On this week's S&P Global Commodity Insights' Market Movers Asia with Vandana Sebastian: China's manufacturing activity in June expanded for the first time in three months, indicating continuing improvement in steel demand (00:14)
Other highlights from Asia's commodity markets:
*Asian ethylene sentiment remains bearish (00:50)
*Monsoon hits India's methanol demand (01:33)
*Grain markets eye Egypt's wheat purchase program (02:16)
*Renewable energy carbon market sees no bids (02:53)
This week: Ethylene prices in Asia are falling amid selling pressure, grain markets will pay close attention to Egypt's wheat purchase program, and the renewable energy carbon credit market is expected to be bearish.
But first, China's manufacturing activity in June expanded for the first time in three months, indicating continuing improvement in steel demand. Flat steel demand has been rising in China but remains insufficient to ease the glut in steel markets. Markets will continue to keep an eye on the pace of China's steel output cuts. The production cuts along with expectations of rising manufacturing activity are expected to stabilize steel prices.
China's demand for low-calorific value coal may also see an uptick amid a resurgence in power demand.
In petrochemicals, there are very few active ethylene buyers in Northeast Asia because of tight inventory space. Buyers from Southeast Asia are expressing interest in spot cargoes amid falling prices in Northeast Asia but are restricted by the lack of vessel availability. Selling pressure, however, remains high as cargoes remain plentiful. Prices in the import and Chinese domestic markets have fallen, adding to the stress. Naphtha-fed steam crackers in the region are likely to remain under pressure from poor production margins as ethylene prices are falling but naphtha prices remain volatile.
Staying with petrochemicals, India's methanol consumption in July is expected to be capped as the monsoon season slows demand from downstream formaldehyde producers. This comes at a time when incoming flows from several origins, including Russia, Venezuela and Iran may boost supplies. However, the steep fall in the Indian rupee is likely to keep traders cautious.
In Asian gasoline-related markets, such as xylene and toluene, the impact of high gasoline demand is expected to reduce going forward. Robust gasoline demand ahead of the summer driving season has been the main driver of strong gasoline margins this season.
In agriculture, grain markets are closely watching Egypt's wheat purchase program for marketing year 2022-23. Egypt has plans to purchase about 180,000 metric tons of wheat from India in the coming months. However, Egypt's plan to extract more flour from wheat by raising the extraction percentage could reduce its potential wheat imports.
That brings us to our social media question for the week: Will Egypt's plan to extract more flour from wheat hurt India's wheat export prospects? Share your thoughts on Twitter and LinkedIn.
And finally, the voluntary carbon market is expected to see weakness in the coming week amid lack of trading activity in the over-the-counter market. Investor sentiment has soured over concerns of recession and rising inflation hurting the economy. The renewable energy segment, which has been reeling under pressure for the past few months, is expected to see more bearishness in the months to come. Project developers and traders in Turkey, India and China have said that there are no bids in the segment, especially in hydro credits.
Thanks for kicking off your Monday with us. Have a great week ahead!