Commodity Tracker: 5 charts to watch this week

Movement at the Panama Canal is in focus as restrictions are expected to affect the transit of LNG vessels from the North America to Asia. In the UK, government has increased the maximum bid price for offshore wind projects in next the auction to drum up interest in its wind program.

1. Panama Canal’s congestion could impact LNG prices more than expected this winter

What’s happening? Container ships will be given priority starting Dec. 1 over the only two booking slots LNG vessels would typically use to transit the Panama Canal. Consequently, LNG vessels would have no choice but to opt for auctions to expedite their transit, likely affecting LNG prices and demand for shipping.

What’s next? As the height of the winter demand season in Asia approaches, transits through the Panama Canal of LNG cargoes loading from the US and Trinidad and Tobago would dramatically reduce. Longer routes could result in additional LNG vessels needed to meet potential demand, which would exacerbate the current tightness in the shipping market. Additionally, Asian buyers would have to offer a premium to European LNG prices in order to attract available volumes.

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Asia faces steep competition against Europe for US LNG ahead of winter

S Korean lifters of US LNG bypassing Panama Canal amid tightening transits

Japanese lifters of US LNG weigh alternatives to Panama Canal amid tightening transits

2. UK boosts offshore wind bid limit as it scrambles to hit 2030 target

What’s happening? In an effort to revive its flagging offshore wind program, the UK government has increased the maximum bid price for offshore wind projects in next March’s Contracts for Difference renewable energy auction. Developers can bid up to GBP73/MWh ($91/MWh) — a 66% increase on this year’s bid ceiling, which failed to attract any interest at all. The government has also raised the bid ceiling for floating offshore projects, to GBP176/MWh, a 52% hike. All these prices are in 2012 money, so the actual ceilings are considerably higher when accounting for inflation.

What’s next? The UK needs these higher incentives to work. It currently has 14 GW offshore wind installed — and has a target of 50 GW by 2030, 5 GW of which is floating wind. To get there, every single megawatt of approved capacity has to be built, taking the total to around 37 GW. This still leaves considerable new capacity to be awarded in 2024 and 2025 auctions to make up the remainder. Even then, getting these massive infrastructure projects up and running in five years would be unprecedented. Look out for additional green energy incentives in the Nov. 22 Autumn Budget to bump start the revival.

3. Green hydrogen-based DRI costs remain at a premium

What’s happening? Green hydrogen-based direct-reduced iron costs remain elevated, making it necessary to secure renewable power and hydrogen supply at lower prices to support a transition to lower emission steel in Europe. DRI costs using green hydrogen have decreased since peaking in August 2022, but are still well above costs for traditional blast furnace iron ore and met coal inputs. Green hydrogen-based DRI costs in October were around double the cost of a mix of iron ore and coking coal used for pig iron, and for DRI using DR pellets and TTF natural gas prices.

What’s next? Progress with long-term power purchase agreements and government support may help cut costs for low-emissions steel. The transition to lower steel sector emissions may rely mainly on growing ferrous scrap use and expanding DRI as inputs over pig iron. DRI costs using blue hydrogen using CCS are lower than for green hydrogen with PEM electrolysis. Platts hydrogen prices track renewable power and natural gas markets costs, with potential for lower pricing under bilateral energy contracts. Platts is part of S&P Global Commodity Insights.

4. Copper concentrate TC/RCs expected to resume downtrend

What’s happening? Platts copper concentrate TC/RC assessments have been on a downtrend since October due to smelters restocking and supply disruptions. Platts clean copper concentrate treatment charge fell to $78.10/mt CIF China Nov. 20, down 18% from the peak of $95.10/mt July 31 and the lowest since March 21. Chinese smelters and Chilean miner Antofagasta settled 2024 annual contracts at $80/mt on Nov. 17, down 9% from the 2023 benchmark.

What’s next? Other copper producers and smelters are likely to follow this price. The spot market is yet to show stabilization as smelters still have appetite to buy for winter restocking, while offers are limited in both spot and term contracts markets. Traders have indicated lower offers for January shipment due to difficulties to buy clean concentrates from suppliers. The ongoing protests against a large copper mine in Panama are also adding uncertainties to 2024 supply.

5. Norwegian seafood exports value reaches all-time high in October amid high salmon prices

What’s happening? Norwegian seafood exports totaled NOK 18.4 billion ($1.72 billion) in October, an all-time high. The Norwegian Seafood Council data comes during a bumper year for the value of its seafood exports, which have shown a 19% year-on-year growth in value despite volumes remaining broadly unchanged. Salmon has been the major driver, accounting for 53% of the country’s seafood exports, with Norway representing 45% of the global salmon market. The average year-to-date price for salmon at 1-2 kg/pc FOB Norway is 10% higher year on year, according to data from S&P Global Commodity Insights. For the 9kgs/pc Norwegian salmon, the year-to-date price increase is 27% from the same period last year.

What’s next? Salmon demand is expected to decline in the coming months in favor of other fish species, as is typical during the northern hemisphere’s winter. Demand typically bottoms out in April/May. Due to high supply following the June-August fishing season and the seasonal demand slowdown, prices are expected to decline until demand revives in Q2 2024.

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S&P Global Commodity Insights Agribusiness

Reporting and analysis by Barbara Fernandez-Pita, Henry Edwardes-Evans, Hector Forster, Han Lu, Lucy Tang, Guilherme Esteves

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