Commodity Tracker: 4 charts to watch this week

The potential impact of the UAE's Port of Fujairah expansion takes the spotlight this week. S&P Global Commodity Insights editors are also keeping an eye on the battery metals and ferrous metals space. Looking at a long-term view, our analysts examine the role of natural gas in Southeast Asia's energy transition.

1. Ship fuel prices at UAE's Port of Fujairah may get boost from expansion

What's happening? The UAE's Port of Fujairah expects to serve a record number of ships this year, helping support ship fuel prices at the world's third-largest bunkering hub. The port is now considering adding more jetties(opens in a new tab) to serve liquid bulk ships, with the current setup consisting of nine main liquid bulk jetties and a VLCC jetty. One or two jetties may be added, according to the port's business development manager Martijn Heijboer.

What's next? A decision is expected by the end of 2023, with construction taking up to 18 months to complete. In the meantime, ship fuel sales are expected to be around 7.7 million cu m this year, down from 8.1 million cu m last year. Smaller surrounding ports have been chipping away at the port's bunker business, traders said.

2. Q4 outlook mixed for Asian lithium prices

What's happening?  The Q3 domestic Chinese lithium salt market was depressed on weaker-than-expected restocking demand ahead of the traditional peak season in September-October. Platts, part of S&P Global Commodity Insights, assessed lithium carbonate on a DDP China basis at Yuan 161,000/mt on Oct. 13, down 45.2% from the start of the quarter on July 3, while lithium hydroxide fell 47.2% to Yuan 150,000/mt over the same period. Consumers were heard destocking raw material or finished product inventories and buying hand-to-mouth to avoid procuring in the spot market.

What's next? The outlook for Asian lithium prices in Q4 is mixed as demand in October still reflects a subdued market. November could mark a turnaround as available chemicals supply falls further on production cuts, although the impact on lithium prices could be limited depending on consumer buying habits. Market participants also said that without a significant rebound in demand, lithium prices would not emerge from its current slump as overall fundamentals still point to a surplus market.

Related content: Metals Trade Review (opens in a new tab)

3. Atlantic contract iron ore pellet premiums slip closer to spot price

What's happening? Atlantic contract blast furnace iron ore pellet premiums have fallen toward spot premiums in China. The narrowing of the spread underlines weaker demand for pellets typically sold under contract, as narrow steel margins limited interest to use pellets to boost productivity. Weaker Q4 settlements and indications were reflected in Platts October assessment for contract premiums, tracking business in Europe, northeast Asia and South America. Contract premiums reflect higher quality pellets, compared with spot market pellets with higher alumina typically imported into China from India.

What's next? Premiums for seaborne pellets may stay in a lower range, reflecting weaker European pig iron output, and limited demand growth elsewhere expected in Q4. Pellet premiums are applied over Platts IODEX 62% Fe(opens in a new tab) fines, with some supply pricing on 65% Fe fines, and markets hit by a four-year low in 62%-65% Fe spreads. A widening in the spread may increase comparative premiums and realized pellet pricing. Market indications and offers for Q4 pellet premiums in Europe are mainly in a $35-$45/dry mt range, on a 62% Fe fines basis, close to the October assessed premium of $38/dmt.

4. The prospects for more natural gas generation across Southeast Asia

What's happening? Southeast Asia will certainly play a significant role in the world's decarbonization efforts, especially as the region is projected to account for an increasing share of global emissions in the power sector as they expand their use of fossil fuels and increase overall generation. Natural gas is often presented as an option for the region to simultaneously grow generation capacity and limit the use of coal.

What's next? There are challenges in place for the region's energy transition, and significant investment will be needed to build out and convert existing natural gas infrastructure. Southeast Asia could accelerate their energy transition, although it appears it will take a significant change in course for the region to impact the trajectory of their emissions. A high natural gas use scenario(opens in a new tab) for the region would have an impact on regional coal demand, which would peak before 2050, although net-emissions would still grow versus 2020 levels.

Reporting and analysis by Claudia Carpenter, Litian Wang, Vivien Tang, Hector Forster, Jeffrey Moore