The highlights in Asia this week, with S&P Global Platts editor Miranda Zhang: commodity markets are on alert as participants wait for China's countermeasures after US President Donald Trump announced a 10% tariff on $300 billion worth of Chinese goods from September 1, Iran claims to have seized a foreign vessel at the Persian Gulf, Indonesia is pushing back on the implementation of the International Maritime Organization's 0.5% sulfur cap regulation, and petrochemical markets expect the spread between paraxylene and mixed xylene to remain below breakeven levels.
The highlights in Asia this week: tensions heat up as Iran claims to have seized another tanker, Indonesia pushes back on IMO 2020, and spread between paraxylene and mixed xylenes seen to remain below breakeven levels.
But first, commodity markets await China's countermeasures after US President Donald Trump announced last week that he would impose a 10% tariff on the remaining 300 billion dollars worth of Chinese goods, starting September 1. The oil market in particular will keep an eye on whether crude oil trade flows will be affected.
So this leads us to our social media question this week: do you expect China to slap tariffs on crude oil imports from the US? Share your thoughts with the hashtag PlattsMM.
Latest data from China's General Administration of Customs show that Beijing imported 796,000 metric tons of crude from the US in June. China's crude oil imports stood at 9.7 million barrels per day in June. Asian oil buyers will be keenly awaiting China's July preliminary trade data release scheduled on Thursday to get cues on China's prospective appetite for oil products in the coming months.
Meanwhile, heightened tension in the Middle East is another factor leading markets to focus on trade flows. Iran claimed on Sunday that it had seized a small foreign ship carrying 700,000 liters or 4,400 barrels of fuel oil in the Persian Gulf on Wednesday. Iran has repeatedly threatened to close or disrupt the Strait of Hormuz should US sanctions block its oil shipments. Hormuz is a critical chokepoint through which about 30% of the world's seaborne oil transits.
In the bunker market, Indonesia has decided to allow domestic shipping to continue burning 3.5% sulfur fuels after January 1, 2020 - the day when the International Maritime Organization is scheduled to implement the 0.5% sulfur cap on marine fuels. Indonesia's decision has raised concerns about unfair competition and some observers have said this could potentially lead to non-compliance to the IMO 2020 rule on a wider scale. Industry participants will be monitoring the market to see if other countries will follow suit.
In petrochemicals, market participants expect the spread between paraxylene and isomer-grade mixed xylene to hover around the 100 dollar per metric ton level this week. This is after the spread hit an eleven-year low of 92 dollars and 42 cents per metric ton on July 29. With increasing PX supply in the region and a firm demand for prompt MX cargoes, PX prices are expected to remain underpressure. The breakeven level for non-integrated producers in the region is between 160 and 180 dollars per metric ton.
And finally in agriculture, the fall in Chicago traded corn futures last week marked the end of market lull in South Korea, which lasted almost a month. Platts CFR Northeast Asian prices shed 10% within 2 weeks and the drop saw a slew of queries from the buyers at the end of last week. South Korean buying groups were seeking close to 400,000 mt of corn for December delivery. Sellers are expecting the rest of Southeast Asian buyers to also start looking to book more cargoes in the coming week.
Thanks for kicking off your Monday with us. Have a great week ahead!