In this week's S&P Global Platts Market Movers Asia, with Associate Editor Parisha Tyagi: driving activity – a proxy for gasoline demand – is increasing; markets await cues on China's crude and steel demand, oil product exports.
More from this episode:
*Tighter credit conditions pose threat to China's steel demand
*Coal producers struggle to meet China, India demand
*Ethylene supply in focus amid cracker turnaround
*Container markets continue to grapple with congestion, equipment shortage
This week: eyes on key trade data from China, supply crunch in coal and ethylene markets, and container shipping still reeling in the aftermath of the Suez Canal blockage.
But first, Asia is on the move again – well, mostly. Driving activity – a proxy for gasoline demand – is increasing in the region, as governments roll out coronavirus vaccines and relax restrictions on movement.
Apple mobility data shows that driving activity in Malaysia, Australia, New Zealand and Vietnam are back to above-baseline levels in late-March. Thailand and Indonesia also hit multi-month highs. Increased movement on the roads is giving gasoline demand and market sentiment a boost.
For our social media question this week: Is the worst over for the gasoline market? Share your thoughts with hashtag PlattsMM.
Now gasoline supply in the region has tightened, with the demand growth coupled by a series of unplanned and extended refinery outages in Asia. Asian physical gasoline crack spread surged to a 14-month high last week. The FOB Singapore 92 RON gasoline crack against front month ICE Brent crude futures hit its highest average since February 2020.
In an attempt to fully capture the lucrative margins, South Korean refiners are planning to raise gasoline exports this quarter. South Korea, Asia's major middle distillate supplier, is expected to export more than 6.6 million barrels of gasoline this month and close to 7 million barrels in May.
Meanwhile, Japan introduced new restrictions today in Tokyo, Kyoto and Okinawa to prevent the further spread of COVID-19. This is expected to hit Japan's peak gasoline demand season – the Golden Week National Holidays, over late-April to early May.
Moving on to China, markets await the economic giant's data for Q1, including preliminary trade figures, set to be released this week.
Market participants will closely track these releases to get cues about the country's crude appetite and export prospects for Q2.
The data will also be crucial to Asia's metals industry. Market participants are waiting for indications on commodity imports and exports for March, and fixed asset investment in property and infrastructure. This becomes more crucial as China has been tightening up credit conditions, particularly in the property sector, posing a threat to steel demand. If the March numbers indicate liquidity is drying up, there could be a reaction in iron ore and steel futures markets.
While metals industry is concerned about weak demand, the coal sector struggles to match supply for buyers in China and India. Indonesian thermal coal will continue to see tightness in supply, as the fasting period in the country approaches. In Australia, prices are expected to remain firm amid anticipation of tight domestic supply until June.
Supply is also tight in the ethylene market amid planned cracker turnaround in South Korea. However, the healthy downstream margins supported the buying interest.
Speaking of buying interest, many petrochemical traders in Asia continue to struggle with container vessel shortage. The container market, which was already grappling with congestion and equipment shortage issues, is likely to face more trouble in the aftermath of Suez Canal incident. Sources say higher surcharges, more blank sailings and severe congestion issues are imminent in the days to come.
For more on all the issues affecting commodity markets from wherever you are, make sure to check out Platts LIVE at the address displayed on your screen.
Thanks for kicking off your Monday with us. Have a great week ahead!