The highlights in Asia this week, with Paul Bartholomew, S&P Global Platts Head of Metals News & Insight for Asia-Pacific:
* China to ramp up crude oil and agricultural product purchases from the US to comply with Phase 1 of trade deal
* LNG prices rise on uncertainties in Gorgon LNG supply
* Seaborne iron ore prices hit 6-year high
* Demand fundamentals weigh down Indonesian thermal coal prices
* September contract talks for paraxylene and benzene set to kick off
* Long Range tanker freight rates inch closer to three-month highs
China boosts US crude purchases in line with trade deal
The highlights this week: China eyes buying more oil and agricultural products from the US, a heatwave in Japan impacts LNG and coal buying, and iron ore prices continue to soar.
China is on track to receive a record monthly volume of US crude in August, which is expected to surpass 30 million barrels, as a flurry of tankers head towards Chinese ports.
China has stepped up its purchases of North American crude grades in an effort to comply with the Phase 1 trade deal that the two countries signed in January.
However, low global oil prices in 2020 means the value of China's crude imports from the US in the first three quarters may only reach $3.42 billion, which is far below its Phase 1 commitment.
Our social media question this week is: Do you think China will import a record volume of oil from the US in August? Share your thoughts with the hashtag PlattsMM.
China is also ramping up its purchases of US agricultural goods as part of the Phase 1 deal, buying more corn, sorghum and wheat than expected in recent weeks, along with a large volume of soybeans.
Inquiries for soybeans from the US Gulf Coast were limited last week, but demand from Chinese buyers is expected to return this week to cover requirements from November.
Moving to LNG, spot prices in Asia are expected to continue climbing this week after the Platts JKM crossed the $4/MMBtu mark last week on the back of supply uncertainty from Australia's Gorgon LNG project.
A heatwave in Japan is boosting its energy demand with all those air conditioners switched on, but the recent increase in LNG prices is making coal prices look very competitive.
Platts Analytics also says there are signs the JKM rally could be losing steam as the spread between it and other global gas benchmarks widens for October and November, which could bring more supply back into the market.
In thermal coal, production cuts across the Kalimantan archipelago are offering limited support to Indonesian export prices this week as sluggish seaborne demand fundamentals weigh on sentiment.
A lack of clarity on China's import quotas and patchy inquiries from India are also keeping prices in check.
In shipping, clean tanker freight rates appear to be heading for strong gains this week due to an uptick in demand.
The expected gains will come after prices hit multi-year lows and provide a much-needed boost in earnings for owners, who a month ago were barely covering their operating expenses.
An increase in road travel in Europe as lockdown restrictions ease is boosting demand to move Middle East gasoil to Europe, while demand for feedstock naphtha from petrochemicals units is supporting eastbound freight.
In petrochemicals, negotiations for September Asia contracts for paraxylene and benzene are expected to begin this week.
And finally in metals, seaborne iron ore prices hit a 6-year high of more than $120/mt delivered to China last week, but could come under pressure this week if Chinese steelmakers are unable to pass on the higher costs.
In Japan, aluminum buyers will start to negotiate Q4 term premiums with suppliers this week. Buyers are expected to point to high aluminum port stocks and try to negotiate premiums below $80/mt for the next quarter.
Thanks for kicking off your Monday with us. Have a great week ahead!