The highlights in Asia this week on S&P Global Platts Market Movers Asia with Shikha Singh: all eyes are on benchmark crude oil prices this week, after front-month ICE Brent futures rose to almost $50/b last week for the first time since early March, while Asian refiners as they look to conclude term contract negotiations for 2021 crude supply with major Middle Eastern producers.
Also on this week's episode:
* Seaborne thermal coal demand remains firm
* Panamax rates firm on China coal demand
* Iron ore prices surge on demand from China
* Methanol supply tightens in Asia
This week: Crude oil prices touch 9-month highs, iron ore prices surge for delivery to China, and Asia's methanol supply tightens further
But first, all eyes are on benchmark crude oil prices this week, after front-month ICE Brent futures rose to almost $50 per barrel last week for the first time since early March. This comes as advances in vaccines increase hopes of containing the pandemic. The US Energy Information Administration has also revised up its forecast for crude prices by almost $2 per barrel. It now expects Brent prices to average $48.50 per barrel in 2021, up $1.91 from its November forecast. The EIA cited the OPEC+ decision to lift production by just 500,000 barrels per day in January, instead of by 1.9 million barrels per day as earlier scheduled, as the reason. However, refinery sources in Asia said the price uptrend may not be sustainable, as demand for transportation fuels remains weak.
It's going to be a busy week for Asian refiners as they look to conclude term contract negotiations for 2021 crude supply with major Middle Eastern producers. China's Norinco Huajin refinery recently secured up to 16 million barrels of Basrah crude from Iraq for 2021, in line with its contract for 2020. Asian suppliers are also seeking to boost fuel exports to South Africa, as around half of its crude refining capacity is expected to remain shut until at least early next year. In the latest development, the country's second-largest refinery was shut after a fire on December 4. With Northeast Asian refiners grappling with tepid transportation fuel demand due to the pandemic, the demand from South Africa offers a great opportunity. South Korea has already stepped up fuel sales to South Africa this year, sending 823,000 barrels of oil products to date, up almost tenfold from 2019.
In coal, China's domestic prices could edge higher this week as supply falls short of demand, while high-ash Australian coal prices are expected to remain firm amid steady demand from India. Indonesian mid- to high-CV thermal coal demand remains strong amid a flurry of purchases from China, coupled with pockets of supply tightness in Kalimantan amid the rainy season.
The dry bulk market is also awaiting news of China's coal import quotas for the new year, after the quota for December was raised to 35 million mt from 20 million mt. Charter rates in the Pacific are unusually high for this time of year, supported by China's strong appetite for Indonesian coal since Australian coal imports were rejected in November.
In metals, active restocking by Chinese steel mills, and fears of supply shortages, have propelled prices of iron ore delivered to China by 34% since the start of November. It's the most rapid price rise seen for many years. Domestic Chinese steel margins remain very healthy, suggesting there is further room for seaborne iron ore prices to rise.
This brings us to our social media question for the week. Will iron ore prices delivered to China reach $170/mt? Share your thoughts on Twitter with the hashtag PlattsMM.
And finally, in petrochemicals, methanol supply in Asia, especially China, is expected to tighten further this week as several plants in the Middle East shut for long turnarounds in December and January. Zagros, Kaveh, Marjan and Sipchem all have maintenance planned in the next six weeks. This has pushed methanol prices in Asia to a year-to-date high of $272/mt CFR China on December 10, and further price rises are likely.
Thank you for starting your Monday with us. Have a great week ahead!