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About Commodity Insights
Maritime & Shipping, Agriculture, Dry Freight, Grains
January 28, 2025
Featuring S&P Global Commodity Insights
The South Atlantic grain freight market is challenged by a tonnage surplus and cargo shortages, while Bitcoin mining profitability rebounds. Meanwhile, Asian used cooking oil prices have increased, and Indonesia has restricted UCO and palm oil residue exports to support its biodiesel initiative.
What's happening? The East Coast South America, North Coast South America freight market faced challenges as a tonnage surplus and Pacific cargo shortages hindered recovery. Following the New Year, the South Atlantic grain freight market operated on a muted note, with owners caught between accepting lower rates for quick trips or ballasting further west. Competitive bidding was observed, but buying activity slowed ahead of the Lunar New Year. Platts, part of S&P Global Commodity Insights, assessed the 60kt Santos-Qingdao grain fronthaul at $30.5/mt on Jan. 27, with time charter rates in the low $7,000s/day.
What's next? Looking ahead, market expectations remain cautious as a dire influx of cargoes in the Pacific is needed to address the current tonnage surplus in the Atlantic. The upcoming Lunar New Year celebrations are likely to further slow buying activity, impacting demand in the short term. Additionally, concerns over the Q2 crop harvest may dampen optimism for seasonal output. Shipowners are expected to remain hesitant to ballast further west unless rates stabilize or improve, while the market will closely monitor developments regarding Brazilian soybean shipments and their compliance with health standards.
What's happening? Bitcoin mining profitability in both the ERCOT West Hub and SPP South Hub has returned to a range-bound, in-the-money profitability above $40/MWh.
What's next? On Jan. 22, US President Donald Trump announced the Stargate joint venture partnership between OpenAI, Oracle and Softbank, with plans to invest up to $500 billion in AI data center infrastructure. The initial investment is set at $100 billion, with additional capital allocated over the next four years. Prior to the inauguration, the Softbank CEO announced an investment of $100 billion in AI infrastructure, which is expected to increase to $200 billion, bringing the total announced investment to $700 billion.
What's happening? China's drive for petrochemical self-sufficiency since 2019, amid weak domestic demand, has led to increased exports, yet the country remained a net importer in 2024. Chinese PP homopolymer net exports hit a record 2.162 million mt, up 88.18% year-over-year, while net imports decreased by 12.64% to 2.356 million mt. Similarly, PP copolymer net exports rose to 290,297 mt, up 54.48% year-over-year, with net imports falling by 8.9% to 1.158 million mt. The weaker Yuan/USD exchange rate and flat domestic prices have made Chinese exports more competitive.
What's next? Commodity Insights projects China's PP exports to grow to 2.5-2.6 million mt in 2025 due to ongoing capacity increases. However, the growth pace may slow because of Trump-era tariffs and Africa's self-sufficiency initiatives, such as Nigeria's Dangote refinery's new capacity. Southeast Asia is expected to remain a crucial market for Chinese PP, but potential tariff conflicts and capacity adjustments in Western Europe, Northeast Asia, and Southeast Asia could impact growth. Geopolitical factors will play a significant role in shaping the market's future trajectory.
What's happening? Asian used cooking oil prices have soared to over a two-year high, with Platts assessing UCO North Asia at $1,015/mt FOB China and UCO FOB Straits at $1,010/mt as of Jan. 23. This increase is fueled by strong demand in both the EU and China, particularly following the cancellation of China's 13% export tax rebate, which took effect on Dec. 1, 2024. Additionally, the EU's anti-dumping duties on Chinese biodiesel imports and measures to address the reduction in UCOME supply have further heightened the demand for UCO.
What's next? Market sources anticipate that UCO prices will continue to rise in 2025, driven by increasing domestic consumption in China and sustained demand for biofuel feedstock in the EU. China's biofuel strategy targets the production of 50,000 mt of SAF by 2025 together with the EU's growing mandates for SAF will necessitate a significant supply of UCO.
What's happening? Indonesia has restricted exports of UCO and palm oil residue to support its new B40 biodiesel blending mandate, increasing from 35% in 2024 to 40% on Jan. 1. But it delayed the implementation of the policy, adding to market uncertainties. The implementation of this policy has been delayed, creating market uncertainties. The Energy and Mineral Resources Minister signed a decree for 15.6 million kiloliters of biodiesel in 2025, with a significant portion allocated for Public Service Obligation. Market stakeholders have two months to transition from B35 to B40 blending.
What's next? On Jan. 14, government officials met with market traders to clarify the restriction policy. This expansion of Indonesia's biodiesel mandate aligns with President Prabowo Subianto's goal for energy self-sufficiency, as Indonesia remains the largest producer of palm oil and palm oil mill effluent in the region.
Reporting and analysis by Cresida Rodrigues, Maxim Grama, Nanda Lakhwani, Chau Kit Boey and David Chai.