This week: All eyes are on China’s petroleum product export quotas, China’s domestic aluminum prices are likely to remain under pressure in the near term, the onset of the monsoon is expected to create supply challenges in the Asian market for thermal coal and the capacity to export wheat. of Australian ports is in the spotlight.
But first, Market participants will be watching for the implementation of a comprehensive economic package announced by China. The set of 33 measures, aimed at getting the economy back on track, is expected to boost demand for raw materials.
China’s dynamic “COVID-zero” strategy has slowed economic activity since early March. The country’s crude output had slumped to a two-year low in April due to subsequent shutdowns. But with the government’s emphasis on improving logistics and boosting infrastructure development, traders expect a recovery in demand for jet fuel and diesel. This may boost crude oil production in the coming months.
Market participants will also watch China’s oil product exports in June, which are likely to rise to offset tight supplies in the current Asian market. They expect Beijing to release an additional 3.5 million metric tons of export quotas for gasoline, diesel and jet fuel to relieve pressure on the country’s inventory and increase crude output.
Sticking with China, all eyes remain on the pace of China’s recovery from the COVID-19 outbreaks, which has negatively affected demand for metals. May PMI data from China is expected to show a slow recovery in manufacturing activity due to the pandemic. Steel demand is expected to remain dismal at a time when supply is plentiful.
Meanwhile, China’s domestic aluminum prices will remain under pressure in the short term as production continues to outstrip downstream demand.
In coal, the onset of the monsoon may create supply challenges in the Asian thermal coal market. It remains to be seen whether Chinese buyers will again boost demand at a time when Indonesian coal prices have remained range-bound. Traders are waiting to see if the influx of cheaper Russian supplies will be enough to meet demand from Chinese buyers looking to stock up on inventory. India’s power demand is expected to weaken with the onset of the monsoon, but import demand is still seen as firm as the rains may affect domestic supply. High freight rates seen out of time have also been a drag on markets.
That brings us to the social media question of the week: Will there be a correction in Indonesian coal prices amid the absence of Chinese buyers? Share your thoughts with us on Twitter and LinkedIn.
And finally, in agriculture, grain markets are closely watching Australian wheat export potential for the remainder of the 2021-22 marketing year. The capacity of Australian ports is seen as limiting the country’s shipping potential. With India restricting wheat exports, Australia is expected to be a stable supplier, but limited logistics capacity remains a concern for buyers.
Sticking with agriculture, India, the world’s top buyer of vegetable oil, last week allowed duty-free imports of 2 million metric tons of soybean oil and sunflower oil. But traders said high prices and tight supplies could see India’s annual quota of sunflower oil imports not met. This could delay cooking oil price relief for Indian consumers.
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