LONDON COMMODITY NEWS 3rd January 2025

COAL
Coal markets experienced increased price action today, with significant declines across indices. European gas prices were relatively rangebound, with the front-month contract slipping just over 1%. This weakness weighed on coal swaps, triggering renewed downward momentum in Newcastle (NEWC) coal futures, which saw sharp declines across the curve.
Newcastle coal futures traded below $123 per tonne in January, marking a 10-month low. The decline reflects an oversupply offsetting robust demand from major consumers. China’s coal output hit a record 14.27 million tons per day in November, up from 12.28 million tons in October, positioning the world’s top coal producer for another record-breaking year in 2024.
Utilities continue to grapple with record-high coal inventories, up 12% in the two months ending October. At the same time, Beijing’s stimulus measures have yet to generate significant economic growth, dampening expectations for thermal coal consumption in 2024. Furthermore, increased rainfall in key Chinese manufacturing hubs has boosted hydroelectric power generation, reducing coal demand.
BRENT
Brent crude oil futures traded around $76 per barrel on Friday, hovering near its highest level in over two months and on track for a second consecutive weekly advance. Prices were buoyed by optimism surrounding China’s economic outlook, following President Xi Jinping’s pledge to promote growth in the world’s largest oil-importing nation. Additionally, a continued decline in U.S. crude inventories provided further support. However, the broader outlook for the year remains uncertain, amid expectations for oversupply and the possible revival of idled OPEC+ production. Traders are also closely monitoring geopolitical developments, including the potential impact of Donald Trump’s return to the White House.
TTF GAS
European natural gas futures climbed to €51 per megawatt-hour, the highest since October 2023, before easing to €50 as the region faces freezing temperatures without a key supply route. Russian gas flows via Ukraine stopped on New Year’s Day after a transit deal expired, leaving no replacement and raising concerns about faster storage withdrawals. With inventories already depleting at the fastest pace since 2021, sub-zero temperatures in parts of Europe could drive up heating demand. While Europe has enough gas for this winter, refilling reserves next season could be costly. Greater reliance on LNG, including pricey imports for landlocked nations, adds pressure, especially as Asia’s summer demand intensifies.
IRON ORE
62%Fe iron ore futures fell below $101 per ton on Friday, hitting a three-month low amid signs of rising inventories and weakening demand in China. Disappointing economic data from the country further dampened the outlook for demand, as China remains the world’s largest iron ore consumer. The Caixin/S&P Global Manufacturing PMI dropped to 50.5 in December from 51.5 in November, missing forecasts of 51.7.Meanwhile. Chinese authorities pledged to implement “more proactive” macroeconomic policies and lower interest rates this year, helping stabilize market sentiment. In the US, expectations of fewer rate cuts from the Federal Reserve this year boosted the dollar, which in turn pressured greenback-priced commodities. Policy uncertainties surrounding the incoming Trump administration also prompted investors to shift into safer assets.
COPPER
The direction of copper prices in 2025 is likely to be heavily influenced by China’s sluggish property market, according to SP Angel. The potential for supply disruptions out of Chile and Peru could also jolt prices, while China’s grid spending is expected to be a primary driver of incremental demand, like last year, the broker says in a note. The LME 3-month copper is up 0.77% at $8,870.50/metric ton. The most-traded January copper contract on the Shanghai Futures Exchange dropped 0.3% to 73,070 yuan ($10,010.41) a ton.
On Friday, the dollar was poised for its best weekly performance in over a month, fueled by expectations of slow U.S. interest rate cuts after a larger-than-expected drop in weekly jobless claims.
A stronger dollar makes it more expensive for holders of other currencies to buy greenback-priced commodities.
“The dollar remains strong; downward pressure on copper prices persist,” analysts at Jinrui Futures said in a note.
In China, the Caixin/S&P Global manufacturing PMI nudged down to 50.5 in December from 51.5 the previous month, falling short of the market expectation of 51.7, suggesting a slowed pace of expansion.