890 27.14
Capesize 19 3,178,363 20.95
Post-Panamax 0 0 0.00
Panamax 4 300,119 30.75
Supramax 2 109,275 17.50
Handymax 8 359,211 28.50
Handysize 8 230,003 27.38
Total 48 6,171,861 24.85
Last updated 19 May 2020
DRY BULK
Capesize rates dip slightly as week startsCapesize freight rates slipped back slightly on Monday as fi x-ing activity was slow after the rush of bookings last week.
Sentiment among owners in the Capesize market was eroded by news that Brazilian iron ore producer Vale’s op-erations at Itabira's Conceicao, Caue and Periquito mines had been suspended. Brazil has been the main driver of higher Capesize rates in 2020 and the news exerted some pressure on the market.
Vale has maintained its annual output guidance of 310mn-330mn tonnes, and in any case it has been largely absent from the Capesize spot market in 2020 as the major-ity of its material is now carried on VLOCs that it charters in long-term deals. But the news of the suspensions still caused some concern in the market. It is the largest iron ore producer in Brazil by a substantial margin and any impact to its exports could aff ect the market as a whole.
The cost of freight between Tubarao and Qingdao slipped 15¢/t lower to $11.30/t with charterers slow to commit to bookings. The rate rose substantially last week and the time charter equivalent level is now at $7,035/d — above estimat-ed operating costs of $7,000/d. Shipowners are likely to be resistant to prices returning below operating costs.
The cost of freight between west Australia and north Chi-na fell 40¢/t to $5.60/t as charterers picked up at least four vessels at this level. Australian exports have been robust for some time, but last week's rate increases on the route were driven mainly by momentum in the Brazilian market pulling ships away from the Pacifi c basin. Rates could come under renewed pressure if momentum in the south Atlantic slows.
Opec+ extra cuts will end in JuneMideast Gulf countries that pledged deeper crude cuts beyond their Opec+ commitments this month do not plan to extend these into July, Saudi oil minister Prince Abdulaziz bin Salman said on Monday.
Opec+ agreed on 6 June to extend to the end of July the first phase of its two-year production restraint deal — which is to cut May-June production by 9.7mn b/d, largely from an October 2018 baseline — for all participants except Mexico.
Saudi Arabia, Kuwait and the UAE pledged additional cuts in June, which would cap Saudi production at 7.49mn b/d, Kuwaiti output at or below 2.09mn b/d and UAE production at around 2.35mn b/d. Non-Opec Oman pledged to take 15,000 b/d off the market in June, above its commitment. In total these will remove around 1.2mn b/d this month.
These deeper voluntary cuts will not be extended into July, Prince Abdulaziz said on Monday. He said that they have served their purpose and improved the atmosphere among the group to encourage countries to act in a more committed way.
The deal struck at the weekend hinges on countries that produce above their quotas in May and June making up for this non-compliance in the July-September period. This means that overall cuts could exceed the 9.6mn b/d for July and the 7.7mn b/d planned for August and September, Prince Abdulaziz said. He said that compliance will be self-enforced, although the group's Joint Ministerial Monitoring Committee (JMMC) — which tracks observance — will meet every month until the end of the year. It will next assemble on 18 June.
Prince Abdulaziz, who chairs the JMMC, indicated that it will not come up with specific numbers for any additional cuts that over-producers would have to implement. He said that the compensatory amounts would be determined by May and June output numbers provided by the secondary sources — of which Argus is one — that Opec uses to deter-mine production numbers.
But the minister said that he would not be tolerant to-wards non-compliers.
"We have no room whatsoever for lack of conformity," he said. "We have no stomach for any types of laxities in terms of self-imposed obligations that need to be attended to."
The Opec+ agreement comes as Libya — which is exempt from Opec+ output restraints — resumes production at its 300,000 b/d El Sharara field after a five-month shutdown. Prince Abdulaziz said the Opec+ group will consider this development, but that it would be unproductive to engage in discussion about it so soon. He said that the group can accommodate an additional 300,000 b/d.
Indeed, Monday's message from the Opec+ group was
very focused on the short term. Russia's oil minister Alex-ander Novak said it is too soon to decide whether to amend the output deal following the expiry of the first phase, which is now at the end of July.
"As for August, it is too early to make any forecast. We took a decision about July and we continue to monitor the situation with the recovery of the demand, including air transport, road transport," Novak said.
In addition to compliance with quotas, Opec+ will watch "the current market situation, the monitoring of the speed of demand recovery… and stocks, of course" he said, point-ing out that global crude stocks rose "significantly" over the past few months.By Rowena Edwards, Samira Kawar, Nader Itayim and Anastasia Krasinskaya
New Orleans ports reopened following stormThe US Coast Guard reopened New Orleans-sector ports today at around 2:30pm ET after closing them yesterday evening ahead of tropical storm Cristobal making landfall in Louisiana.
The Mobile-sector ports of Biloxi, the Gulf Intracoastal Waterway, Gulfport, Mobile and Pascagoula remained open with restrictions. The US Coast Guard didn't immediately respond to requests for comment on the specifics of those restrictions.
Cristobal was downgraded to a tropical depression this morning. As Cristobal continues to move inland, heavy rains are expected, according to the National Weather Service.
US Gulf producers shut in nearly 35pc of oil output from the region ahead of the storm. By Michael Connolly
Libya lifts force majeure on exportsLibya has lifted force majeure restrictions on crude exports from the 300,000 b/d El Sharara field and the 130,000 b/d-capacity El Feel field, both of which have restarted after five months offline.
State-owned NOC chairman Mustafa Sanalla said exports will resume "as soon as possible."
El Sharara resumed operations on 6 June, an an initial rate of 30,000 b/d, after the reopening of a valve on the pipeline that connects the field with the port of Zawia. El Feel, which depends on El Sharara for electricity supply, restarted on Sunday at a 12,000 b/d rate, NOC said. The company expects El Feel to reach output capacity within 14 days, although it is unclear if this means the field's full capacity or the largely 70-90,000 b/d levels observed prior to shutdown.
Production from El Feel is comingled with Wafa conden-
sate into the Mellitah blend crude grade and exported from the Mellitah oil terminal. El Sharara's crude grade Esharara is shipped out of Zawia. The restarts could add up to 400,000 b/d in the short term — El Feel typically produces 70,000-90,000 b/d — but it is unclear how much will be available for export. Sanalla said crude is reaching the 120,000 b/d Zawia refinery, which runs Esharara as its main feedstock.
Combined shipments of Mellitah blend and Esharara aver-aged 243,000 b/d last year, according to Argus tracking data. NOC last week raised official June-loading prices for Mellitah blend by $3/bl to a $1.65/bl discount to North Sea Dated, while taking Esharara up by $3.10/bl to a 75¢/bl discount against the benchmark.
The majority of Libya's onshore oil fields and its export terminals have been offline since January, when the Libyan National Army (LNA) ordered shutdowns in the east of the country as part of its attempt to seize control from the UN-backed Government of National Accord (GNA). A nascent peace initiative proposed by Egypt is yet to be accepted by the GNA, which recently recorded strategic victories at al-Watiya and Tarhuna.
Argus estimates Libyan production averaged below 100,000 b/d in March, April and May, and exports have been limited to sour grades Bouri and Al Jurf from offshore fields. The restarts come just as the 23-nation Opec+ coalition — in which Libya participates without production restrictions — has extended its output cuts to cover 9.6mn b/d in July, largely against an October 2018 baseline.
Saudi Arabia's oil minister Prince Abdulaziz bin Salman on Monday said that it was premature to discuss the Libyan developments as part of the group's strategy.
"As long as they are way behind in terms of what they are going to be producing, I think it would be unfair and unproductive to engage them in their early days," Prince Abdulaziz said. "However, I think we have proven that we are accommodating enough to a very much bigger percent than 100,000 b/d here or 200,000 b/d there, or even 300,000 b/d."By Ruxandra Iordache and Nader Itayim
US Gulf operators restart productionUS offshore Gulf of Mexico oil production is starting to climb as operators restart operations shut-in by tropical storm Cristobal over the weekend.
Oil production shut-in stood at 629,351 b/d, or 34pc of the region's total, the Bureau of Safety and Environmental Enforcement said today. That compares with 635,781 b/d, or 35pc of the total, as of yesterday as Cristobal made landfall.
But natural gas production shut-ins ticked higher today, touching about 952.3mn cf/d, representing 35pc of the total compared with 878.3mn cf/d yesterday, the bureau said.
As facilities get restaffed, the number of platforms that
remain evacuated fell to 179 out of a total of 643 manned platforms in the region. That compares with 185 platforms as of yesterday.
BP has started to resume normal operations at its four operated platforms in the deepwater Gulf of Mexico, it said. The major removed offshore personnel and reduced produc-tion at the company-operated Thunder Horse, Atlantis and Na Kika facilities. Non-essential staff were evacuated from its Mad Dog platform, but production remained unaffected.
Shell said earlier today it will begin redeploying non-es-sential staff on board some of its US Gulf offshore facilities. There was no impact on production as a result of the storm and the major is set to resume activities in the region, Shell said.
Cristobal continues to move further inland after making landfall yesterday, with the center currently located over northeastern Louisiana, the National Hurricane Center said in an update earlier today.
Heavy rain will continue to push inland across the central Gulf coast and into the lower Mississippi valley today, travel-ing up the mid- and upper-Mississippi valley tonight and through tomorrow night, it said.
Storm activity has had a more muted effect on oil and natural gas prices in the past decade because so much domestic output now comes from onshore fields. But storms that make landfall along the energy infrastructure-rich Gulf coast can still disrupt refinery operations and cause the prices of transportation fuels to spike. Nymex WTI crude futures settled at $38.19/bl today.
The 2020 Atlantic hurricane season will likely have a higher-than-normal level of storms because of warm ocean waters and lower wind shear, according to the National Oce-anic and Atmospheric Administration (NOAA).By Manash Goswami
Vale keeps iron ore guidance after Itabira haltBrazilian iron ore producer Vale has maintained its annual output guidance of 310mn-330mn t after a court ordered it to suspend mining at its 36mn t/yr Itabira complex in Minas Gerais to combat a growing Covid-19 outbreak.
Vale suspended operations at Itabira’s Conceicao, Caue and Periquito mines in compliance with a 5 June decision issued by the regional labour court of the third region that reinstated the interdiction term issued by Minas Gerais labour officials, Vale said on 6 June.
The suspension may result in temporary shortage of pel-lets for the domestic market as the Itabira complex provides pellet feed to the Tubarao complex, Vale said.
“Considering the expected monthly production of 2.7mn t from the Itabira complex for the coming months and the provisioning of up to 15mn t of losses associated with Co-vid-19 in 2020, there is no need, at this moment, to revise
and persistent supply woes.Another market participant from China said that “steel
demand outlook in China cannot be overseen” in determin-ing the iron ore price outlook despite the supply woes.
“We are entering a period of monsoon and high tempera-tures in China and that will curb some of the downstream activity further,” he said. By Deepali Sharma and China staff
Chad exports fall to multi-year low in JulyChad's crude exports will drop to 92,000 b/d next month, the lowest since December 2017.
The July exports will load on three cargoes, down from the four planned in this month, loading programme show. Chinese state-owned CNPC's local unit is listed as marketer of all three 950,000 bl cargoes, which will load on 10-11, 17-18 and 25-26 July. By Andy Devine
Saudi July prices disappoint buyers in AsiaSaudi Arabia’s official July price increases across the board sharply exceeded the expectations of Asia-Pacific and Euro-pean refiners.
July-loading Saudi exports to Riyadh’s main sales region in Asia were lifted by $5.60-7.30/bl on the month. The in-creases were a disappointment to the region's refiners, who had expected prices to be raised by $2-4/bl. The increase may not necessarily lead to drastic region-wide cuts in term Saudi crude that Asia-Pacific refiners plan to nominate for July loading given limited supply alternatives.
Saudi state-controlled Aramco set the July formula prices to Asia-Pacific for its main crudes Arab Extra Light, Arab Light, Arab Medium and Arab Heavy at the highest levels in four months. The July price hikes follow the 90¢-$1.70/bl increases that Aramco made last month for the June formula prices of these four grades destined for Asia-Pacific.
A southeast Asian buyer said the Saudi July formula prices were higher than they expected, with at least one Indian refiner also surprised that the July prices had risen so sharply from June. Several refiners in northeast Asia consid-ered the July Saudi prices high and above their predictions, although they added that it was not a total surprise given the 6 June Opec+ agreement to extend the first phase of its historic two-year production restraint deal to the end of July for all participants except Mexico. Japanese refiner JXTG said its purchases in July will be unaffected by the rise in July-delivery formula prices.
Asia-Pacific refiners have limited alternatives, as other Mideast Gulf producers usually set their crude formula prices in line with Aramco. Cutting July term loadings could also be a risky move for refiners, because the trade cycle for July-loading spot cargoes has largely ended, while spot prices for
the guidance,” Vale said.The ruling will remain in effect until a court rules on the
merits of the interdiction or until Vale implements control measures for Covid-19 as set by labour inspectors, Vale said. It faces a daily fine of 500,000 real ($100,800) for non-com-pliance.
The Itabira complex, in Vale’s southeastern system, ac-counted for 36mn t, or 12pc, of the company’s 302mn t of fines production in 2019 and 6mn t of Vale’s 59mn in the first quarter.
Iron ore prices at China’s ports, the seaborne market and in the futures market rose on Monday as the market reacted to the Itabira suspension.
Australian mainstream Pilbara Blend (PB) fines prices hit 800 yuan/wet metric tonne (wmt) ($113/wmt)) at Tangshan, while Qingdao prices rose to Yn795/t. The Argus portside PBF index was at Yn764/t on 5 June.
Dalian commodity exchange September iron ore futures rose over Yn790/t soon after their 9am opening on Monday, up from a close of Yn760/t at the end of the 5 June night session.
The contract was at Yn783/t at 3pm Singapore time on Monday.
“The impact of the Itabira suspension is still within the previously expected range as the production target of 310mn-330mn t is being maintained. Markets overreacted to the news and portside prices shored up, with PB fines trad-ing at Yn791-795/t over the weekend and moving up further on Monday,” a Beijing-based trader said.
“There is no doubt that iron ore prices would remain high in the near future, while the booming steel markets in China will also support the iron ore market,” he added.
A PB fines cargo in the seaborne market on Monday fetched $103.55/dry metric tonne (dmt) on a 61pc Fe basis on the Corex trading platform, up from a traded price of $100/dmt on a 62pc Fe basis on the GlobalOre platform on 5 June.
“The suspension at Itabira may mean that supply from Brazil will not improve as expected in the coming months,” a market participant from China said.
Seaborne iron ore prices have been supported this year largely because of the persistent supply disruptions from Brazil, caused by dam-related closures, record rainfall and Covid-19-related disruptions.
Market participants have highlighted the risks to Vale’s ability to meet its production guidance for the year because of the disruptions, while at the same time global steel production cuts and iron ore diversions to China have offset some of the supply cuts.
Argus 62pc Fe iron ore prices rose back above $100/dmt on 5 June, with the 65pc Fe fines index moving up to $115/dmt on the same day amid tight port inventories in China
August-loading cargoes may rise in the current environment of tighter Mideast Gulf supplies.
Saudi crude provides base-load supplies for many refiners in Asia-Pacific, allowing Aramco to raise formula prices to the region. Asia-Pacific is Aramco's main market — over 70pc of the 7.76mn b/d of Saudi crude that loaded during January-April headed to the region, according to Argus tracking.
But the rise in Saudi crude prices will hit Asia-Pacific refiners’ margins, as the region’s demand for refined oil products has not fully recovered. Certain countries such as Vietnam, Australia, New Zealand, Japan and South Korea are seeing some recovery, but demand in key markets like Indo-nesia and the Philippines remain weak. While gasoline and jet-kerosine margins have firmed, and have been positive in the past week, they are still well below levels in February and in the first half of March before the full impact of the Covid-19 pandemic hit oil demand. Some Asia-Pacific refiners forced to reduce runs earlier this year amid falling demand have begun to increase them again. But product demand is only starting to recover, and sharply higher crude feedstock costs could prompt refiners to consider run cuts again.
Relatively high official formula crude prices may also lead to a flow of cargoes out of floating storage, if refiners are able to secure prompt supplies at cheaper prices. It is unclear how much crude is in floating storage in Asia-Pacific, but volumes accumulated in the past few months when the wide crude contango, with forward prices higher than prompt prices, made storage feasible. The currently narrow-ing contango could encourage sellers to push out volumes from storage, increasing regional availability.
Aramco’s price hikes also shocked European and Mediter-ranean refiners. The company bolstered its July prices by $4.20-5.40/bl on the month, in what one refiner pegged as double the expected hike. Aramco’s price increases could be part of the company’s strategy to discourage European nominations, given tight Saudi availabilities because of ongo-ing Opec+ production restraints, a buyer said.
Towards the end of last week, market participants anticipated that Aramco would lift July prices by $2/bl to the two regions. Aramco typically takes guidance from spot sale prices for rival Russian sour grade Urals in the second half of the month that precedes the price issuance — Argus-assessed prices for Baltic Sea Urals averaged $2.02/bl above North Sea Dated in that period, compared with $1.68/bl over 1-15 May. Second-half May Argus assessments for Black Sea Urals were $1.06/bl above Dated, versus 81¢/bl above the basis over 1-15 May.
One term buyer was considering at least lowering its Saudi allocations commitment, as a result of Aramco’s price increases for Europe and the Mediterranean, where refinery margins have struggled to keep up with recent upticks in crude differentials. A trader said that sharp Mideast Gulf
price increases — assuming Kuwaiti KPC and Iraqi Somo continue their trend of moving in line with monthly Saudi price adjustments — and tight alternative Urals crude avail-abilities could push refiners to switch to a light-sweet crude feedstock.
European nominations for Saudi crude were expected until Monday at 12:00 London time. Aramco usually gives the verdict on its allocation requests within a few days of nomination.
Niche North Sea crudes heading to ChinaA cargo of niche North Sea crude grades Balder and Chestnut is preparing to head to China, which typically takes Forties from the region.
The 1mn bl Seoul Spirit completed two ship-to-ship (STS) transfers at Scapa Flow, Scotland, at the weekend and is readying to depart for China on Tuesday, according to the local port authority.
The Suezmax took Chestnut crude on board from the Gijon Knutsen on 6 June and crude from the Norwegian Balder field via an STS operation with the Hilda Knutsen on Sunday. Oil analytics company Vortexa suggested that Balder crude accounts for around 821,000 bl of the Seoul Spirit’s total cargo.
The tanker will follow the 2mn bl Eco Leader, which departed Mongstad, Norway, for Qindao in China at the weekend. It is unclear which crude was on board, although Mongstad is the loading terminal for Johan Sverdrup, a fa-vourite North Sea grade with Chinese refiners.
With European demand still weak as the continent slowly re-emerges from Covid-19 related lockdown measures, North Sea crudes are finding unusual outlets. A cargo of Ekofisk de-parted for New York late last week on the 600,000 bl Pacific Treasures. Ekofisk last headed to New York in September last year.By Michael Carolan
Abu Dhabi's Adnoc raises July formula pricesAbu Dhabi's state-owned Adnoc has sharply raised the official July formula prices of all of its crude exports, matching a move by Saudi state-controlled Aramco.
Adnoc lifted the July formula price for its flagship light sour Murban crude by $5.45/bl on the month, setting it at a $1/bl premium to the monthly average of front-month Dubai assessments. Adnoc's prices apply to exports to all destina-tions, although most of its crude goes to Asia-Pacific.
As has been its practice since it first released forward-looking official prices in March, Adnoc used Murban as the benchmark for its other three export grades. It set the July formula price for its light sour Umm Lulu and Das crude at parity and at a 35¢/bl discount to Murban, respectively, both unchanged from the differentials in June. This equates to a
$1/bl premium to Dubai for Umm Lulu and a 65¢/bl premium to Dubai for Das, with both grades' differential to Dubai wider by $5.45/bl on the month.
The company set the July formula price for medium sour Upper Zakum crude at parity to Murban, from a 50¢/bl pre-mium in the June formula price. Adnoc had set Upper Zakum at an unusual premium to Murban for the past two months. The July Upper Zakum price equates to a $1/bl premium to Dubai, higher by $4.95/bl from the previous month.
This is the first time in four months that Adnoc has set the formula prices for all its crude exports at premiums to Dubai.
Adnoc's price increases were slightly smaller than those made by Aramco, which raised the July formula prices for Asia-bound shipments of its light sour Arab Extra Light and medium sour Arab Light crudes by $6.70/bl and $6.10/bl respectively.
The premium of Murban's July formula price to Arab Extra Light narrowed by $1.25/bl month-on-month to 80¢/bl, and Upper Zakum's premium to Arab Light narrowed by $1.15/bl on the month to 80¢/bl. Adnoc's light sour grades typically compete with Arab Extra Light, while Upper Zakum is comparable with Arab Light.
Adnoc had said that it will relax cuts to term crude nomi-nations for two of its main grades in July.By Fabian Ng
Saudi Aramco lifts prices after Opec+ cutsSaudi Arabia has raised the official formula prices of its July-loading crude exports to buyers in all regions, with the larg-est increases applied to cargoes bound for Asia-Pacific. The price hikes come after the Opec+ alliance agreed to extend existing production cuts by another month.
State-controlled Saudi Aramco lifted the July formula price of its flagship Arab Light crude sold to Asia-Pacific by $6.10/bl on the month and raised the Arab Extra Light and Arab Medium prices by $6.70/bl and $5.90/bl respectively. All three grades were set at the same price of a 20¢/bl premium to the monthly average of Oman-Dubai assessments — the first time they have been priced at a premium to the benchmarks since March.
Aramco increased the July Asia formula price for Arab Super Light by $7.30/bl from the previous month to a $1.65/bl premium to Oman-Dubai, while the Arab Heavy price was raised by $5.60/bl to a 10¢/bl discount to Oman-Dubai.
The price hikes were steeper than anticipated, with most buyers hoping Aramco would lift prices of its crude shipments to Asia-Pacific by just $2-4/bl. But supplies are expected to remain tight after the Opec+ alliance agreed on 6 June to extend the first phase of its historic two-year production restraint deal to the end of July for all partici-pants except Mexico. The deal is contingent on countries
that overproduce in May and June making up for their non-compliance over the course of the following three months.
Aramco raised its July formula prices for northwest Europe by $3.90-4.20/bl compared with June. For the Medi-terranean, Aramco raised prices by $4.20-5.30/bl month-on-month on a fob Ras Tanura basis, and by $4.30-5.40/bl on a fob Sidi Kerir basis. These price increases were also higher than anticipated, with traders having expected Aramco to raise prices for July-loading crude sold to northwest Europe and the Mediterranean by $2/bl, in line with recent strength in the competing Russian Urals grade.
Aramco raised the July formula prices for its US custom-ers by 40-60¢/bl on the month.By Fabian Ng
Saudi gasoil to Europe faltersSaudi Arabia's exports of diesel and other gasoil to Europe are showing signs of faltering, after heavy traffic on that route last month helped push northwest European diesel premiums to crude down to 17-year lows.
Only one tanker, carrying around 92,000t of diesel, has departed Saudi Arabia for Europe in June to date, according to oil analytics firm Vortexa. This compares with 18 tankers, carrying 1.55mn t of diesel and other gasoil, which departed on the route in all of May. That was the largest monthly amount since January 2019.
This sign of contraction could reflect relatively robust demand in Asia-Pacific, which is drawing cargoes from Saudi Arabia. Additionally, Saudi refiners are operating well below capacity since they cut output to meet lower domestic and international demand caused by the Covid-19 crisis.
It probably also reflects poorer economics on the route to Europe. So far this month, 10ppm sulphur diesel cargoes delivered to northwest Europe have averaged an $8.01/t premium to the same grade loading in the Mideast Gulf, by Argus assessments. That is down from a $41.56/t average premium across the whole of May.
European gasoil markets have weakened as product released from storage has combined with large import flows to overwhelm any gradual recovery in demand from eased lockdown restrictions. Northwest European French-grade diesel cargo premiums to North Sea Dated crude have aver-aged just $4.04/bl so far in June, down from $6.26/bl in May and $15.06/bl in April.
State-controlled Saudi Aramco's bookings with European discharge options have actually ticked up this month, ac-cording to shipping lists, but most of these tankers also have Singapore options and are likely to head east. In June so far, front-month Singapore gasoil swaps have averaged a $1.45/bl premium to front-month Ice gasoil futures, up from 84¢/t in May. In April, the northwest European futures averaged a 97¢/t premium to the Singapore swaps.
Saudi gasoil exports have risen in the past two months, partly in an attempt to avoid filling storage capacity as demand falls. Additionally, refineries are maximising gasoil production over jet fuel because demand for the latter is lower still.
Saudi Arabia reimposed strict lockdown conditions in Jeddah, the country's second-largest city, after a sharp rise in new Covid-19 infections. Any resulting fall in vehicle use could free up more gasoil for export to Europe.By Benedict George
China’s crude imports surge to new recordChina’s crude imports rose to a new record high in May, after buyers loaded up on lower-priced cargoes in March and April as demand rebounded following the worst of the country’s Covid-19 outbreak.
Imports were 11.3mn b/d last month, rising above 11mn b/d for the only the second time and exceeding the previous record of 11.2mn b/d in November last year.
May’s imports rose by 19.5pc from a year earlier and were up by 14.8pc from 9.84mn b/d in April, preliminary data from China’s general customs administration (GAC) shows.
Imports in January-May this year averaged 10.35mn b/d, up by 4.5pc compared with the same period in 2019.
Low prices helped boost China’s crude arrivals last month. The average import price for May was $27.04/bl, less than half of 2019’s average of $65.63/bl, the GAC data show. The impact of the global Covid-19 epidemic, and the oil price war between Saudi Arabia and Russia, sent prices sharply lower in March and April, when many of the cargoes that arrived in May would have been bought.
Crude imports are likely to stay strong in June and July, as lower-cost cargoes continue to arrive and the Chinese economy recovers from the impact of the coronavirus.
Crude prices have recovered, as Opec+ output cuts came into effect from May and were extended by another month until the end of July. And Sunday’s move by Saudi Arabia to raise its July crude prices will further increase costs for Chinese buyers.
China exported no crude in May, the customs data show.
India returns to buying Nigerian crude cargoesIndian refiners are seeking Nigerian grades again, which are in plentiful supply as Abuja struggles to meet its Opec+ com-mitments.
Indian refiner IOC on 11 May-1 June issued eight tenders to buy light sweet crude loading mainly in June-July, the company’s first buy tenders for west African crude since mid-March. The refiner did not award the first two, and may have been testing offers and availability. But it bought at least eight cargoes of west African crude, favouring Nigerian
grades such as Akpo, Bonga, Bonny Light and Brass River, in the subsequent six tenders.
IOC’s purchases already match the 245,000 b/d of crude that left west African terminals to go to India in May, an unusually low figure reflecting the sharp drop in demand caused by Covid-19 lockdowns. The tallies for June and July exports to India are likely to rise, as IOC has yet to close the tenders it issued on 1 June.
Indian oil demand is showing faint signs of recovery, de-spite the recent extension of the lockdown to 30 June after a rebound in the number of coronavirus cases. New Delhi is relaxing a number of restrictions to revive economic activ-ity, allowing shopping malls, hotels and restaurants to open from Monday, and domestic air travel resumed on 25 May.
IOC’s preferred loading dates reveal signs of moderate buying urgency. The refiner generally seeks cargoes load-ing up to 80 days after it announces its tenders, but was looking for June or early-July parcels in most of the recent tenders, circulated in the second half of May.
Renewed Indian demand has helped to partly reduce the growing overhang of unsold Nigeria cargoes and support val-ues. Key grades such as Bonny Light and Qua Iboe have been returning to premiums to Atlantic basin benchmark North Sea Dated. But high amounts of crude lingering in floating storage offshore Nigeria and the slow demand recovery from European refiners — the main buyers of Nigerian crude — are still limiting crude sales.
Nigeria still has an issue with producing more than its quota under the Opec+ agreement. It produced almost 200,000 b/d above its 1.41mn b/d allowance last month, and cargo loading schedules indicate that output could be even higher in June and July.
Loading programmes for 18 Nigerian grades show around 1.74mn b/d scheduled for export in July, up from 1.71mn b/d in June. This reflects an increase in the number of cargoes to 57 in July from 55 this month and includes extra shipments of Qua Iboe, Forcados, Akpo and Jones Creek. Subtracting the Akpo condensate from these figures still leaves Nigerian crude exports above quota. Akpo loadings are scheduled at 67,000 b/d in June and 95,000 b/d in July, leaving Nigerian crude exports at 1.64mn b/d and 1.65mn b/d over the two months, above even the less stringent Opec+ target of 1.495mn b/d for August-December — and the new deal agreed on 6 June is contingent on countries that over-produce in May and June making up for their non-compliance over the following three months. Actual produc-tion does not always match planned loadings and NNPC and its partners still have time to revise some of the schedules.
Extra volumes could be partly offset by a drop in Bonga output. Shell began maintenance at the field’s floating storage, production and offloading unit on 21 May, and it is likely to last until July. But production disruptions to the
stream might be limited. Maintenance will entail only “a few days of total shutdown”, Shell said. Loadings of the grade are pencilled in at 127,000 b/d in June and 93,000 b/d in July.By Nicola De Sanctis
Petrobras hits new fuel oil export recordBrazil’s state-controlled Petrobras exported a record
1.11mn t of fuel oil in May, marking a return to the com-pany’s focus on higher-margin fuel exports after the Covid-19 pandemic scuttled the firm’s plans earlier in the year.
Volumes exported in May were up 10pc compared with the previous 238,000 b/d, around 1mn t, record set in Febru-ary and marked a 230pc increase over May 2019.
Utilization rates at the Petrobras' 13 domestic refineries climbed to around 75pc earlier this month, just shy of the 79pc first quarter average, after touching 52pc in mid-April, spurred by demand for IMO 2020 compliant marine fuel.
Resilient international demand for low-sulfur bunker has buoyed Petrobras’ upstream activities, particularly produc-tion of sweet light pre-salt crude. The company pumped around 2.163mn b/d of crude in Brazil in April, down from 2.188mn b/d in March but up almost 12pc higher on the year.
Petrobras exported a record 1mn b/d of crude in April—around 60pc headed to China—but says it is now focusing on production of higher-margin fuel for export.
“The strategy of diversifying the destinations of fuel oil exports has shown to be effective in capturing greater par-ticipation in the foreign market,” the company said.
Total Brazilian fuel oil exports averaged 205,615 b/d in April, down from a record 332,359 b/d in March but up by 46pc from a year earlier, according to data from Brazilian hydrocarbons regulator ANP.
Petrobras dominates the Brazilian refining market, but private producers are also gearing units toward fuel oil production.
Riograndense, a Brazilian company that operates a 17,000 b/d refinery in southern Brazil, produced around 1,400 b/d of fuel oil in the first four months of the year, a 53pc increase over the same period of 2019.
S Africa coal exports rebound South African coal loadings rebounded in May but the out-look for exports remains challenging.
Policy and seasonal obstacles could hamper demand from India, even as the country emerges from lockdown, while recent stockbuilding in Vietnam and Pakistan could weigh on near-term buying interest from these markets, which have acted as key sources of flexible demand during the second quarter.
The Richards Bay Coal Terminal (RBCT) exported 6mn t last month, down by 1.2mn t on the year but 2.3mn t above
April’s level and the highest since December 2019.The decline in RBCT's May exports was driven by lower
flows to India, which slumped by 60.1pc on the year to 2mn t amid the Covid-19-related slowdown. India accounted for a 33pc share of South African exports in May, far lower than last year's average of 57.7pc.
Indian imports should recover over the coming months as the country’s economy restarts. But a sharp rise in seaborne purchases appears unlikely as the government has intensified efforts to prioritise domestic coal sales due to record stocks with domestic producer Coal India. The monsoon season and high inventories with power plants are also downside risks for imports, while labour shortages could weigh on industrial demand.
Due to the reduced Indian demand, South African sup-pliers diversified their exports in May. Buyers — particularly those in Vietnam and Pakistan — took advantage of more competitive prices to build stocks, while deliveries to South Korea and Turkey rose sharply on the year. Unusually for recent months, suppliers also despatched cargoes to Egypt, France and Morocco.
Loadings for Vietnam surged by 1.4mn t on the year to a record 1.6mn t, boosted by low hydropower stocks and a heatwave in the southeast Asian nation that has driven power demand for cooling higher. But the recent bumper im-ports mean Vietnamese buyers are now well stocked, which could weigh on future flows to this destination, a trading firm said.
Stockbuilding could also weigh on future Pakistani im-ports, as some firms took advantage of competitive prices earlier in the second quarter to secure tonnage and are now overbooked, a buyer said. RBCT exports to Pakistan edged up by 4.9pc on the year to 746,000t last month, with South African suppliers competing strongly to dominate Pakistani market share at the expense of Indonesian and Russian sup-ply.
Cumulative RBCT exports between January and May were 26.1mn t, down by 12.3pc on the year. Exports would need to average 6.6mn t/month for the remainder of the year to match last year’s exports of 72.2mn t. Annual exports would reach just 62.4mn t if the January-May export rate is main-tained for the duration of 2020.Domestic supply and demandThere should be no shortage of supply available for export from RBCT for the remainder of the year, now that the min-ing sector is back up and running following lockdown-related curtailments.
Rail operator Transnet has postponed its 10-day annual maintenance on the rail line to RBCT until January 2021, which should maintain supply to the port. And the lower year-to-date exports have resulted in a stockbuild at RBCT. Stockpiles were about 5mn t last week, down by 350,000t
from early May but up from 2.8mn t in January.Low export demand in March-April encouraged some
mining firms to divert flexible supply to the domestic market but it remains to be seen whether this trend can continue. Utility Eskom — by far South Africa’s largest coal user — has built up coal stocks amid a crash in domestic power demand. As of mid-May, Eskom’s power plant stocks were sufficient for 55 days, above its 37-day target.
Domestic power demand fell to 20-25pc below last year in early April but has recovered to a 10pc deficit in late May. Overall year-to-date power demand is running at 8pc below last year, based on Eskom figures.
After slumping to a multi-year low in December 2019 due to disruptions caused by flooding, South African coal produc-tion recovered by 5.2pc on the year and by 6.3pc on the quarter to 63.6mn t in the first quarter of 2020, government data show.
March production was relatively flat to February 2020 and March 2019 at 21.6mn t, although the lockdown mea-sures' effects on mining output are unlikely to be shown until April and May data are released.By Alex Thackrah
Equinor to halve maritime emissions in NorwayNorway's state-controlled Equinor aims to halve its maritime greenhouse gas (GHG) emissions in the country's waters by 2030, compared with 2005 levels, by developing, producing and using more low-carbon and zero-emission marine fuels.
The company also aims to halve its global GHG emissions by 2050, compared with 2008 levels, which is in line with targets set by the government and with the International Maritime Organisation's (IMO) initial decarbonisation strat-egy.
Maritime emissions make up 6pc of GHG emissions in Norway, and 2-3pc of GHG emissions globally, the firm said. Equinor said it aims to produce and use more low-sulphur fuels by 2030, and to "strongly increase" its production and use of zero-emission fuels by 2050. It said it is developing and taking delivery of more fuel-efficient ship types, and it will increasingly burn alternative fuels such as LNG and LPG.
Equinor has signed long-term contracts for 30 more fuel-efficient tankers since 2015, and will enter into agreements for an additional 10 between 2020-22. It expects the carbon intensity of its fleet to be 45pc lower in 2025 than in 2008. Taken as a measure of emissions per unit of economic activ-ity, or grams per megajoule (g/MJ), LNG and LPG have CO2 g/MJ savings of about 21pc and 15pc compared with con-ventional bunker fuels like heavy fuel oil and marine gasoil, according to shipping classification society DNV GL.
Equinor will use hybrid fuel systems with LNG, LPG and batteries to reduce emissions in the mid-term. Longer-term it will develop zero-emission fuels such as hydrogen and am-
monia with carbon capture and storage (CCS), or by elec-trolysis of water from renewable power. It will also increase the share of biofuels in bunkers.
Earlier this year Equinor signed an agreement with ship-owner Eidesvik Offshore to convert the LNG-fuelled Viking Energy supply vessel to test run on carbon-free ammonia from 2024. Viking Energy will supply installations on the Norwegian offshore.
The IMO has not yet adopted GHG regulations for ship-ping, but plans to publish a revised strategy in 2023. Until then, it calls for reducing CO2 emissions by at least 40pc by 2030 and by 70pc by 2050, all compared with 2008 levels.By Erik Hoffmann
Tight quotas curb China’s coal importsChina’s overall coal imports fell sharply in May as expiring quotas for imported coal dampened buying by utilities and traders.
The imports, which include anthracite, coking coal and thermal coal, fell by 20pc on the year to 22.06mn t in May, according to preliminary customs data.
But cumulative imports over the first five months of the year rose to 148.71mn t, up by 17pc from the year-earlier period, given record shipments in January-April against the same period last year.
Chinese utilities were forced to slow booking of imported coal last month amid limited quotas and adequate — but more expensive — domestic supply. Major state-controlled power generator Guodian’s plants in Jiangsu and Fujian provinces in April have delayed a few April-arriving cargoes and defaulted on almost all May and June arriving cargoes that they had awarded through tenders. A number of coastal plants expect to exhaust their 2020 quotas by July or Au-gust.
The curbs were kept up on imported coal despite stron-ger coal consumption and the government-ordered suspen-sion of production at domestic mines during China’s two annual, national political conferences held last month. All these developments helped to buoy domestic and imported coal prices.
Coal burn at major power plants in China’s coastal re-gions averaged 628,000t/d in May, up from the average coal burn of 552,000 t/d in April, according to data released by coal industry association the CCTD.
The prices of Indonesian NAR 3,800 kcal/kg (GAR 4,200) coal, the most liquid physical market for seaborne thermal coal, rose to $29.37/t fob on 29 May from $24.24/t on 30 April amid tighter supply, according to Argus assessments.
China’s imports for the next a few months could continue to be curbed by expiring quotas as well as the restrictions imposed recently against Australian coal. Several coastal regions work with overall quotas for their area of jurisdic-
tion, while other coastal regions have broken down the regional quotas into quotas for individual plants. A few state-controlled utilities were ordered in mid-May by Beijing to suspend coal imports from Australia, amid growing politi-cal tensions between the two countries.
Coal shipments from major Australian ports have started to reflect the impact of China’s restrictions. Shipments from the two Port Waratah Coal Services' terminals at Newcastle, Australia, hit a 2½-year low of 6.93mn t in May amid low demand, as well as storms, rail maintenance and the slowing of production by some mining firms.
The two largest coal export facilities in the Australian state of Queensland — Gladstone port and Dalrymple Bay Coal Terminal — were on track to report multi-year shipping lows for May. Each of the ports were on track to ship less than 4mn t in May, well behind the monthly average in 2019 as a result of weaker demand.
China’s iron ore imports fall by 9pc China’s iron ore imports fell by 9pc in May from a month earlier on slower shipments from Brazil but rose by around 4pc from a year ago when both Brazil and Australia were hit by supply disruptions.
Chinese imports of iron ore fines, lump, pellet and con-centrate rose to 87.03mn t in May, up by 3.9pc from a year earlier, according to preliminary customs data. This is down from April imports of 95.71mn t.
The country’s January-May imports increased by 5.1pc to 445.3mn t from 424mn t during the same period a year earlier.
Shipments from Brazil slowed in May as Brazilian mining firm Vale struggled to increase production following a dam accident and heavy rains last year, as well as the Covid-19 outbreak now. Vale has lowered its 2020 guidance to 310mn-330mn t from 355mn t and halted its 6.2mn t/month Itabira mining complex.
Brazil exported 21.6mn t of iron ore in May, down by 11pc from April and by 28pc from a year earlier, the coun-try’s latest customs data show.
Iron ore inventories at Chinese ports fell to around 107mn t last week, the lowest level since late 2015, indus-try data show. China’s near-record steel production in May has kept seaborne iron ore supply tight, even despite steel production cuts in other regions. “Chinese steelmakers are ramping up production as the country tries to revive eco-nomic output and catch up with delayed projects following the Covid-19 outbreak,” a north China mill manager said.
The Argus ICX 62pc fines index ranged from $83.65-100.75/dmt in May, rising above $100/dmt on 29 May for the first time since August 2019.
By China staff
Brazil’s ethanol imports decline, exports riseBrazil’s ethanol imports fell in May because of declining consumption in the domestic market, while biofuel exports increased.
Ethanol imports decreased by 76pc in May in annual com-parison to 42.9mn l, which was 70pc below the total posted in April, according to Brazil's trade ministry MDIC.
Also in May, biofuel exports rose by 18pc over the same period last year, reaching 158.5mn l, compared to 81.6mn l in April.By Lara Leal
Brazilian crude wave pressures Portugal storagePortugal's imports of Brazilian crude in the first four months of this year were nine times the level of a year earlier, as the country's integrated Galp took more of its own produc-tion.
But this meant that Galp struggled to curb crude imports for April in line with the Covid-19 drop in demand for its products, and it halted fuels production at its 110,000 b/d Porto refinery in the first half of the month and its 220,000 b/d Sines refinery on 4 May as storage space ran low. It has said it plans to restart both plants this month.
Galp first directed a higher share of its 116,000 b/d of Brazilian crude production towards its own refineries in January, in order to utilise more of the sweet crude in pro-duction of marine fuel oil. At the start of the year the firm switched to 100pc very low-sulphur product as it strove to meet International Maritime Organisation (IMO) limits. Later, Galp faced difficulties with placing its Brazilian production with clients in Asia-Pacific when demand fell as the Covid-19 pandemic escalated.
Portugal imported 66,000 b/d on average from Brazil in the first four months of the year, including a record 96,000 b/d in March and 65,000 b/d in April, and this drove a 24pc increase in total imports over the same period to 260,000 b/d, according to Portugal's general directorate for energy DGEG.
Overall crude imports, which all usually go to Galp's re-fineries, were 231,000 b/d in April, down by 31pc from March but up by 18pc on the year. Demand for road and jet fuel in Portugal fell by 59pc on the year in April.
Portugal received 23,000 b/d of UK crude and 19,000 b/d from Denmark in April, along with 19,000 b/d of US crude, the first such since January. This partly offset sharply lower imports from west Africa.By Jonathan Gleave
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