The highlights in Asia this week on S&P Global Platts Market Movers, with Dry Bulk Shipping Associate Editor Isaac Eio:
** LNG market to continue tightening on supply outages, winter demand
** Pakistan boosts LNG purchases
** China's tight credit conditions start to bite, impacting steel sector
** Dry bulk market anticipates flurry of activities after China's holiday
Related event: S&P Global Platts Dry Bulk Virtual Forum
This week: eyes on China's market activities as the country returns from a long holiday, India's oil demand recovery, and dry bulk market trends.
But first, Asia's LNG market is expected to continue tightening due to global producer outages and an uptick in winter procurement from regional buyers. The Platts JKM for November was assessed at $5.535/MMBtu at last week's close on stronger buying interest and higher pricing indications. This is the highest level for JKM in 11 months, after languishing in the two to three dollar range for most of 2020. Buying interest has emerged from North Asian buyers like Japan and South Korea, with indications of healthy downstream demand, but high storage inventories are capping demand growth. Analysts say much of the peak winter demand will depend on colder temperatures going forward.
The LNG market is also seeing flurry of activities from Pakistan, with tenders being issued for at least nine spot LNG cargoes for this winter in a single week. The ramp-up in Pakistan's spot LNG procurement comes in anticipation of higher demand, as the government has allowed unutilized LNG terminal capacity to be auctioned and domestic gas production has been on the decline.
However, a key reason for tighter supply concerns is disruptions at gas producers. Norway's hydrocarbon projects have been affected by strikes and accidents, and US LNG terminals and gas production facilities have been shuttered ahead of Hurricane Delta making landfall over the weekend.
In oil, markets will be monitoring China's transportation sector to gauge how recent travels for the Golden Week holiday is impacting domestic gasoline and jet fuel inventories. Eyes are also on China's preliminary trade data for September. China's crude oil imports slowed down in August and July from the record high of 12.99 million b/d in June amid high inventories. Market participants will be keenly awaiting September figures to get cues on China's appetite to import crude oil in the fourth quarter while domestic stockpiles are still high.
Still in oil, the market will be digesting India's oil data for signs of demand recovery. The easing of lockdown restrictions and the increasing preference for personal mobility over public transport has been helping demand for gasoline. Senior refining officials expect demand for automotive fuels to reach pre-coronavirus level by December, but jet fuel demand would take much longer to bounce back.
In metals, markets weakened in September as the impact of Beijing tightening credit conditions from July started to bite. China's vehicle sector has improved in recent months, along with manufacturing as a whole, helping to support prices of flat steel and other metals. The metals markets may be spooked if cash is shown to have tightened further in September – as it likely points to a weaker Q4.
So for our social media question this week: do you expect credit conditions in China to tighten further? Share your thoughts with hashtag PlattsMM.
Meanwhile in shipping, dry bulk market participants anticipate a hike in activity after China's holiday. The Capesize market saw the Platts Cape T4 index rise to a year-to-date high of over 33 thousand dollars per day last week. Panamax freight rates were also on an uptrend, supported by the larger sizes, while smaller vessels saw a decline in the Indian Ocean, due to an oversupply of vessels and China's hiatus.
Do join us for the annual Platts Dry Bulk Shipping Forum, which will be held virtually this year. Let's discuss the latest market trends, the challenges emerging from COVID-19, trade tensions and the impact of IMO 2020.
Thanks for kicking off your Monday with us. Have a great week ahead.