The week ahead in Asia on S&P Global Platts Market Movers, with refined products associate editor Mark Tan: the US-China trade tension keeps the market on its toes even as fears of further escalation seem to have been abated, Chinese refiners are expected to resell US crude cargoes arriving after Beijing's September 1 tariff deadline, Chinese soybean traders limit buying activities, and demand outlook tepid for Kalimantan thermal coal.
The highlights in Asia this week: Chinese refiners expected to resell US crude cargoes; Chinese soybean traders limit buying activities, and outlook tepid for Kalimantan thermal coal miners.
But first, commodity markets continue to eye trade tensions between the US and China, even as earlier fears of the dispute escalating have abated. There have been reports saying that the Chinese government will not immediately retaliate against US President Donald Trump's most recent tariff announcement. Trump had also said that the US and China were meeting at a different level, further downplaying worries of an escalation. Still, over $125 billion of goods from China have been subjected to a 15% tariff rate as of September 1. The tariffs, which apply mainly to Chinese consumer goods, will have its second tranche kick in later this year.
On the other side of the dispute, Beijing's 5% tariff on US crude oil imports were also implemented yesterday. Chinese refiners this week are expected to resell some of the US crude cargoes initially bought for September and October deliveries. These cargoes could go to refiners in South Korea, Thailand, India and Taiwan who are all keen to increase crude imports from the US. Singapore-based traders said seaborne shipments will be tough to resell as prompt cargoes have to be heavily discounted due to the last-minute sale, and it may be cheaper for buyers to simply pay the tariff.
This brings us to our social media question for the week: How much US crude do you expect to be resold by Chinese refiners? Share your thoughts with the hashtag PlattsMM.
Moving on to agriculture Chinese soybean buyers have slowed down their spot purchases for Brazilian soybeans due to prolonged discussions between the US and China. In addition, the recent inquiries from Chinese crushers for Brazilian new crop 2020 soybeans have stopped as traders sought more direction ahead of trade discussions.
And finally, trade tensions have also kept the outlook for thermal coal dim, as a weakened Chinese Yuan as a result of trade tensions have been a drag. Kalimantan thermal coal miners have seen tepid seaborne demand sentiment this week from China, which is one of the largest buyers of thermal coal in the region. While Indian buyers are expected to begin their post monsoon restocking, expectations are for a slow return amid a weakened Rupee and some existing inventories at Indian power plants.
Also in thermal coal markets, Australian producers will be starting the negotiation process for annual supply contracts with their Japanese customers for deliveries from October 1. Initial offer prices in the talks are around $80/mt FOB Newcastle for the 6,000 NAR grade of Australian thermal coal. With spot prices for the grade currently trading around $60/mt, last October's benchmark price of $109.77/mt FOB Newcastle looks out of reach this year.