Commodity Tracker: 5 charts to watch this week

The carbon offset market received its first tranche of high integrity credits tagged with the Core Carbon Principles stamp. In China, fuel oil imports are expected to decline due to rising prices, making imported crude oil more competitive for Shandong's independent refineries. Thermal coal imports to Turkey are also experiencing a decline due to falling demand.

1. Carbon offset markets receive first tranche of CCP-tagged high integrity credits

What's happening? Twenty-seven million carbon credits were tagged with the high-quality Core Carbon Principles stamp after the approval of seven carbon crediting methodologies, the Integrity Council for the Voluntary Carbon Market said June 6. This is a pivotal moment for the voluntary carbon market, which has been dogged by quality issues in the past few years. These credits currently only represent a small section of the voluntary carbon market, originating from projects that fall under Ozone Depleting Substances, and Landfill Gas Capture and Utilization categories.

What's next? Market participants expect the release of more CCP-labeled credits to help rebuild trust and confidence, with these high-integrity offsets demanding a higher price compared to credits without the CCP-tag. The ICVCM said it will release more CCP-aligned credits in the next new few months, with 27 project categories, representing over 50% of the market, currently under active assessment. These include credits from project categories such as Renewable Energy, REDD+, Improved Forest Management, and Afforestation, Reforestation, Revegetation.

2. China's fuel oil imports to fall amid rising costs

What's happening? Rising feedstock fuel oil prices have made the barrels less competitive than imported crude oil for China's independent refineries. Russian M100 fuel oil for June and July arrival was heard at prices equal to a premium of around $3-$4/b over ICE Brent Futures, which was higher than the offers for Iran Light crude barrels at a discount of around $5.5-$6/b on the same basis, according to market sources.

What's next? The rise in costs could lead to a further decline in China's imports of fuel oil, which are used in bunkering and refining. Feedstock fuel oil imports by independent refineries, mostly Shandong-based, have accounted for more than 62% of China's total fuel oil imports, Commodity Insights and China's customs data showed. The refineries have cut their feedstock fuel oil imports by 45.4% to 1.1 million mt in May following the all-time high of 2 million mt in April, according to Commodity Insights data. To compensate for the shortfall, the refineries are expected to boost crude oil imports as feedstock.

3. Global LNG deliveries into Europe drop year to date amid weak cargo economics

What's happening? Europe's market share of global LNG deliveries has dropped to the lowest level since 2021, according to Commodity Insights data, with market sources saying that the current spread between LNG and inland pipeline gas prices makes it less economical for traders to procure spot cargoes. Europe's market share has fallen to 27% of total global LNG imports. At the same time, Asia's LNG market share has generally climbed year on year since 2022 to 68%, the largest market share over this period since 2021.

What's next? Europe and Asia are increasingly engaged in a pricing competition to attract LNG cargoes in the global waterborne market. Sellers have been favoring taking cargoes to Asia over Northwest Europe given current price spreads. However, sellers are still tipping between selling to Asia or NWE, depending on price levels and are eyeing demand for third quarter when Europe is expected to ramp up cargo buying to help replenish gas inventories. The market was also gauging arbitrage opportunities for fourth quarter, given the wider NWE-JKM LNG spread, which may incentivize some more selling to Asia over Europe.

4. Thermal coal imports to Turkey anticipated to sustain downward trend

What's happening? Thermal coal imports to Turkey have endured a significant downturn, dropping 34% to 1.9 million mt in April, the lowest since May 2022, according to Turkish Statistical Institute data. The monthly volume has continued to drop from the start of 2024 despite a sharp decline in the delivered prices, industry sources said, as stockpiles in the country remain at "severely elevated" levels. Platts assessed the weekly CIF Med 45,000 mt price at $93/mt on June 7, down from $122/mt in June 2023.

What's next? With decreasing reliance and a falling demand trajectory for thermal coal, import levels are expected to decline throughout the rest of the year, with market sources indicating that there has been no recent spot trade or fresh enquiry to secure cargoes until the early parts of 2025. This is likely to maintain a downward movement with the delivered thermal coal price in an attempt to keep the material attractive to consumers.

5. Global steel product exports likely to continue upward trend after 2023 increase

What's happening? Global steel exports increased in 2023 despite crude steel production for the year remaining mostly stable year on year at 1.89 billion mt and global steel demand falling 1.1% year on year to 1.76 billion mt. Global steel product exports, including ingots, semi-finished products, hot-rolled and cold-finished products, tubes, wire and unworked castings and forgings, totaled 402.8 million mt in 2023, up 6.4% year on year, according to the World Steel Association's latest World Steel in Figures 2024 publication.

What's next? Exports are likely to increase in the current year, with World Steel expecting demand to increase 1.7% to 1.79 billion mt, with further growth of 1.2% in 2025 to 1.8 billion mt.

Reporting and analysis by Eklavya Gupte, Oceana Zhou, Aly Blakeway, Jacqueline Holman, Sarah Matthews