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Fertilizers, Chemicals, Energy Transition, Agriculture, Renewables, Biofuel
November 04, 2024
Featuring Staff
The Russia-Ukraine war continues to impact commodities, with thermal coal in the spotlight as liquidity dries up. Brazil's ethanol import tariff limits trade with the US, and ammonia supply is being monitored due to its importance for fertilizer.
What's happening? The Russian thermal coal market, particularly for the premium grade 6,300 kcal/kg GAR, is facing a significant liquidity crisis(opens in a new tab) due to international sanctions, logistical hurdles, and dried-up financing. Since the invasion of Ukraine, Russian coal exports have shifted from European to Asian markets, with initial demand from China and India. However, as discounts have diminished and freight costs soared, Russian coal has become less attractive. Liquidity is evaporating, financial institutions are hesitant to fund new coal projects, and logistical constraints are leaving thermal coal suppliers struggling to meet demand.
What's next? The future of Russian coal exports remains uncertain as the liquidity crisis for 6,300 kcal/kg GAR thermal coal is expected to persist. With tightening profit margins and diminishing rail transport availability, Russian exporters may struggle to secure competitive pricing. In South Korea, escalating power demand may drive a temporary increase in Russian coal purchases, but this is contingent on market conditions. Without significant changes in supply chain dynamics or a revival in demand, the Russian coal industry faces a challenging road ahead.
What's next? The North-Northeast region will need to rely on regional domestic production and ethanol from other states in Brazil to cover demand until mid-April, the expected start of the Center-South 2025/26 harvest. The forward curve for the CIF Suape landed price of ethanol originating from the US Gulf Coast is pointing toward a seasonal bottom in January and February and a seasonal high during the summer months of 2025. These seasonal shifts in the price of ethanol in the US are driven by demand fluctuations for gasoline, summer-blend fuel requirements, maintenance and refinery issues and regulatory influences.
What's happening? Chemicals companies Yara and Mosaic have agreed to roll over their monthly contract price(opens in a new tab) for deliveries of ammonia to Tampa, Florida. The agreement at $560/mt CFR for November was generally expected, although some anticipated up to $10/mt movement either side. Market sources expected that the disruption from hurricanes Helene and Milton on phosphate production for Mosaic, as well as weak US domestic demand, would offset a global supply squeeze for the key nitrogen fertilizer ingredient.
What's next? Global supply is expected to increase as ammonia plants in North Africa and the Middle East return from maintenance. Market players will be keeping a close eye on domestic demand in the US for direct application, due to concerns about dry weather, particularly in the Midwest.
Reporting and analysis by Shriparna Saha, Phillip Herring, Mollie Gorman and Thales Schmidt
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