Geopolitical Tension & Global Trade

RCEP

China and 10 members of the Association of Southeast Asian Nations plus Australia, Japan, New Zealand and South Korea signed the Regional Comprehensive Economic Partnership agreement, or RCEP on Nov. 15. The new accord demonstrated Beijing's commitment of engagement in Asia-Pacific market, which is a breakthrough for multilateral trade relationships in the region. However, S&P Global Platts Analytics views the short-term impact on China oil market to be minimal.

Chinese - Australian Tensions

Growing tensions between China and Australia, which have affected bilateral trade for commodities like coal and cotton, threaten to cloud the LNG sector with Chinese importers hesitant to enter new contracts with Australian LNG producers.

Australian gas exporters argue that their projects are not contingent on Chinese buyers in a growing Asian market. They also expect the new trade agreement -- the Regional Comprehensive Economic Partnership, or RCEP -- which was signed by 15 countries on Nov. 15, including the 10 ASEAN states, China, Australia, Japan, South Korea and New Zealand, to open new channels for LNG trade.

U.S. Elections

The methanol industry is watching for changes in US foreign policy under the incoming Biden administration, as well as decarbonization policies that could create new opportunities for the product as a fuel.

Methanol trade flows have been altered in recent years owing to sanctions on Iran, but a potential shift in the US stance on the country could spur increased Iranian production.

Meanwhile on the demand side, there may be limits to growth potential from traditional applications in petrochemicals and formaldehyde production. A more promising outlet for the future could be the shipping sector, which is seeking out alternative fuels to lower emissions.

Meat & Agriculture

The sanitary standards of meat supply chains are back in focus after the Chinese government found evidence of SARS-COV-2 on packaged beef shipped from Brazil, Reuters reports. The shipment, linked to Marfrig, had been completed in August but had only recently been tested before use. That follows earlier Chinese restrictions on imports of poultry by Aurora in Brazil as outlined in Panjiva’s research of Aug. 20.

Panjiva’s data shows China was the largest consumer of Brazillian beef, accounting for 65.1% of exports in the 12 months to Sept. 30. It’s also been the fastest growing destination with exports to China from Brazil rising by 55.1% year over year in Q3’20. Shipments linked to Marfrig represented 18.7% of shipments to China and expanded by 107.2% in Q3’20 after a 220.5% increase in Q2’20. The largest supplier was JBS with growth of 17.2% in Q3 while Minerva was third with growth of 55.1%.

Solar Supply

The solar industry's growing dependence on China's autonomous Xinjiang region for a critical raw material poses mounting risks to a wide range of companies as the U.S. government moves to confront Beijing over alleged human rights abuses there.

In 2019, when solar ranked as the world's top source of new power generating capacity, about one-third of the polysilicon the industry used to make solar panels came from Xinjiang, according to Johannes Bernreuter of Bernreuter Research. China as a whole accounts for about 80% of global capacity.With polysilicon-makers boosting production in Xinjiang, Richard Winegarner, a former industry analyst who retired in late 2019, said the region is poised to become "even more important" to the solar market in the coming years.

Those deepening ties come as Washington's scrutiny of labor conditions in the region intensifies. On the heels of a U.S. government report that described rampant abuse of Uighurs and other Muslim minorities in Xinjiang, the U.S. House of Representatives passed a bill in September that would ban goods made "wholly or in part" in the region unless the producers were proven not to have used forced labor. The near-unanimous vote came a week after U.S. Customs and Border Protection ordered officers to seize certain imports from Xinjiang, including cotton and computer parts.

Oil & Gas

Iraq's federal government could wean itself off Iranian energy imports by taking advantage of gas production in the semi-autonomous Kurdistan region, a US official said Nov. 23, as OPEC's second largest oil producer continues to come under pressure from Washington to part ways with Tehran.

"The US remains a steadfast champion of Iraqi sovereignty and continues to oppose Iran's efforts to undermine it," Mark Menezes, US Deputy Secretary of Energy, told a virtual Kurdistan conference organized by the US-Iraq Business Council.

Coal

The Hydrogen Energy Supply Chain project between Australia and Japan eyes full commercial operations over the next decade and remains committed to delivering hydrogen from coal as the primary input, amid a slew of ongoing projects in Australia exploring the fuel's production from alternative feedstock, executives at this week's Australian Hydrogen Conference said.

Metals

The CIS steel industry has emerged from pandemic demand slumps relatively quickly thanks to Chinese demand and government incentives in Russia. Although further challenges lie ahead, production cuts at steel mills appear to be less severe than at their European peers.

Platts Managing Editor Laura Varriale is joined by Platts Metals Editors Katya Bouckley and Wojtek Laskowski to discuss the current shape of Russia and Ukraine's steel industry.

Further Reading