UPDATE 6-Oil markets volatile as trade conflict between U.S. and China escalates - Reuters
06-Jul-2018 03:03:02 PM
- U.S. implements tariffs on Chinese goods on Friday
- China set to take action; customs delays -sources
- Dispute comes amid increasingly tight oil market
- U.S. plans new sanctions against oil exporter Iran
- South Korea stops all orders of Iranian oil - sources
Updates prices, adds China set to take action
By Henning Gloystein
SINGAPORE, July 6 (Reuters) - Oil prices seesawed in nervous trading on Friday as the United States slapped a raft of tariffs on Chinese goods in an escalating trade war between the world's two biggest economies.
Oil prices initially fell on Friday, along with Asian stock markets.
The trade dispute between the United States and China is looming over oil markets.
Washington put the tariffs in place on Chinese goods from 12:01 a.m. Washington D.C. time (0401 GMT) on Friday.
China has said it will impose tariffs on 545 U.S. goods in return. Meanwhile, major Chinese ports have already delayed clearing goods from the United States, according to several sources.
"We're headed for an unparalleled trade conflict between the world's largest economies," said Stephen Innes, head of trading for Asia/Pacific at brokerage OANDA.
As part of the retaliatory response, Beijing has threatened a 25 percent tariff on U.S. crude imports, although it has not specified an introduction date.
American crude shipments to China are around 400,000 barrels per day (bpd), worth $1 billion a month at current prices.
Tariffs would make U.S. oil uncompetitive in China.
An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on U.S. oil imports.
He added his refinery had cancelled U.S. crude orders and would switch to Middle East or West African supplies instead.
TARIFFS, SANCTIONS & DISRUPTIONS
The potential trade war between the United States and China comes amid a tight oil market.
Energy consultancy FGE on Friday issued a warning of looming supply shortages due to U.S. sanctions against Iran, and because of disruptions elsewhere.
"Iran's exports are some 2.7 million bpd, including condensate," it noted.
Even if the U.S. government grants some waivers to allies, FGE estimated 1.7 million to 2 million bpd of crude and condensate would be cut out of markets once its sanctions are implemented.
U.S. investment bank Jefferies said on Friday it expected "a drop in Iranian exports well in excess of 1 million bpd" due to the U.S. sanctions.
Some are already reacting. South Korea, a major buyer of Iranian oil and condensate, will not lift any Iranian oil in July for the first time since August 2012, three sources familiar with the matter said on Friday.
Cutting Iran out from oil trading comes amid other disruptions.
"Venezuela ... will lose another 400,000 bpd by year-end with production going to below 1 million bpd," FGE said, adding that another 300,000 bpd of Libyan capacity was disrupted.
Although Saudi Arabia and Russia have said they would raise output to make up for disruptions, FGE said "there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya", and warned of the possibility of oil prices rising to $100 per barrel.
(Reporting by Henning Gloystein in SINGAPORE; additional reporting by Meng Meng in BEIJING; editing by Christian Schmollinger and Richard Pullin)
PRECIOUS-Gold trims losses on soft dollar after U.S. tariffs take effect - Reuters News
06-Jul-2018 03:48:26 PM
- Spot gold up 0.3 percent for the week
- Tariffs on $34 bln of Chinese goods kick in
- Investors eye China's response
- U.S. jobs data due at 1230 GMT
(Adds comment, detail; updates prices)
By Apeksha Nair and Karen Rodrigues
BENGALURU, July 6 (Reuters) - Gold prices narrowed losses on Friday as U.S. tariffs on Chinese imports weighed on the greenback, stoking fears of a full-blown trade war between the two leading economies.
China has implemented additional tariffs on some import products from the United States immediately after U.S. tariffs on $34 billion in Chinese imports took effect, state media reported.
"If the trade war escalates and then China could sell U.S. treasuries and buy gold. This would be a big event," said Helen Lau, analyst, Argonaut Securities.
Spot gold was 0.1 percent lower at $1,256.54 an ounce by 0702 GMT, having dropped to $1,252.15 earlier in the session.
The bullion was, however, headed for its first weekly gain in four.
U.S. gold futures for August delivery slipped 0.1 percent to $1,257.50 an ounce.
The dollar eased against its peers on Friday ahead of the key U.S. jobs report later in the day and investor caution prevailed in global markets with focus turning to retaliatory measures China could employ.
China has no choice but to fight back against U.S. bullying on trade, the country's Commerce Ministry said on Friday.
"Traders are extremely cautious when it comes to gold. The intraday price-action has a bullish set-up and shows that the price has potential to test the level of $1,280 in the coming days if the dollar weakness continues," ThinkMarkets chief market analyst Naeem Aslam said.
Meanwhile, U.S. central bankers discussed whether recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong, minutes of the Federal Reserve's last policy meeting on June 12-13 released on Thursday showed.
The minutes described a meeting in which the Fed raised interest rates for the second time this year. It also suggested policymakers might soon signal the central bank's rate-hiking cycle was advanced enough that policy was no longer boosting or constraining the economy.
"I take the view the Fed will take a modestly dovish line, while trade tariff uncertainties persist. Gold is oversold, so I expect it to rally somewhat while interest rate expectations soften, perhaps to one more instead of two quarter point increases this year," said Alasdair Macleod, head of research with Toronto-based Goldmoney Inc.
Among other precious metals, silver climbed 0.5 percent to $16.06 an ounce.
Palladium slipped 0.2 percent to $945.97 an ounce, while platinum gained 0.3 percent to $842.70.
All three metals were headed for their fourth straight weekly decline.
(Reporting by Apeksha Nair and Karen Rodrigues in Bengaluru, Editing by Joseph Radford and Sherry Jacob-Phillips)
UPDATE 1-Confusion as China ports delay U.S. cargoes, disrupting trade - Reuters News
06-Jul-2018 03:11:03 PM
- Customs waiting for official word on new tariffs -sources
- Punitive duties would affect $34 billion of U.S. products
- Absence of official statement sows confusion in markets
Updates with details
BEIJING, July 6 (Reuters) - Some major Chinese ports delayed clearing goods from the United States on Friday, four sources said, potentially disrupting imports worth billions of dollars as the world's top two economies head towards an outright trade war.
News of the hold-ups came as Washington imposed tariffs on $34 billion of Chinese imports from 0401 GMT on Friday.
Beijing had said it would retaliate with punitive measures on U.S. products worth a similar amount, including soybeans, pork and cotton, but it had not officially confirmed on Friday that they had taken effect.
The port of Shanghai had put on hold clearing some U.S. imports through customs, said an official at a company in the coastal city, which handles customs clearance for importers. He had spoken to customs officials.
There did not appear to be any direct guidance to hold up cargoes, but some customs departments were waiting until they had received official instructions from the central government on whether to start collecting the hefty new import tariffs on hundreds of products, the sources said.
A wine merchant in Shanghai, one of the country's busiest trading hubs, said customs brokers were also slowing the clearance process because of confusion about how and when to implement duties.
"They're holding everything ... because there's uncertainty," he said.
"But overall, this weekend they should be able to identify what the taxes are and how they should be implemented, and they should be processed as normal."
The absence of an official statement enforcing the tariffs also sowed confusion among nervous commodity traders, adding to choppy futures trading as soymeal and soybean contracts came under heavy selling pressure in afternoon trade.
A commodities trader in eastern Shandong province was told by customs at a major northern port that they have slowed the clearance of goods from the United States on Beijing's list.
Delays started at midnight local time on Thursday as agents waited for official go-ahead from the central government to enforce the new tariffs, he said.
The General Administration of Customs did not comment on the delays and said the agency will implement the tariffs as announced on Thursday.
The agency said on Thursday that tariffs on U.S. products will take effect immediately after U.S. tariffs on Chinese goods kick in.
(Reporting by Yawen Chen, Hallie Gu and Josephine Mason in BEIJING and Brenda Goh in SHANGHAI; editing by Richard Pullin)
EXPLAINER-The fallout in commodities from the U.S.-China Trade war: what's at stake - Reuters News
06-Jul-2018 03:05:00 PM
By Josephine Mason
BEIJING, July 6 (Reuters) - Washington imposed tariffs on $34 billion of Chinese imports on Friday and Beijing has said it will retaliate with punitive measures on U.S. products worth a similar amount, including soybeans, pork and cotton.
The Chinese government had not officially confirmed on Friday afternoon that the retaliatory tariffs had taken effect.
But the tit-for-tat measures have escalated the trade dispute between the world's two largest economies and the world's commodities markets are increasingly embroiled in the bust-up.
The higher U.S. tariffs went into effect just after noon in Beijing (0401 GMT).
The U.S. and China have also issued a second batch of proposed duties on $16 billion of each other's goods. These would hit U.S. energy exports, such as coal and crude oil, among other areas. It is unclear when these will come into effect.
Below is a detailed breakdown of the markets affected by the tariffs imposed and proposed:
FOOD:
* Beijing's tariffs will have the biggest impact on soybeans, the United States' top agricultural export to China in 2017 worth about $12.7 billion, hurting U.S. farmers in states, such as Iowa and Texas, which backed Republican President Donald Trump in the 2016 election.
Buying interest in U.S. beans from China, the world's top importer of the oilseed, has slowed to a trickle ahead of the tariffs, with one remaining U.S. cargo heading for China still on the water.
The vessel, Peak Pegasus, carrying 70,000 tonnes of the U.S. oilseed for state grain trader Sinograin, was due to arrive in the port of Dalian at 5:00 p.m. (0900 GMT) on Friday, just hours after the duties went into effect.
Some shipments marked for China were due to be loaded from the U.S. Pacific Northwest, and are likely to get sent elsewhere as exporters scramble to avoid paying the tariff, a U.S. trader said.
In the months ahead though, China will struggle to replace the U.S. beans, forcing processors, which crush the beans to make oil and animal feed, to pay the extra duty or find substitutes.
Rabobank reckons China may have to buy up to 15 million tonnes of U.S. beans at tariff prices. Crushers may not pass on the inflated cost at least in the short term, further eroding their already low margins, the bank said in a research note.
The biggest impact will likely be seen in sales of the next U.S. crop, which will come to market in September.
In the meantime, Brazil, the world's top exporter, will likely pick up the slack, although a trade association warned on Thursday the South American country may need to import the oilseed from the United States this year to satisfy demand from local processors.
* U.S. pork was already saddled with duties enacted in an earlier round of the trade row and now faces an extra 25 percent tariff that would raise the total charges up to 62 percent.
European pork will gain some ground over the U.S., which shipped almost $500 million worth of pork to China last year. U.S. shipments have nearly ground to a halt since the 25 percent tariffs implemented on April 2.
ENERGY:
* A record volume of U.S. crude oil is heading to China even as Beijing's planned tariffs threaten to cut off a relatively new and burgeoning business for U.S. exporters.
Nine vessels with 26.6 million barrels of crude oil loaded in Texas and Alaska and worth about $2 billion are due to land over the next five weeks, Thomson Reuters trade flow data shows.
That equates to 700,000 barrels per day, 8 percent of China's daily imports and a large volume for the United States, a newcomer to the Chinese market.
If enacted, the import duty would make U.S. oil less competitive than other crudes, likely causing a decline in Chinese purchases and forcing U.S. oil firms to find other buyers.
Amid a relatively well-supplied global oil market, energy consultancy Wood Mackenzie said the United States "would find it hard to find an alternative market that is as big as China," as Chinese buyers make up 20 percent of U.S. overseas crude sales.
China would likely replace the lost U.S. barrels from their top sellers Russia or Saudi Arabia, which have recently announced plans to raise output.
Among other energy products, China noticeably spared U.S. liquefied natural gas (LNG) exports from potential import tariffs, but in doing so, it has preserved a potential weapon should the trade war with Washington deepen.
However, coal could be caught in the crossfire if the second batch of duties are introduced.
Replacing American shipments with coal from other places would not be difficult for China, but a loss of business with the world's top importer of the fuel would hurt companies in West Virginia, a state that heavily favoured Trump in the 2016 presidential election.
(Reporting by Josephine Mason, Additional reporting by Dominique Patton in BEIJING, Karl Plume in CHICAGO and Henning Gloystein in SINGAPORE; Editing by Christian Schmollinger)
GRAINS-Soybeans tick up after hitting contract-low on U.S.-China trade war - Reuters News
06-Jul-2018 03:37:57 PM
- Wheat eases after 2-session rally on global supply woes
By Naveen Thukral
SINGAPORE, July 6 (Reuters) - U.S. new-crop soybean prices ticked higher on Friday after dropping to a contract-low earlier in the session as the trade war between the United States and top importer China escalated.
Wheat slid after two sessions of strong gains driven by concerns over adverse weather.
Chicago Board of Trade November soybeans hit a contract-low at $8.53 a bushel and the market was up 0.2 percent at $8.57-3/4 a bushel by 0718 GMT. The most-active contract hit a 10-year low of $8.42 a bushel last month.
Wheat dipped 0.2 percent to $5.04-1/2 a bushel after rising 5.3 percent in the last two sessions, while corn gave up 0.3 percent to $3.63-1/2 a bushel.
"The soybean market has largely factored in Chinese tariffs. We expect Brazilian soybeans premium to rise further when the tariffs start," said one India-based agricultural commodities analyst.
U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday, and with Beijing having vowed to respond immediately in kind, the world's two biggest economies took a high-stakes turn towards all-out trade conflict.
China is expected to raise tariffs on U.S. soybeans to a level that is expected to curb Chinese demand for U.S. shipments.
China's soymeal futures fell more than 2 percent on Friday afternoon before erasing most of the losses, amid market confusion over whether China had implemented its tariffs on soybeans and other goods from the United States.
The January soymeal contract on the Dalian Commodity Exchange fell to a low of 3,090 yuan a tonne before closing down 0.6 percent at 3,162 yuan a tonne.
Brazil, the world's largest soybean exporter, may have to import the oilseed from the United States this year to satisfy demand from local processors, an executive of exporters association Anec said on Thursday.
If China's demand for Brazilian soy rises due to the trade war with the United States, local processors may have to resort to importing 500,000 to 1 million tonnes from the United States, Luis Barbieri said at an event in Sao Paulo.
Private analytics firm Informa Economics revised upward its forecast for the U.S. 2018 corn yield to 176.0 bushels per acre (bpa), from 174.5 bpa previously, and raised its U.S. soybean yield forecast to 49.8 bpa from 49.5 bpa, the firm said on Thursday in a client note seen by Reuters.
Wheat futures have rallied sharply in the last two sessions on worries about smaller harvests from major exporters.
The European Union may harvest almost 6 million tonnes less wheat this year after hot and dry weather damaged some crops, a Reuters poll showed.
Commodity funds were net buyers of CBOT wheat and corn futures contracts on Thursday and net sellers of soybeans, soymeal and soyoil, traders said.
Trader estimates of fund activity in corn ranged from selling a net 6,000 contracts to buying a net 5,000 contracts.
GRAINS-Soybeans tick up after hitting contract-low on U.S.-China trade war - Reuters News
06-Jul-2018 03:37:57 PM
- Wheat eases after 2-session rally on global supply woes
Adds China markets, updates prices
By Naveen Thukral
SINGAPORE, July 6 (Reuters) - U.S. new-crop soybean prices ticked higher on Friday after dropping to a contract-low earlier in the session as the trade war between the United States and top importer China escalated.
Wheat slid after two sessions of strong gains driven by concerns over adverse weather.
Chicago Board of Trade November soybeans hit a contract-low at $8.53 a bushel and the market was up 0.2 percent at $8.57-3/4 a bushel by 0718 GMT. The most-active contract hit a 10-year low of $8.42 a bushel last month.
Wheat dipped 0.2 percent to $5.04-1/2 a bushel after rising 5.3 percent in the last two sessions, while corn gave up 0.3 percent to $3.63-1/2 a bushel.
"The soybean market has largely factored in Chinese tariffs. We expect Brazilian soybeans premium to rise further when the tariffs start," said one India-based agricultural commodities analyst.
U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday, and with Beijing having vowed to respond immediately in kind, the world's two biggest economies took a high-stakes turn towards all-out trade conflict.
China is expected to raise tariffs on U.S. soybeans to a level that is expected to curb Chinese demand for U.S. shipments.
China's soymeal futures fell more than 2 percent on Friday afternoon before erasing most of the losses, amid market confusion over whether China had implemented its tariffs on soybeans and other goods from the United States.
The January soymeal contract on the Dalian Commodity Exchange fell to a low of 3,090 yuan a tonne before closing down 0.6 percent at 3,162 yuan a tonne.
Brazil, the world's largest soybean exporter, may have to import the oilseed from the United States this year to satisfy demand from local processors, an executive of exporters association Anec said on Thursday.
If China's demand for Brazilian soy rises due to the trade war with the United States, local processors may have to resort to importing 500,000 to 1 million tonnes from the United States, Luis Barbieri said at an event in Sao Paulo.
Private analytics firm Informa Economics revised upward its forecast for the U.S. 2018 corn yield to 176.0 bushels per acre (bpa), from 174.5 bpa previously, and raised its U.S. soybean yield forecast to 49.8 bpa from 49.5 bpa, the firm said on Thursday in a client note seen by Reuters.
Wheat futures have rallied sharply in the last two sessions on worries about smaller harvests from major exporters.
The European Union may harvest almost 6 million tonnes less wheat this year after hot and dry weather damaged some crops, a Reuters poll showed.
Commodity funds were net buyers of CBOT wheat and corn futures contracts on Thursday and net sellers of soybeans, soymeal and soyoil, traders said.
Trader estimates of fund activity in corn ranged from selling a net 6,000 contracts to buying a net 5,000 contracts.
WRAPUP 6-As tariffs strike, U.S., China trade conflict escalates - Reuters News
06-Jul-2018 03:35:34 PM
- Tariffs take effect as U.S. deadline passes
- China says forced to respond to U.S. tariffs
- State media: Trump administration like "gang of hoodlums"
- Uncertainty over China implementation of tariffs
By Michael Martina and David Lawder
BEIJING/WASHINGTON, July 6 (Reuters) - U.S. tariffs on $34 billion in Chinese imports took effect as a deadline passed on Friday, with Beijing saying it had no choice but to respond in kind, as the two trading giants escalated a bitter row.
Hours before Washington's deadline for the tariffs to take effect, U.S. President Donald Trump upped the ante, warning that the United States may ultimately target over $500 billion worth of Chinese goods, or roughly the total amount of U.S. imports from China last year.
China's commerce ministry, in a statement shortly after the U.S. deadline passed at 0401 GMT on Friday, said that it was forced to retaliate, meaning $34 billion worth of imported U.S. goods including autos and agricultural products also faced 25 percent tariffs.
However, China stopped short of actually saying it had implemented tariffs, stirring market confusion.
"China promised to not fire the first shot, but to defend national core interests and the interests of the people it has no choice but to strike back as necessary," the Commerce Ministry said in a statement.
Some Chinese ports had delayed clearing goods from the United States, four sources said on Friday. There did not appear to be any direct instructions to hold up cargoes, but some customs departments were waiting for received official guidance on imposing added tariffs, the sources said.
Ford Motor Co said on Thursday that for now, it will not hike prices of imported Ford and higher-margin luxury Lincoln models in China.
China's commerce ministry called the U.S. actions "a violation of world trade rules" and said that it had "initiated the largest-scale trade war in economic history."
Chinese shares, which have been battered in the run-up to the tariff deadline, reversed earlier losses to close higher, but the yuan remained weaker against the dollar. Asian equities wobbled but also managed to end up.
"We can probably say that the trade war has officially started," said Chen Feixiang, professor of applied economics at Shanghai Jiaotong University's Antai Colege of Economics and Management.
"If this ends at $34 billion, it will have a marginal effect on both economies, but if it escalates to $500 billion like Trump said then it's going to have a big impact for both countries," Chen said.
'GANG OF HOODLUMS'
Trump has railed against Beijing for intellectual property theft and barriers to entry for U.S. businesses and a $375 billion U.S. trade deficit with China.
Throughout the escalating conflict, China has sought to take the high road, positioning itself as a champion of free trade, but state media ramped-up criticism of Trump on Friday.
"In effect, the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China," the state-run China Daily newspaper said in an English language editorial on Friday.
"Its unruliness looks set to have a profoundly damaging impact on the global economic landscape in the coming decades, unless countries stand together to oppose it."
While the initial volley of tariffs was not expected to have major immediate economic impact, the fear is that a prolonged battle would disrupt makers and importers of affected goods in a blow to global trade, investment and growth.
"For companies with supply exposure to tariffs, they will move sourcing country of origin if they can; if they can't, they'll pass on as much of the tariff cost as they can, or see a cut in margins," said Jacob Parker, vice president of China operations at the U.S.-China Business Council in Beijing.
"Companies don't know how big this may get, or how it will end."
A China central bank adviser said the planned U.S. import tariffs on $50 billion worth of Chinese goods - $34 billion plus a planned follow-on list worth $16 billion - will cut China's economic growth by 0.2 percentage points, although the overall impact would be limited, the official Xinhua news agency reported Friday.
The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks.
"This is not economic Armageddon. We will not have to hunt our food with pointy sticks. But it is applying the brakes to a global economy that has less durable momentum than appears to be the case," Rob Carnell, chief economist at ING, said in a note.
VALVES AND DISK DRIVES
U.S. Customs and Border Protection officials were due to collect 25 percent duties on a range of products including motor vehicles, computer disk drives, parts of pumps, valves and printers and many other industrial components.
The list avoids direct tariffs on consumer goods such as cellphones and footwear. But some products, including thermostats, are lumped into intermediate and capital goods categories.
Chinese Commerce Ministry spokesman Gao Feng said on Thursday that the proposed U.S. tariffs would hit many American and foreign companies operating in China and disrupt their supplies of components and assembly work.
Foreign companies accounted for $20 billion, or 59 percent, of the $34 billion of exports from China that would be subject to new U.S. tariffs, with U.S. firms accounting for a significant part of that 59 percent, Gao said.
China's tariffs on hundreds of U.S. goods include top exports such as soybeans, sorghum and cotton, threatening U.S. farmers in states that backed Trump in the 2016 U.S. election, such as Texas and Iowa.
(Reporting by Adam Jourdan in SHANGHAI, Michael Martina and Elias Glenn in BEIJING, David Lawder and Jeff Mason WASHINGTON; Writing by Tony Munroe;
Editing by Sam Holmes & Shri Navaratnam)
