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Commodity Tracker: 4 charts to watch this week

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This week, S&P Global Commodity Insights editors and analysts are looking at power demand from global data centers, European gas stocks, ADNOC's storage deal with South Korea and steel raw materials demand in the EU.

1. Global data center power demand set to exceed 120 GW in 2023

What's happening? Insatiable demand for data-intensive services is driving the meteoric rise of the data center industry, which accelerated in the wake of the global pandemic. Despite efficiency gains, these energy-hungry computers are drawing an increasingly large share of global power, now heading towards 4% of total demand. In 2023, demand is likely to grow by 6% year on year, against a backdrop of increasing energy prices, dwindling energy security and the urgency of decarbonization.

What's next? Regulators have taken notice and are clamping down on capacity expansions, while data center customers are demanding more sustainable practices. Over 70% of data center power demand growth will occur in markets with high carbon emission intensity grids. Partly in response, the rapidly growing industry is seeking to become more efficient and expand its use of renewable energy, which presents an opportunity for corporate low-carbon energy procurement, a space already dominated by large IT companies with ambitious targets.

2. European gas stocks set to rebuild ahead of key winter season

What's happening? Stock levels across the EU's gas storage sites have leveled out at around 56% of capacity as the withdrawal season comes to an end. The current stock level is historically high for the time of year and compares with stocks filled to just 26% of capacity this time last year.

What's next? The filling trajectory for European gas storage sites in the coming weeks will be key to the EU's preparedness for next winter. Member states are required to fill storages to at least 90% of capacity by Nov. 1, but if injections are carried out at recent average rates, sites will likely be filled well before that date.

3. ADNOC expands oil storage profile in Asia with South Korea deal

What's happening? South Korea, the world's fourth largest crude importer, continues to build strong ties with Middle East crude producers. In January, Abu Dhabi National Oil Co. signed an agreement with Korea National Oil Corp. to use tanks in South Korea to store 4 million barrels of crude. ADNOC sent 2 million barrels to KNOC last week as part of the joint storage and reserve project.

What's next? Seoul is expected to receive another 2 million barrels of crude from ADNOC in the coming days. The joint storage deal helps ADNOC expand its storage footprint in Asia beyond India, a strategic push to ensure unhindered supplies to its key customers in the region in the event of any trade flow disruptions. Meanwhile, the deal is in line with South Korea's goal to enhance its crude supply security as refiners shun Russian cargoes and traders fret that OPEC may slash output if the downtrend in oil prices continues. 

4. Demand for steel raw materials set to improve; EU lags on pig iron output

What's happening? EU steel mill pig iron production volumes have recovered from a steep contraction in Q4 2022, while remaining well below year-ago levels. Lower pig iron production volumes last year in Europe and other markets such as Turkey, Japan and South Korea cut demand for met coke, met coals and iron ore. The impact was more severe on high-grade iron ore such as pellets, lump and concentrate. Weaker demand for these grades was seen in China on lower output and less stringent pollution controls. Global pig iron volumes have been steadier, with output in the rest of the world excluding the EU trending up in January.

What's next? Without further recovery in EU iron and steel production rates, the market will continue to closely scrutinize demand and supply volumes for various grades of coking coal and iron ore. Miners and suppliers may seek new markets in Asia, the Americas and the Middle East and North Africa to offset lower demand, or adapt products. Broadly, demand for steel raw materials is expected to recover in 2023 as more blast furnaces return to production and operate at higher rates.

Reporting and analysis by Bruno Brunetti, Miguel Brito, Phil Vahn, Hector Forster