News & Media

02 August, 2021

China Shipping Watch Newsletter - July 2021

IRON ORE & STEEL


CHINA IRON ORE FUTURES DROP AS STEEL OUTPUT CONTROL DAMPENS DEMAND
Source: Reuters
Benchmark iron ore futures in China fell more than 3% on 21st July on cooling demand as mills controlled their crude steel production, while arrivals of the steelmaking ingredient gained.
Some steel producers in China’s Jiangsu, Fujian and Yunnan provinces were told by the government to cut production as the country aims to keep its annual output no higher than it made in 2020. Meanwhile, iron ore arrivals in China recovered last week. Portside inventories of the ingredient rose for the third week and stood at 127.34 million tonnes as of July 18, according to SteelHome consultancy. FULL STORY

CHINA'S IRON ORE IMPORTS HIT 13-MONTH LOW, MORE WEAKNESS SEEN
Source: Reuters
China’s iron ore imports fell to their lowest in 13 months in June as shipments declined, and analysts expect demand could continue to ease in the second half.
The world’s top iron ore consumer imported 89.42 million tonnes of the material last month, down 0.4% from May, data from the General Administration of Customs showed on 13th July. Iron ore imports in June were down 12.1% from a year earlier. In the first half of 2021, China took 560.7 million tonnes of the ingredient, though, 2.6% higher than the same period a year earlier, according to the customs data. FULL STORY

IRON ORE STUMBLES AS RISING SUPPLY RUNS INTO CHINA STEEL DISCIPLINE
Source: Reuters
Iron ore prices have suffered their worst week for nearly 18 months amid signs that the two factors needed for a sustained correction may be coming into play - Chinese steel producer discipline and a recovery in supply of ore.
The main Chinese domestic iron ore benchmark, the Dalian Commodity Exchange contract, dropped around 10% in the week to July 23, the worst weekly performance since February last year. The contract ended the week at 1,126 yuan ($173.77) a tonne, and has now slid about 17% from its record high in May. FULL STORY

SURGING IRON ORE PRICES FUEL CHINA’S DIVERSIFICATION EFFORTS
Source: Global Times
Despite the continuous decline in volume, China's iron ore imports in June still recorded a rebound in value from the previous month, an indication that it has become an urgent need for the country to diversify sourcing of the commodity.
China's iron ore imports reached 89.42 million tons in June, down 0.4 percent from May, while in US dollar terms, the import value grew 7.43 percent month-on-month to $16.78 billion, according to Chinese customs data released on 13th July, 2020. FULL STORY 

IRON ORE SLUMPS ON SUBDUED CHINA DEMAND OUTLOOK FOR SECOND HALF
Source: Hellenic Shipping News
Iron ore futures in Asia fell on 27th July, pressured by the prospects of a slowdown in demand for the steelmaking ingredient in top buyer China, and despite tempered shipment expectations from its biggest producer, Rio Tinto.
The most-traded iron ore for September delivery on China’s Dalian Commodity Exchange slumped 2.5% to 1,105 yuan ($170.67) a tonne by midday break, extending losses into a third straight session. Iron ore’s most-active September contract on the Singapore Exchange shed 3.5% to $188.60 a tonne. This week’s generally upbeat quarterly production reports from major miners come as China has intensified its de-carbonisation drive, asking steel mills to limit this year’s output to no more than the 2020 volume. FULL STORY 

CHINA REPORTS STRONG EXPORT NUMBERS DESPITE SHIPPING DELAYS
Source: The New York Times
China has prospered during much of the coronavirus pandemic as the world’s factory, making everything from face masks to exercise equipment for housebound consumers. Demand for its products doesn’t appear to be slowing even as Western economies reopen.
China’s General Administration of Customs announced on 13thJuly that the country’s exports surged 32.2 percent in June compared with the same month last year. The increase caught many economists by surprise, as one of China’s biggest ports was partly closed for most of June and China’s exports of medical supplies have begun to level off.
China’s export performance in June “is quite impressive and not so easy to understand,” said Louis Kuijs, the head of Asia economics in the Hong Kong office of Oxford Economics.  FULL STORY 

CHINA STEELS ITSELF FOR FIGHT TO COOL RISING COMMODITIES PRICES
Source: The Wall Street Journal
China’s multipronged campaign to roll back rising commodity prices is pitting the world’s largest buyer of many major resources and its brand of command economic policy against global market forces. Prices show victory remains elusive.
Chinese authorities aren’t giving up yet, signaling that they plan in the near term to double down on measures launched in recent months to cool commodity markets that have been buoyed by economic recoveries around the world. Adding to inspections of pricing platforms and broad warnings against market speculation, Beijing in early July auctioned state stockpiles of copper, aluminum and zinc reserves to increase supplies. The state stockpiler said it plans to sell more. “We will continue to organize releases of state stockpiles in the near future to ensure the stable operation of the market,” the National Development and Reform Commission, China’s top economic planner overseeing its commodity reserves, said July 6. FULL STORY 

CHINA TO ACCELERATE DOMESTIC IRON ORE EXPLORATION TO SECURE DOMESTIC SUPPLY: CISA
Source: Hellenic Shipping News
China Iron and Steel Association (CISA) vowed on 29thJuly to accelerate development of domestic iron ore source and the construction of overseas iron mines invested by Chinese companies in order to secure the country’s iron and steel supply during the 14th Five-Year Plan 2021-25.
Shen Bin, president of CISA, said that the organization will take a series of measures to ensure iron ore supply, including increasing self-supply rate of iron ore, and enlarge the number of Chinese companies invested overseas iron ore mines in West Africa and West Australia. 
With the implementation of the new iron ore supply strategies, China’s iron ore supply will be strengthened. CISA also issued several development reports and plans to do away with existed barriers that slow down domestic iron ore output. FULL STORY 

COAL


CHINA TO ENCOURAGE QUALIFIED COAL MINES TO EXPAND PRODUCTION CAPACITY
Source: Reuters
China will encourage qualified coal mines to expand production capacity, the country’s state planner said on Friday, in an effort to boost coal supply and cool prices of the commodity.
Coal miners, who apply for capacity expansion before March 31, 2022 must promise to shut down a certain amount of outdated production capacity and complete the closure within three months after receiving the approvals, it said in a statement. FULL STORY 

CHINA AVOIDS COAL PROJECTS IN BELT AND ROAD FOR FIRST TIME, SAYS GREEN FINANCE THINK TANK
Source: Hellenic Shipping News
China didn’t finance any coal projects via its Belt and Road Initiative in the first half, the first time that’s happened since the plan was launched in 2013, the International Institute of Green Finance said in a report.
The lack of funding from China for the dirtiest fossil fuel comes amid increased scrutiny from investors and environmental groups due to concern over its contribution to man-made climate change. More than 70 per cent of all coal plants built today rely on Chinese funding, according to the Beijing-based institute, followed by investment from Japan and South Korea. Seoul said in April that it would halt state-backed financing of coal-fired power plants overseas. FULL STORY 

CHINA'S COAL-FIRED POWER COMPANIES STRUGGLE AMID HIGH PRICES, AUSTRALIA BAN: RUSSELL
Source: Reuters
China's coal-fired power generators have seen profits evaporate amid surging domestic prices, with imports unable to provide much relief amid an ongoing unofficial ban on buying cargoes from major exporter Australia.
Out of 10 listed coal-fired power companies, four reported losses and five others saw first-half profits plunge, according to a report on Chinese energy industry website BJX News on July 27.The only utility to post a rise in profits was Changyuan Electric, which benefited from its large portfolio of renewable energy, according to Refinitiv analyst Yan Qin. FULL STORY 

CHINA ORDERS POWER PLANTS TO BUILD 7-DAY COAL INVENTORIES
Source: Reuters
China's state planner has ordered power plants to build their coal inventory to the equivalent of at least seven days of consumption by July 21, three sources with knowledge of the matter told Reuters on 19th July.
The order came as the government strives to ensure electricity generation at coal-fired power plants amid surging power consumption from industrial and residential users. 
The sources pointed to a statement issued on 18th July, seen by Reuters, in which the National Development and Reform Commission (NDRC) asked major coal-fired power plants to submit by midday on Monday (19th July) details of how they would lift inventory, and to complete the stockpile build by 21st July. FULL STORY 

CHINA’S COKING COAL IMPORTS REBOUND IN JUNE
Source: Argus Media
China's coking coal imports rebounded in June on accelerated seaborne trade as trading firms bought cargoes on tighter domestic supply.
China imported 4.13mn t of coking coal in June, down by 34pc from a year earlier but up by 21pc from May, according to Chinese customs data. January-June imports fell by 42pc on the year to 22.28mn t. China has banned coal imports from Australia since October, and there has been no Australian import since December.
US imports rose by nearly threefold to 938,000t in June on the year, 4pc lower than the record 974,700t in April. Canadian imports in June more than doubled to 888,179t from a year earlier, below the record 1.2mn t in March. FULL STORY 

CHINA'S JUNE COAL IMPORTS SOAR TO HIGHEST SO FAR IN 2021
Source: Reuters
China’s coal imports in June rose 35% from a month earlier to their highest level in 2021, driven by robust demand from power generation and industrial activity in the country.
China brought in 28.39 million tonnes of the fossil fuel last month, up from 21.04 million tonnes in May, and 12.3% higher compared to June of 2020. For the first six months this year, China imported a total of 139.56 million tonnes of coal, down 19.7% year-on-year, data from the General Administration of Customs showed on 13th July. FULL STORY 

CHINA'S NDRC PLANS TO RELEASE 10 MIL MT FROM COAL RESERVES TO BOOST SUPPLY
Source: S&P Global
China's National Development and Reform Commission, or NDRC, said on July 15 it plans to release more than 10 million mt of coal into the market, in an aim to alleviate domestic supply tightness.
In order to ensure a consistent supply of coal during the peak summer season, NDRC plans to release from its coal reserves to various ports and storage facilities around the country in batches to maintain supply stability. Since the beginning of 2021, the state has injected more than 5 million mt from the national coal reserves into the market to address supply and demand imbalances, according to the commission. FULL STORY 

SOYBEAN


CHINA’S JUNE SOYBEAN IMPORTS FROM BRAZIL FALL AS CRUSHING MARGINS DECLINE
Source: Hellenic Shipping News
China’s soybean imports from Brazil slipped in June from a year earlier, customs data showed on 21st July, as poor crushing margins weighed on demand.
China, the world’s top buyer of soybeans, brought in 10.48 million tonnes of the oilseed from top supplier Brazil, slightly down from 10.51 million tonnes the previous year, a record high, according to customs data. The figures were still up by 14% from 9.23 million tonnes in May, as demand continued to be supported by the country’s recovering pig herd, data from the General Administration of Customs showed. FULL STORY 

CHINA’S JUNE SOYBEAN IMPORTS SURGE ON PIG HERD RECOVERY
Source: Hellenic Shipping News
China’s soybean imports in June rose on strong domestic demand as the country’s pig herd recovers from African swine fever, market sources told S&P Global Platts July 13.
According to a customs department report released June 13, China imported 10.7 million mt of beans in June, up 11.6% month on month, but down 3.9% from record imports last June. The world’s largest soybean importer bought 48.96 million mt of beans in the first half of 2021, up 8.7% on the year, the customs report showed. FULL STORY 

BRAZIL’S SOYBEAN EXPORTS LOSE STEAM ON WANING CHINESE BUYING
Source: Agricensus
Brazilian soybean exports dropped to 11.1 million mt in June, 13% lower on the year and 26% below volumes exported in May, as the country’s harvest ended and Chinese buying interest subsided, official customs data showed.
Cargoes bound to China represented 64% of total Brazilian bean exports in June, down from 68% in May and 71% in April, when the country registered record export volumes. In 2020, China bought 70% of total Brazilian bean exports in June. FULL STORY 

CHINA'S SOYBEAN IMPORTS TO SLOW OVER REST OF 2021 ON CURBED MEAL USE
Source: Reuters
China's soybean imports are set to slow sharply in late 2021 from a record first-half tally, confounding expectations for sustained growth from the top global buyer and denting market sentiment just as U.S. farmers look to sell their new crop.
A collapse in hog sector profitability and a sharp rise in wheat feed use are crimping demand in China, where imports this year may now be less than 100 million tonnes, compared with a recent U.S. forecast of 102 million tonnes. FULL STORY 

ENERGY


CHINA’S CRUDE OIL OUTPUT UP 2.8% IN JUNE
Source: Hellenic Shipping News
China’s crude oil output rose 2.8 percent year on year to 16.67 million tonnes in June, official data showed.
The June output grew 3.5 percent from the 2019 level. The daily oil output last month stood at 556,000 tonnes, according to the National Bureau of Statistics (NBS). In the first six months, the country’s crude oil output came in at 99.32 million tonnes, an increase of 2.4 per cent from a year earlier. FULL STORY 

CHINA CRACKDOWN COULD KNOCK CRUDE OIL IMPORT GROWTH TO 20-YEAR LOW
Source: Hellenic Shipping News
Beijing’s crackdown on the misuse of import quotas combined with the impact of high crude prices could see China’s growth in oil imports sink to the lowest in two decades in 2021, despite an expected rise in refining rates in the second half.
Shipments into the world’s top crude importer and No. 2 refiner could be steady, or increase by up to 2% to just over 11 million barrels per day (bpd) this year, consultancies Energy Aspects, Rystad Energy and Independent Commodity Intelligence Services (ICIS) found. That compares to an average annual import growth rate of 9.7% since 2015, and would be the slowest growth since 2001, China customs data showed. FULL STORY 

CHINA'S CRUDE THROUGHPUT TO FALL IN JULY ON INDEPENDENT REFINER CUTS, QUOTA LIMITS
Source: S&P Global
China's crude throughput in July will likely fall slightly from the record high in June as expected cuts by private refiners over the month amid adverse weather offset the impact of mostly steady run rates at state-owned refiners.
The average utilization rate of China's four state-owned refineries was around 82% in July, steady compared with 82.4% in June, a four-month high, according to S&P Global Platts July 26. The four state-run oil companies -- Sinopec, PetroChina, CNOOC and Sinochem -- plan to process a total 32.06 million mt of crudes, or 7.58 million b/d of crude in July, against their nameplate capacity of 9.24 million b/d. This compared with their earlier plan of processing 31.07 million mt, or 7.59 million b/d, of crude in June.China’s crude oil output rose 2.8 percent year on year to 16.67 million tonnes in June, official data showed. FULL STORY 

CHINA OFFERED MILLIONS OF BARRELS FROM OIL RESERVE TO COOL RALLY
Source: Bloomberg
China supplied oil from its strategic state-run inventories to the country’s largest refiners earlier this month in a bid to quell a price rally.
The Strategic Petroleum Reserve supplied about 3 million tons, or 22 million barrels, to the processors, according to people familiar with the situation. The move was intended to cool prices and control a growing threat of inflation, said the people, who asked not to be named discussing a confidential matter. The operation might weaken Chinese demand for imported crude. FULL STORY 

DEMAND RECOVERY, SLOWER 2022 FLEET GROWTH AID LNG SHIPPING VIEW
Source: Bloomberg
Robust demand that’s mitigating the pressure of a heavy vessel-delivery schedule this year and a slowdown in fleet growth expected in 2022 give us a more positive view of the liquefied natural gas shipping market. 
The rapid rise in one-year charter rates shows an improved outlook. Demand may outpace fleet growth in 2022, supporting rates, but a modestly oversupplied market adds risk. FULL STORY