27th December 2024
*COAL*
Newcastle coal futures dipped to $125 per tonne in December, the lowest since February, as soaring supply levels outweighed strong demand from key consumers. China’s coal production surged to a record 14.27 million tons per day in November, significantly higher than October’s 12.28 million tons per day. This sets up another record-breaking year of coal production for the world’s top producer, even as utilities face record-high inventories, which rose 12% in the two months ending October. Additionally, heavy rainfall in Chinese manufacturing hubs boosted hydroelectric power generation, further reducing coal demand. Concerns over the limited impact of Beijing’s stimulus measures added to downward pressure on thermal coal consumption.
*BRENT CRUDE*
Brent crude futures rose above $73 per barrel on Friday, marking a modest weekly gain in light year-end trading. Prices edged higher amid Israeli strikes on Yemen’s Houthi rebels, sparking a “fear bid” for oil. China’s announcement of additional economic measures, including more flexible government bond usage, also supported prices by improving demand prospects. API data showing a fifth consecutive drop in U.S. crude inventories further bolstered the market. However, the World Bank’s raised growth forecast for China highlighted lingering challenges in its property sector. European energy companies are reportedly prioritising short-term profits in oil and gas over renewables, a trend expected to persist into 2025. Brent remains on track for a nearly 3% annual decline.
*TTF GAS*
European natural gas futures climbed 4% to €47.8 per megawatt-hour, the highest in three weeks, as Russian President Vladimir Putin cast doubt on renewing the gas transit deal with Ukraine. The current agreement expires this year, and proposed alternatives face resistance from Ukraine, which opposes arrangements benefiting Russia amid ongoing conflict. The potential loss of Ukrainian transit gas—representing 5% of European demand—could increase Europe’s reliance on Norwegian pipelines and U.S. LNG. European gas storage levels have also fallen below 75%, adding to market concerns.
*IRON ORE*
Iron ore prices rebounded above $104 per tonne as Chinese steel mills ramped up stockpiling ahead of expected spring activity. Earlier price declines were driven by reduced operations during the winter off-season, which pushed output at major mills to a three-month low. Despite this uptick, iron ore prices remain over 20% lower for the year due to weak demand from China’s struggling construction sector. While market sentiment is fragile, the Chinese government has pledged further economic support to stabilise demand.
*COPPER*
Copper prices were slightly higher on Friday, with LME three-month copper trading at $8,966.50 per tonne, up 0.18%. On the Shanghai Futures Exchange, prices were mixed as supportive macroeconomic developments in China clashed with pressure from a strong U.S. dollar. Recent Chinese fiscal policy announcements, including increased budget deficits and intensified fiscal spending, have bolstered market expectations for higher metals demand. Plans to expand subsidies for pensions and medical insurance, along with incentives for consumer goods trade-ins, are also expected to support demand. However, the U.S. dollar index, hovering near a two-year high, continues to pressure commodity prices by making dollar-denominated assets more expensive for international buyers.
