Market Movers Asia, May 9-13: Heatwave in India weighs on wheat production and fuels coal demand

This week: Strong power demand in India is expected to support Indonesian thermal coal prices, Asia-Pacific LNG spot trading activity may increase as participants return from holidays, and it is likely that a heat wave affects India’s wheat production.

But first, crude oil and middle distillates traders are eyeing refinery operations in Thailand and Indonesia and increased travel is expected to boost demand for transportation fuel. Thai refiners plan to actively buy spot cargoes of crude oil to supplement their overall feedstock consumption to accommodate increasing refinery operating rates. Southeast Asia’s second-largest economy expects domestic fuel demand to rise rapidly with its tourism industry poised to make a stellar recovery. Thailand imported 2.34 million barrels per day of crude oil in March, almost three times as much year on year.

Thailand has announced intentions to end pre-arrival testing for guests arriving on May 1. Thailand’s Tourism Authority said the country aims to attract at least 1 million tourists per month by the end of 2022. S&P Global Commodity Insights estimated that Thailand’s gasoline demand would rise to around 192,000 barrels per day for the season. summer vacation in July.

Indonesian state-run Pertamina also said it would reassess the outlook for domestic fuel demand and the production plan for transportation fuel at its main Cilacap refinery. Major cities and tourist spots in the country, including Bali, have reopened to international flights.

Next, in the Asian thermal coal market, maritime demand from India is likely to support Indonesian thermal coal prices as the world’s second largest importer of the fuel faces a severe stockpile crisis. With temperatures rising to 100-year highs, the surge in energy demand prompted the Indian government to order states to speed up imports for May deliveries.

Therefore, the market expects a healthy demand for low hp Indonesian coal even though China, a major buyer, is seeing its demand reduced due to coronavirus restrictions. Australian high ash coal prices are also expected to remain resilient due to tight supply and continued market demand from Japan, Korea and Taiwan.

Turning to agriculture, global wheat markets are watching India as a severe heatwave is likely to affect its wheat production and export prospects at a time of tight global supplies. High temperatures in major growing regions have forced down expectations for the size of India’s wheat crop in the 2022-23 marketing year to around 105 million metric tons, according to an Agriculture Ministry official. This is lower than the latest government estimates of around 111 million metric tons.

A drop in production could limit India’s export potential. The development comes at a crucial time when Egypt, the world’s largest wheat importer, is looking to secure supplies from India. Influenced by unfavorable weather, India’s wheat exports could drop to 9m-10m metric tons from an earlier estimate of 11m-12m metric tons.

That brings us to our social media question for the week: Do you think India’s wheat exports will be able to withstand rising temperatures? Share your thoughts on Twitter and LinkedIn.

And finally, the Asia-Pacific LNG market could see increased spot trading activity this week as Chinese and Japanese companies return from their week-long vacation. Market participants will be watching for the impacts of the EU’s phased ban on Russian oil, amid expectations that replenishment demand will improve closer to the peak summer demand season. Despite limited downstream demand from North Asian end-users, market fundamentals have become more balanced in terms of interest in speedy deliveries in South and Southeast Asia.

And that’s a roundup of this week’s Market Movers Asia. Thank you for starting your Monday with us and have a wonderful week ahead!

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