European Natural Gas

Coal prices saw limited movement yesterday, remaining relatively unchanged and closing near their starting levels. In contrast, European natural gas prices experienced significant volatility, with the front-month contract rising over 2%. Meanwhile, Brent crude oil prices remained steady, showing minimal fluctuations and ending the day close to their opening levels.

Newcastle coal futures continued trading below $142 per tonne in November, hovering near their lowest levels since late September. This decline reflects ample coal supplies from China and increased availability of alternative power sources. October data revealed a 4.6% year-on-year increase in Chinese coal production, as the conclusion of safety inspections in major mines allowed for higher output. Additionally, heavy rainfall in Yunnan bolstered hydroelectric power generation, reducing coal’s share in the energy mix. Despite these trends, strong demand for coal power has kept futures 25% above their March lows. Thermal power generation in China rose nearly 10% year-on-year in September, with coal imports during the period reaching a record 47.6 million tonnes, marking a 13% increase.

European natural gas futures dipped slightly to €46/MWh but remained near their highest levels since November 2023. Market sentiment was shaped by rising tensions between the West and Russia, particularly after Russia revised its nuclear doctrine, allowing potential use of atomic weapons. This coincided with Ukraine’s first use of US-manufactured missiles on Russian territory. Weather forecasts for December predict colder temperatures, likely increasing demand and accelerating gas reserve depletion, now below 91% capacity. Norwegian gas flows dropped due to outages at Aasgard and Oseberg, while Austria’s OMV reported that Gazprom would suspend deliveries. Despite this, Russian gas flows through Ukraine have remained stable.

 Iron ore prices for 62% Fe content fell below $102 per tonne, reflecting ongoing weakness in China’s property sector, which drives much of its steel consumption. Property investment in China declined by 10.3% year-on-year in the first 10 months of 2024, while October saw the steepest drop in new home prices in over nine years. Tax incentives for home and land transactions introduced by China’s finance ministry failed to boost market sentiment. On the supply side, ANZ noted that October iron ore shipments from Australia’s Port Holland reached 45.6 million tonnes, bringing the 2024 total to 472.3 million tonnes, a four-year high. Rising Chinese port stockpiles, attributed to traders’ passive restocking, added further pressure.

 Copper futures rose for a third consecutive session on Wednesday, supported by a weaker US dollar easing pressure on commodity prices. Geopolitical concerns remained in focus as Russia lowered its threshold for nuclear weapon use amid its conflict with Ukraine. However, comments from Russian Foreign Minister Sergei Lavrov, pledging efforts to avoid nuclear war, and a steady US nuclear posture helped alleviate tensions. In China, the central bank maintained key lending rates, offering no surprises to influence copper demand in the world’s largest consumer of the metal.

 Lithium carbonate prices rose to CNY 79,000 per tonne, recovering from the three-year low of CNY 71,000 seen in late October. This increase was driven by supply curbs and a moderate revival in demand. The Chinese government implemented subsidies encouraging citizens to trade older cars for electric vehicles (EVs), boosting expectations that battery manufacturers will resume restocking lithium inputs.