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Dalian iron ore companies on positive China factory activity data
Dalian iron-ore futures rose on Thursday for the second session in a row, as positive factory activity data from China boosted demand prospects. As of 0222 GMT, the most-traded contract for?September Iron Ore? on China's Dalian Commodity Exchange was?0.51% higher. It stood at 787.5 Yuan ($115.15), per metric ton. The contract is up 0.19% this week. From May 1 to 5, the markets in China will be closed for holiday. The benchmark June Iron Ore at the Singapore Exchange is?0.06% less expensive, $106.35 per ton. The contract is up 0.37% this week. An official survey revealed that China's factory activity increased for the second consecutive month in April, largely due to higher output and increased stockpiling. This suggests that the growth momentum continued despite external shocks from Middle East war. According to a National Bureau of Statistics survey, the official manufacturing purchasing managers' (PMI), which measures growth, fell to 50.3, from 50.4, in March, but remained above the 50 mark that separates contraction from growth. The median poll forecast was 50.1. The survey, which followed better-than expected first-quarter growth showed the resilience and strength of the Chinese economy. However, prolonged inflationary pressures may also affect?external consumption, on which the country depends to offset its tepid internal consumption. Baoshan Iron & Steel Co., China's largest listed steelmaker, announced on Wednesday a?fall of 8.6% in its net profit for the first quarter,?due to?higher feedstock costs related to Iran war. Steel prices dropped 4.4% while iron ore prices rose 3.2% in the first three months of the year, according to Baosteel. This subsidiary is owned by the China Baowu Steel Group. It is the largest steel producer in the world. Coking coal and coke, which are used to make steel, also rose, by 0.91% each. The majority of steel benchmarks traded on the Shanghai Futures Exchange rose. Rebar gained 0.57%; hot-rolled coil 0.59%; stainless steel rose 0.97% and wire rod lost 1.01%. ($1 = 6.8388 yuan) (Reporting by Ruth Chai; Editing by Subhranshu Sahu)
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Axios reports that US military commanders will brief Trump on new options for Iran
Brad Cooper, the head of the U.S. Central Command (Axios) reported Wednesday that U.S. president Donald Trump will receive a briefing on new 'plans' for a?potential armed action against Iran. According to a report citing unidentified sources, the briefing will be held on 'Thursday. The 'White House didn't immediately respond to an inquiry for comment. Axios cited sources to report that CENTCOM had prepared a plan of a "short, powerful" strike on Iran. This would likely include infrastructure targets. The report said that Washington would hope to see Iran be more flexible at the table when it comes to nuclear issues. The'report' added that a plan to take over part of the Strait of Hormuz and reopen it for commercial shipping may include ground forces. Axios reported that a?special forces?operation could be discussed in the briefing to secure Iran's?stockpile of highly enriched Uranium. Axios reports that the U.S. Joint Chiefs of Staff Chairman General Dan 'Caine will also attend Thursday's briefing. Kanishka Singh, Chandni?Shah in Bengaluru and Himani Sarkar and Lincoln Feast edited the report.
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Sources say Indian refiners are limiting the use of a special FX credit facility, causing rupee pressure.
Three sources with knowledge of the situation said that India's state-run oil refineries are using a special FX credit line provided by the largest bank in the country to help ease the pressure on the rupee. This is a sign that the rupee may fall even further. Three sources familiar with the matter said that India's?state-run oil refiners are making limited use of a special FX?credit line offered by the country's largest bank to ease pressure on?the rupee. This is indicating concerns about a further fall in the rupee. Forex traders claim that the currency has been affected by dollar purchases related to oil in recent sessions. India's biggest imports are crude oil and petroleum products, which have added $12 billion to $13 billion per month over the last three months. India offered state-run refineries a special FX line through State Bank of India mid-April, allowing them the ability to borrow dollars for oil import payments. This was done to curb spot dollar buying for oil imports. Two sources from state-run refineries said that refiners are hesitant to tap the facility because they believe 'the rupee will weaken even further,' which would increase their repayment burden. One source said that using the special FX line was not cost-effective when the rupee will likely weaken. His company uses the facility to meet a portion of its dollar needs, while the remainder is met through spot purchases. Second source: His company has resorted to a short-term borrowing from the market, in addition to the limited use of credit facilities. The source stated that the weakening rupee and the persistently high price of oil are reducing its appeal. Sources spoke under condition of anonymity as they weren't authorised to make public comments. OIL WORRYS The rupee is down about 2% in the last eight sessions. This pace is similar to other Asian countries that import oil, such as Thailand and the Philippines. Brent crude has risen from $86 per barrel to $112.9 since mid-April, when it had fallen to that level on the?optimism of a resolution to the U.S./Iran conflict. The third source who is familiar with the thinking of the central bank said that dollar purchases by oil refining companies on the spot market are among the factors putting pressure on the rupee. This source, who did not elaborate, said that it is not the only factor. The RBI didn't immediately respond to our request for a comment.
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The spot crude premium has fallen from its record highs, despite the closure of Hormuz.
Analysts and traders said that spot premiums on physical crude had fallen from the record highs set during the Iran War as refiners were drawing down their inventories and reducing processing to make up for lost Middle East supply. Citi analysts say that since the U.S. and Israel's war?on Iran began on February 28, the global market lost access to 500,000,000 barrels of crude oil and refined products. This sparked a price spike on panic purchases, but has destroyed demand for consumers and refiners. Refiners searched the world for alternatives and paid premiums. Some grades reached record highs earlier this month of over $30 per barrel. Premiums are decreasing as refiners opt to reduce production and focus on barrels sanctioned previously, while Chinese state-owned companies Sinopec, and PetroChina, tap commercial reserves and offer spot market crude. Analysts at Kpler said that "Asian demand has started to ease, as refiners reduce runs. This is shifting the market from panic buying toward more selective acquisition, with Russian barrels dominating the incremental demand." This?feeds through to the Atlantic Basin where weaker Asian demand and increasing supply are putting pressures on medium sweet and light sweet differentials." While strategic reserve releases and inventory drawdowns provide a buffer, they are insufficient ?to cover the 15-million-barrel-per-day loss in Middle East crude supply, meaning prolonged disruption from the Strait of Hormuz closure will continue to exert upward price pressure. June Goh is a senior analyst with Sparta Commodities. She said that the correction has brought prices to "affordable levels". "The physical crude shortage in the market still exists, so premiums will remain higher than pre-crisis levels. She said that it shouldn't reach the record panicked levels we experienced previously. RESERVE ?RELEASES, FALLING PREMIUMS Sinopec is expected to receive approximately 1 million barrels per day (bpd) of crude oil from its reserves between April and June, according to two traders who are familiar with the situation. This will allow its trading arm Unipec, to sell some cargoes of West African, Brazilian, and Canadian crude on the spot market in this month. CNOOC and PetroChina have also exported Canadian crude from the Trans Mountain Pipeline (TMX) in this month. Requests for comment from the companies were not immediately responded to. Two trading sources said that earlier this month, Canada’s Access Western blend exported through TMX was sold at a record-breaking $8 a barrel for ICE Brent to be delivered to Asia in July. However, the price dropped to $4 last week. Premiums for European crude and West African crude are also declining. Ekofisk, a North Sea oil, was offered at a discount of less than $10 per barrel to Brent dated on Tuesday. This is a 50% reduction from two weeks earlier. Forcados Bonny Light, Qua Iboe and other African grades have fallen to $7.75 per barrel compared to $10 a barril in mid-April. Brazilian crude premiums also fell?after prices rose above $30 per barrel earlier in the month, traders who are familiar with the market reported. They said that Taiwan's Formosa Petrochemical purchased 2 million barrels on Brazilian crude delivered ex-ship at a premium between $8 and $9 per barrel compared to Brent dated. The traders reported that Indian refiners purchased Brazilian crude at a premium of almost $5 to Brent. Middle East crude prices that reached record highs in March have also fallen sharply this past month, which may lead Saudi Aramco to reduce the term price for June. The premiums for WTI Midland oil from the U.S., delivered to Asia, have fallen from record highs near $40 per barrel over Dubai's?quotes. Recent deals for August delivery to Japan are at $20 to $22, similar to the levels of a month earlier, according to two traders. WTI traded in Europe at $7.40 over Brent dated on Tuesday. This is compared to a premium of $22 per barrel two weeks ago. Spot premiums also fall as consumers'simply cut back on consumption of a variety of oil products, including naphtha, for petrochemical manufacturers, liquefied petrol gas, for cooking, and diesel, for hauling cargoes, or fuel oil, for ocean-going vessels. Morgan Stanley estimates demand destruction at 4.3 million barrels per day (bpd) in the second quarter. This will lead to an 800,000-bpd drop in 2026 total oil consumption. It would be the first decline since the COVID-19 epidemic.
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Prices of oil continue to rise as US-Iran conflict keeps supply off the market
The oil prices continued to rise on Thursday as there was concern that supply in the Middle East, a key region for producing oil, would remain stagnant due to the deadlock in the talks between the U.S. and Israel over the war against Iran. Brent crude 'futures' for June were up $1.91 or 1.62% to $119.94 per barrel at 0057 GMT, after rising 6.1% the previous session. The June contract expires Thursday, and the July contract is at $111.38 up 94 cents or 0.85% after rising 5.8% the previous session. U.S. West Texas Intermediate Futures for June are up 63 cents or?0.59% at $107.51 per barrel after climbing 7% the previous session. They have risen in eight out of nine sessions. A White House official revealed that U.S. President Donald Trump had discussed with oil companies on Wednesday how to minimize the impact of what could be a months-long U.S. blockade of Iran’s ports. This triggered concerns on the market about an extended disruption of oil?supplies. Tony Sycamore, IG's market analyst, said that the prospects for a near-term solution to the Iran conflict and a reopening of?Strait of Hormuz remained dim. The meeting was held after a deadlock occurred in the efforts to resolve a conflict that has caused thousands of deaths and what analysts call the biggest energy disruption the world has ever seen. Since the U.S. began airstrikes on Iran in February, Tehran has blocked most shipping except its own, through the Strait of Hormuz. This is a major chokepoint for Middle East energy supplies. The U.S. started blocking Iranian ships this month. Sources say that on the'supply side,' the OPEC+ grouping, which includes OPEC and its allies, is 'likely to agree on a.small increase in oil production quotas of 188,000 barrels a day, Sunday. The meeting is just days after the United Arab Emirates announced its withdrawal from OPEC on May 1. This move will 'damage the ability of the oil producer group to control the price'. The Gulf nation's departure would allow it to "raise production" after exports resume, but analysts say that this is unlikely to have a significant impact on the market fundamentals in the coming year, particularly with the Hormuz war and other production disruptions. Wood Mackenzie analysts stated in a report that it would take several months for Gulf countries, including UAE, to reach pre-war levels of production.
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Japan's March industrial production drops on the back of a decline in chemical output
Government data revealed that Japan's factory output unexpectedly dropped in March compared to the previous month. This was due to a decrease in chemical and fuel product production as a result of Middle East supply disruptions. The Ministry of Economic, Trade and Industry (METI) reported that the country's industrial output shrank by 0.5%. This is the second consecutive monthly decrease, and disappointing market expectations for a 1.1% increase. The decline in the production of petroleum-based products was a major factor. In March, polyethylene production fell by 27% and polypropylene by 15%. METI reported that Japan has maintained a stock of?1.8 months worth?of intermediate chemical products. This allows it to minimize the impact of these products on downstream shipments. The data also showed that domestic fuel production was down across the board, with gasoline output dropping 7.3% and diesel output falling?14.3%. Japan gets 95% of its crude from the?Middle?East. Much of it is?channelled? through the Strait?of Hormuz. This waterway has been closed by Iran?after U.S. and Israeli attack. METI surveyed manufacturers who expect output to drop again in April. The adjusted estimate is down 0.7%. (Reporting and editing by Jacqueline Wong; Kantaro Kommiya)
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Mike Dolan: The US inflation expectations are back on the boil after the war-stasis between Iran and ROI
The U.S. headline and core inflation rates are headed back over 3%, and inflation expectations are building steam for the year ahead. Federal Reserve can only take comfort in the fact that long-term price expectations have improved, but even they are irritated by the 'oil shock' related to the war with Iran. Most central banks can tolerate a relatively short energy shortage for a time, but they are more concerned about a prolonged crude oil outage that will feed the expectations of wage-bargaining and price-setting agents over time and cause inflation to rise above target for longer. It may be necessary, in the end, to squeeze borrowing rates to slow credit expansion to dispel these expectations. In this environment, it is unlikely that interest rates will be further lowered. The Federal Reserve's inflation gauge, which is closely monitored by all policymakers, will be released for the first time since the Iran War on Thursday. For the first time since more than two decades, the annual rate of inflation as measured by the personal consumption expenditures gauge (PCE) is expected to rise above 3%. The Cleveland Fed's "nowcaster" inflation estimate pencils in a rate for March of 3.4% - 1.4 points higher than the Fed's target 2%. This month, the rate of inflation has risen to 3.6%. It is the highest since almost three years. Even when you remove energy and food prices, there is no relief. The "core" PCE is expected to have also topped 3% at a two-year low of 3.1% in March, with the Cleveland Fed penciling in 3.2% for this month. Brent crude futures, at $80 per barrel for delivery within 12 months, are still 20 % higher than before the Iran War. Markets and households are both increasing their expectations of inflation over the next year. U.S. One-year Inflation Swap is following those estimates for March and April, and with 3.4%-3.6% it is close to its highest level since the Ukraine shock of 2022. One-year and one-year swaps for forwards are also starting to 'boil higher. At more than 2.7%, they are at their highest level in over a year. The results of household surveys often exceed market expectations. But they're also going higher - the University of Michigan one-year reading is closing in on 5%. The long-term expectations have improved, reflecting the hope for calmer seas in due course. These too 'appear to be a reflection of another shock?, compounding on top if inflation which had not yet returned back to target after the previous one. The 5-year and 5-year forward inflation swap is still above target, but at a relatively low level of 2.4%. The 5-year outlook for households is as high as 3.5%. It remains to be determined whether the trimmed mean PCE, a measure favoured by incoming Fed chair Kevin Warsh?will cut through all this noise. The Fed cannot ignore the fact that U.S. inflation is a serious problem. The administration cannot ignore the results of the most recent polls regarding the cost of living. The opinions expressed are those of Mike Dolan, columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Ford increases profit forecast for 2026 in spite of nagging aluminum costs
Ford Motor raised its annual guidance by $500 million on Wednesday, thanks to significant tariff refunds. However, it said it still faced rising material costs as it worked to source aluminum for the?lucrative F150 pickup trucks. Ford Motor Company received $1.3 billion of relief from the U.S. Supreme Court's February ruling that invalidated some Trump Administration tariffs. Ford booked a gain in the first quarter on the expected refund, which boosted its bottom line. However, the company acknowledged that it is uncertain how quickly the government will reimburse them. Ford's guidance was raised by less than the refund amount, as the company is now facing higher-than expected tariff costs. These additional expenses are mainly on raw materials, such as aluminum, since Ford's U.S. major supplier Novelis suffered two large fires by 2025. The automaker said that production at the affected area of the New York factory is expected to resume in May or September this year. Novelis expects that production will resume in the second quarter. Ford increased its forecasted earnings before interest and taxes for the entire year from $8 billion to $10billion to $8.5billion to $10.5billion. After-market trading saw its shares drop by less than 1%. The automaker declined to reveal its total tariff cost, saying that it would only be liable for a net of $1 billion. Ford, based in Michigan, reported adjusted earnings per share (EPS) of 66 cents during the first quarter. This was a far greater result than analysts expected, who had predicted 19 cents. The tariff refund helped to boost this figure. Ford's adjusted earnings were $3.5 billion, while revenue reached $43.3 billion. Ford reported a quarterly net profit of $2.5 Billion. F-150 Production Estimated to Have Fallen According to CatalystIQ data, the inventory of the F-150 fell 38% from April of last year. This was largely due to the Novelis Fires. Ford's F-150 is the top-selling vehicle in America and has been for over 40 years. It is also a major source of profit for Ford. Ford's financial health is at risk if its production is disrupted. According to JPMorgan analyst Ryan Brinkman citing data by?S&P Global Mobility, the F-Series production is estimated to have dropped 12% over the past year in the first three months as of mid-April. This was a greater drop than anticipated. Brinkman, in an analyst note, said that Ford may have a harder time recovering than expected from the Novelis Fire. Ford's total vehicle sale decreased by 9% in the first three months of this year, and the decline was largely due to a decrease in demand for hybrid and electric vehicles. General Motors, a cross-town competitor, reported on Tuesday a 22% increase in its first-quarter profit. It also raised its earnings forecast for the full year. This was boosted by an optimistic $500 million tariff refund and a robust U.S. auto market. Ford's shares have risen by about 20% in the past year, while GM has risen by more than 60%.
US sanctions against China's Hengli marks an escalation of Iran oil crackdown
Treasury Department imposed sanctions against China's Hengli Petrochemical Refinery (Dalian), accusing it of "buying billions in Iranian oil", in a significant increase in Washington's effort to curb Tehran's oil revenues.
Hengli Petrochemical, the parent company listed on Shanghai's Stock Exchange, denied doing business in Iran and said that sanctions lacked legal and factual basis. It also stated it would work to lift them.
The following are?key facts:
Why is this an escalation?
Hengli operates in Dalian in the north-east a refining facility that can process 400,000 barrels per day. This makes it the biggest Chinese refiner sanctioned by the United States, since the United States re-enforced its crackdown against Iranian oil exports.
The designation came shortly after a waiver of 30 days of sanctions for importing Iranian crude oil that had already been loaded had expired, and after U.S. Treasury Sec. Scott Bessent had threatened to sanction 'buyers of Iranian Oil' on April 15, and had said the Treasury Department had sent warning letters to 2 Chinese banks.
The move is in anticipation of U.S. president Donald Trump's planned visit to Beijing, which is scheduled for May.
Prior to this, the U.S. had imposed sanctions against Chinese entities based on their relationship with Iran. These included three small independent refiners, and several import terminal operators.
What has been the impact so far?
Hengli Petrochemical shares fell 10% on Monday.
Hengli Petrochemical International in Singapore was also restructured by the Hengli Group, which reduced the firm's 100% ownership stake to 5%. The remaining 5% is now owned by a Chinese government entity.
Trading executives expressed skepticism that the U.S. measure would protect the Singapore unit against the wariness of its counterparties, given the ownership at the time it was announced.
Hengli Petrochemical stated that it had enough crude to cover its processing needs for over three months. It will continue to settle oil purchases in Chinese Yuan.
What are the pre-conditions?
The U.S. sanctioned several Chinese entities, including three small refiners. According to sources, this caused difficulties in receiving crude oil and forced two of the companies to sell their product under different names.
In October of last year, the U.S. Sinopec, the state-owned refinery in China, received one fifth of its crude through an import terminal sanctioned by the U.S. This led to the terminal being idle for months and disrupting crude flow. It also forced cargo diversions because traders avoided the terminal for fear of secondary sanctions.
Sinopec's logistics unit sold its stake to a local port operator.
Shandong Yulong Petrochemical is another Chinese?refiner that produces 400,000 barrels per day and has a presence in Singapore. Last year, non-Russian customers, foreign banks, and vendors stopped doing business with the company after they were sanctioned by Britain and European Union for dealing with Russian oil.
Yulong became more dependent on Russian oil as a result of the measures.
What has been the impact of U.S. sanctions on Iranian oil?
China, which is the largest oil importer in the world, has been the main buyer of Iranian oil for many years. Vortexa Analytics reports that China brought in a record-breaking 1.8 million barrels per day (bpd) in March.
According to traders, China's giant state refiners are not buying Iranian crude after the U.S. reinstated sanctions in 2019. Instead, independent "teapots", who buy discounted Iranian barrels, are the only ones willing to purchase them.
Iranian oil shipped to China is usually transshipped on the way and is mainly branded as Malaysian, or Indonesian.
Beijing has defended the legitimacy of its trade with Iran and rejected unilateral sanctions it has called "illegal". (Reporting and editing by Raju Gopikrishnan; Tony Munroe)
(source: Reuters)