Commodity Market In 2020
Global coal consumption
According to the Energy Information Administration (EIA), combustion of coal emits about 210 pounds of CO2 per million British thermal units (BTU) of energy. In comparison, oil emits about 160 pounds of CO2 per million BTU, and natural gas emits 117 pounds of CO2 per million BTU. Another issue with coal is that there are a lot of other associated emissions from coal-fired power plants. Historically, coal plants emitted a lot of sulfur dioxide, which causes acid rain. Regulations eventually reined in that problem, but coal-fired power plants still emit pollutants like mercury. They even emit more radioactive elements than a nuclear power plant. Thus, there have been many regulations passed that have attempted to lower coal’s impact on the environment. But, because of the various pollution issues associated with coal, most developed countries have moved away from coal-fired power. Although global coal consumption modestly declined in 2019, over the past decade it grew by an average annual rate of 0.8 percent. Nevertheless, global growth has been in a downtrend over the past five years. Growth is especially taking place in countries in the Asia Pacific region, which have seen coal consumption climb at an average annual rate of 2.4 percent over the past decade. This growth has been led by China and India, globally the #1 and #2 consumers of coal.
Pakistan wheat production
Despite a slight boost in wheat production Pakistan still falls short of its targets of 27 million tonnes for the current year, according to a Global Agricultural Information Network report from the US Department of Agriculture (USDA). The current year’s wheat production forecast is 25.5 million tonnes, a 1.2-million-tonne increase over the previous year. Pakistan procured 6.5 million tonnes of wheat from this year’s harvest, about 80 percent of its goal, the USDA said. The country sought to increase it wheat reserve due to the uncertainties of the coronavirus (COVID-19) pandemic. In June, Pakistan lifted the 60 percent wheat import duty for the private sector, and it will remain in place until further notice. The country also is dealing with possible locust infestations on top of COVID-19. According to the USDA, Pakistan has enough wheat stocks for the current marketing year and may import around 600,000 tonnes to build reserves.
China’s iron ore strengths
The Iron ore market is looking increasingly bifurcated between a robust China and a lacklustre rest of the world, and the challenge is working out whether the boost from the one is enough to outweigh the drag from the other. Certainly the market pricing indicates that the China story is the more compelling, with spot prices for 62 percent iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, trading near the highest in a year. The price ended at $110.50 a tonne on Tuesday, up from $108.95 the previous day and close to the 11-month high of $112.40 reached on July 14. Iron ore is up 39 percent since the low so far this year of $79.60 a tonne, hit on March 23 as both China and the world was enduring economic and social lockdowns to combat the spread of the novel coronavirus pandemic. The rally in iron ore prices has been explained by market commentators as having two legs, namely strong China demand and concerns over supply, especially from number two exporter Brazil, which is one of the country’s worst hit by the coronavirus. Certainly Chinese demand has been robust, and given the world’s biggest steel producer accounts for about two-thirds of seaborne iron ore, the rally in prices is understandable. China imported 101.68 million tonnes of iron ore in June, a 33-month high, taking imports for the first half of 2020 to 546.91 million tonnes, up 9.6 percent over the same period in 2019. But is China’s appetite for iron ore enough to offset weakness in the rest of the world? Other Asian importers have seen their purchases of iron ore slide in recent months as the coronavirus takes its toll on steel-intensive industries such as ship and vehicle manufacturing. Japan imported 5.08 million tonnes of iron ore in June, down 37.3 percent from the same month in 2019, according to vessel-tracking and port data compiled by source. Japan’s second-quarter imports were 20.16 million tonnes, down from 24.92 million in the same period last year.
World’s newest oil
After a series of major offshore oil discoveries since 2015, with the largest ever made earlier this year, the tiny South American country of Guyana has become a hotspot for international oil majors. The deeply impoverished former British colony’s oil potential is being compared to nearby Brazil and that country’s prolific pre-salt oil fields. By February 2020, another oil discovery by Exxon in the Starbroek block lifted the global integrated energy major’s recoverable resource estimate to 8 billion barrels. If that assessment translates into oil reserves, it will catapult the impoverished South American country into an exclusive global club comprised of the top-20 countries by oil reserves. This highlights the considerable oil wealth possessed by Guyana and its population of 800,000 people. Those discoveries sparked investment frenzy as foreign oil majors and smaller upstream explorers scrambled to acquire interests in various offshore oil blocks in Guyana. It is easy to understand the substantial interest in Guyana’s offshore oil potential. The Guyana-Suriname basin, two decades ago, was rated by the U.S. Geological Survey as the second-most prospective unexplored oil basin globally. Guyana’s deep-water offshore hydrocarbon complexes have been compared to Brazil’s prolific offshore oil basins. The economics are impressive.