Commodity Market Headline (27th of Feb)

[곰이좋아]

Daily Summary of Baltic Exchange Dry Indices

Baltic Exchange	Dry	Index	BDI	741 ( DOWN 2)
Baltic Exchange	Capesize	Index	BCI	1291 ( DOWN 32)
Baltic Exchange	Panamax	Index	BPI	939 ( UP 17)
Baltic Exchange	Supramax	Index	BSI	734 ( UP 10)
Baltic Exchange	Handysize	Index	BHSI	419 ( UP 5)

Iron ore slips to 1-month low despite approaching Australia cyclone

Spot iron ore prices drifted to a one-month low as prospective buyers in top importer China worried more about declining steel prices than potential supply disruption from key exporter Australia due to an approaching cyclone.
Chinese steel mills are in no rush to buy iron ore cargoes, traders said, although a prolonged stoppage of shipments from Australia, the world's biggest iron ore, may help iron ore prices rebound.
Cyclone Rusty is on course for a direct hit on Australia's Port Hedland, which handles a fifth of the world's seaborne-traded iron ore. Hedland has closed ahead of the cyclone, which is expected to reach Australia's northwest coast on Wednesday.
"The cyclone in Australia looks pretty serious, so we are likely to see some support for iron ore prices," said a physical iron ore trader in Hong Kong.
Weaker steel prices in China are restraining steel mills from rushing to buy iron ore, though, stalling the expectations of post-Chinese New Year restocking that lifted the price of iron ore to a 16-month high of $158.90 a tonne last week.
The most-traded rebar contract for October delivery on the Shanghai Futures Exchange hit a two-month low of 3,971 yuan ($640) a tonne.
Tuesday marked rebar's seventh consecutive day of losses, the longest losing streak for the construction steel product since a 13-day slide in August.
Fears over property sector curbs in China have knocked down steel prices since last week, countering optimism that demand would pick up pace as construction activity resumes from March.
"The (iron ore) market looks tight for now, but the market is a bit confused because we are still seeing low offers for port stocks in China," said an iron ore trader in Singapore.
Despite the approaching cyclone, offers for Australian iron ore cargoes in China fell by $1 per tonne on Tuesday, according to Beijing-based consultancy Umetal.
Benchmark 62-percent grade iron ore for immediate delivery to China fell more than 1 percent to $151.90 a tonne on Monday, its weakest since Jan. 30.
Similar port closures for a few days in Australia last month barely affected spot iron ore prices. If the terminals are shut for a week this time, the supply disruptions may help prop up prices, traders said.
Two cyclones in January disrupted 3 million tonnes of shipments from Australia's Pilbara region, based on estimates by Standard Bank.
"We would expect at least 5 million tonnes of exports to be impacted by Rusty; the amount of inland flooding will be difficult to estimate ahead of time but could further affect port inflow rates," Standard Bank said in a note.
Source: Reuters

S Korea's Komipo buys Russian spot coal at $93/mt, basis 6,080 kcal/kg NAR

Korea Midland Power or Komipo has awarded spot contracts to buy 270,000 mt of Russian bituminous coal to Glencore at $93/mt FOB, basis 6,080 kcal/kg net as received, an industry source said Monday.
Platts reported last week that the buy tender was awarded to Glencore but price details were not available.
The contract is for coal with a calorific value of 5,750 kcal/kg NAR, the source said.
In the tender issued February 5, the South Korean utility had sought 260,000 mt of bituminous coal via two Capesize shipments of 130,000 mt each with the following specifications: minimum calorific value of 5,700 kcal/kg NAR, maximum total moisture of 15% as received, maximum ash of 17% air dried, maximum sulfur of 1% air dried and volatile matter of 22-36% air dried.
The tender closed on February 13. The cargoes are to load over April-June for delivery to the Boryeong power station.
Source: Platts

ASIA THERMAL COAL: CFR China market rangebound ahead of Chinese parliament

Buying interest stayed muted at south China's trading hubs for imported thermal coal Tuesday, and CFR delivered prices were rangebound at $86/mt and remain capped by competitively priced domestic thermal coal, traders said.
The Chinese spot market has lacked direction for several weeks, and international traders were hoping that a key meeting of the Chinese parliament next week could provide a fillip to demand.
The annual gathering of the National People's Congress in Beijing lasts from March 5-10 and is to discuss central government plans and policies for the coming year, including production targets for energy-intensive steel, cement and infrastructure sectors.
"End users will keep a close watch on the...meeting. It could have a big impact on steel and cement production and on power demand, which should provide some direction to the coal market," said one market participant.
Traders in China said that although inquiries from local buyers had risen significantly in the immediate post-Lunar New Year period, actual physical demand for imported thermal coal had stayed low.
Offer prices for 5,500 kcal/kg NAR Australian thermal coal with maximum ash of 23% were quoted as high as $88/mt CFR China, but bidding interest from Chinese end users was no higher than $85/mt CFR, and was mostly around $84/mt CFR from traders.
A Singapore-based trader said Newcastle 5,500 kcal/kg NAR coal, with maximum ash of 23%, was being offered into the Chinese market at $75-76/mt FOB, but buying interest from China was stuck at $74/mt FOB.
Any offers above $76/mt FOB Newcastle would fail to elicit a response from Chinese buyers, he said.
In the over-the-counter market Tuesday, high ash cargoes of Australian thermal coal were heard bid at $74.75/mt for March loading to offers at $75.25/mt, and were bid at $75.25/mt to offers at $75.75/mt for April cargoes through broker Marex Spectron.
A second Singapore-based trader also said that not many bids and offers for Indonesian 5,500 kcal/kg NAR coal were being heard in the market this week.
"There is slim hope for deals of overseas coal to be done in the Chinese market due to the existing bid-offer spread of $2-3/mt for 5,500 kcal/kg NAR material," a Shanghai-based trader said.
"Chinese power plants have yet to see their coal consumption increase immediately after the holidays," he added.
Available stocks at Chinese power plants remain relatively high for the time of year, and have further pressurized Chinese coal prices, with 5,500 kcal/kg NAR domestic coal trading at Qinhuangdao port at about Yuan 521/mt FOB, ($82.50/mt) excluding 17% value-added tax, said market sources in China.
South African 5,500 kcal/kg NAR was keenly priced in the Chinese market, with offers heard at a discount of $6.50 to Richards Bay 6,000 kcal/kg NAR prices which were trading at $86.50/mt for April swaps, Tuesday.
Adjusting for calorific value, Richards Bay 5,500 kcal/kg NAR thermal coal would be priced at $73/mt FOB, which was $2 lower than comparable calorific value Newcastle thermal coal.
Delivered prices for South African 5,500 kcal/kg NAR coal were quoted in the market at $85-86/mt CFR China, including $12.50/mt for Capesize vessel freight.
In the Newcastle 6,000 kcal/kg NAR market, an April-loading parcel of 25,000 mt traded onscreen early in the Asian trading window Tuesday at $93/mt FOB, and followed four Newcastle 6,000 kcal/kg NAR screen trades Monday.
Two of these screen trades were each for April parcels at $94.25/mt FOB Newcastle, and two June-loading parcels traded at $93.25/mt and $94/mt respectively.
Platts assessed the FOB price of Newcastle 5,500 kcal/kg NAR thermal coal with typical ash of 20%, normalized from 17-23% and for loading in the next 7-45 day period at $76.50/mt, unchanged day-on-day.

INDONESIAN 5,500 NAR SOUGHT FOR TERM DEAL
A power plant in China was in the market to procure 150,000 mt/month of Indonesian 5,500 kcal/kg NAR thermal coal under an annual contract, but the Chinese utility's price indications were not immediately available, said an Indian trader, who had received the interest from the Chinese company.
A Singapore-based trader said there was a disparity in pricing between small to mid-sized miners and major Indonesian producers for similar grades of coal.
He said that major miners were seeking a premium of $1-2/mt for a cargo, while small to mid-sized miners were offering similar cargoes at a discount to current market prices.
A medium-sized miner, producing around 4 million-5 million mt/month, was selling 5,900 kcal/kg GAR coal to Japanese buyers at $84/mt FOB, he said.
"I wonder who's going to buy at those levels in China and India," he added.
A Supramax cargo of 4,000 kcal/kg GAR Indonesian coal was reported sold into South China at $43/mt FOB for March delivery.
The Shanghai-based trader said the price was about $2-3/mt above current market prices.
Indonesian thermal coal for delivery in the next 90-days was assessed at $76/mt FOB for 5,900 kcal/kg gross-as-received product, and 5,000 kcal/kg GAR Indonesian thermal coal was assessed at $60.15/mt FOB, and both price assessments were stable day-on-day.
Indonesian thermal coal with a calorific value of 4,200 kcal/kg GAR for loading in the next 7-45 days was assessed at $41.20/mt FOB, also unchanged.
Source: Platts

Augment wheat exports to Bangladesh

Bangladesh last year imported about 3 million tonnes (mt) of wheat from Russia, Ukraine (1.0mt), Canada/Australia (0.9 mt), while India’s contribution-- which is flush with huge stocks - has been minimal (0.5 mt).
Though there is regular cross-border export of wheat to Bangladesh by the medium-sized traders, import on Government and private account via Chittagong and Mongla port of approximately 2.5 mt per annum takes place from all origins. This includes a tendered annual import of Director General, Department of Food (DG Bangladesh) of approximately 800,000 tonnes. India should actively exploit this market for better “fob” value realisation, as logistics costs would be the least; there are no quarantine concerns like Iran/Egypt and payment arrangements are fairly smooth.
INDIA MISSES OUT
In 2010, the Bangladesh government made an official request for import of 300,000 tonnes of rice and 200,000 tonnes of wheat from Food Corporation of India (FCI). However, the terms of trade offered by FCI were “as it where is” basis from warehouses at port towns. It took no liability on account of quality, quantity shortage and transit loss after the material was de-stocked. The Bangladesh government had desired supplies on delivered basis — (C&F Liner out shipments); 90 per cent payment against shipping documents and 10 per cent payment after quality and quantity are contractually complied with, or pro rata deduction thereof. The Indian and Bangladesh governments, respectively, represented by three PSUs (STC, PEC, MMTC) and DG Bangladesh could not arrive at a compromise. Repeated requests made by the Bangladesh government for supply of grains could not be appropriately responded to by the Indian side. Bangladesh feels let down by this episode.
During 2010-12, the aggressive bidders/shippers in “DG Bangladesh” tenders were international traders based in Dubai, Singapore, Bangkok, who sourced wheat from diverse origins. (Most MNCs have stayed away from Bangladesh Government wheat tenders.) However, upon execution of the contracts, they discovered that there was an extra cost of $10-12/ tonne, which remained unforeseen (at the time of bidding) for deemed contractual non-compliance. The option was either to perform at a loss, or abandon implementation by allowing the Bangladesh Government to encash their performance bank guarantee.
After losing money, these traders have withdrawn from their aggressive posturing in tenders, while new kids on the block- South Korean trading firms and some other companies -- are bidding for Indian/third country wheat at $12-15 below performing price. They might also face a similar situation like their predecessors, unless they see major bearishness in coming months. The chances are that Bangladesh may not be able to import the contracted quantity, but may be content with monetary compensation by invoking bank guarantees. The objective of any Governmental institution should be to secure its food supplies, rather than to be in the business of making money out of defaults. Therefore, there is an immediate need on the Bangladesh side to correct these procedural wrangles.

DIFFERENT MODEL
The “South Korean” model necessitates the involvement of two intermediaries and two additional banks in a string of seven parties, while the normal trade flow comprises three entities. A local trader in Bangladesh assigns the contract to his foreign principal. Extended intermediation is meant to mitigate risk exposure due to quality or quantity claims, after wheat is discharged at ports in Bangladesh and for expediting 10 per cent payment/ release of bank guarantees. This risk premium induced by extreme contractual cautiousness reduces FOB realisation of the supplier. It also adds additional cost burden to the Bangladesh government and extra banking cost. The prospects of supply of poor quality grains also increase. The net effect is that the Bangladesh Government acquires feed quality /low grade wheat, though payments appear to be made for good milling wheat.
For private wheat imports by Bangladesh, Singapore/Australian traders have an edge because they can offer 180 days secured or unsecured credit at better terms. That may not be possible for Indian players.
However, for efficient trade flow for official imports the Indian side has to be flexible as well. The way out is simple: (a) GOI/private trade should be willing to supply wheat to Bangladesh on C&F Liner Out delivered basis and (b) Bangladesh government should accept quality/quantity final at load port (c) a performance guarantee of 5-10 per cent may be held as security for contractual performance, instead of the existing provision of making 90 per cent payment against the shipping document, and holding 10 per cent payment till quality issues and performance bank guarantee are finalised.
Such a procedure would be cost effective and pave the way for much greater bilateral co-operation.
Source: The Hindu Business Line

Vale Balance-Sheet Cleanup Heralds Record Loss: Corporate Brazil

Vale SA (VALE), the world’s largest iron- ore producer, probably lost money for the first time in a decade in the fourth quarter after Chief Executive Officer Murilo Ferreira dropped unprofitable projects and wrote down assets.
The Rio de Janeiro-based miner will report tomorrow a record loss of $1.22 billion for the three months ended Dec. 31 under U.S. accounting standards, according to the average of five analysts’ estimates compiled by Bloomberg. That would mark the first loss since the third quarter of 2002, when Vale lost $150 million after a currency slump boosted debt costs.
Ferreira, who took over as CEO in May 2011, is selling assets and cutting spending after a two-year metals boom led by China stalled, causing iron-ore prices to slump 55 percent from a February 2011 peak to a three-year low in September, before rebounding. The decline helped trigger more than $60 billion in writedowns at companies from BHP Billiton Ltd. (BHP) to Rio Tinto Group. An increasing focus on its core iron-ore business will help Vale restore profit and increase dividends, said Arthur Byrnes at Deltec Asset Management LLC in New York.
“They have to be much more targeted and much more efficient about what they are going to expand into,” Byrnes, who helps manage $1 billion, including Vale shares, at Deltec as a senior managing director, said by telephone. “Dividends would have been a lot nicer having not gone nuts for eight of the last 10 years trying to do everything in the world.”
Stock Decline
Vale shares declined 16 percent in U.S. dollar terms since reaching a nine-month high on Jan. 2, compared with a 4.3 percent drop for Melbourne-based BHP, the world’s largest mining company, and 11 percent for London-based Rio, the second biggest. Vale is trading at 7.25 times estimated earnings, according to data compiled by Bloomberg, compared with a ratio of 13.3 for BHP and 11 for Rio.
Iron-ore prices have rebounded 75 percent from September to reach a 16-month high on Feb. 20, as growth in China, the biggest metals consumer, accelerates. Prices averaged $120 a ton in the fourth quarter, a 7.2 percent increase from the previous quarter and 15 percent lower than a year earlier, according to a price index compiled by The Steel Index Ltd. Rates may tumble to $70 a ton in the three months ending September, UBS AG analyst Tom Price said by telephone today.
Vale’s earnings before interest, taxes, depreciation, and amortization will drop 37 percent from a year earlier to $4.79 billion, the average of 14 estimates, after iron-ore prices declined. Nickel and copper output also fell. The estimated fourth-quarter loss will be the largest on record since at least 1997, when the company was privatized.
Assets Review
Vale is wrapping up an annual review of asset values. The company said on Dec. 20 it would book a $4.2 billion fourth- quarter pre-tax charge after lowering the valuation of its Onca Puma nickel project in Brazil and its stake in aluminum producer Norsk Hydro ASA. (NHY) Another writedown of between $50 million and $100 million for several assets will be announced along with the earnings, Chief Financial Officer Luciano Siani said Dec. 6.
“Our intention is to clean up the balance sheet quite soon,” he said in a presentation to investors in London.
Vale’s press office in Rio declined to comment on earnings before the quarterly release.
Failed deals in aluminum and coal caused $14 billion in writedowns at Rio and led CEO Tom Albanese to lose his job last month. Cost overruns at Anglo American Plc (AAL)’s flagship Minas-Rio iron-ore project in Brazil were followed by Cynthia Carroll’s announced departure as the company’s top executive. Anglo slashed $4 billion from the value of Minas Rio.
At the helm of Vale since 2011, Ferreira is the only CEO of the top five miners who isn’t leaving.
Mine Sales
Ferreira began reversing predecessor Roger Agnelli’s acquisition strategy a year after he took charge. Vale announced $1.47 billion of asset sales last year, including a coal mine in Colombia, while putting potash projects on hold in Argentina and Canada.
“Too many acquisitions, too much overspending on capital - - this is something of an industry-wide phenomenon,” Leo Larkin, a metals and mining analyst at S&P Capital IQ, said by telephone from New York. “Companies get carried away.”
Ferreira is also cleaning up liabilities from tax disputes that have led Vale shares to trail those of its main rivals. In December it agreed to pay about $560 million to settle Swiss and Brazilian tax disputes, of which about $460 million will be booked in the fourth quarter.
While analysts anticipate the impact of Vale’s writedowns on its earnings, the company is set to report an improving operating performance, Banco Santander SA analysts Felipe Reis and Alex Sciacio said.
Operating Profit
“We expect higher iron-ore sales volume and realized prices to be the main drivers of the operating performance recovery,” the Sao Paulo-based analysts wrote in a Feb. 20 research note. “This trend is set to continue in the first quarter of 2013, as iron-ore spot prices have been surprisingly high since the start of the year.”
Vale on Feb. 1 posted a 3.1 percent increase in fourth quarter iron-ore output, beating analysts’ estimates, because of less rain in Brazil. Nickel and copper production declined compared with the previous year.
After having increased its investments for several years and overpaid for acquisitions, Vale is now adapting to a new reality, S&P Capital IQ’s Larkin said.
“Vale has made it very clear that they are going to be more disciplined about the capital allocation process,” he said. “Everybody is retrenching.”
Source: Bloomberg

China Jan copper imports down 28% on year on reduced demand: Antaike

Reduced demand from importers who use copper as collateral for borrowing money, as well as poor arbitrage trade opportunities, trimmed China's January refined copper imports, Beijing Antaike, the state-run metals consultancy said Monday.
China imported 243,174 mt refined copper in January, down 28% from the same period last year, the latest customs figures showed.
"A key reason for the lower import volume in January was that in January last year a lot of copper imported was from those seeking materials as collateral for seeking funds, whereas this year this has not been the case so much," He Xiaohui, a copper analyst with Antaike said.
Due to the poor arbitrage trade opportunities in recent months, Antaike predicted China's copper imports in February were likely to be lower than in January.
Imported copper trade could incur losses of Yuan 1,500-2,000/mt ($241-321) in late January, according to Chinese copper industry analysts.
However, Antaike's He said March copper imports are likely to show an increase over January due to increased activity following the break for Chinese Lunar New Year.
Source: Platts

Weak coal prices put Whitehaven in red

Whitehaven Coal has slumped to a net loss after tax of $47 million in the first half of 2012-13 and cancelled its interim dividend.
The coal miner was hit by a raft of problems including weaker coal markets, the high dollar, last year's train derailment at Boggabri, and costs associated with the delayed approval of its controversial Maules Creek mine.
Whitehaven shares dropped to 8 cents or 2.7 per cent to $2.92 in early trade this morning.
Revenues for the half-year ended December 31 slumped 18 per cent, year-on-year, to $281 million, while recurrent earnings before interest tax depreciation and amortisation fell 86 per cent to $8.2 million.
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Saleable coal production jumped 56 per cent to 3.5 million tonnes during the half, but this was offset by a fall in average realised coal prices from $US108 a tonne to US$92 a tonne in the previous corresponding period,
This was in part to coal quality linked to moisture in product from the new Narrabri longwall mine.
Outgoing chief Tony Haggarty said significant work had been undertaken across the company to minimise the impact of the commodity cycle.
"While we are already well placed on the cost-curve, we are continuing to review our open cut operations to identify opportunities to further reduce costs and enhance operating performance and revenue.
"As outlined previously, our small and relatively high-cost Sunnyside open cut mine was placed on care and maintenance in November 2012. The accounting treatment of closure related costs has contributed a loss of approximately $20 million to our overall result.
"The ramp up of our Narrabri longwall production progressed well through the later stages of the first half. Ensuring that Narrabri meets consistent high production rates remains a key focus for our business.
"Higher than anticipated moisture in the Narrabri thermal coal has had a negative impact on our revenue, and while this issue will diminish as production increases, a number of operational actions are being taken to reduce moisture levels in the product coal."
Mr Haggarty, who will be replaced after Easter by Whitehaven director Paul Flynn, said following the recent approval of the Maules Creek mine, and regardless of external factors Whitehaven remained on track to becoming a 25 Mtpa coal producer.
Source: Sydney Morning Herald

China's Jan iron ore imports from Australia jump 21% on year on stronger demand

China imported 32.42 million mt of iron ore from Australia in January, up 21% year on year, data released Tuesday by the General Administration of Customs showed.
The imports were, however, down 3.7% from December.
Despite weak steel prices, a Singapore-based trader said there was strong demand for Australian iron ore last month as Chinese producers were operating their steel plants at high rates.
"Many Chinese mills are upbeat on stronger steel prices after the Lunar New Year, and they did not even cut their crude steel output during the Lunar New Year holidays," said the trader. "Many buyers had also bought more iron ore to stock ahead of the week-long national day holidays, which explains the hike in Australian iron ore imports in January."
Australia remained the top supplier of iron ore to China, accounting for 49% of the country's total imports in January, compared with 47% in December.
Iron ore imports from Brazil, the second largest supplier to China, reached 12.91 million mt in January, down 16% year on year and 35% month on month, the data showed.
Trading sources said that Vale tried to sell as many cargoes as possible before the rains set in during the later half of December, and the last spot tender was awarded on December 6 last year.
Vale sold at $156/dry mt CFR China on January 14, a 63.8%-Fe LOBT cargo, after an absence of six weeks from the spot market.
Some other sources, however, said production issues, and not weather-related problems were the main reason for the fall in in Brazilian iron ore imports to China in January.
Meanwhile, imports from India reached 0.56 million mt in January, soaring 100% from the previous month but plummeting 87.5% year on year.
A Shanghai-based trading source attributed the spike in the number of iron ore offers from India and deals done to the rise in 62%-Fe Iron Ore Index prices since early December. China's imports from India have been declining, however, as New Delhi had hiked export duties to 30% from 20% on December 30, 2011.
"We are seeing more Indian cargoes offered and sold in the market when the price for iron ore hovers over $140/dmt," said a Shanghai-based trader.
Platts on February 25 assessed the 62%-Fe Iron Ore Index at $151.50/dmt CFR North China.
Separately, the ban on mining in the states of Karnataka and Goa have also limited availability of Indian iron ore for China.
Mining operations in Karnataka have been banned since August 2011, pending investigations into illegal mining activities. In addition, mining in Goa was banned in September 2012 following a probe being carried out into illegal mining activities.
Source: Platts