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- According to the Bloomberg Commodity Spot index, following optimistic prospects for the world’s economy, commodity prices have risen to a 3-year high.
- Analysts have highlighted that the strongest manufacturing since the financial crisis has helped by boosting demand for commodities ranging from crude oil to precious metals.
- Markit’s global survey of manufacturing activity rose to a near 7-year high last month, indicating it is likely that 2018 could be yet another strong year of growth.
- Based on figures from the Society of Motor Manufacturers and Traders (SMMT), the sale of new UK ca rs has dropped for the first time in 6 years with the demand for diesel cars suffered the most dropping by almost a fifth.
- Experts are warning that China’s ban on the importing of 24 different types of waste is likely to lead to the stockpiling of waste in waste-exporting countries, and an increase in the volume of waste being incinerated or sent to landfill. The waste ban has been put in place in an effort to improve Chinese industries and environment, and includes a ban on various plastics and unsorted papers from Britain.
- According to the Climate Change Performance Index (CCPI), the UK is the fifth best performing country in terms of environmental practices and behaviours affecting climate change. The CPPI assesses the green performance of 56 countries as well as the EU as a whole by looking at greenhouse gas emissions, energy efficiency credentials and renewable energy output, and incorporating this with the opinions of 300 climate experts from around the world.
- Thanks to generous subsidies, sales of electric and hybrid cars rose to above half (52%) of new registrations in Norway in 2017, compared to 40% in 2016. In Norway, electric cars are exempt from almost all taxes and have access to grants that could be worth thousands of dollars per year in terms of free or subsidised parking, re-charging and the use of toll roads, ferries and tunnels.
- Cocoa, coffee and sugar futures all ended 2017 lower than at the start of the year. On the back of excess suppliers, cocoa, sugar and coffee ended the year 20%, 22% and 20% down, respectively.
- Commodity analyst Green Pool has raised its forecast for a global sugar surplus in the 2017/17 season from 9.80m to 10.43m tonnes as a result of increasing production outpacing increasing demand. If the 10.43m tonnes surplus materialises, this would be the first double-digit deficit since 2012/13.
- According to Reuters, Brazil’s 2017/18 soybean crop, which farmers are now beginning to harvest, is the second largest in history. The crop is expected to surpass 110m tonnes thanks to good weather in the world’s largest soybean exporter.
- Agricultural meteorologists have warned that a cold snap on New Years Day in the southern US Plains poses a threat to winter wheat, especially in Kansas, the US’s largest producer. Supplies of hard red winter (HRW) wheat, which is grown by farmers in Kansas, are already scarce due to low protein levels in the previous 2 harvests.
- The abnormally cold temperatures in the US sent US agricultural markets upwards as concerns over crop damage and delayed exports heighten.
- The Gulf Coast is the US’s largest grain exporting region and the US’s largest outlet for grains struggled to obtain barges of corn and soybeans following two-weeks of sub-freezing temperatures which froze the Illinois River, a major grain barge shipping waterway.
- Red hard wheat prices reached a six-week high (front-month contract traded at $4.39-1/2 a bushel) as a result of freeze-damage, and cattle prices hit 7-week highs (front-month contract traded at $1.2295/lb) due to slowed beef cattle production at feedlots.
- Fruit and vegetable prices in many of China’s major central and northern cities have surged following severe winter weather which cut off highways and damaged crops.
- Parts of major highways were blocked and there have been instances of vegetable greenhouses collapsing under the weight of snow.
- Prices for vegetables including cabbages and lettuces have more than doubled in some places over the past week.
- Japan’s steel output for the next business year starting April 2018 is expected to rise slightly from the current year due to firm domestic and foreign demand. The chairman of the Japan Iron and Steel Federation hopes that crude steel output will exceed 10.6m tonnes next year.
- Having fulfilled its 2017 target of reducing steel capacity by 50m tonnes in 2017, China’s Ministry of Industry and Information Technology has announced that China will continue to cut existing steel capacity and ban the launch of any new steelmaking facilities in 2018. China is the world’s largest steelmaking country and is also on track to prematurely meet its 2016-2020 capacity cut back target of 150m tonnes.
- China’s Industry and Information Technology Ministry has issued new guidelines restricting the replacement of obsolete steel mill capacity, pushing SHFE steel futures upwards.
- The ministry announced that for every 1.25 tonnes closed in key regions, it would allow 1 tonne of new capacity to be built.
- The announcement reinforces signs that Beijing is deepening efforts to cut capacity and prevent it from increasing.
- Data from the Ukraine’s steel producer’s union indicates that Ukrainian steel production fell 12% last year.
- The Australian government is forecasting a 20% drop in iron ore prices for 2018.
- The Australian Office of the Chief Economist forecasts that the price of iron ore will fall to $51.50 by the end of this year as a result of growing supply from low-cost Australian and Brazilian producers and moderating demand from China as a result of easing steel production.
- This view however contrasts with private forecasts including that of Swiss bank UBS which forecasts that iron ore prices will remain essentially level from 2017 at around $64 this year.
- Copper prices have climbed to their highest level in almost four years, enabling copper to achieve its best year since 2010 by finishing 2017 up more than 30% thanks to strong economic growth and robust demand from the world’s largest consumer, China. Companies including Rio Tinto and Glencore are now forecasting that there could be a lack of copper supply by as soon as the end of the decade as a result of old mines reaching the end of their lives not being replaced by new ones. LME copper for 3-month delivery is currently trading at around $7,140 a tonne.
- Following the tightening of Chinese restrictions on the importing of foreign waste, Chinese metal recyclers are starting to look at Southeast Asian countries as an alternative location for the processing of copper scrap. Although China depends on imports for around half of its scrap copper needs, it has told the World Trade Organisation (WTO) that it will stop accepting certain types of foreign solid waste.
- Trump has stressed his ambition for the US to cease being reliant on foreign supply of “critical minerals” including lithium and cobalt which are used in EV batteries, and rare earths used in magnets for wind turbines. The US president noted that reliance on foreign supply makes the US economy and military vulnerable to supply disruption from natural disasters adverse foreign government action.
- Palladium prices also hit a record high yesterday closing in on the $1,100/tr. oz benchmark on the back of a weaker USD, which makes palladium cheaper in foreign currencies, and concerns of a supply crunch. Palladium was one of last year’s best performing commodities and with strong global growth and buoyant car market achieved 60% gains in 2017.
- Zinc is the latest commodity to achieve multi-year highs with prices have reached their highest levels in 10 years.
- Zinc prices have climbed almost 90% since Glencore revealed its production cuts in October 2015.
- Zinc is commonly used to rust-proof steel and yesterday rose by $22 to $3,352 on the back of positive manufacturing data which triggered supply-shortages concerns.
- Swiss miner and commodity trader Glencore has announced it plans to restart some of its idled mines to increase its zinc output.
Energy - UK
- Centrica, the UK’s biggest energy supplier, is seeking another joint-venture partner to boost its oil and gas production business. The move reinforces market expectations that deal-making in Europe’s oil and gas industry will remain strong through 2018.
- Shell has agreed to buy First Utility, one of biggest rivals of British Gas and the other UK’s “big six” power suppliers. The deal follows a similar announcement in November when SSE and npower announced their plans to merge. It is likely that further consolidation efforts will take place over the coming months as UK suppliers prepare themselves from the government’s energy price cap which many expect will come into force by 2019.
- Ofgem are introducing some changes which come into effect on April 1st, 2018 for how electricity is billed in the UK. These include:
- Ensuring any half-hourly (HH) meter is billed fairly and correctly for its available capacity (kVA) in an effort to help Distribution Network Operators (DNOs) balance network usage.
- Changing the way in which distribution charges (which make up around 19% of your electricity bill) are calculated and the way in which business pay bills.
- The government is making some changes via Minimum Energy Efficiency Standards (MEES).
- MEES is a set of legal requirements aimed at improving the energy efficiency of commercially-rented properties across England and Wales.
- As of April 1st, MEES will make it unlawful to agree a new lease for a commercial property with an EPC rating of F or G (applicable also to all existing tenancies on 1st April 2020, and then 1st April 2023 for all privately rented properties.
- Altho ugh MEES will apply to most properties, properties exempt from needing an EPC, such as Liste d buildings, will not need to meet MEES. It also will not apply to short lettings of 6 months or less, and lettings over 99 years.
- The UK government’s Department for Business, Energy and Industrial Strategy (BEIS) has set a “hard” date and limit for the phase-out of unabated coal-fired power plants. The department has announced that as of the 1st of October 2025 all coal-fired plants which do not have carbon capture technology fitted to them which limit carbon emissions to 450g of CO2 for each kWh of electricity produced, will be closed.
- According to a new government report, Wales generated 43% of its electricity through renewables in 2016, up nearly a third from 2016.
- According to analysis by Carbon Brief, over half of the electricity generated in the UK in 2017 came from low-carbon sources. The report also found that wing generation supplied twice as much energy as coal with renewables and nuclear providing more electricity than all fossil fuels combined.
Energy - International
- The International Energy Agency (IEA) has warned that US shale production will lead to non-OPEC production growing faster than expected next year, delaying the “rebalancing” of supply and demand until late 2018. The warning follows a pickup in US drilling and completion rates with prices rebounding over the past few weeks.
- Brent has rose to above $68/bbl for the first time since 2015 last week on the back of increasing Iranian political tensions, strong global economic growth and OPEC-led production cuts. Brent has now risen by more than 50% in less than 6-months.
- Trump’s administration is seeking to make about 90% of US coastal waters available for oil and gas drilling, a move which is likely to instigate a vicious debate between oil companies, politicians and environmentalists. The move reflects Trump’s pro-fossil fuel policies and his belief in the importance of reducing US dependence on foreign supply, and is yet another snub to Obama’s pro-environment legacy. Waters off the coast of Florida, California and Alaska could all be impacted.
- Despite crude prices moving upwards supported by a sharp cut in inventories, a larger-than-expected increase in US gasoline and distillate inventories has dragged gasoline prices lower. Energy Information Administration (EIA) data shows that crude inventory levels fell by over 2m barrels more than expected, whilst gasoline inventories increased by 4.8m barrels compared to the less than 0.5m barrel increase expected.
- Rystad Energy has predicted that the US is to become the world’s largest oil producer, overtaking the current top producers Russia and Saudi Arabia for the first time since 1975. Rystad Energy predicts that shale oil output from fracking could increase US production by a tenth this year alone, bringing the US’s output of oil to nearly 11m barrels a day.
- Cold temperatures across North America have resulted in a record high demand for natural gas. The surge in demand has however done little to US gas prices, with the supply from shale rock being able to compensate for the increase in supply. New Year’s Day saw temperatures in the 48 contiguous US states (excluding Hawaii or Alaska) experience their coldest day of this century, sending total gas demand to 140bn cubic feet. Despite this and the forecasted prolonged cold spell, has price rises have remained modest.
- According to Navigant Research, thanks to the falling costs for renewable energy and battery projects, the total revenue for the energy storage and renewable integration (ESRI) sector will be more than $23bn by 2026. Utility-scale and behind-the-meter applications are expected to achieve the strongest growth.
- According to data from the Centre for Solar Energy and Hydrogen Research Baden-Württemberg (ZSW) and the German Federal Association of Energy and Water Management (BDEW), over 36%, around 217bn kWh, of gross German electricity consumption last year came from renewables. That is a 4.4% increase from the 188bn kWh of renewable electricity consumed in 2016.
- The latest data from Russian Gazprom shows that exports of Russian gas to Europe and Turkey hit an all-time high in 2017, increasing over 8% to 193.9bcm. The increase comes despite EU efforts to cut its reliance on Russian energy following Russia’s annexation of Crimea from Ukraine in 2014.
- Asian benchmark thermal coal prices have hit their highest levels since late-2016 as a result of demand in China and loading delays in Indonesia which have resulted in a ramp up in shipping congestion outside major ports.
- Australian Newcastle coal spot prices have risen by nearly 15% from late-November 2017 lows following a loosening of Chinese import restrictions.
- The IEA however forecasts that global coal demand is likely to be subdued over the next 5 years, growing just 0.5% per year, as a result of lower demand from China and the continued surge in renewables and efficiency improvements.
- China, the world’s largest producer of coal, has announced its target of creating several “super-large” coal mining companies by the end of 2020, and slash outdated capacity. The announcement follows years of effort to streamline what has to date been a fragmented industry sector. China’s National Development and Reform Commission (NDRC) stated that these new companies will each have the capacity to produce 100m tonnes of coal per year.