Daily Sources 4/10

Happy Good Friday!

1. John Detrixhe at Bloomberg reports that overseas issuers have sold $180 billion of debt denominated in US dollars so far this year, the fastest rate on record.

2. Tara Patel at Bloomberg reports that the CEO of GDF Suez, Gerard Mestrallet, told reporters in Paris today that the company has entered into negotiations with OAO Gazprom on participating in the Nord Stream project.

"Gazprom, which owns 51 percent of Nord Stream, supplied GDF with 14 percent of the utility’s supply last year through long- term contracts."

In the meantime, in a report which you can only access via a subscription, but can get the relevant information via the headline, Toby Anderson at Lloyd's List reports that Merrill Lynch has forecast that the global LNG fleet will grow by slightly more than 25% or 77 ships from about 300. In the meantime, AFP reports that Ashgabat blamed the explosion on the Central Asia-Centre supply network which supplies Russia with natural gas from Turkmenistan. The foreign ministry said in a statement:

"This accident happened due to a unilateral and egregious violation by Russian company Gazprom Export of agreements and rules of natural gas purchases."

It is interesting that Ashgabat would appeal to the sanctity of contracts, but perhaps there is something to it given on December 31, 2008, it was announced that Russia had agreed to pay about $340/tcm (~$9.61/MMBtu.)

3. Paul Panckhurst at Bloomberg reports that the Chinese customs agency has released data showing that Chinese exports fell by 17.1% in March to $90.29 billion from a year earlier. Imports dropped 25.1%, producing a trade surplus of $18.56 billion.

"The 'collapse of global trade and China’s exports in the last few months was not in small part due to a freeze in trade credit and aggressive de-stocking abroad as a result of extreme uncertainty,' said Wang Tao, an economist at UBS AG in Beijing. 'As expectations start to stabilize, we expect to see export orders rebound in the coming months.'

Still, research by the National Development and Reform Commission, China’s top economic planning agency, suggests shipments may decline 10% this year, compared with a 17% gain in 2008."

Brad Setser at Follow the Money notes that "Exports had been growing steadily at a $200b a year annual pace until the fourth quarter of 2008, when they went into something like free fall." Here is his graph of rolling 12 month sums for Chinese exports/imports:

"The latest PMI data suggests that China’s economy that the pace of contraction in China’s manufacturing economy has slowed, and perhaps may even be rebounding off a low base. But the trade at least suggests that China isn’t in rude health."

Worth reading in full. In the meantime, Andrew Batson at China Journal reports that a new study put out by the Hong Kong Monetary Authority suggests that China is more vulnerable to declines in export growth than previously thought.

"The authors estimate that a decline of 10 percentage points in export growth would be associated with a decline of about 2.5 percentage points in GDP growth. 'This is about at least twice as large as what could have been expected if only the direct impact of exports is considered,' they write.

Part of the explanation, they say, is that exports are extremely important to a group of Chinese coastal provinces, which themselves account for the majority of the national economy. So changes in export demand can cause dramatic fluctuations in those regional economies, even while the inland provinces are less affected.

But of course, China’s exports have recently slowed by a lot more than 10 percentage points. In volume terms, export growth rates have swung from around positive 20% in 2007 to nearly negative 20% in the first part of this year.

The biggest effect of a decline in exports, the authors find, is on corporate investment, as companies scale back expansion plans. And since the sharp drop in exports is just a few months old, the full magnitude of the subsequent drop in capital spending may not yet be evident."

Meanwhile, John Liu at Bloomberg reports that Chinese net oil imports rose to the highest volumes seen since May 2008, or 15.87 million metric tons, or 3.73 mb/day.

"'It’s wise for the Chinese government to fill the emergency stockpile at such low oil prices,' Charles Ting, an oil analyst with China Southern Fund Management Co., said by telephone from the southern city of Shenzhen. 'Even taking the stockpiles out of the equation, China remains one of few economies still seeing flat or growing energy demand.'"

4. Sky Canaves at China Journal has the interesting story on a new study published in the British Journal of Medicine which states that in 2005 there were 32 million more males in China than females under the age of 20.

"The cause is no surprise: A one-child policy combined and a cultural preference for boys that leads some prospective parents to abort female fetuses."

This is bound to create many troubles over the long term.

5. Mike Grinter at Lloyd's List wrote Wednesday that local news sources are reporting that Seoul plans to establish a 4 trillion won (~$2.9 billion) fund to assist South Korea's shipping industry.

"[I]t is proposed that the fund buys from existing vessel fleets at market prices from shipping companies in a bid to prevent loss of valuable national assets at rock bottom prices to foreign interests--as was experienced during the Asian financial crisis of 1997/1998.

The fund will not finance vessels under construction."

In the meantime, Seyoon Kim at Bloomberg reports that the Bank of Korea decided to leave its benchmark interest rate unchanged yesterday at 2%.

"'Although domestic economic activity has not yet been able to pull out of its downturn, some indicators point to the moderation of the abrupt slowdown,' the central bank said. 'There are signs that production activity in the manufacturing and services sectors is improving slightly.'

The bank revised its forecasts today, saying the economy will shrink 2.4% in 2009. In December it had predicted a 2% expansion.

'An economic recovery will be very slow,' Kim Jae Chun, director general at the central bank, told reporters in Seoul today. Kim said inflation will slow to a '2% level' from May, after consumer prices rose 3.9% in March."

6. James Topham and Angela Moon at Reuters report that Saudi Aramco is further cutting its supply to two major Asian refiners in May, while maintaining its current level of supply to the US.

"Asian refiners buy about half of the kingdom's exports and are normally a good barometer of policy, although state oil firm Saudi Aramco also uses its monthly allocations to shift more or less oil to one or another consuming region."

In the meantime, Hanim Adnan at the Kuala Lumpur Star reports that James Fry, a London-based international oils and fats expert at LMC International Ltd, has argued that crude palm oil will trade at MYR2,400 per metric tonne (~$665.38/tonne ~ $91.15/b (!?) ) as long as OPEC maintains crude prices at $55/b. However, if OPEC allows the price of crude to fall to $35/b, then Fry forecasts that CPO will fall to MYR1,500 per metric tonne (~$415.86/tonne ~$56.97/b).

"He added that Malaysia’s palm oil stocks could fall below 1.7 million tonnes by October if the Government’s B5 biodiesel programme succeeded in reducing palm oil stockpiles.

'I expect a 100,000-tonne drop in palm oil stocks to translate into a 5% increase in CPO prices,' Fry said at the 29th Program Advisory Committee Seminar organized by the Malaysian Palm Oil Board (MPOB) here yesterday."

The front month contract for CPO on Bursa Malaysia closed at MYR2417.00/tonne April 10. The Congressional Budget Office today released a report which argues that ethanol production was responsible for "between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices measured by the consumer price index (CPI)." (h/t Keith Johnson at Environmental Capital.)

7. Dieter Bednarz, Erich Follath and Georg Mascolo at Der Spiegel conducted a long and interesting interview with President Ahmadinejad, with fairly tough questions (most of which the Iranian president deflected). Key excerpts:

"SPIEGEL: The new US president, Barack Obama, directed a video address to the Iranian nation three weeks ago, during the Iranian New Year festival. Did you watch the speech?

Ahmadinejad: Yes. Great things are happening in the United States. I believe that the Americans are in the process of initiating important developments."

"SPIEGEL: But you should not [learn from the lessons of the past as Agmadinejad asserts the US must]?

Ahmadinejad: Everyone must learn from the past."

"SPIEGEL: Again, we see no evidence of any self-criticism.

Ahmadinejad: Then why don't you tell me what mistakes we are supposed to have made. We have no interest in a historical settling of accounts."

"SPIEGEL: That doesn't sound at all like you have any interest in helping the Americans and NATO fight the Taliban. Obama is placing more emphasis on civilian reconstruction, but he also believes that radicals who seek to stand in the way of this reconstruction must be dealt with militarily.

Ahmadinejad: I am telling you now that Obama's new policy is wrong. The Americans are not familiar with the region [Afghanistan], and the perceptions of the NATO commanders are mistaken."

SPIEGEL: You are referring to India, Germany, South Africa? Should Iran also be a permanent member of the Security Council?

Ahmadinejad: If things were done fairly in the world, Iran would also have to be a member of the Security Council.

Very much worth reading in full.

8. JGW at Frontier Markets reports that a new unofficial index of the rental market in Dubai, compiled by Landmark Advisory, shows a fall in rentals by up to 45%.

"According to the data, a studio in Jumeirah Lake Towers that was going for Dh90,000 in the market last year, for example, is now being offered for Dh50-55,000."

9. Platts reports that the IEA cut its forecast for 2009 oil demand to 83.4 million b/d, down 2.8% or 2.4 million b/d on 2008.

"Based on more recent pessimistic indicators, the IEA said it now assumes that global GDP will contract by 1.4% this year, rather than expanding modestly as it had been expecting in previous reports.

Demand is expected to be particularly weak in the developed countries of the OECD, where it is seen falling to 45.2 mb/d, 4.9% lower than 2009 and 760 kb/d below the IEA's previously estimate."

The IEA cut the call on OPEC crude and stocks by 700 kb/d from its last estimate to 28.2 mb/d.

10. Jeff Stein at Spy Talk reports that Luis Carriles Posada, a onetime CIA agent and a member of the anti-Castro terrorist organization CORU which was likely responsible for the bombing of a Cuban airliner in 1976, has been indicted by US authorities. However, it appears that the US Justice Department violated most of his rights in Posada's naturalization hearing in 2005--a key part of the case against him, evidently. I feel no sympathy for men who blow up commercial airplanes, but the continuing revelations about the abuse of power at the Bush DOJ is not encouraging, to say the least. Worth reading in full.