Commodity Tracker: 5 charts to watch this week
The ongoing outbreak of coronavirus, known officially as COVID-19, continues to dominate commodity and energy market developments, as illustrated by this week’s pick of charts from S&P Global Platts news editors. Plus, key trends in EU and US electricity markets.
1. COVID-19 stalls Chinese workers’ return to manufacturing centers…
What’s happening? China’s coastal provinces are heavily dependent on migrant labour from other provinces. Every year millions of these migrant workers go home for the Lunar New Year, travelling back to the coastal cities when the holiday ends. They go back to jobs on construction sites, in factories and across the service sector. This year the annual migration has stalled due the coronavirus (COVID-19) outbreak, as shown by data from Chinese technology company Baidu. Movement of people into the coastal province of Guangdong after the lunar new year is way down compared to last year. Guangdong is home to more industrial enterprises than another province, many of them privately owned, small and medium sized, manufacturers reliant on migrant labour. The same trend can be seen in Zhejiang and Jiangsu, two other coastal provinces with a large number of private enterprises.
What’s next? State-owned companies are less reliant on migrant labour. The State Council, China’s government, recently announced that 97% of central government-controlled petroleum and petrochemical companies had resumed work. But supply of oil products is not the issue. Demand is the problem. With so few people travelling after the new year and a lack of workers in the coastal provinces, oil demand from the transport, construction and petrochemical sectors is taking a dive. The government has to balance the drive to get people back to work, and the economy moving, with efforts to contain COVID-19 – no easy task. Look for rising levels of internal migration to indicate that China’s economy is spluttering back to life and that oil demand is back on the rise.
2. …and adds to woes for already weak LNG market
What’s happening? China is the world’s second-largest LNG importer behind Japan. Quarantines and travel restrictions imposed to restrict the spread of COVID-19 have caused a demand contraction, hitting an already oversupplied global LNG market....MUCH MORE
What’s next? The impact of the outbreak is expected to worsen in coming weeks as economic activity in key manufacturing hubs struggles to rebound, keeping a lid on natural gas demand and triggering more LNG trade flow disruptions. As the previous item shows, travel restrictions were still preventing millions of industry employees in China from returning to work in the week ending February 14 and factories expected only partial production restarts, with some delaying a return to operations until late February or early March....
