Commodity Tracker: 5 charts to watch this week

The dynamics of the natural gas market are in the sights of the editors of S&P Global Platts this week, as European prices soar due to a variety of factors. In addition, the main trends in emissions, US gas, aluminum and coal.

1. The tightness of LNG, the lack of transit reservations in Ukraine are driving up TTF prices

What is happening? TTF prices have increased dramatically in recent months to reach levels not seen since 2008, primarily due to a prolonged winter and strong demand that pushed storage stocks down the historical range, and more recently the tightening of gas pipeline and LNG supplies. In addition, the market is now struggling to price gas outside the power sector as coal replacement prices hit new highs.

And after?The view of S&P Global Platts Analytics is that currently TTF and JKM prices above $ 11 / MMBtu and $ 13 / MMBtu respectively are not justified. Risks remain that could push Platts Analytics’ forecast for TTF and JKM even higher, but to break above the levels already considered by the market, we would need to see several major bullish factors align, including aversion. Gazprom continues to reserve Ukrainian interruptible capacity. Russian flows in July will drop considerably on maintenance work on the Yamal and Nord Stream gas entry routes, scheduled from July 6 to 10 and from July 13 to 23, cutting 78 million m3 / d and 158 million m3 / d respectively on the basis of current flows.

Infographic: TTF rally against record CO2 prices

  1. 2. EU CO2 hits new high after leaked 2030 emission reduction plans


EU carbon emissions price

What is happening? EU carbon prices hit a record high of 58.64 euros / mt on July 1, after leaked documents showed more details of the European Commission’s legislative proposals to reform the market, expected on July 1. July 14th. As expected, the draft documents showed that the EC plans to tighten annual carbon caps to align with the bloc’s new 55% emissions reduction target for 2030 within one year of the entry into force of the bloc. the new law.

And after? More volatility is likely as the market digests the implications of reforms expected ahead of the EC’s July 14 proposals. The leaked project also included plans to expand the EU’s Emissions Trading System to include maritime transport from 2023 in a 3-year phased approach and to create a new carbon market for emissions. of CO2 from road transport and buildings.

Infographic: The maritime transport sector weighs the impact of the EU ETS

  1. 3. The heat wave forecast in the United States could push Henry Hub past the latest record


NYMEX Henry Hub Award

What is happening? A rally in late June in the US natural gas market pushed the NYMEX Henry Hub prompt month futures contract up about 15% recently to over $ 3.60 / MMBtu, marking its highest level in 30 months. The summer rally was initially boosted by a heat wave that caused temperatures to rise until the mid-90s in many places, fueling demand for gas cooling. According to traders and brokers active in the futures markets, the recovery was further exaggerated by premature short selling, resulting in an increase in the purchases needed to cover the previous sales of the expiring July contract.

And after? On June 30, the U.S. National Weather Service released a revised one-month forecast for July, warning of a 60% to 70% risk of above-average temperatures in parts of the Rocky Mountains, from Pacific Northwest and many heavily populated areas. areas of New England. Historically, heat waves in July and August are generally the most severe of the summer season. As extreme weather conditions and the corresponding cooling demand push America’s reserve generating capacity to its limit, gas-fired electricity consumption becomes increasingly price inelastic – suggesting that gasoline prices Henry Hub gas will rise further, potentially exceeding $ 4 / MMBtu at some point. summer.

4. Export duties on aluminum from Russia cause prices to skyrocket in Europe


Platts European premium aluminum

What is happening? Aluminum spot premiums over the LME spot price surged in Europe during the week ending July 2, as the market reacted to the Russian government’s announcement of a tax on l export on a series of ferrous and non-ferrous metals from August 1. aluminum will have to pay a specific component of $ 254 / mt in addition to a base rate of 15%. With Russia being a key source of unpaid aluminum in Europe, the new tax is expected to dramatically increase the cost of unpaid replacement units on the continent. Imports from other regions also remain unprofitable due to high freight rates and long queues at warehouses in Asia. Before the announcement, unpaid premiums had already increased by 90.91% in 2021 due to the tightening of supply.

And after? Premiums are expected to strengthen further in Europe and increase to a lesser extent in other regions of the world. Some in the market believe that producers may seek to recoup their costs by producing less ingots and increasing the production of value-added and more income-generating products, such as billets. This would further exacerbate the tightening of supply on the European unpaid bullion market.

  1. 5. Glencore is betting on charcoal, while others look to get out


Global demand for coal

What is happening? On June 28, Glencore announced the acquisition of the stake of its two partners in the Cerrejón coal mine in Colombia, one of the largest surface thermal coal mines in the world. The sellers, Anglo American and BHP, along with many other fossil fuel producers, have targeted emission reductions through the divestiture. In contrast, Glencore has sought to acquire productive assets in the short term, while committing to a “responsibly managed decline” of its coal portfolio over the long term.

And after? While major fossil fuel producers have come under pressure to reduce their emissions, it is important to note that as long as there are buyers of fossil fuel-producing assets from companies seeking to take them off their books, the divestment strategy has set limits for the overall reduction in emissions. To meet the most ambitious global emission reduction targets (> 2 degrees,> 1.5 degrees, net-zero, etc.), fossil fuel-producing assets will likely need to be retired before the end of their useful life. , which will be more expensive than selling them to another entity. S&P Global Platts Analytics expects demand for coal, in particular, to remain fairly robust over the next several years, as demand declines in industrialized countries and their demand for imports from companies like Glencore will be offset. through growth in developing countries.

Reporting and analysis by Ornela Figurinaite, James Huckstepp, Valentina Bonetti, Samer Mosis, Luke Cottell, Frank Watson, J Robinson, William Healy and Dan Klein


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