The highlights in Asia this week on S&P Global Platts Market Movers, with thermal coal associate editor Fred Wang: US and China return to negotiating table for high level talks as the flow of crude and LNG from the US to China remain under pressure, trading activities in thermal coal and petrochemicals seen picking up as China returns from its Golden Week Holiday, and eyes on the Indian Joint Plant Committee's official monthly data for cues of the industry bottoming out in September.
This week: Asian importers keep eyes peeled on Saudi Arabian crude allocations, Chinese polyester production enters critical period for winter apparels, and negotiation for Japan-Australia October thermal coal contract talks yet to reach consensus. But first, a high-level ministerial meeting between US and China is expected to take place in Washington later this week, according to media reports, in a sign that trade negotiations between the two economies could be back on track. The talks are the first high level discussions being held in several months, the tense backdrop of the talks raise concerns about a positive and timely agreement.
US-China trade relations have been volatile with the hiking of tariffs on both sides earlier this year. But tensions had eased around the anniversary celebrations and National Day holiday in China, with China exempting some US good from tariffs and the US delaying the implementation of some tariffs on China. Soybean traders will be watching for progress of the talks on fresh Chinese purchases.
Trade flows of US crude oil and LNG to China remain under pressure, however, with Beijing imposing a 5% tariff on US crude and 25% on US LNG currently. US-China energy relations have also been further complicated with the US targeting of Chinese shipping companies for transporting Iranian crudes. This has sent tanker shipping rates surging in recent weeks and disrupted Chinese crude import and chartering activities, and impacted freight rates for the whole market.
So for our social media question this week: will the US and China finally reach a consensus after the high level talks this week? Share your thoughts with the hashtag PlattsMM.
While it remains difficult to find an arbitrage for US LNG supplies to China at the moment, some US crude cargoes continue to make their way to China, partly because of the brief disruption in Saudi Arabian crude supplies.
Asian refiners will wait for Saudi Aramco's official confirmation of their allocations for November-loading term crude cargoes this week. Aramco has managed to supply most of the term volumes nominated by its Asian buyers for September and October-loading crude cargoes as it recovers from attacks on key oil facilities and replenishes stocks.
But Asian buyers are expected to continue adopting a cautious stance as it remains unclear whether the refiners will receive their full term volumes beyond November.
Aramco's ability to supply crude of the specified quality also remains uncertain.
Also this week, China returns from its Golden Week holiday, and activities in different markets are expected to pick up.
The petrochemicals market will closely monitor the sales of the polyester and textile products for cues on the demand on the entire polyester chain for the rest of the year, including upstream paraxylene, purified terephthalic acid and monoethylene glycol. The overall rate of Chinese polyester production is currently healthy at around 90%, and it is a critical period to prepare for winter apparels for year-end holidays.
Chinese participants in the Asian seaborne thermal coal market are also expected to return to the trading desk, but the market continues to keep a close watch on China's import policy.
The price of Australian 5,500 kcal/kg NAR grade of coal is expected to be range-bound as Chinese buyers are still cautious of the import curbs. Japanese-Australian October reference price for term contract shipments of Newcastle 6,300 kcal/kg GAR thermal coal have yet to be settled amid slow negotiation, market sources are expecting some Japanese spot buying for Q4 due to limited coal-to-oil switch.
And finally in metals, India's steel industry will look at the Joint Plant Committee's official monthly data for cues of the industry bottoming out in September . Market sentiment remains weak amid bearishness in the automobile and consumer durables sectors.
Thanks for kicking off your Monday with us. Have a great week ahead!