Commodity Tracker: 4 charts to watch this week

Battery metals prices could have reached a bottom after positive indications from the Chinese government. The focus also is on the Hinkley Point C nuclear plant, food and beverage price inflation and developments around the voluntary carbon credit market.

1. Battery metals prices look to reach bottom

What's happening? The Platts battery metals assessments have been in a continued downtrend for two months, remaining at historical lows on weakening demand and worsening sentiment in the battery metals industry. Chinese domestic lithium carbonate spot prices started to bottom in the week of Dec. 4, led by rising lithium carbonate futures on the Guangzhou Futures Exchange, after remarks by an official of the Economic Committee of the Chinese People's Political Consultative Conference Dec. 4 that the country's sales of electric vehicles are expected to account for more than 50% of total new car sales by 2025-26.

What's next? Market sources expect prices to reach a bottom soon while a rebound in spot prices remains to be seen. Sources worry that the sudden stabilization in domestic prices is driven by financial market speculation rather than a change in downstream fundamentals as oversupply persists.

2. Symbolic moment looms for UK's Hinkley Point C nuclear plant

What's happening: French-owned EDF Energy is preparing to lift the huge reactor lid into place on its 1.6-GW Unit One EPR nuclear facility at Hinkley Point C in Somerset, southwest England. Wind and rain allowing, the 10-hour operation will be carried out by Big Carl, the largest crawler crane in the world, capable of lifting 5,000 tonnes at a radius of 40 m. The lift presents EDF with an opportunity to update the market on the beleaguered project, delayed by COVID-19 and running massively over budget. S&P Global analysts now assume Unit One to be online sometime in 2028, with Unit Two following in 2029.

What's next: Currently, Hinkley Point C's adjusted-for-inflation strike price of GBP128/MWh looks like reasonable value for money in a UK wholesale market where expensive gas sets the price most of the time. By 2028, however, S&P Global Commodity Insights analysts forecast power prices to average below GBP80/MWh, with gas-firing greatly reduced by offshore wind growth. Affordability is just one aspect of the trilemma, with new nuclear seen as needed for security of supply and sustainability. And with the UK an enthusiastic signatory at COP28 of a declaration to triple global nuclear capacity by 2050, two more reactor units at Sizewell C in Suffolk would appear to be a minimum requirement for the country's ambitions and not, as some commentators believe, a ceiling.

3. Food & Beverage Price Index at highest point since mid-2022

What's happening: S&P Global Commodity Insights' Food & Beverage Price Index increased by 2.1% month on month to 113.6 points in November, which represents the first monthly increase since July and the highest point for the index since July 2022. El Nino-related weather extremes continued to support prices, with dry weather interrupting the planting of various crops in Brazil, notably soybeans. Drought concerns also continue to hang over West Africa, Southeast Asia and Australia, which are key producers of crops including cocoa, sugar, rice and wheat.

What's next: International agencies typically agree that El Nino will last until at least second-quarter 2024. With the Southern Hemisphere's planting season ending, the market would have to wait a few months to fully understand what damage, if any, the weather extremes that El Nino brings has occurred. Meanwhile, Northern Hemisphere farmers will hope for a swift end to the phenomenon ahead of their planting season.

4. Voluntary carbon credit demand gets boost from oil company

What's happening? In a year when the voluntary carbon market has come under scrutiny and buyers remain cautious in their purchases, retirements of credits from the VCM increased by 56% month on month in November to over 14 million mt, of which more than half was constituted by nature-based avoidance credits, which have been the target of several integrity attacks since early 2023. Beneficiary data published on the Verra registry highlights that more 6 million mt have been retired by international oil company Shell, almost entirely from the scrutinized category. The company had previously signaled a move away from the VCM.

What's next? While retirements usually ramp up toward the end of the year as companies seek to show progress against their net-zero targets, buyers may be more cautious this year as they await the outcomes of discussions on Article 6.4 of the Paris Agreement expected at COP28.

Reporting and analyses by Laura Varriale, Dana Agrotti, Henry Edwardes-Evans and Peter Storey.