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Market Movers Asia, Nov 15-19: COP26 deal to promote carbon markets; Biden-Xi meet in focus

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Metals | Energy | Coal | Natural Gas | Non-Ferrous | Steel | Emissions

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Watch: Market Movers Asia, Nov 15-19: COP26 deal to promote carbon markets; Biden-Xi meet in focus

On this week's Platts Market Movers Asia with Associate Editor Shilpa Samant: Japanese power utilities are considering early procurements of fuel oil as winter power shortage concerns loom (00:14)

Other highlights from Asia's commodity markets:

*After COP26 deal, voluntary carbon markets in spotlight (01:28)

*Aluminum production cuts in China continue (02:25)

*Container rates soften as China's production cuts slow down exports (03:00)

*India's October vegetable oil import data to be out this week (03:28)

*Joe Biden-Xi Jinping meet in focus (04:07)

View Full Transcript

This Week: Spotlight on voluntary carbon markets after COP26 deal, Biden-Xi meet in focus, aluminum production cuts in China and eyes on India's vegetable oil imports data.

But first, Japanese power utilities are considering early procurements of fuel oil as winter power shortage concerns loom.

Last week, Japan's largest refiner, ENEOS, said it was receiving high number of inquiries from power utilities for fuel oil. The country's second largest refiner Idemitsu Kosan said requests it received are double the peak volumes seen last winter.

There are concerns that the country's refiners may not be able to meet all requests from local power utilities. In October, the Petroleum Association of Japan had echoed this worry.

Japan faced a similar situation last winter when it saw a power supply shortage. At that time, local power utilities were forced to restrict gas-fired power generation due to low LNG stocks.

In coal, winter heating demand is likely to support prices amid an existing supply tightness. Market participants expect Indonesian thermal coal prices to remain firm as Chinese domestic prices stabilize. Australian thermal coal prices are also expected to remain stable with fewer cargoes available for sale.

All eyes will be on the voluntary carbon markets after countries reached a final deal at the UN Climate Change Conference or COP26. After a fortnight of negotiations, a decision was finally reached on Article 6 of the 2015 Paris Agreement on the future of the global carbon markets. It will pave the way for a more transparent market allowing countries to trade carbon emissions reductions while at the same time providing a clear accounting mechanism for the calculation of credits. In the last fortnight, suppliers were holding on to credits while awaiting a final decision. This had pushed up prices considerably. But the decision at COP26 is expected to bring in new supply into the markets.

That brings us to our social media question for the week: Do you think voluntary carbon markets will see a surge in volumes after the COP26 deal? Share your thoughts on Twitter with the hashtag PlattsMM.

Moving to metals, China's primary aluminum smelters continue to cut production. Operating rates are likely to be lower this month as well. There are also reports of smelters in China's Inner Mongolia region planning to curb their output in late January, ahead of the Winter Olympics. Industry observers said more than one-third of Chinese smelters are currently facing losses due to falling prices and inflated production costs. This could delay launch of new projects that were scheduled for the fourth quarter.

In shipping, container rates softened on ex-China routes. The ongoing power rationing in China has hit productivity at factories leading to a slowdown in exports. This, in turn, has given a breather to the container segment as cargo pressure eased. Traders expect stable container freight in the coming weeks. With holiday shipments booked, they do not expect a major surge in demand before December.

Moving to agriculture, focus is on India's October vegetable oil import data. India's veg oil imports had touched a six-year high in September, led by palm oil imports. But analysts expect the October imports to be around the monthly average of 1.1 – 1.2 million metric tons. Malaysia's end-October stockpiles of palm oil crossed 1.8 million metric tons for the second time this year as exports dipped in the month. However, analysts do not see a letup in high palm oil prices any time soon as supply tightness is expected to continue.

And finally, commodities markets will keenly watch out for the virtual meet between US President Joe Biden and Chinese President Xi Jinping this week. Markets will watch out for signs of thaw between the two countries engaged in a trade war since 2018.

Thanks for kicking off your Monday with us. Have a great week ahead.