Commodity Tracker: 4 charts to watch this week

This week, S&P Global Commodity Insights editors are keeping an eye on the ripple effects of looming strikes at key Australian LNG ports on Asia's thermal coal markets. Also in focus are container volumes at key US ports ahead of the peak season, the growing battery storage capacity in the US, and the rise in China's sorbitol exports.

1. Potential tightening of Australian LNG supply could send ripple effects to Asian thermal coal market

What's happening? Thermal coal prices have remained subdued in an oversupplied market, with the Platts-assessed Australian high-ash 5,500 kcal/kg NAR grade coal price dropping from the $120-$125/mt level in February to the $85-$90/mt range since the beginning of June. But coal market players said the situation could change on the back of possible ripple effects of the current threats of worker strikes at key Australian LNG facilities. While Woodside Energy has reached an agreement in principle with workers' unions at its North West Shelf plant, Chevron's Wheatstone could still face supply disruptions. Australia's Offshore Alliance said its members will be "participating in rolling stoppages, bans and limitations" as part of its protected industrial action at Chevron's three west coast facilities from Sept. 7.

What's next? Australian LNG account for about 10% of global LNG supply. Market participants believe potential LNG supply disruptions due to looming strikes(opens in a new tab) could lead to higher demand for thermal coal in Asia if customers are forced to switch to coal for power generation. The impact would be limited in Europe as the continent has ample coal stocks.

2. Diverging port volumes point to uncertain US container peak season

What's happening? Key California ports of Los Angeles/Long Beach and Oakland showed divergent trends(opens in a new tab) as weak market fundamentals have led to volatile cargo throughput at many US ports. This comes after several months of US West Coast labor disruptions and vessel transit restrictions through the Panama Canal, compounded by a weakening demand-side picture. The Port of Los Angeles, the largest container gateway in the US, reported Aug. 23 it handled 684,291 twenty-foot equivalent containers in July, down 27% on the year. During the same period, the Port of Oakland moved 181,555 TEU, up 13% on the year.

What's next? As the US market enters the peak import season, most participants expect a muted uptick in volumes, given a weak demand-side picture. After a mid-summer rally, freight rates are expected to follow in the downward trend, and rates on the key North Asia-US West Coast run have already come off 5% over the last week.

3. US battery storage capacity climbs 61% on-year in Q2

What's happening? Total battery storage capacity in the US(opens in a new tab) rose 61% year on year to 12.689 GW by end-Q2. Only about 50% of the expected facilities came online in Q2, and roughly 3.5 GW is expected to be added in Q3. There was 1.931 GW of capacity added during Q2, an increase of 18% from Q1, according to an S&P Global Commodity Insights compilation of various government filings. The California Independent System Operator leads the country's in battery storage capacity at 6.314 GW, or 47.8% of total US capacity.

What's next? If all of the proposed Q3 additions are completed and connected to the grid, it would bring the US total battery storage capacity to nearly 16.2 GW, according to the data compiled. Developers in CAISO are expected to add over 2 GW, or 59.3% of all US planned additions, while the Western Electricity Coordinating Council is projected to add 843 MW. The Electric Reliability Council of Texas is proposed to be third in line with nearly 400 MW added, or 11.4% of Q2 additions.

4. China's sorbitol exports rise 45% year-on-year amid growing demand

What's happening? China's Q2 exports of sorbitol, a polyol widely used as a sweetener, rose 44% year-on-year to 41,996 mt on the back of growing demand for food and confection applications in Asia and Africa. Sorbitol is widely used as a replacement for sugar in food, candy and chewing gum, due to its low glycemic index and fewer calories. It is also used in personal care products, primarily toothpaste, as it is does not contribute to tooth decay. A growing demand for the manufacture of personal care products from CIS countries and Baltic States, especially Russia, has also driven demand for China's sorbitol. The average Chinese export price of D-Glucitol (Sorbitol) was recorded at Yuan 0.90/kg ($0.12/kg) in July, up by 3.7% year on year, according to data from S&P Global.

What's next? Exports are expected to be high throughout 2023(opens in a new tab), but prices will remain relatively stable due to overcapacity of producers. Consumption of sorbitol in the Southeast Asia, Middle East and Africa is projected to have average annual growth rates of 3.5%, 4.1%, and 3.3%, respectively, during 2023-28, according to S&P Global. With a limited number of producers within these regions, exports from China are expected to remain strong.

Reporting by Shiparna Saha, Anupam Chatterjee, David Lademan, Kassia Micek, Rocco Canonica, Mark Chooi Kim Weng