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Market Movers

Market Movers, Feb 20-24: China coal policy changes, methanol supply constraints, LNG tender interest

With Kenneth Foo

February 20, 2017 09:00:37 EST (3:24)

Have non-OPEC countries been as compliant as OPEC members as far as the oil output cut agreement is concerned? Will China reinstate its 276 working day policy for thermal and metallurgical coal mines? And will the methanol market's supply woes continue? Editor Kenneth Foo looks at this and other factors that could drive commodity markets this week.

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Video Transcript

Market Movers, Feb 20-24: China coal policy changes, methanol supply constraints, LNG tender interest

By Kenneth Foo, Associate Editor, Steel Raw Materials, Asia

Welcome to Platts Market Movers, your three-minute look at what the week ahead holds for the Asian commodity markets.

Spotlight: China’s coal policy changes, methanol’s supply constraints and LNG’s tender interest

The key highlights this week: China’s coal policy changes, methanol’s supply constraints and LNG’s tender interest.

But first, in oil, the committee, created to monitor and enforce November’s OPEC/non-OPEC deal cutting 1.8 million barrels a day, will meet in Vienna on Tuesday and Wednesday. The oil market has been pleasantly surprised by the high level of compliance by OPEC members with the deal. This meeting of technical experts could shed light on how compliant non-OPEC members have been.

Further clarity expected for China’s coal supply policy

This week, all eyes will also be on China’s National Development and Reform Commission and its next policy steps. The temporary relaxation in policy to 330 working days from 276 for thermal and metallurgical coal mines late last year sent prices plummeting from multi-year highs.

Australian thermal cargo prices stabilized last week on unconfirmed reports that Beijing will reinstate its 276-day policy. Prices could strengthen if an official announcement confirms this.

For our big question this week: Will China’s NDRC reverse its policy to276 working days for coal mines? Join our poll on Twitter and share your thoughts.

Methanol supply strangled by Iran, Oman cuts

In petrochemicals, methanol surged to an almost 3-year high in China last week. This was due to plant shutdowns in Iran and Oman. This week, we expect supply woes to continue.

Iran’s cold weather could divert natural gas to meet household heating demand. The Zagros methanol plant is responsible for more than half of Iran’s supply. Its operating rate is expected to drop to about 25% of capacity. Last week, it was operating at 50% of capacity.

Moving on to metals, Japan’s second quarter aluminum premium negotiations are likely to begin with producers starting contact with buyers. The Q2 talks may affect spot prices that have been range-bound since December.

Iron ore could slip below $90/dmt on China sintering cuts

Elsewhere, sintering and output restrictions next week ahead of China's National People's Congress meeting in March could hit iron ore demand and threaten to knock prices off two-and-a-half year highs.

Asia LNG: Robust March tender demand

Next, In LNG, demand continues this week for prompt March cargoes among buyers in the Middle East and India. These tenders issued by India’s Gail and Kuwait’s KPC are providing support to the market and could pressure other buyers to return earlier to meet requirements.

China customs data to shed light on Asian Ethanol trade

Look out for Chinese customs data this week. In the case of ethanol, this will be the first monthly data since China increased import tariffs on denatured ethanol from 5% to 30%. It will be interesting to see whether this will change ethanol trade routes in Asia.

Finally, in wheat, a force majeure in Western Australia is expected to be lifted this week. This is likely to see prices stabilize.

Send us your views on Twitter with the hashtag PlattsMarketMovers. Thanks for kicking off your Monday with us and have a great week ahead.

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