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Market Movers

Market Movers, Mar 13-17: OPEC output data, rising freight costs, Brazilian ethanol's re-emergence in Asia

With Elizabeth Low

March 13, 2017 10:00:37 EST (3:00)

S&P Global Platts’ latest OPEC production survey pointed to 98.5% compliance. Will the market see the same number when OPEC and the International Energy Agency release their oil market reports this week? What's driving freight costs higher? And what will bring Brazilian ethanol all the way to Asia? Editor Elizabeth Low looks at this and other factors that could drive commodity markets this week.

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Video Transcript

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

The highlights: rising freight, narrowing coking coal price gaps in China and the return of Brazilian ethanol in Asia.

Updates on compliance to oil production cuts

But first, in oil: OPEC and the International Energy Agency are expected to provide updates on OPEC and non-OPEC producers’ compliance to the latest agreed production cuts in February.

S&P Global Platts’ latest survey pointed to 98.5% compliance with the cuts by OPEC. Numbers by the IEA and OPEC are expected to be similar. The Platts OPEC production survey is one of the six secondary sources that OPEC uses to monitor compliance among members.

In petrochemicals, Asia will be shipping butadiene in March to the US Gulf Coast. It's a rare reverse arbitrage, underpinned by the widening gap between Asian and US prices. Market sources believe/ that polyethylene-methanol margins in Asia are likely to remain negative in the short term given the bearish economic outlook in the region.

In agriculture, cheaper Brazilian ethanol will be looking for homes in Japan and South Korea, due to weak demand in Brazil and expectations of new crop cargoes hitting the market next month.

In freight, healthy demand for grains out of East Coast South America and higher demand for coal cargoes in the Pacific pushed freight rates higher last week. Despite new vessels being delivered and a slower pace of scrapping, the rates are expected to continue trending higher.

Higher freight in Asia

In metals, details on China's economic policy this year are expected to emerge after major political meetings conclude this week. China has set targets to reduce steel scapacity by 50 million mt, and coal by 150 mil mt. So for our big question: Do you expect China’s capacity cuts to finally have an impact on its steel output?

Speaking of steel output, here's the preliminary data from the China Iron & Steel Association. China will release final figures this week.

Rising thermal coal prices, shrinking coking coal arbitrage

In coal, Japan's Tohuku/ and Australian coal suppliers are in talks to settle the price for annual supply contracts, with the market keenly watching developments.

Meanwhile, sources have begun to take a more bearish view of the coking coal market as the price spread between China domestic and seaborne cargoes narrowed in the past two weeks. Do you expect this trend to continue?

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

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