According to data from the National Energy Administration, China has beaten the annual de-capacity target in the steel industry as of the end of October by eliminating 50 Mtpa surplus and outdated steel capacity, adding to a total cutbacks of 110 Mtpa during the two years’ supply-side structural reform. The overcapacity cutbacks significantly improved supply-demand fundamentals in the sector and help loss-making mills swing back to profit. Data of the China Iron and Steel Association showed that the average profit margin of large steel enterprises increased 4.18% in the first nine month from a year ago. Regarding the coal industry, China has achieved the 2017annual de-capacity target of over 150 Mtpa two months ahead of schedule; while in 2016, over 290 Mtpa of overcapacity has been kicked out, 50 Mtpa more than planned. Looking ahead, an official with the Ministry of Industry and Information Technology noted that 2018 is a key year to protect the de-capacity achievements the country got in steel and coal industries and that China will continue to deepen the de-capacity drive in the two sectors and shut down “zombie enterprises” in accordance with the relevant laws and regulations.
Strategie Grains lowered its monthly forecast for EU soft wheat exports this season as it factored in stiff competition on world markets and very slow shipments from Germany and Poland. The analyst firm projected 2017/18 soft wheat exports from the European Union at 22.3 million tonnes, down from 22.9 estimated last month and 24.1 exported in 2016/17. Meantime, the agency added that French wheat is also facing stiff competition on its main client markets from Russia and Argentina. Farm office FranceAgriMer cut its outlook for French 2017/18 soft wheat exports outside the European Union earlier on the week for the second month in a row to take account of intense competition on world markets. In its monthly supply-and-demand report the office put French non-EU exports at 9.5 million tonnes, down from 9.9 million tonnes estimated last month.
Basis a note from the USDA, Indonesia’s drive for self-sufficiency is resulting in record wheat imports displacing imported rice and corn. The country’s rise to the second-largest wheat importer has been urged by growth not only for food but also for feed wheat, primarily supplied from Australia and Ukraine. While rice self-sufficiency has nearly been achieved, it has been due to declining rice consumption in the face of affordable wheat-based alternatives more so than higher rice production. However, Indonesia’s record forecast is driven even higher this year (11.5 million tonnes) due to growing feed use. Import restrictions on corn have shrunk imports since 2014/15 turning feed mills to seek lower-priced feedstuffs. Wheat feed use has surged as a result of lower prices relative to domestic corn, in addition to feed use for the burgeoning poultry and aquaculture industries. As a result of ballooning imports, the government has placed restrictions on feed wheat to strengthen and expand domestic corn production. To surpass the feed wheat import restrictions, Indonesia has been importing lower-quality milling wheat to blend in feed supplies As Indonesia continues its quest for self-sufficiency in grains, feeders are likely to remain reactive and agile in this dynamic environment.
Regarding the long term export supply of grains in Russia, the country plans to expand its grain export capacity at Russian ports to boost grain shipments by 30 million tonnes annually from 2022, according to the Agriculture Ministry Russia is a major wheat exporter and its total grain exports are expected to hit a record 45 million tonnes in the 2017/18 marketing year, which began on July 1. However, its limited infrastructure has put a brake on further growth. The current modernization of a grain terminal at the Novorossiysk Grain Plant in the Black Sea port of Novorossiisk would double its capacity. Meanwhile, a project to develop Russia’s Black Sea port of Taman and construction of a new grain terminal in Russia’s far east would also increase grain export capacity in the future.
Based on projections from the USDA, the U.S. soybean export forecast for 2016/17 (Starting on September of each year and ending on August of the following year) is raised 1.4 million to a record 57.2 million tons due to the strength of exports to date and outstanding sales to be shipped later. As of the week ending in June 29th, accumulated exports had reached 52.9 million tons, 18 percent above this time last year, and exceeded total exports (including outstanding sales) in 2015/16. Outstanding sales of U.S. soybeans for the current marketing year are also strong at 6.8 million tons, slightly below the record level observed in 2015/16. While interest in U.S. soybeans remains strong, the market dynamics driving buyers to the United States are different to last year’s factors, as lower prices following Brazil’s record production have spurred additional global demand. Despite record post-harvest selling, Brazilian producers, facing these lower prices and a stronger real, have been more willing to store a larger percentage of this year’s crop in hopes that prices will rise. This has encouraged buyers to source additional product from the United States where supplies are ample and prices remain competitive. The recent price increase could temper the U.S. export forecast, as the increased prices could spur additional Brazilian sales and dampen global demand, resulting in a larger than usual quantity of reported outstanding sales being pushed into the 2017/18 marketing year.
Residents of villages along a key highway for grains exports in Brazil’s northern Para state continued to stage protests on Tuesday blocking the flow of goods like corn and soybeans to nearby ports. Local residents, merchants and farmers have protested on a federal since July 5 against a veto by President Michel Temer of legislation that would reduce the area under protection at a national forest in the region, Brazil’s federal highway police (PRF) said. Brazilian private ports association ATP on Wednesday said it was expecting 150 million reais ($47 million) worth of losses from protests in northern Para state. ATP said in a statement that the losses would be caused by a lack of grains for transport from the riverside city of Miritituba, where grains traders Cargill Inc and Bunge Ltd opened terminals in recent years. If disruptions persist, grain shipments at the port in Miritituba could ground to a complete halt by Friday and even if the blockades are called off and freight services resume at Miritituba, it would take several days to reorganize the flow of trucks and barges.
Earlier this week, in a presentation at the “8th China Iron and Steel Energy Conservation and Emission Reduction Forum 2017”, the director of China Metallurgical Industrial Planning and Research Institute (MPI), estimated that China’s steel reservoir, of which scrap could be generated from, will reach about 7.8 billion tonnes in 2017. He hypothesized that the country’s steel reservoir will reach 10 billion and 12 billion tonnes by the middle of China’s fourteenth and fifteenth “Five Year Plan” respectively. Additionally, MPI estimated that Chinese steel scrap generation will exceed 100Mt in 2017, and then could climb to over 200Mt by the end of the fourteenth “Five Year Plan”. According to the MPI, the way to achieve green and low-carbon development in China’s iron and steel industry is to strictly adhere to “one center” (sustainable development) and implement “three steps” which include; improving energy utilization efficiency, reducing greenhouse gas emissions and reducing pollutant emissions. China’s crude steel production is marking a rounding top. Stagnant steel production represents both challenge and opportunities. To maintain sustainable development, China’s steel industry is in urgent need of structural reform and products updating. Scrap steel, as an environmental-friendly recyclable metallic input and the only substitution for more polluting raw material – namely iron ore and coking coal – and is deemed to be encouraged by the government in steel production.