Commodity Tracker: 4 charts to watch this week

Despite attempts to diversify its crude basket, Japan may continue to buy mainly from Middle Eastern countries as the most economical choice. In food and agriculture, removal of tariffs from the UK could make way for more Indian shrimp to reach European tables, while in battery metals, lithium salt prices struggle to recover amid oversupply and poor demand.

1. Japan's reliance on Middle Eastern crude set to continue

What's happening? Japan may struggle to reduce its reliance on Middle Eastern crude due to OPEC+'s decision to increase output, which makes Persian Gulf barrels more economical than alternatives. Despite efforts to diversify, over 95% of Japan's crude supply comes from Persian Gulf countries. Japan imported 2.45 million b/d from these suppliers in the first quarter, accounting for 96.6% of total crude imports. The drop in OSP premiums since OPEC+ increased production has made Persian Gulf crude more attractive compared to US or Southeast Asian options.

What's next? Japan's refining industry is expected to continue relying heavily on Persian Gulf suppliers throughout 2025, as OPEC+'s output increase impacts Dubai price structures and OSP differentials. Despite diversification attempts, the economics favor Middle Eastern sour crude. US crude imports dropped 55% year-on-year in the first quarter to 39,071 b/d. WTI Midland and WTL remain preferred non-Persian Gulf grades, but high demand from Indian refiners limits price improvements.

Related content: Japanese refiners see OPEC+ output hike impeding crude import diversification efforts

2. Spanish solar capture prices forecast to recover in Q3

What's happening? Spain's solar power expansion is deflating spring capture prices for a second year, with cannibalization of power profits in the wholesale market accelerating. Platts pricing data shows the volume-weighted monthly average for Spanish solar falling to Eur14.16/MWh, while the capture rate plunged to 53% in April. Platts is part of S&P Global Commodity Insights. In addition to falling capture prices, the April 28 blackout across Iberia may cloud the outlook for solar in Spain. While the exact causes of the event are still under investigation, solar output has been curtailed since, with solar peak hours around midday most impacted, yet still yielding negative hourly prices.

What's next? Analysts at Commodity Insights forecast Spanish solar capture prices to recover to around Eur19/MWh in June and to average around Eur27/MWh in the third quarter, when demand for cooling is highest, according to a report dated May 8. For May, the analysts forecast solar and wind curtailment at unprecedented levels, averaging a combined 3.5 GW, also the highest relative curtailment levels among EU10 countries. Spain is forecast to reach almost 40 GW of solar PV capacity by end-2025.

Related content: Spanish solar capture set to rise in May, but weakness remains

3. UK-India trade pact boosts outlook for Indian shrimp exports

What's happening? The UK and India have finalized a long-anticipated free trade agreement that covers multiple sectors, from machinery to agri-food. The deal eliminates tariffs on several products, including frozen shrimp. Until now, UK importers faced a 4.2% duty on Indian shrimp, prompting many to favor supply from Vietnam and Ecuador. India accounted for 26% of UK shrimp imports in 2024, but Ecuador and Vietnam have grown their market shares.

What's next? With the tariff removed, sources say India is poised to regain lost ground in the UK market, especially in semi-processed formats like PDTO and peeled shrimp. While exporters see the deal helping India regain market share from Ecuador and Vietnam, meaningful trade shifts may take time. Some industry experts have said that buyers across Europe could follow suit, especially in markets like France, where demand is shifting toward convenience products.

Related content: UK-India trade pact boosts outlook for Indian shrimp exports, eliminates tariffs

4. Lithium prices see no rebound as high stocks, slow demand persist

What's happening? Lithium salt prices have been falling for two years due to overproduction and slower-than-expected growth in electric vehicle sales. These conditions resulted in high inventories, impacting prices. Battery grade lithium hydroxide and lithium carbonate prices were both at $8,700/mt CIF Europe basis, down 41% on the year, based on the most recent Platts assessments. Lithium hydroxide prices, however, have been trading at a premium, discount and parity with lithium carbonate, depending on the supply-demand balance.

What's next? Tighter supply recently allowed lithium hydroxide to reach parity with lithium carbonate prices. Still, the premium is unlikely to return, considering slower growth in lithium hydroxide high-nickel battery demand versus relatively strong growth in lithium iron phosphate batteries using lithium carbonate. The lithium market remains soft. Many sources see much of the current production as barely profitable or generating losses, fueling expectations of further supply cuts, investment freezes, and eventually a long-awaited price rebound once the stocks are consumed. In the meantime, lithium prices may see a further downtrend.

Related content:Seaborne lithium carbonate price remains flat; hydroxide drops in post-holiday week

Reporting and analysis by Philips Vahn, Andreas Franke, Gabriel Lorca Aicardi, Karan Dadure, Namarita Kathait and Wojciech Laskowski