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Market Movers Asia, July 26-30: Flooding, heat wave impact trade flows in China, parts of northeast Asia

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Ver: Market Movers Asia, July 26-30: Flooding, heat wave impact trade flows in China, parts of northeast Asia

On this week's Platts Market Movers Asia with Jeffrey Moore, Manager, LNG Analytics Asia: Climate change in focus as China and parts of northeast Asia battle extreme weather events, impacting commodities trade flows in the region.

More highlights in Asia's commodity markets:

*Floods in China impacting alumina, aluminum production

*Rains to put wheat quality at risk, raise ASF concerns

*Heat wave pushes up power demand in NE Asia

*Typhoon could strike petrochemical trade flows

Transcripción completa

This week: The weather looks to play a key role in the markets -- flooding in central China, a typhoon in east China and a heat wave across parts of northeast Asia.

Record high rainfall in China's Henan province has triggered mass evacuations, and several dams and reservoirs have breached warning levels.

While floods in China are an annual affair, the severity of natural disasters and climate-related events in the backdrop of record floods in Germany and heatwaves in the US, have ignited a fresh debate about the need to fight climate change.

Henan is the country's third-largest alumina producer. Production of aluminum and alumina could be impacted after transportation activities and power supply to smelters were disrupted. This could keep domestic alumina prices firm in the near term.

The heavy rains in Henan may also impact the crop quality of wheat harvested in the province. Henan accounts for 30% of China's output. The main wheat crop is already harvested, but if rains affect the quality, the situation may push buyers for more wheat imports. However, the impact on corn may be muted as the standing crop is at a stage where it requires water.

A bigger worry from the floods could be a potential rise in African swine fever cases. Floods increase the risk of disease breaking out among pigs and infecting healthy hogs through contact with sick pigs or contaminated feed and water.

So for our social media question: Do you expect another ASF outbreak due to the floods? Share your thoughts with the hashtag PlattsMM.

China's coal supply has also been impacted by the floods. Some coal mines were shut, but sources said downstream utilities are actively replenishing their stock and prices will continue to climb.

Meanwhile, a heat wave sweeping across northern China, South Korea and Taiwan is driving up power consumption and supporting record high coal prices, while LNG prices are back over the 14 dollars per MMBtu level again.

The S&P Global Platts Northeast Asia Thermal Coal Index hit a record high of 125 dollars per metric ton at the end of last week due to tight spot markets, strong demand from Japan, Korea and Taiwan, supply issues, and high freight and international coal prices. This is the highest level seen for the NEAT Index since Platts began the assessment in 2017.

The Platts JKM price for spot LNG hit 14 dollars and 67 cents per MMBtu on July 23 -- this is one of the highest summer LNG prices recorded in Asia since 2014.

More than 22 major Chinese cities including Beijing, Guangzhou, Shenzhen and Chongqing have taken measures to reduce the strain on power grids and prevent large-scale power outages, and regulators have issued orders for coal inventories to be built up.

In South Korea, the heat wave is expected to continue for another month, unless a typhoon disrupts the weather pattern. To help shore up power supply, the operator of Korea's nuclear fleet has said it will bring back three units early from maintenance by the end of July.

S&P Global Platts Analytics has noted that overall output from nuclear plants averaged 17.9 GW on July 22, which was only an increase of 1.3 GW since July 17, as Kori no. 4 started maintenance in the meantime as other plants have come back online.

On to petrochemicals, a typhoon in east China that made landfall July 25 is likely to slow ship traffic and affect discharging operations. Several markets, including ethylene, styrene monomer, isomer-mx and paraxylene, could witness a disruption in shipping trade flows. Sources have said the cargo delays in styrene would not have a big impact due to ample prompt supply, while the typhoon's direct fallout on isomer-MX is less apparent.

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