Commodity Tracker: 5 charts to watch this week

Commodity markets are focusing on shipping risks in the Red Sea amid attacks by Yemen's Houthi rebels. Meanwhile, Australian exports of prime hard coking coal are declining, and Kuwait's new emir is looking to continue existing energy policy.

1. Global trade impacted as Houthis step up attacks

What's happening? Repeated attacks by Yemen's Houthi rebels along the Bab al-Mandeb, through which 10% of the world's seaborne oil flows, have led the world's top shipping companies to suspend transit along the Red Sea. Danish shipping giant A.P. Moller-Maersk, Hapag-Lloyd, MSC, CMA CGM and Cosco have all instructed their fleet to avoid the Red Sea and opt for the longer Cape of Good Hope route instead. The Houthis have threatened to attack any ship that has Israeli ownership or is bound for one of the country's ports. As a result, all types of commercial ship have come under attack, from car carriers to tankers and dry bulkers, including many with no obvious connection to Israeli trade.

What's next? Oil major BP said on Dec. 18 it would pause transit of tankers via the Red Sea in response to the escalating security situation in the region and repeated attacks by Houthi fighters on shipping. Other oil majors are expected to follow suit. Using the longer Cape of Good Hope route would add 40% to voyage distance and affect shipping costs and oil prices, as well as contributing to inflationary pressures in the global economy.

2. Australian premium hard coking coal exports poised to fall for fourth year

What's happening? Australian prime hard coking coal production and exports have been curtailed by geological and operational factors, reducing allocations of spot sales. Lower exports have partly been offset by weaker demand from China, which has relied on domestic prime coking coal output since end-2020. Platts Premium Low Vol Hard Coking Coal assessments averaged $293.66/mt FOB Australia in the first 11 months, down 21% on the year, but 24% higher than the average of January-November prices over 2019-2023. Platts is part of S&P Global Commodity Insights.

What's next? Australian exports of prime hard coking coal are set to decline for the fourth consecutive year in 2023, with the 82 million mt shipped in the first 10 months, down 7% year on year and 19% lower than the same period in 2019, according to S&P Global - Global Trade Analytics Suite. Producer BHP said it expects group output to increase over January-June 2024, after the completion of a planned wash plant maintenance at Peak Downs and Caval Ridge, and an ongoing ramp up of operations at Broadmeadow.

3. New Kuwaiti emir set to maintain business-as-usual for energy sector

What's happening? Sheikh Mishal al-Sabah, the de facto ruler of Kuwait since 2021, is Kuwait's new emir after the passing of Sheikh Nawaf al-Sabah. Sheikh Nawaf, who delegated responsibility to Sheikh Mishal during his three-year reign due to ill health, passed away on Dec. 16. The new emir takes over as Kuwait faces challenges including the struggle to raise crude production capacity to desired levels before peak demand and in advance of the midcentury global net-zero deadline. Kuwait revised its plans for crude production capacity in October, aiming for 4 million b/d by 2035 and 2 Bcf/d of non-associated gas by 2040.

What's next? Kuwait's plans to raise production capacity from 2.9 million b/d remain hampered by years of political infighting, a wariness of foreign investment and a relatively democratic but fractious parliament whose approval is needed to advance mega-projects. Oil accounts for 90% of government revenue and Kuwait faces the prospect of being left behind by its regional peers when it comes to energy transition. The country has no renewables capacity and no solid plan to reach its stated net-zero goal by 2060.

4. China's Jan-Oct sorbitol exports rise 31% on year as Asian, African demand spikes

What's happening? China's exports of sorbitol, a polyol widely used as a sweetener, rose 31% year on year to 155,327 mt between January and October on the back of growing demand for food and confection applications in Asia and Africa. Sorbitol is widely used as a replacement for sugar in sugar-free foods and in personal care products, primarily toothpaste. Export prices were 11% lower year on year at Yuan775/mt FOB ($108/mt) in October, according to data from S&P Global, due to overcapacity in an industry capitalizing on demand growth.

What's next? Exports are expected to grow moving into 2024, especially with a limited number of producers in Asia and Africa. Consumption of sorbitol in Southeast Asia and Africa is expected to have higher-than-average annual growth rates of 3.5% and 4.1%, respectively between 2023 and 2028. Prices are expected to remain stable due to the overcapacity of producers in mainland China.

5. US textured protein concentrate exports fall 8% on year in Q3: Global Trade Atlas

What's happening? The US exported 24,451 mt of protein concentrates and textured protein substances in Q3, down 800 mt or 3% from Q2, and down 2,039 mt or 8% year on year, according to S&P Global Market Intelligence's Global Trade Atlas (GTA). The year-on-year decline in exports is due to falling demand for plant-based meat, in line with weaker-than-expected Q3 financial results announced by leading plant-based meat producer Beyond Meat. The average export price of US protein concentrates and textured protein substances has decreased 8% year on year to $7.15/kg in Q3, according to GTA.

What's next? Markets for plant-based meat alternatives and their raw ingredients textured protein concentrates are expected to remain bearish into 2024 as inflationary pressures keep plant-based food prices at premiums compared to their animal-based food alternatives. Other factors like mixed consumer views on taste, texture and health credentials are also limiting demand for plant-based foods.

Reporting and analysis by Jennifer Gnana, Keith Tan, Mark Chooi Kim Weng, Eugene Ong