Dry Bulk Commodity Overview (23 Aug 2019)

wheat field commoditiesEuropean wheat prices appear to be firming on the back of a softer euro and renewed optimism for the EU wheat crop. Paris prices rose by EUR 0.5/mt at the end of last week to EUR 173.25/mt for Decem­ber milling wheat contracts after reaching a contract low at the start of the week some EUR 3/mt lower. The euro, however, has been falling since the start of August, making euro-denominated wheat more at­tractive for dollar buyers on the global marketplace. Analysts including Strategie Grains have responded to the turnaround by upgrading their export fore­casts for EU soft wheat in the present season. Fresh optimism about the German wheat harvest, albeit delayed by recent rainfall, has driven new sales in the domestic market with some traders claiming that as much as 0.25 Mt has already been purchased from this season’s new German crop. More than 90% of the current German wheat crop has already been harvested, making sales activity less vulnerable to shifting weather conditions going forward.

The European Commission said this week that it would downgrade its intended hike in tariff-free steel quotas to 3% from an earlier 5%. The change would be across all product categories, said the commission, nonetheless informed by new data showing that last year was an all-time high for steel import volumes to the European Union. The change would also mean that total quotas available in the third period would be limited to 31.6 Mt or 1.5 Mt under the 2018 record. Regarding HRC, the EU says it will establish a limit of 30% to the share in the global quota that any one exporting country can achieve per quarter. The EU noted that Turkey, India and Serbia were able to replace their import shares lost by countries that lowered their overall import levels after imposing anti-dumping and reactive measures, further noting that Russia has recovered a large part of its historical trading volume despite being the object of anti-dumping measures itself.

Imports of thermal coal to Europe continued to fall in June, according to new customs data, with the month the fifth in a row to see falling imports. Net receipts from non-EU members amounted to 6.18 Mt in June, 2.5 Mt below June 2018. This was also equal to the sharpest year-on-year drop in EU re­ceipts since the month of September 2016, analysts noted, when arrivals declined by almost 3 Mt YoY to 8.7 Mt. Even more dramatically, June’s imports of thermal coal were lower than May’s 6.5 Mt, itself the lowest volume in 18 years. Coal-fired power genera­tion has been fighting competitively priced natural gas this year, and trends indicate that gas will con­tinue to eat into coal’s share of the European energy mix well into the foreseeable future. ARA on-port coal stocks have remained at around 7 Mt all year, which is much higher than the 2014-18 average. Italy has accounted for the biggest drop in thermal coal imports in the EU this year with the first six months of 2019 with receipts down 1.6 Mt YoY to 3.7 Mt. Poland, France, UK and Ireland have all im­ported less in the first half of the year, some 0.8-1.2 Mt down each YoY. Only Germany and the Nether­lands increased their imports in the period, with their receipts up slightly by 0.38 Mt and 0.18 Mt in the six months, respectively, to 5.9 Mt and 15.7 Mt.

Ukraine’s ban on Russian cement imports has been extended to the end of 2020. The ongoing import ban on all types of Russian cement and clinker im­ports was originally imposed from 15 May. As of 1 August, Ukraine has also imposed a ban on plywood imports from Russia. The measures may well have a significant impact on the Russian economy. Current estimates have the value of Russian exports of ce­ment and plywood to Ukraine at US$ 17m and US$ 19.7m, respectively. In May, the Ukraine Cabinet also imposed special customs on all Russian goods imported to Ukraine with exclusions for coal, coke, petrol, liquefied natural gas and pharmacy products.

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