Coal
The bearish trend in coal markets persisted today, with API2 prices dropping by over $2 at various points on the curve, driven by continued weakness in the physical DES ARA market and a sharp decline in European gas prices, which fell over 2.5% for the front month by close. The pressure on API2 swaps also pulled Newcastle coal futures lower, despite physical trades for January 2025 Newcastle coal loading maintaining levels close to those seen yesterday. Newcastle futures slipped below $140 per tonne, their lowest since July, as Chinese coal production increased by 4.6% year-on-year in October, following the conclusion of safety inspections, enabling higher mine output. Additionally, abundant rainfall in China’s Yunnan province boosted hydroelectric power generation, further reducing reliance on coal.
Despite these factors, robust demand for coal power throughout the year has kept futures 25% above March’s low point. September data showed a nearly 10% increase in China’s thermal power generation compared to the previous year, coupled with a 13% rise in coal imports to a record 47.6 million tonnes, underscoring the sustained demand for coal amid macroeconomic challenges.
Brent Crude
Brent crude oil futures edged closer to $74 per barrel on Wednesday, extending gains from the previous session, which saw a 2.5% rise. The rally was fueled by reports that OPEC+ is nearing an agreement to postpone output increases for another three months, with an official decision expected on Thursday. Additionally, the US imposed sanctions on 35 entities involved in transporting Iranian crude, further tightening supply sentiment. However, market optimism was tempered by API data showing a surprising build in US crude inventories, which rose by 1.2 million barrels last week against expectations of a 2.1 million barrel draw, alongside significant increases in gasoline and distillate stocks.
TTF Gas
European natural gas futures declined to around €47 per megawatt-hour, retreating from the 13-month high of €49 earlier in the week. Forecasts for milder, windier weather in north-west Europe from December 5-9 indicated reduced demand for gas-fired power generation, contributing to the drop.
Iron Ore
Iron ore prices climbed above $106 per tonne, driven by optimism surrounding potential stimulus from Beijing during key political meetings. The absence of a typical readout from the Politburo’s November meeting has heightened speculation of forthcoming economic support. Meanwhile, strong steel exports, improved margins, and destocking in China continued to support demand. November data also showed Chinese manufacturing expanding for the second straight month, bolstering the outlook for iron ore consumption.
Copper
Copper futures dipped on Wednesday, easing from recent three-week highs. This followed a nearly 2% surge in the previous session, underpinned by expectations of Chinese economic stimulus. The skipped Politburo meeting readout in November added to speculation about support measures, as China grapples with economic uncertainty and the return of Donald Trump, whose recent tariff threats against BRICS nations have heightened tensions. November also marked a second consecutive month of growth in Chinese manufacturing, sustaining a positive demand outlook for copper.
Lithium
In the lithium market, demand remains subdued as downstream cathode material plants cut production schedules and approach year-end destocking. Purchasing sentiment is weak, with only limited activity from plants with immediate needs. On the supply side, smelters negotiating long-term contracts have maintained firm price quotes, although transactions have been sparse. Spot lithium carbonate prices are expected to face slight downward pressure due to anticipated demand reductions.
