2024-06-21 07:52

SYDNEY, June 21 (Reuters) - Australia's east is facing a gas shortage after a cold snap drove up demand for heating and power while supply dipped due to an extended outage at the region's main gas plant, the energy market operator said. To help boost supply, the market operator has asked gas producers in Queensland state, which include Shell (SHEL.L) New Tab, opens new tab, Origin Energy (ORG.AX) New Tab, opens new tab and Santos (STO.AX) New Tab, opens new tab, to send gas to the southern states. The Australian Energy Market Operator (AEMO), in a notice issued late on Wednesday, warned of heightened risks of gas supply shortfalls during Australia's winter months. "The supply of gas in all or part of the east coast gas system may be inadequate to meet demand," the notice said. Gas demand has surged for power generation at the same time as heating as the weather conditions have hampered wind and solar power output, the market operator said. And demand jumped just as the main gas plant that supplies the southeastern states, Longford, jointly owned by Exxon Mobil's (XOM.N) New Tab, opens new tab Esso and Woodside Energy (WDS.AX) New Tab, opens new tab, had to cut production more than forecast for extended maintenance work, AEMO said. Esso Australia said it expected to return to full production by July 1. Australia considers gas a critical element in its transition to cleaner energy as the country moves rapidly away from its dependence on coal-fired power stations, and has been reaching new gas deals to plug the gaps in long-term supply. But the market operator has been warning about potential gas shortages, calling for urgent new investment to prevent any shortfall. East coast gas production was running at full capacity according to a statement from Australian Energy Producers, which represents firms such as Exxon and Santos. The AEMO warning underscored the need for new investment in gas supply, it added. Prime Minister Anthony Albanese said Energy Minister Chris Bowen would work with the AEMO and the energy industry to manage gas supply. The market operator held talks with the gas industry on Thursday, an AEMO spokesperson said. "We will work those issues through with AEMO ... this is not the first time that has been declared," Albanese told ABC television, but said the country does need more gas in the east. Australia produces far more gas than it needs to meet its domestic demands, but most supply is contracted for export. Sign up here. https://www.reuters.com/business/energy/australias-east-faces-immediate-gas-shortage-amid-cold-snap-outage-2024-06-21/

2024-06-21 07:45

SHANGHAI/SINGAPORE, June 21 (Reuters) - A sliding yuan and extensive outflows of cash from the mainland into Hong Kong show China's domestic investors are shelving expectations for any immediate recovery in their home markets and fleeing to the closest better-yielding assets. The yuan has dropped to seven-month lows this week, alongside a reversal in equity investment flows into China. Analysts said Hong Kong's stockpile of yuan deposits has also grown as mainland investors use their limited offshore investment channels to seek higher yields and companies prepare to pay annual dividends, adding to the pressure on the currency. "Sentiment on China soured over the past month as the market has rallied ahead of improvement in macro data which continues to disappoint," said Gary Tan, a Singapore-based portfolio manager at Allspring Global Investments. Tan, whose funds are underweight on Chinese stocks, said sentiment had come a long way from a time when mainland markets were considered "uninvestible", however, and he expected that would improve further. But investor patience has worn thin after months of waiting for authorities to roll out more stimulus, mainly to support a sinking property sector. The Shanghai benchmark stock index (.SSEC) New Tab, opens new tab rose 20% between early February and mid-May but is down 6% since. Foreigners who had returned to the market since February, after quitting in 2023, have turned sellers too this month, pulling out 33 billion yuan ($4.54 billion) via the northbound leg of the Stock Connect Scheme. Domestic investors have used the southbound leg to pump 129 billion yuan into Hong Kong. Analysts say investors have several reasons to pause and reflect, not just about how far the People's Bank of China will ease rates, but also on the approaching July plenum of China's Communist Party to shape economic and fiscal policy. Chi Lo, senior market strategist for Asia-Pacific at BNP Paribas Asset Management, said foreign funds, though now positioned neutral on Chinese stocks, are turning positive. "Beijing is likely to keep the easing measures more progressive than they were in the 18 months, in my view, and the plenum will likely reiterate that policy direction," Lo said. The PBOC's daily guidance for the yuan , which it manages in a tight band, is stirring speculation that the authorities are allowing some depreciation to manage the pressure. The yuan is down 2.2% against the dollar so far this year. PULL AND PUSH INTO HK As mainland cash floods into Hong Kong, yuan deposits in the financial hub are at record levels, with latest official data for April showing they stand at 1.09 trillion yuan ($150 billion), close to peaks last seen in January 2022. Ju Wang, head of Greater China currency and rates strategy at BNP Paribas, said mainland investors were thronging Hong Kong for better returns on offshore yuan , given low yields at home and expectations for further easing. Persistent southbound flows and the traditional June-July transfers by Chinese firms to finance their dividend payments in Hong Kong had also led to selling of the offshore yuan and demand for Hong Kong dollars, she said. Since early May, the CNH has fallen 1.9% against the Hong Kong dollar . Also drawing money into Hong Kong is the expectation of peaking U.S. dollar rates as the Federal Reserve prepares to ease policy, which, by virtue of the Hong Kong dollar's peg, will affect its economy too. "U.S. rate cuts are very important for Hong Kong's liquidity because of the currency peg, so once the Fed starts cutting rates, I think we will be flush with liquidity here, which will push up asset prices,” said BNP Asset Management's Lo. ($1=7.2610 Chinese yuan renminbi) Sign up here. https://www.reuters.com/markets/currencies/cash-is-leaving-china-again-pressuring-yuan-2024-06-21/

2024-06-21 07:44

JINAN, China, June 21 (Reuters) - After weeks of scorching heat and little rain, farmer Zhang Yunjing had no choice but to collect water from a wastewater pipe to irrigate her parched corn field in China's eastern Shandong province. Zhang would normally use water from a nearby river for the half hectare (1.24 acre) field, but it dried up a month ago. Record high temperatures have swept across northwest and east China, a key grain producing region, during the crucial corn sowing season, threatening to curb production in the world's second-largest producer and consumer of the grain. "There is no water," Zhang said. "Look, people are going to other villages to collect water. Seeds are not sprouting without water." China, also the world's No. 1 corn importer, produced a record 288.8 million metric tons last year and aims to grow more to achieve food security, but climate shocks are posing big challenges. The agriculture ministry warned this week that the drought is impacting the sowing and growth of new crops. Beijing has allocated 443 million yuan ($61.1 million) for drought prevention work such as watering, replanting and adding fertiliser in seven provinces. Lower grain output in the world's top cereal importer will encourage higher purchases from exporters such as Brazil, the United States and Argentina, underpinning global prices and food inflation. The seven, drought-hit provinces account for roughly 35% of China's corn production, although some areas are likely to escape severe damage because they have irrigation capacity. The heat hit Shandong, a major agricultural province, just as farmers were wrapping up their wheat harvest, damaging some of the ripened grain. Shandong has planted over 3.32 million hectares of corn so far this season, as well as 78,000 hectares of corn and soybean intercrop planting. That compares with 3.29 million hectares of corn and 79,933 hectares of intercrop planted by the same time last year. Near the capital Jinan, farmers are finding ways to mitigate the drought as they start to sow corn. Some growers told Reuters that they are delaying planting to avoid the gruelling heat but still expect a poor harvest this year. Despite pushing back his corn sowing from June 5 to June 20, Chen Fuling said his seeds will struggle to sprout due to the dry soil. "We will not have a good harvest this year," he said. Some seedlings that have sprouted are showing signs of heat stress. "There was no water in the river. I can only mix pesticide with tap water," another farmer Wang Cuiping said. China's emergency management ministry has asked people in the drought-hit regions, including northwestern Shaanxi, northern Hebei and Shanxi, eastern Anhui and Shandong as well as central Henan, to protect water and food production. Analysts said the drought, if prolonged, will impact freshly emerged seedlings, but a bigger concern is the upcoming La Nina weather pattern which typically brings heavy rain to the region and may damage crops. La Nina is expected to emerge in late summer, usually the end of September, according to China's meteorological department. The summer corn crop is typically harvested around October. "The drought did have some impact on corn planting but it is not a big problem now because the irrigation system is very effective in most areas of North China," said Rosa Wang, analyst at Shanghai-based agro-consultancy JCI. Near Zhang's farm, where many small plotholders still rely on manual watering, a group of sweat-drenched farmers braved the heat to repair a well that had been unused for over 30 years. They attempted to add a high-pressure water pump to draw water from underground. "Every year after the wheat harvest is done, it usually rains within 10 days. It has been 20 days and the rain has not fallen," Jiang Xueyuan said. "We have planted the corn too late, even after the autumn, it will not mature in time. The money for seeds and pesticides will be wasted." Sign up here. https://www.reuters.com/world/asia-pacific/severe-drought-forces-corn-farmers-chinas-east-delay-planting-2024-06-21/

2024-06-21 07:36

LONDON, June 21 (Reuters) - The pound briefly edged up on Friday, after data showed UK retail sales beat expectations in May, offering some comfort about the resilience of the British consumer a day after the Bank of England paved the way for a possible August rate cut. A separate release on UK public finances painted a more downbeat picture, which could weigh on gilt prices and, ultimately, sterling. Sterling rose to a session high of $1.2675 shortly after the retail sales numbers, before nudging back to $1.2669, up 0.1% on the day and heading for a third weekly decline of 0.3%. The BoE on Thursday left interest rates unchanged at a 16-year high of 5.25%, as expected. Some policymakers said the decision to leave rates where they are was "finely balanced", a sign economists took to mean the prospect of a future rate cut has now moved closer. On Friday, British retail sales volumes rose 2.9% in May, rising sharply from a revised 1.8% fall in April when heavy rain kept shoppers away, the Office for National Statistics. Economists polled by Reuters had on average forecast sales volumes would increase by 1.5% on the month. Against the euro , the pound pared some losses, leaving the single European currency at 84.60 pence. Kathleen Brooks, research director at trading platform XTB, said the rise might be down to the so-called 'Taylor Swift effect' - where economic activity in numerous locations around the world has reflected the pop icon's sold out Eras tour. "The ONS said that sales rebounded after a wet April, and sales volumes grew across most sectors, with clothing and furniture sales rebounding strongly. Could this be the Taylor Swift effect, with people (including myself) splurging on new outfits ahead of her Eras tour, the UK leg of which is set to add 1 billion ($1.27 billion) to the UK economy?" she said. Separately, the ONS reported British public debt rose last month to its highest as a share of the economy since 1961, adding to the financial pressures the next government will face after an election on July 4. "Overall, the next UK government needs to keep control of public spending as the bond vigilantes are never far away," Brooks said. ($1 = 0.7904 pounds) Sign up here. https://www.reuters.com/markets/currencies/pound-gets-small-lift-retail-sales-2024-06-21/

2024-06-21 07:06

NEW DELHI, June 21 (Reuters) - ArcelorMittal's India joint venture has privately warned trade officials in New Delhi that a plan to curb imports of a key raw material for steelmaking overlooks the implications of the Red Sea crisis, a letter showed. The curbs planned by the world's second-biggest producer of crude steel could hit output, as they cap New Tab, opens new tab imports of a steelmaking fuel, low ash metallurgical coke, also known as met coke, at 2.85 million metric tons for a year. The April proposal, which came after growing shipments caused "serious injury" to domestic producers, also recommended setting quotas on met coke for exporting nations. "India should not close its eyes to the geopolitical situation and implement a measure that may adversely affect its steel industry," the company told the directorate general of trade remedies (DGTR) in the June 3 letter, seen by Reuters. Quotas envisioned for European countries under the plan "will very seriously affect" imports from the region, it added. The company, India's commerce ministry and the trade remedies body did not respond to requests for comment. No date has yet been set for the proposal, now being reviewed by the commerce ministry, to take effect. India's plan to allot about 40% import quota to European nations will affect ArcelorMittal Nippon Steel India (AM/NS India) as the Red Sea crisis has already forced rerouting of vessels, and boosted ocean shipping rates, the company said. The company does not use domestic met coke. India's imports of the fuel have more than doubled over the past four years, and its top suppliers include Poland and Switzerland, as well as China and Indonesia. Attacks on ships in the Red Sea by Yemen's Iran-aligned Houthi militants are disrupting trade, with freight firms switching to routes around the Cape of Good Hope to avoid the Suez Canal. India must reconsider the proposal as it could hit the steel industry, the company, which has not commented on the matter publicly, urged in its letter. This month, Reuters reported that India's steel ministry also did not favour limits on imports of met coke, citing risks to domestic output. In its letter, AM/NS India said authorities proposing the curbs did not factor in the prospect of increased demand for met coke as steelmakers plan to add capacity. "The quantiative restraint on imports will reduce the ability for the steel industry to raise its capacity and growth levels," it added. One of India's leading steelmakers, with annual capacity of about 9 million metric tons, AM/NS India competes with JSW Steel Ltd (JSTL.NS) New Tab, opens new tab and Tata Steel Ltd (TISC.NS) New Tab, opens new tab. Sign up here. https://www.reuters.com/markets/commodities/steelmaker-arcelor-nippon-says-indias-plan-raw-material-curbs-ignores-red-sea-2024-06-21/

2024-06-21 07:03

Japan's economy recovering moderately, though with some weakness BOJ sticks to view underlying inflation to gradually accelerate Uchida says BOJ's bond taper size will be 'significant' BOJ to hold meetings with bond market players July 9-10 TOKYO, June 21 (Reuters) - Bank of Japan Deputy Governor Shinichi Uchida said on Friday the central bank will "adjust the degree of monetary support" if the economy and prices move in line with its forecasts, signalling readiness to raise interest rates further. "Japan's economy is recovering moderately, although there are some weak signs," Uchida said in a speech at an annual meeting of trust unions. Uchida delivered the speech on behalf of governor Kazuo Ueda. The deputy governor also said Japan's underlying inflation is likely to gradually accelerate towards the BOJ's 2% target, as rising wages and prices heighten inflation expectations. The BOJ ended eight years of negative interest rates in March and has signalled its intention to raise short-term rates further from the current range of 0-0.1%. The central bank also decided at last week's policy meeting to announce a plan in July on how to trim its huge bond buying in the coming one to two years. Uchida said the scale of the BOJ's bond tapering will be "significant," repeating a comment made by governor Ueda in last week's post-meeting news conference. The BOJ said on Friday it will hold a series of meetings with bond market participants on July 9-10 to collect their views, which will be taken into account in deciding on the taper plan at its next policy-setting meeting on July 30-31. Many market participants expect the BOJ to raise rates again some time this year, though they are divided on whether the timing could come as early as July or later in the year. The central bank has also been under pressure to embark on quantitative tightening (QT) and scale back its nearly $5 trillion balance sheet to ensure the effects of future rate hikes smoothly feed into the economy. Sign up here. https://www.reuters.com/markets/rates-bonds/boj-deputy-governor-uchida-signals-readiness-raise-rates-further-2024-06-21/