Baltimore bridge collapse forces freight changes

  • Market: Agriculture, Biofuels, Chemicals, Coal, Coking coal, Crude oil, Fertilizers, Metals, Oil products, Petrochemicals, Petroleum coke
  • 26/03/24

Vessel traffic in and out of the Port of Baltimore, Maryland, has been suspended indefinitely in the wake of a container ship collision early today that brought down the Francis Scott Key Bridge, an accident that will force the rerouting of coal, car and light truck shipments.

The prolonged closure of one of the largest ports on the US east coast could have a ripple effect on trade flows across much of the US, as shippers grapple for alternatives in the absence of a certain reopening timeline.

Search and rescue efforts are still ongoing in the Patapsco River, after the 116,851dwt Dali headed to Colombo, Sri Lanka, slammed into a bridge support. The crew had lost control of the vessel. The Dali is owned by Grace Ocean and managed by Synergy Marine Group.

The Maryland Port Administration said it does not know how long it will take for the shipping channel to be cleared and for traffic to resume. Shipping companies are bracing for a closure of at least two weeks, but many expect the clean-up effort could take significantly longer.

President Joe Biden vowed the federal government will provide whatever resources are needed to get the port "up and running again as soon as possible."

The port is a major trade hub for steam and coking coal, automobiles and scrap metal. Many market sources are still trying to determine whether the disruption will be dramatic enough to move prices.

But coal markets were already being affected today.

Baltimore is home to two key coal export terminals: eastern US railroad CSX's Curtis Bay Coal Piers and coal producer Consol Energy's Consol Marine Terminal. The facilities are upstream of the bridge, meaning ships will not be able to serve them until the route reopens.

The terminals handle thermal and coking coal from Northern and Central Appalachia. They have a combined export capacity of 34mn short tons (30.8mn metric tonnes). The two terminals loaded 2.4mn t of coal in February, up from 2.1mn t a year earlier, according to analytics firm Kpler, mostly exports to India and China.

An India-based trader said that the suspension of coal exports will probably raise prices in India, as brick kilns enter the peak production season in the summer. Buyers could look to petroleum coke as a substitute, but the higher sulphur content may not be appealing to some users despite the higher calorific value.

Prices for deliveries to northern Europe are also likely to rise given that the Netherlands, Germany and Belgium combined are the second-largest market for North Appalachian coal. April API 2 futures rose by $2/t to $113.30/t. The incident has added a "level of volatility [which] could have big implications," a European paper broker said.

The lack of information has prompted some coal producers to hold off on activating force majeure clauses in their contracts.

Curtis Bay is served only by CSX, while CSX and fellow eastern carrier Norfolk Southern serve Consol.

CSX said it is in contact with existing coal customers and contingency plans are being implemented. The railroad at this point intends to keep Curtis Bay open but will continue to assess the circumstances moving forward. Norfolk Southern did not respond to questions.

Some scheduled Baltimore coal exports may be redirected to the other three eastern US coal export terminals in Hampton Roads, Virginia, but such reroutings likely will entail increased costs.

Not all coal mines will be able to shift terminals. Such decisions will depend on available capacity in Hampton Roads. Exports from the three terminals in January reached a five-year high, signaling somewhat limited capacity.

Mine location and railroad access may also determine whether coal can be rerouted, an industry source said. But some producers do not have much of a choice about trying to send coal to Hampton Roads. They may need the cash so will be forced into a decision.

The producers most vulnerable to delays may be Consol and Arch Resources. Arch's Leer coking coal mine may be in the best position because it co-owns Dominion Terminal Associates in Hampton Roads with Alpha Metallurgical Coal Resources.

The sudden lack of export capacity could put a floor under US coal prices, which have mostly been falling since last year amid low domestic demand. The competition to replace Baltimore coal exports could prevent further cuts, another coal trading source said.

Metals sources say the accident will have only isolated effects on the global ferrous scrap market, but many market participants are still assessing the situation. The port is the 10th largest ferrous scrap export port in the US, and over the last five years an average of 44,000 metric tonnes/month of ferrous scrap was exported from Baltimore, according to US Department of Commerce data.

But the port closure is likely to affect other freight. Baltimore is the nation's top handler of automobile traffic.

Motor vehicles and parts accounted for about 42pc of all Baltimore port imports and 27pc of all exports, according to state data. The Port of Baltimore handled 847,158 cars and light trucks in 2023.

"It's too early to say what impact this incident will have on the auto business — but there will certainly be a disruption," said John Bozzella, chief executive of industry trade group Alliance for Automotive Innovation.

Dry bulk freight rates likely unaffected

Several sources told Argus Baltimore's closure is unlikely to have a major impact on dry freight rates despite short-term interruptions to coal transports.

"We are in the shoulder months with less demand for thermal coal," a shipbroker said, suggesting mild global temperatures means the collapse "may not have too much of an impact" on freight markets overall.

Vessel traffic in ports such as Charleston, South Carolina, and Savannah, Georgia, may increase on diversions from Baltimore.

Kpler identified 17 vessels that will likely be impacted because they are either in the Port of Baltimore or were expected to load there in the coming days.

Port of Baltimore coal terminals

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
12/04/24

Michigan organic hens culled over bird flu

Michigan organic hens culled over bird flu

Washington, 12 April (Argus) — At least 2mn head of organic egg layers have been culled by egg producer Herbruck's Poultry Ranch in Michigan because of an outbreak of Highly Pathogenic Avian Influenza (HPAI), according to market sources. The US Department of Agriculture's Animal and Plant Health Inspection Service (USDA APHIS) has detected HPAI in Michigan poultry operations in recent weeks. APHIS data indicates that 4.076mn head of poultry were culled in Ionia County, Michigan, where Herbruck's is located, during the first two weeks of April. Argus estimates that 2mn head of organic egg layers consume about 4,500 bushels of organic corn and 63 short tons of organic soybean meal per day. Herbruck's operations are not expected to return to normal until late summer or early fall, which would lead to deliveries of organic corn and soybean meal being delayed or shifted to other buyers until mature replacement egg layers can be raised. Herbruck's did not immediately respond to a request for comment. The cullings are expected to have a sizable impact on the Michigan organic corn market, as Herbruck's is among the largest users of organic corn in the region, according to market sources. Deliveries of old crop organic corn contracts are being delayed and rolled forward to the fall 2024 new crop for delivery, the source said. With the rolling forward of old crop contracts, some new crop 2024 contracts have been canceled outright, they said. According to industry contacts, organic corn deliveries being pushed from old crop to new crop has left farmers in the region concerned about having sufficient storage space for new crop corn come harvest. As a result, organic farmers in Michigan are expressing interest in taking lower bids that previously received little interest in order to clear old crop out of their bins. The rush to sell old crop organic corn could boost liquidity in the market, especially from the sell side, and apply further bearish pressure to the market as farmers compete to clear out bin space. The Argus Corn Belt delivered spot price for feed grade organic corn fell by 4¢/bushel in the week ended April 6 to $7.25/bushel. The H5N1 variant of HPAI was discovered in the first commercial poultry flock in February 2022. In March this year, HPAI was confirmed in US dairy herds , with confirmed dairy cases in seven states as of 11 April. By Alexander Schultz Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Opec+ crude output above target again


12/04/24
News
12/04/24

Opec+ crude output above target again

The alliance overshot its output target in March, with serial overproducers Iraq and Kazakhstan again exceeding their pledges, writes Aydin Calik London, 12 April (Argus) — Opec+ crude output was once again above target in March, as serial overproducers Iraq and Kazakhstan continued to exceed their pledges. Kuwait and Gabon were last month's other notable overproducers. March production from members subject to targets rose by 70,000 b/d to 34.59mn b/d, according to Argus estimates, leaving the alliance 270,000 b/d above its goal (see table). The gap would have been wider were it not for a war-related decline in output from non-Opec members Sudan and South Sudan. Opec+ has been cutting production since November 2022 in a self-described attempt to support and balance the oil market. A new round of "voluntary" reductions by several members came into force in January this year and is due to run until the end of June. The group is not relaxing its stance on production discipline, despite front-month Ice Brent crude futures moving above $90/bl for the first time in around six months in early April. Earlier this month, Opec's Joint Ministerial Monitoring Committee, which oversees compliance with the coalition's crude production cuts and studies market dynamics, said members that overshot targets in the first quarter of this year will submit plans to compensate. "Participating countries with outstanding overproduced volumes for the months of January, February and March will submit their detailed compensation plans to the Opec secretariat by 30 April 2024," the secretariat said. The nine Opec members bound by targets were 400,000 b/d above their combined production pledge in March, while the nine non-Opec members of the alliance were 130,000 b/d below. Iraq reduced output by 50,000 b/d in March after burning less crude for power generation, but it was still 180,000 b/d over its 4mn b/d target. To allay concerns, Baghdad last month pledged to drive its crude exports down to 3.3mn b/d, although state-owned marketer Somo reported exports of 3.42mn b/d for March. Like Iraq, Kazakhstan has vowed to comply with its pledges and compensate for overproduction in January and February, but it made no progress last month — output was unchanged at 1.59mn b/d, which was 120,000 b/d above target. Wide of the mark Others that overshot the mark last month include Kuwait, where production rose by 40,000 b/d to 2.51mn b/d, leaving the country 100,000 b/d above its pledge. Kuwait overproduced by around 70,000 b/d on average in the first quarter. Fellow Opec member Gabon exceed its March quota by 80,000 b/d. Saudi Arabia and the UAE, which have shouldered much of the burden of the group's collective cuts over the past 16 months, were slightly above target last month too, after increasing output by a respective 30,000 b/d and 20,000 b/d. Russian crude production rose by 30,000 b/d to 9.44mn b/d, just 10,000 b/d shy of its target. Drone attacks and refinery maintenance resulted in as much as 1.1mn b/d of crude processing capacity being off line for repairs last month, freeing up more crude for export — shipments hit an 11-month high in March. Energy minister Nikolai Shulginov said on 3 April that all recently damaged refineries would be fully repaired by June or earlier — implying that there could be excess crude for export this month and in May. Fellow non-Opec producers Sudan and South Sudan were both 40,000 b/d below their quotas last month as the impact of Sudan's ongoing civil war began to be felt. South Sudan, which is entirely reliant on its northern neighbour to get its oil to international markets, saw its production nearly halve to around 80,000 b/d because of a blocked pipeline. Opec+ crude production mn b/d Mar Feb* Mar target† ± target Opec 9 21.62 21.49 21.22 0.40 Non-Opec 9 12.97 13.03 13.10 -0.13 Total Opec 18 34.59 34.52 34.32 0.27 *revised †includes additional cuts where applicable Opec wellhead production mn b/d Mar Feb* Mar target† ± target Saudi Arabia 9.00 8.97 8.98 0.02 Iraq 4.18 4.23 4.00 0.18 Kuwait 2.51 2.47 2.41 0.10 UAE 2.95 2.93 2.91 0.04 Algeria 0.92 0.91 0.91 0.01 Nigeria 1.50 1.47 1.50 0.00 Congo (Brazzaville) 0.25 0.23 0.28 -0.03 Gabon 0.25 0.23 0.17 0.08 Equatorial Guinea 0.06 0.05 0.07 -0.01 Opec 9 21.62 21.49 21.22 0.40 Iran 3.28 3.27 na na Libya 1.18 1.16 na na Venezuela 0.85 0.88 na na Total Opec 12^ 26.93 26.80 na na *revised †includes additional cuts where applicable ^Iran, Libya and Venezuela are exempt from production targets Non-Opec crude production mn b/d Mar Feb* Mar target† ± target Russia 9.44 9.41 9.45 -0.01 Oman 0.76 0.76 0.76 0.00 Azerbaijan 0.49 0.48 0.55 -0.06 Kazakhstan 1.59 1.59 1.47 0.12 Malaysia 0.36 0.36 0.40 -0.04 Bahrain 0.15 0.15 0.20 -0.05 Brunei 0.08 0.08 0.08 0.00 Sudan 0.02 0.05 0.06 -0.04 South Sudan 0.08 0.15 0.12 -0.04 Total non-Opec 12.97 13.03 13.10 -0.13 *revised †includes additional cuts where applicable Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Gunvor set for buying spree after windfall: CEO


12/04/24
News
12/04/24

Gunvor set for buying spree after windfall: CEO

London, 12 April (Argus) — Trading firm Gunvor plans to use part of a massive earnings windfall over the past two years to build out its asset base, its chief executive Torbjörn Törnqvist told Argus . "Today, we are under-invested in assets so we will change that," Törnqvist said, adding that investments would be broad based and to some extent opportunistic. "We will employ quite a lot of capital in investments." Independent commodity trading companies are sitting on unprecedented piles of cash after two years of bumper earnings arising from supply chain disruptions and market volatility. While Geneva-based Gunvor is smaller than its peers Vitol, Trafigura and Mercuria, it is still a huge company by most metrics. It reported revenues of $127bn in 2023 and a profit of $1.25bn, following a record $2.36bn in 2022. It has kept most of its earnings in house and had an equity position of almost $6.16bn by the end of 2023 — its highest ever. Törnqvist is eyeing further growth. "We will definitely be a much bigger company, that I can say," he replied when asked where he saw Gunvor in 10 years' time. "I think we will grow in tune with the [energy] transition." Trading firms are looking for ways to keep their competitive advantage, particularly given the uncertainties associated with the energy transition. One emerging trend is an appetite for infrastructure. Vitol is in the process of buying a controlling stake in Italian refiner Saras, which operates the 300,000 b/d Sarroch refinery in Sardinia. Trafigura said this week that it is in talks to buy ExxonMobil's 133,000 b/d Fos refinery on the French Mediterranean coast. Part of the rationale behind these moves is to increase optionality and take advantage of the loss of Russian products to the European market, as well the closure of large chunks of local refining capacity. Gunvor owns the landlocked 100,000 b/d Ingolstadt refinery in Germany and a 75,000 b/d refinery in Rotterdam, where it plans to shift away from fossil fuel use. "Many oil refineries have been up for sale and still are," Törnqvist said. Asked if Gunvor was looking for something similar, he said the company is interested in the "right opportunity" whether in upstream, downstream, midstream or shipping. "It all feeds into what we are doing and all supports our underlying trading," he said. But Törnqvist suspects a lot of Gunvor's growth will come from gas and power — areas where trading companies are already seeing rising profits. The company made its first investment in a power generation asset late in 2023, when it agreed to buy BP's 75pc stake in the 785MW Bahia de Bizkaia combined-cycle gas turbine plant in Bilbao, Spain. It has signed a slew of LNG offtake agreements in the past year and continues to grow its LNG tanker fleet . "We're building logistical capabilities in LNG," Törnqvist said. "Oil is here to stay" Törnqvist said Gunvor is well placed to navigate the energy transition, and is stepping up investments in renewables and biofuels and expanding into carbon and metals trading. "There will be disruptions, there will be different paths to the transition in different parts of the world which go at different paces and have different priorities and ways to deal with it," he said. "This will create opportunities." But Törnqvist is clear that oil and gas will remain an integral part of Gunvor's business. "We feel that oil is here to stay," he said. "And it will grow for several years." By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

French union eyes strike over Exxon's petchem closure


12/04/24
News
12/04/24

French union eyes strike over Exxon's petchem closure

Barcelona, 12 April (Argus) — ExxonMobil's plan to close its Gravenchon petrochemical plant in Normandy has raised the possibility of more strike action in France's downstream oil sector. The CGT trade union has called on all ExxonMobil workers in France to down tools and for the "immediate shutdown of installations". The situation is fluid and it is not immediately clear whether workers will vote on strikes today or if ExxonMobil's operations in France will be stopped. "We are preparing our plan of action. We will be announcing it very soon," a union official told Argus. ExxonMobil said on 11 April that the Gravenchon plant has made more than €500mn ($540mn) in losses since 2018 and that it cannot afford to continue operating at such a loss. The firm expects the site to fully close, including the steam cracker and related derivatives units, at some point this year with the loss of 677 jobs. "The configuration of the steam cracker, its small size compared to newer units, high operating costs in Europe and higher energy prices make it uncompetitive," it said. The announcement coincided with news that a consortium comprising trading firm Trafigura and energy infrastructure company Entara is in talks to buy ExxonMobil's 133,000 b/d Fos refinery on the French Mediterranean coast. As well as the direct job losses at Gravenchon, the CGT said there would be an additional loss of work for around 3,000 indirect positions and sub-contractors. The local prefecture of Seine Maritime said the decision will have a "very serious impact on employment and the local economy". The CGT said upgrades costing around €200mn are needed at Gravenchon, which is "around 0.5pc" of ExxonMobil's total profit in 2023. ExxonMobil said the decision to close the plant will not impact operations at its adjacent 236,000 b/d Port Jerome refinery. "In current market conditions, the refinery will continue to operate and supply France with fuels, lubricants, basestocks and asphalt," the firm said. ExxonMobil has reduced its exposure to Europe's downstream sector in recent years, selling the 198,000 b/d refinery at Augusta in Italy to Algerian state-owned Sonatrach in 2018 and divesting its stake in the 126,500 b/d Trecate refinery in northern Italy to local refiner API last year. By Adam Porter Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

IEA sees oil demand growth slowing next year


12/04/24
News
12/04/24

IEA sees oil demand growth slowing next year

London, 12 April (Argus) — The IEA has released its first forecast for 2025 which shows global oil demand growth slowing to 1.15mn b/d next year — some 700,000 b/d lower than Opec's latest projection. In its latest Oil Market Report (OMR) , the Paris-based agency also lowered its oil demand growth forecast for this year by 130,000 b/d to 1.2mn b/d, citing lower heating fuel use and a protracted factory slump in advanced economies. The 2024-25 figures contrast sharply with 2022 when the global economy's emergence from the Covid-19 pandemic led to a demand increase of 2.25mn b/d — something the IEA said had now largely run its course. "Despite the deceleration that is forecast, this level of oil demand growth remains largely in line with the pre-Covid trend," it said. The IEA also reiterated its view that a peak in oil consumption is in sight this decade, although it notes that without an increased investment push into clean energy technologies, "the decline in global oil demand following the peak will not be a steep one". The IEA said its 2025 forecast reflects a "somewhat sub-par economic outlook" and included vehicle efficiencies and an expanding electric vehicle (EV) fleet acting as "further drags on oil consumption." China, which has led much of the world's oil demand growth over the past few decades, is slowing down, according to the IEA. The agency lowered its 2024 forecast for Chinese oil demand growth by 80,000 b/d to 540,000 b/d, falling to 330,000 b/d in 2025, although China still remains the single largest contributor to global growth next year. The IEA's latest forecasts continue to reflect stark differences with Opec in the way they see oil demand unfolding over the years and decades ahead. Opec sees oil demand growth substantially higher at 2.25mn b/d in 2024 and 1.85mn b/d in 2025. On global oil supply, the IEA nudged down its 2024 growth estimate by 30,000 b/d to 770,000 b/d. While non-Opec+ production is projected to expand by 1.6mn b/d, this is partially offset by an 820,000 b/d forecast fall from Opec+ — assuming the group's latest voluntary cuts remain in place until the end of the year. Relentless oil supply growth from outside Opec+ is set to continue putting pressure on the alliance to keep production lower for longer. The IEA said that additional production from the US, Brazil, Guyana and Canada "alone could come close to meeting world oil demand growth for this year and next." The IEA's latest supply forecast assumes Opec+ voluntary cuts remain in place until the end of 2024, which would keep the market in a deficit of 270,000 b/d, it estimates. Opec+ has yet to decide on its output policy for the second half of the year and may do so at a ministerial meeting scheduled for 1 June in Vienna. Global observed oil stocks increased by 43.3mn bl to a seven-month high in February, despite a further 24.6mn bl decline in on land stocks, the IEA said. Oil on water rose to a "sizeable" 67.8mn bl in February, driven by shipping disruptions in the Red Sea that have forced vessels to take the longer alternate route around the southern tip of Africa. By Aydin Calik Global oil market balance Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more