Market Movers Asia, Aug 22-26: Power shortages in China disrupt metals production, keep coal demand elevated
This week, an ongoing heat wave resulting in power outages in China put ferrous and nonferrous production at risk.
Aluminum smelters, lithium producers and downstream users in Sichuan have been forced to cut production.
Steel production remains largely unaffected in China’s main hubs.
China’s hot-weather conditions are expected to keep the country’s coal demand elevated, supporting Indonesian prices.
Meanwhile, Asian buyers are likely to stay interested in high-CV Russian thermal coal as the fuel remains in deep discount to other origins.
Refiners in China are looking for discounted barrels of heavy sour arbitrage crudes amid rising demand for products such as bitumen.
Chemical product demand remains tepid, while demand looks better for residuals like bunker fuel oil or asphalt than petrochemicals or light ends like naphtha.
At current levels, many downstream buyers are unable to procure LNG on the spot market.
But expectations of a colder-than-normal winter could force players to buy more expensive volumes.
Japan and South Korea are heard to be actively looking for cargoes, amid expectations that prices could go even higher.
China-based soybean crushers will be keenly watching the upcoming US crop progress report.
Any further cut in crop ratings is expected to support prices and further weigh on Chinese crush margins.