Commodity Tracker: 5 charts to watch this week

S&P Global Commodity Insights editors and analysts are looking at Russia's oil product exports, China's jet fuel demand and orders for methanol- and LNG-powered vessels this week. Also in focus are Northwest Europe's steel and raw materials prices as well as Thailand's tourism-driven power demand.

1. Russian fuels exports slump, shift to Africa after EU embargo

What's happening? Russian oil product exports, the target of the West's latest round of efforts to curb Moscow's oil revenues, fell by a fifth on the month in February to the lowest since May 2022. New buyers in Africa failed to absorb Russian fuels displaced from Europe, according to tanker tracking data from S&P Global Commodities at Sea(opens in a new tab). Russia-origin seaborne oil product exports averaged 2.13 million b/d in February, a 21% slump from recently elevated levels of around 2.7 million b/d in January and 24% below average pre-war levels. In terms of destinations, Europe has seen flows of Russian fuel dive(opens in a new tab) from around 1.5 million b/d in December to less than 500,000 b/d in February, the data shows, including volumes destined for unknown buyers from ship-to-ship transfers in the region. Over the same period, African buyers in Morocco, Algeria, Nigeria, Senegal, Tunisia, Ghana and Egypt doubled their Russian fuel imports to around 440,000 b/d.

What's next? With part of Europe's diesel supply shortfall now being drawn from regional stocks, markets are watching closely how Europe will replace Russian supplies in the longer term. Currently, European buyers have boosted diesel imports from the Middle East, Turkey, and the US, according to the data, to help plug the gap. Meanwhile, Russian seaborne crude exports, which remained resilient in February, could slide more sharply next month as Russia has announced a 500,000 b/d crude output cut for March in retaliation for the EU's ban and G7 price cap on seaborne imports of Russian crude.

Related content: Interactive: Global oil flow tracker(opens in a new tab)

2. Asia's aviation industry taking off in 2023 with China finally on board

What's happening? The aviation sector continues to normalize. Asia-Pacific airlines carried a total of 105.4 million international passengers in 2022, up from 17.4 million recorded in 2021, according to the Association of Asia Pacific Airlines. Preliminary traffic figures from AAPA showed that regional airlines carried a total of 17.2 million international passengers in January, more than seven times higher than the volume carried in the same month last year.

What's next? Kerosene/jet fuel is expected to be the key driver of Asia's oil demand growth(opens in a new tab) in 2023, led by the easing of travel restrictions in China. Overall, Asia's kerosene/jet fuel demand in 2023 will remain some 20% below pre-COVID levels, compared with a global average of 15% below 2019 levels. However, Asia's kerosene/jet fuel demand is expected to improve further in 2024, with the region's recovery outpacing the rest of the world.

3. Orders for methanol-, LNG-fueled ships advance to expedite green shipping

What's happening? Methanol- and LNG-fueled ships continue to gain traction as shipping's environmental regulations loom, with orders for methanol-powered ships hitting a record 22(opens in a new tab) in February, maritime classification society DNV said. Orders for methanol-fueled ships are set to rise from five in 2023 to 81 through 2028, while there are about 886 confirmed LNG-fueled ships currently, it added.

What's next? Both fuel options continue to witness robust growth despite impediments, according to industry sources. LNG offers immediate reduction of greenhouse gases while weakening LNG prices are also rekindling interest in LNG bunkering. Platts, part of S&P Global Commodity Insights, assessed the JKM(opens in a new tab) for April at $13.113/MMBtu March 6, with prices dropping to a near 20-month low that day, reflecting ready supply. Building a methanol fueled ship is less expensive, but price uncertainty lingers while green methanol availability remains a concern. Methanol Bunker Rotterdam(opens in a new tab) (LNG) was assessed at $988.4840/mt March 6, Methanol Bunker Rotterdam (Oil) at $779.3810/mt and conventional Methanol Bunker Rotterdam at $408.70/mt, Platts data showed.

4. Northwest Europe HRC-raw materials spread in Feb widens for third month

What's happening? European hot-rolled coil steel and raw materials spreads widened further in February to average Eur404/mt, as spot prices for flat steel continued to rise on the back of tighter production and restocking. The Northwest Europe HRC steel to raw materials spot spread widened 5.7% in February from January to a three-month high, building on increases since November. Meanwhile, higher iron ore and coking coal costs limited gains from higher steel prices.

What's next? The upturn in the monthly European HRC-raw materials spread is slowing down, after a run of earlier price increases and higher offers, as well as due to higher coking coal and iron ore costs. As more blast furnaces are restarted after idling during steel market destocking in the second half of 2022, steel prices and spreads may stabilize without stronger demand and additional factors to consider. Energy, logistics and carbon emissions costs in addition to feedstock costs may lead to narrower spreads for steel producers, depending on location and their operations. Derivatives markets March 3 indicated higher HRC, coking coal and iron ore prompt futures pricing compared with average spot prices in February. This may keep reference steel raw materials spreads tracking similar dynamics over March, with potential for wider spreads in April on higher steel and lower raw materials prices.

5. Thailand's booming tourism industry will increase power demand

What's happening? Thailand expects more than 30 million international visitor arrivals in 2023 from only 11 million in 2022. The projection will not bring Thailand's tourism industry back to pre-pandemic levels this year, but the rapid recovery will create an increase in power demand.

What's next? Gas-fired power generation will meet most of the increase in Thailand's power demand(opens in a new tab), and should average 14.1 aGW for May through September, which is an increase of 1.2 aGW on the year. There should also be a small year-on-year increase in coal-fired power generation to average 4.4 aGW for the five months, but utilization of coal-fired power plants was already at 74% in 2022 and leaves little room for increase. Both imports and output from domestic hydro power plants could show small declines for the period with the La Niña weather phenomenon likely to end by Q1.

Reporting and analysis by Robert Perkins, JY Lim, Kang Wu, Surabhi Sahu, Hector Forster and Andre Lambine