Summer 2024 was hot! It was hot from a climate perspective with global temperature records. Elsewhere in the world, tensions have continued to escalate: a new front has opened in Russia around Kursk. (the emblematic site of the largest tank battle of World War II); the war in Gaza continues, with failed ceasefire talks and Israeli strikes in Tehran and Lebanon; election manipulation in Venezuela and power consolidation by Maduro; tensions between China and the Philippines over a few islets; an assassination attempt on Donald Trump, Joe Biden's withdrawal, and the dramatic rise of the Democratic ticket Harris/Walz; the fall of the Prime Minister in Bangladesh; and still, the ongoing war in Sudan (the worst humanitarian disaster of this century) and the chronic instability of the Sahel region. The façade of Olympic fraternity didn't last long (but has it ever been otherwise?).
Despite all its limitations and the French muddle, Europe still holds up well. Though divided, the European Parliament has renewed the mandate of Madame von der Leyen, who is now tackling the subtle composition of “her” Commission. In a difficult international context, the European mechanism functions and even manages (finally!) to hold its ground against China on issues like electric vehicles. The return of the Labour Party to power in the UK is also promising, even though economically, Europe at large continues to struggle. Growth for 2024 is likely to be less than 1%, weighed down by Germany’s zero. And here, the contrast with the United States is even more striking: recession fears have dissipated, and Biden’s economic record is excellent to the point that interest rate cuts are already anticipated for the fall, which would benefit Kamala Harris’s candidacy against an increasingly unpredictable Donald Trump, whom Europe would be wrong to underestimate.
From an economic perspective, the main question stirring markets, particularly commodity markets, concerns China. In the second quarter of 2024, Chinese growth was “only” 4.7%, below announced targets. Many indicators are pointing downward, starting with those in real estate and construction, which is reflected in steel and iron ore prices. Is the “Chinese model” of enormous overcapacities flooding the planet starting to reach its limits? China’s partners are reacting, but domestic Chinese demand is struggling to pick up the slack. So even though Chinese raw material imports fluctuate and, in fact, decrease less than anticipated, market sentiment has generally been bearish, with few exceptions.
Whether it concerns metals, oil, or grains, bears have prevailed over bulls. For example, the Brent crude oil barrel, which was $86.54 on July 5, was only $73.75 on September 3. In China, iron ore fell below $100 per ton. Among non-ferrous metals, beyond the troubles of nickel and lithium, copper itself wobbled just above $9,000 per ton. For agricultural products, it was the prospect of excellent harvests (with France as an exception) in the United States and Australia that maintained downward pressure on markets. Tropical products made an exception with continued tensions for coffee (especially Robusta), cocoa, and even sugar. And the true record of 2024 is attributed to antimony, useful for solar panels and especially for munitions, which are unfortunately in high demand these days!
China and the climate have thus weighed more heavily than geopolitical woes, and even incidents around the Red Sea and the necessary detour via the Cape of Good Hope (thus increasing delays and “in-sea” tonnages) had only a minor impact, except on container freight rates, which have more than doubled.
If there is indeed an unfortunate star of the summer of 2024, it is gold, which has reached new records above $2,500 an ounce. Fundamentally, beyond the wedding season in India and central bank purchases, it remains the best indicator of global fears, Keynes’s “barbarous relic” that constantly reminds us that humanity is not out of the barbarism.
This is an excerpt from the monthly summary published by Cercle CyclOpe. The full version, spanning 150 pages, is available by subscription. For more information, please contact us at cyclope@ampersandworld.ch
Market brief, August & September 2024
Energy
❚ Exxon-Mobil anticipates that global oil demand will remain above 100 mb/d for the next twenty-five years. In contrast, BP predicts it will be 75 mb/d by 2050, and the IEA forecasts 54.8 mb/d, assuming climate commitments are met.
❚ At the end of August, the tense situation in Libya (over control of the Central Bank of this unfortunate country…) caused a significant drop in oil production: from 1.18 mb/d in July, it fell to less than 600,000 b/d by August 28.
❚ Kazakhstan is lowering its uranium production forecast to around 26,000 tons in 2025, down from the hoped-for 31,000 tons. Kazakhstan is particularly suffering from difficulties in sulfuric acid supply, and Kazatomprom’s stocks (just over 4,000 tons) are reduced. At the same time, Niger is blocking Orano’s uranium exports and has revoked the mining permits of Orano and Canadian Govi Ex.
❚ OPEC maintains its forecast for global oil demand at +2.11 mb/d in 2024 and 1.85 mb/d in 2025. For the third quarter, OPEC+ demand would be 43.6 mb/d. Meanwhile, the US EIA anticipates a global deficit of 750,000 b/d in the second half of 2024 with an average Brent price of $89 per barrel (July 2024 forecast). The IEA expects demand to grow by 970,000 b/d in 2024 and 950,000 b/d in 2025. Supply is expected to increase by 770,000 b/d in 2024 and 1.8 mb/d in 2025.
❚ A sharp decline in oil freight rates for transporting Russian oil. From a record $20 million for a Suezmax from the Black Sea to India, rates have dropped to $4 to $5 million, allowing Urals prices to rise above $60 per barrel.
❚ In the first half of 2024, China increased its oil stocks (commercial and strategic) by an average of 900,000 b/d. Imports and local production amounted to 13.34 mb/d, with refined volumes of 14.44 mb/d. Note that OPEC expects a 760,000 b/d increase in Chinese demand in 2024, and the IEA expects 500,000 b/d. In both cases, this target is far from being reached.
❚ According to a Reuters survey, the average carbon price in Europe is expected to be €67.25 per ton in 2024, €76.75 in 2025, and €93.46 in 2026.
❚ In the first half of 2024, coal accounted for 59.6% of electricity production in China (2,793 TWh, +2.4%). “Clean” sources (hydro, nuclear, renewables) represented 37.3%. China imported 168.7 Mt of steam coal (+8.5%), mostly from Indonesia (4,200 kcal/kg).
❚ According to a Reuters survey conducted in the second half of July on oil, the Brent barrel would cost an average of $83.66 in 2024, and WTI would be $79.22.
❚ A strong rise in LNG prices in the Asian market to $12.9 per MMBtu by mid-August. In Europe, for September deliveries, the price is $12.67.
❚ In July, India surpassed China as the world’s top buyer of Russian oil, with 2.07 mb/d compared to 1.76 mb/d for China.
❚ The (temporary?) end of the conflict in Libya has contributed to a plunge in oil prices, just above $70 per Brent barrel (CyclOpe forecast). OPEC+ leaders are increasingly questioning their commitment to release an additional 180,000 b/d to the market on October 1 (out of a total of 5.8 mb/d removed from the market since 2022). Ultimately, a decision was made to delay this measure by at least two months.
Minerals and Metals
❚ A significant drop in rare earth prices: since the beginning of the year, dysprosium has lost 32%, terbium 26%, and neodymium and praseodymium 15%. China might adjust its production quotas accordingly.
❚ The EU has decided on its tariffs for Chinese electric vehicles, slightly adjusting them downward: Tesla fares the best with a total of “only” 19%. BHP is at 27% and SAIC (MG brand) at 46.3%.
❚ Burkina Faso has decided to nationalize two gold mines worth $80 million that belonged to the British company Endeavour Mining but had been sold to an American-Burkinabe businessman.
❚ Chinese steelmaking is experiencing its most severe crisis of the century according to the head of Baowu (which produces 7% of China’s steel). In fact, iron ore prices are at their lowest since November 2022, below $100 per ton. Stocks at Chinese ports are 150 Mt, 28% higher than a year ago.
❚ Canadian company Lucara has discovered a 2,492-carat diamond in Botswana, the second largest in history, with an estimated value between $40 and $60 million.
❚ Based on raw material costs, Olympic gold medals (which are actually 90% silver) would be worth $900! There are still six grams of gold.
❚ Indonesia is looking to limit Chinese investment in nickel to allow Indonesian products to benefit from American IRA tax measures. Currently, more than 80% of Indonesian battery-grade nickel production is controlled by Chinese interests. Indonesia accounts for 57% of global refined nickel production (69% in 2030 according to BMI). Meanwhile, Koniambo is closing in New Caledonia.
❚ Due to the collapse in nickel prices, BHP has decided to close Western Australia Nickel until February 2027, which lost $300 million in the 2023/2024 year.
❚ China has decided to limit antimony exports starting September 15. Prices for the metal, particularly used in munitions, have already doubled to $22,000 per ton since the beginning of the year. CRU estimates the market will exceed $30,000. China represents 48% of a market of 83,000 tons in 2023, and the global deficit is estimated at 10,000 tons in 2024. The second-largest producer is Tajikistan.
❚ Strike at Escondida, the world’s largest copper mine, which accounts for 5% of global production with one million tons. The strike only lasted a few days, and BHP agreed to pay a $32,000 bonus per miner.
❚ While iron ore prices have returned to around $100 per ton, stocks in China were significantly higher at the end of July, at 150 Mt compared to 105 Mt in October 2023. In China, steel prices (rebar) have decreased by 20% since the beginning of the year.
❚ In the first half of 2024, China produced 5.9 Mt of refined copper (+6.5%), 359,000 tons more than in 2023. Its imports increased to 1.9 Mt (+16%), and its copper scrap imports grew by 18% to 1.2 Mt. However, Chinese exports increased to 302,000 tons, with 158,000 tons in June alone. These exports actually corresponded to a three-cushion game with Congolese copper and deliveries to CME warehouses in the US. According to Antaike, Chinese copper demand is expected to rise by 2.5% in 2024.
❚ Chinese steel exports could exceed 100 Mt in 2024, pushing prices down in much of the world.
❚ Of all the metals, antimony will be the standout in 2024 with prices having doubled. Antimony is used in solar panels but especially in munitions, and dependency on China is hard to overcome.
Grains and Temperate Agriculture
❚ For the 2023/2024 season, Russia has surpassed Canada as the top supplier of peas to India with 1.13 Mt, or 49% of Indian purchases. Russia has exported 2 Mt to China. Until now, Canada was the top global exporter.
❚ Faced with a record rise in rice stocks (48.5 Mt in public warehouses, a historic high for July), India is expected to ease its export restrictions and embargo on non-basmati rice exports.
❚ At the beginning of August, the Egyptian GASC launched a tender for 3.8 Mt of wheat for October 2024/April 2023. Purchases would be FOB with letters of credit for 270 days. Initially, only one-tenth of the quantities were allocated at around $241 per ton. This exceptional tender is believed to have been directly decided by President Sisi.
❚ Considering the poor French harvest (27.5 Mt vs. 36.3 Mt in 2023/2024), the ICG has reduced its global wheat production forecast to 799 Mt (but still higher than the 794 Mt from the previous season). Corn production is expected to be 1,226 Mt and soybeans 419 Mt (392 Mt).
❚ According to “plain tours,” the United States is preparing for record corn and soybean harvests. In Australia, the wheat harvest is expected to be excellent and could reach 31 Mt (26 Mt in 2023/2024). In Europe, however, forecasts are being reduced: 116 Mt of wheat and 26 Mt of exports (27 Mt in 2023/2024).
❚ The global grain market is expected to be less tense with stocks anticipated to increase by 4.6% in 2024/2025.
❚ Due to restrictions imposed by India and Russia, as well as the low purchase price of Australian wheat, global wheat prices are expected to decrease by 10% to 15% in 2024/2025.
❚ According to a United Nations report, there will still be 582 million people worldwide suffering from undernutrition and malnutrition in 2030. Half will be in Africa, and the rest will be primarily in Asia.
❚ While Canada has imposed taxes on Chinese electric vehicles, China has responded with an anti-dumping investigation into Canadian canola (rapeseed) exports. Canada exports half of its canola to China (with 94% of the 5.5 million tons imported coming from Canada).
Tropical products
❚ For the first time since 1992, Ghana’s Cocobod will not take out its traditional pre-harvest loan for the 2024/2025 cocoa campaign. Instead, buyers—traders—will need to deposit 60% of the value of their “forward” contracts. For the 2024/2025 campaign, the guaranteed price for Ghanaian farmers will be increased by 45% after a 58% rise in April.
❚ The ICCO has revised its forecast for the global cocoa market deficit in 2023/2024 to 462,000 tons, with a global production of 4.332 million tons and grinding of 4.751 million tons. Ivory Coast’s production is estimated at 1.74 million tons, while Ghana’s is only 450,000 tons. The stock-to-grindings ratio is expected to be at its lowest in 45 years.
❚ In mid-July, a record price for Robusta coffee was reached at $4,667 per ton in London. For the first and second quarters, Vietnam’s exports decreased by 11%. On the other hand, demand remains strong: +2.2% in 2023/2024 according to the ICCO and +1.25% in 2024/2025.
❚ In the first half of the year, Brazil exported 15.5 million tons of sugar (+50%). The main traders involved were Wilmar (16%), Alvean (15%), and Sucden (14%). The destinations were Indonesia (12%), India (9%), and the UAE (8%).
❚ According to Czarnikow’s July forecast, global sugar production for 2024/2025 is expected to be 189.7 million tons, with consumption at 180.8 million tons, resulting in a surplus of 8.8 million tons. Meanwhile, the consultant Covrig Analytics also predicts a surplus, but only 200,000 tons. Lastly, the Brazilian consultant StoneX anticipates a global surplus of 1.21 million tons, with lower-than-expected Brazilian production.
❚ Ghana’s Cocobod is reportedly trying to delay the delivery of 350,000 tons of cocoa for this campaign. For buyers who had hedged their positions, this represents a potential loss of $1.4 billion. The main parties involved would be Sucden, Olam, Barry Callebaut, Cargill, Touton, and Ecom.
❚ According to a Reuters survey of analysts, the price of cocoa is expected to end the year in London at £7,600 per ton. The 2023/2024 season would result in a global deficit of 475,000 tons, while 2024/2025 would see a return to a slight surplus of 108,000 tons. Ivory Coast would produce 2 million tons, and Ghana 640,000 tons.
❚ Another Reuters survey predicts that the price of sugar will end the year at 20 cents per pound, with a decrease in production in Brazil’s Center-South region to 40.9 million tons from 42.4 million tons the previous year. The global market is expected to have a surplus of 780,000 tons in 2024/2025, compared to 1.4 million tons in 2023/2024. However, the ISO anticipates a global deficit of 3.58 million tons in 2024/2025, following a deficit of 2.95 million tons in 2023/2024. In 2024/2025, global production is projected to be 179.29 million tons, with consumption at 182.87 million tons.
❚ By early September, global sugar surplus forecasts for 2024/2025 were slightly reduced: 3.9 million tons according to S&P and 5.9 million tons according to Czarnikow. The market remained firm just below 20 cents per pound in New York.
❚ Amid declining global wine consumption (particularly red wine), Pernod-Ricard is selling its operations, including Jacob’s Creek in Australia and Campo Viejo in Spain.
Maritime freight
❚ Surge in container freight prices: a 40-foot container from Asia to Northern Europe has increased from $3,223 in April to $8,461 in August, according to Xeneta. The Red Sea is nearly blocked, while demand is already rising for the winter season. Additionally, the port of Singapore, one of the world’s major hubs, is experiencing its highest level of congestion since the pandemic. Singapore handled 23.82 million TEUs in the first seven months of the year (+6.1%).
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