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Commodity Tracker: 6 charts to watch this week

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A new ammonia futures contract, Germany's gas storage levels and transit at the Panama Canal are in focus this week. S&P Global Commodity Insights editors are also keeping an eye on European MTBE prices, the price parity between plant- and animal-based protein, as well as Indonesian coal prices.

1. ICE poised to launch Platts-based ammonia futures contract

What's happening? The Intercontinental Exchange is to launch a new ammonia futures contract based on Platts weekly CFR Northwest Europe assessment, with a first trade date scheduled for Dec. 11, the exchange said Oct. 31. Ammonia is primarily produced for the fertilizer market and is heavily physically benchmarked using price reporting agency assessments. Efforts to establish an ammonia derivatives contract to date, however, have failed to ignite much interest from a market focused on physical contracts. The import market for ammonia in NWE was assessed last week at $640-675/mt CFR duty paid/duty free. The low end of the of the range reflected contract price input of $640/mt and was aligned with FOB pricing in the Caribbean. Meanwhile, the high end of the range reflected spot trade at $675/mt CFR duty free and subsequent supportive indicative input.

What's next? If successful, an ammonia futures contract could attract the attention of the emerging and potentially much bigger market for clean ammonia derived from blue or green hydrogen, according to S&P Global Commodity Insights Global Pricing Director for Fertilizer Robert Beaman. "Solutions put in place for traditional markets like ammonia and methanol can get carried through to become part of the structure of energy transition markets, which are evolving very rapidly," he said. As well as a replacement for today's conventional ammonia applications, clean ammonia is touted as a future transport and power generation fuel. S&P Global Commodity Insights is tracking the progress of 92.7 million mt of announced low-carbon hydrogen capacity. It forecasts hydrogen demand to reach 265 million mt in 2050, 270% higher than current use.

Interactive: Platts Ammonia price chart

2. Germany exceeds 100% gas storage capacity, but supply risks remain

What's happening? Germany's gas storage sites have now been filled to more than 100% of capacity, the fourth EU member state to fill stocks to more than technical capacity. Germany -- which has the EU's biggest gas storage capacity at some 255 TWh (24 Bcm) -- set itself strict storage filling targets in summer 2022 to improve supply security following Russian gas supply curtailments. The full storage was welcomed by the energy regulator, which said it meant Germany was well prepared for winter.

What's next? Despite full storages, the German regulator has said it is still too early to give the all-clear on winter gas supply security. It said that very cold weather and a potential halt to remaining Russian gas supplies to southeastern Europe were factors that could tighten markets over the course of winter. European gas prices remain relatively high, with the market still worried about the prospect of supply shocks and increased geopolitical uncertainty.

3. Transit, draft restrictions limits at Panama Canal seen staying as dry season begins

What's happening? Panama Canal, one of the world's key waterways, is facing the double whammy of El Nino and climate change. Water levels at Gatun Lake, the largest artificial lake feeding into the canal system, have been around its record low since this summer as Panama experiences its driest rainy season in decades. The Panama Canal Authority has had to repeatedly cut daily reservation slots, leading to lengthy waiting time and altering seaborne cargo flows across various sectors. Total cargo in transit reached 291.7 million lt in fiscal year 2021-2022 (October-September), including 105.1 million lt of dry bulk, 62.4 million lt of containers and 29.2 million lt of LPG.

What's next? As Panama enters the dry season, the Panama Canal Authority has announced further reduction in transits to reserve water. Available daily slots will be reduced from 31 on Nov. 1 to 18 from Feb. 1 in several phases. This is expected to lead to more cargo flow disruptions.

4. Reduced European MTBE demand pulls premiums down from record highs

What's happening? MTBE premiums over front-month Eurobob swap reached record highs on Oct. 3 at $726/mt FOB ARA amid robust buying interest in a tight European market and favorable blending margins. Some market players were examining the potential of shifting from MTBE to alternative blending components, due to very high values. However, the MTBE premium over front-month Eurobob swap on Oct. 26 reached its lowest since July 31 at $303.75/mt FOB ARA due to lower buying interest and improved product availability seen in Europe amid the typical seasonality after the switch to winter gasoline specifications.

What's next? Demand for high-octane blendstock components such as MTBE is set to remain reduced, though not weak, amid winter driving season, as the front-month gasoline-naphtha is narrowing, indicating less favorable blending economics. Meanwhile, volumes are expected to arrive to ARA from the US and the Persian Gulf. Nevertheless, market participants expect that the MTBE market in Europe toward the end of the year will remain healthier compared to the same period in the previous years.

5. Alternative proteins approach price parity with animal meats in Europe

What's happening? Alternative proteins are reaching price parity with conventional meats in Europe, as inflation continues to raise the prices of animal-based meats while plant-based protein prices fall on waning demand. In the UK, for example, deadweight R3 steer price reported by the Agriculture and Horticulture Development Board rose 9% year on year to GBP4.89/kg in October, while 90% GMO-free soy protein isolate plunged 22% year on year to GBP6.25/kg. Elsewhere in Europe, retailers Lidl and Kaufland in Germany also announced pricing most of their plant-based foods at the same levels as their animal-based equivalents.

What's next? The price parity between alternative proteins and conventional meats is expected to drive sales of plant-based options, as a poll conducted by BVLH, a federal trade association in Germany, revealed that 43% of German consumers would buy more plant-based products if they were cheaper. Positioning plant-based products alongside animal products is also expected to increase plant-based sales.

Learn more: S&P Global Commodity Insights Agribusiness

6. Indonesia's revised coal production quota expected to ease supply constraints

What's happening? The Indonesian government has started giving coal miners approval for additional production quota for the rest of the year. Miners usually receive approvals for production requests on top of their initial yearly estimates by September, but faced delays this year, prompting supply constraints in the Indonesian spot market and a consequent rise in prices in October. The average price of Kalimantan 4,200 kcal/kg GAR was at $60.32/mt in October, compared with $53.53/mt in September, according to Platts data from S&P Global Commodity Insights. Indonesian thermal coal prices had started to decline due to falling global demand from the beginning of 2023.

What's next? With approvals coming through, supply tightness is likely to ease for seaborne thermal coal in Indonesia. Miners who had earlier refrained from offering cargoes due to nearly having exhausted their initial production quota can now actively trade again and fulfill their earlier supply commitments. However, overall subdued demand and operational challenges such as heavy rain could hinder miners from meeting their 2023 production targets.

Reporting and analysis by Henry Edwardes-Evans, Mark Astley, Stuart Elliott, Seth Thomas, Max Lin, Maria-Eleni Tsimeki, Eugene Ong, Shriparna Saha, Srija Basu Roy, Vaibhav Chakraborty