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Market Movers Asia, Aug. 19-23: China veers from US crude as trade tension persists


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Смотреть видео: Market Movers Asia, Aug. 19-23: China veers from US crude as trade tension persists

On S&P Global Platts Market Movers this week, managing editor Jeffery Lu highlights the continuing trade spat between the Washington and Beijing, and how this has affected China's appetite for supplies of US crude and soybeans, among other commodities. Also in focus: LNG winter restocking for approaches in North Asia, steel mills hope to see improved margins if iron ore prices continue to fall, and Indonesian thermal coal prices may find price support after a major producer reportedly declared force majeure last week.

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The highlights in Asia this week: the LNG market's winter restocking approaches, iron ore price and steel mill margins in focus, and Australian thermal coal producers feel price pressure. But first, energy and commodity markets continue to keep a close watch on the US-China trade dispute that risks further escalation in coming weeks.

The Trump administration last week announced plans to delay to December 15 the imposition of new tariffs on about $156 billion worth of goods from China. Tariffs on other goods are expected to go into effect from September 1. As recently as Friday, the Chinese government reiterated that it would take measures to respond to the new tariffs on Chinese goods, which Beijing says violated a truce agreed in July.

US crude is still in the crosshairs as it remains one of the key imports that have not been targeted by China yet. But Chinese oil traders have already been avoiding purchases of US crude due to the volatile tariff situation.

Market observers said US soybean offers don't seem to spark interest in Chinese soybean buyers. The Chinese consumers are still looking to Brazil for soybean purchases to cover their near-term demand, and prices of soybeans are expected to stay firm this week on tightening Brazilian stock.

This brings us to our social media question for the week: Do you expect China to announce retaliatory tariffs anytime soon? Share your thoughts with the hashtag PlattsMM.

Moving on to LNG, market participants expect a persistent contango for forward spot prices over September-October as the winter restocking season approaches. But this contango may be limited by prompt demand from Japanese utility companies like Tohoku Electric and JERA as temperatures remain near record highs in Japan over the weekend.

In metals, steel mills will be keeping an eye on iron ore prices, which have been declining in the past few weeks. This is important for market participants to watch because continued decline could mean a change in the direction of the steel mill margins, which are already in a negative territory. S&P Global Platts published steel mill margin is currently estimated to be a negative 23 dollars per metric ton for hot rolled coil and a negative 5 dollars per metric ton for rebar.

Meanwhile, benchmark metallurgical coal prices are currently at a 2 year low, and traders will keep an eye on the Indian demand that is expected to start to come back to the market this coming week. Market participants will also watch the development of China's port-related restrictions for price directions.

The Australia FOB alumina price fell to a new low since 2017. Spot trade was thin amid the western summer holidays, and as Chinese importers shied away after the yuan broke below 7 against the US dollar. Market players will be watching if the downtrend continues this week.

And finally thermal coal, Australian producers are feeling the pressure. Spot Newcastle prices slump to their lowest since mid-2016 due to depressed demand from China and Japan. Japan is using fewer coal, and more gas and renewables for power generation, China's demand continue to be affected by reported its import restrictions. Meanwhile, reports of force majeure declared by a major Indonesian producer may support the price of coal from Kalimantan in Indonesia. Market sources said force majeure was declared after low water levels in the Kedang Kepala River in East Kalimantan affected barging.

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