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Spot prices are affected by the forecast of higher renewables and a weaker demand
On Thursday, prompt electricity prices in Europe's wholesale market fell amid forecasts of increased renewable energy generation and a softer demand. "The signal for Germany is bearish, driven by a decrease in consumption and a noticeable rise in wind- and solar-supply," said LSEG Analyst Xiulan She. By 0800 GMT, the German baseload day-ahead power had fallen 20% to 96.0 Euros ($112.39) per megawatt hour. The French equivalent baseload contract for Friday delivery was down 38.4%, at 38.5 Euros/MWh. LSEG data indicated that the German wind power production was expected to increase from 5.8 gigawatts to 9.3 GW on Friday, while in France it was expected to go up to 11.4 GW. In both countries, solar power production increased by 3.6 GW during the same time period. The French nuclear capacity remained at 75%. The power demand in Germany is expected to drop to 52.2 GW by the weekend, a loss of 500 MW per day, while in France it will reach 43.2 GW with a 300-MW decline. The German baseload for the year ahead fell 1.7%, to 83.4 Euros/MWh. Baseload for 2026 in France was down by 1.0% to 59.7 Euros/MWh. Benchmark European carbon permits fell 0.7%, to 71.71 Euros per metric ton. Analysis of EPEX SPOT data by renewables company 1Komma5 revealed that the number of trading sessions this year where European spot power prices are negative (meaning in scenarios of overproduction, the seller pays to place the delivery volume with the buyer) totaled 457 as of August 26. The value of the products sold by 1Komma5, a company that sells photovoltaics and home-storage battery systems, as well as heat pumps, electric car chargers and electric car chargers in addition to smart meters, is exactly what the full-year 2020 will be worth. According to a monthly GfK survey, the German consumer's sentiment is likely to decline for the third consecutive month in September.
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Prices fall in Europe as LNG and wind supply offset the lower Norway flows
Dutch and British gas wholesale prices fell early on Thursday, as wind energy generation reduced gas-for power demand. Increased liquefied gas arrivals also offset the reduction in Norwegian supplies. LSEG data show that the benchmark Dutch front-month contracts at TTF hub were down 1.32 Euros at 31,23 Euros per megawatt hour or $10.63/mmBtu by 0742 GMT. This was the lowest price for a whole week. The British gas front-month contract fell by 2.55 pence, to 78.21 pence/therm. Meanwhile, the intra-day contract was down by 2.65 pence. Daniel Hynes is a senior commodity strategist with ANZ. He said that ship tracking data showed an increase in imports of liquefied gas in certain parts of Europe this week. He added that "this will help offset Norwegian flow, which is dipping because of seasonal maintenance." Hynes stated that wind generation is expected to also increase in Northwest Europe, which will ease the demand for gas. LSEG data shows that the non-local distribution zone's gas demand, which is mainly power stations and big industries in Northwest Europe will drop from 2,206 gigawatts/day on Thursday, to 1,692/GWh by Friday. LSEG analyst Saku Jussla stated that the European market is comfortable with current conditions, with their looser storage goals and abundant LNG supply despite Norwegian maintenance ramping-up. Data from infrastructure operator Gassco shows that the number of Norwegian gas exports to Europe has dropped from 281 mcm/day to 273 mcm/day since Wednesday. Gas Infrastructure Europe's data shows that EU gas storage facilities were 76.4% filled last year, compared to 92% around the same time last. The benchmark contract on the European carbon markets was down 0.35 euros at 71.89 euro per metric ton. Nora Buli, reporting from Oslo; Barbara Lewis, editing)
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Iron ore reaches two-week high in China as it pushes for a reduction in steel production
Iron ore futures prices hit a 2-week high on Friday, thanks to China's efforts to reduce steel production as it combats overcapacity. The contract for January iron ore on China's Dalian Commodity Exchange grew 1.74% to 790.5 Yuan ($110.51) per metric tonne, its highest level since August 14. The contract is up 1.5% in August. As of 0712 GMT the benchmark October iron ore traded on Singapore Exchange was also up 1.5%, at $104 per ton. This is its highest since August 14. The price has increased by 4% this month. According to a document that was reviewed by a source familiar with the issue, China is planning to reduce its steel production from 2025 to 2026. Analysts believe this will improve the profits of steel mills and increase their ability to absorb rising raw material prices. The prices of key steelmaking materials were also supported by the expectation of improved demand following production restrictions in Tangshan in Hebei Province, a major Chinese production hub. Steelmakers in Tangshan have been asked to reduce production to help curb air pollution before a military parade in Beijing on September 3, which will commemorate the end World War II. "Hot Metal output will likely increase after this round ends." Ore prices were also supported by the expectation that the U.S. Federal Reserve would cut interest rates in September, said Qingwei Xie of consultancy Shanghai Metals Market. The other steelmaking materials were mixed. Coking coal increased by 0.9%, while coke decreased by 0.51. The Shanghai Futures Exchange saw a rise in most steel benchmarks. Rebar was up 0.55%, hot-rolled steel coils were up 0.83%, and wire rod was up 1.08%. Stainless steel fell 0.19%. Baoshan Iron & Steel Co, China's largest listed company, has warned of increasing pressure on exports due to trade protectionism.
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South Korea Minister says it has reached agreement with the US on nuclear fuel reprocessing
Cho Hyun, South Korean Foreign Ministry said that following the summit between U.S. president Donald Trump and South Korean president Lee Jae Myung earlier this week, both countries agreed to discuss nuclear reprocessing. Cho, in an interview broadcast live on television, said: "We run 26 nuclear power stations and buy and bring in fuel every time. We feel the need to be able to reprocess and make our own fuel using concentrates." "Cooperation with the U.S. will be essential in order to achieve this." We must change the nuclear agreement or use another method within the agreement between the countries. It is therefore very significant that we have decided to start discussions in this direction. A bilateral agreement prohibits South Korea from reprocessing spent nuclear fuel, which could be used to create nuclear weapons. Foreign Minister Cho said that South Korea is not interested in nuclear weapons, but rather industrial and environmental purposes. Cho said on Thursday, "Any talk of wanting to have our own nuclear weapons or having nuclear capabilities via revision (of the accord) would be something the U.S. couldn't accept in terms overall nuclear nonproliferation." Reporting by Joyce Lee, Hyunjoo Ji and Ed Davies.
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Top analysts and miners say that China has capped coal production in order to maintain prices.
According to an official from a major mining company and analysts, China has curbed coal production after an unexpected increase in supply during the first half of this year, which weighed down on prices. In July, China's production fell to its lowest level for over a month. In the first half of this year, it had increased by more than 5%. Prices in some areas of the country fell nearly 30%. Analysts say that the country increased inspections in July, to ensure that plants maintained their approved production capacity. An official of China Coal Energy, China's largest coal miner, said to analysts that the increase in supply has exceeded expectations, and this has caused prices to fall. "We have seen restrictions and regulations on production." Mysteel, a Shanghai-based commodities consulting firm, reported on Wednesday that 54 of the 153 mines in Shanxi with a total production capacity 61.1 millions metric tons annually have either suspended or reduced production. Shanxi, China's most coal-producing province. Mysteel cited China’s "anti-involution campaign" and inspections in multiple provinces. Involution is a term used to describe the alleged unsustainable competition between Chinese companies. The slogan "anti-involution" is used to reduce industrial overcapacity. Galaxy Futures analysts stated on Thursday that when prices fall below the cost level, mines reduce investments and upgrades leading to safety concerns. The National Development and Reform Commission and the Energy Regulator did not respond immediately to any questions. Analysts say that regulators have recently restricted production due to concerns about an accident that could make a bad impression before a military parade on September 3, marking the end World War Two. Mysteel reported that the Wanbolin mine, which produces 5 million tons per year in Shanxi, Taiyuan, was shut down on Wednesday for safety concerns. (Reporting and editing by Harikrishnan Nair; Colleen howe)
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Document shows China wants to reduce steel production and prune overcapacity
According to an official document and a source familiar with the issue, China will try to reduce steel production from 2025 to 2026 as it tries to combat overcapacity, which has impacted prices and caused a global protectionist backlash. According to a document prepared by the ministries of industry and the environment, among others. The document stated that "the steel industry faces an excess of supply and insufficient demand for its products, resulting in a supply-demand balance that impacts development quality and efficiency." The document didn't set any targets for the output reductions promised by the government in earlier this year. The first seven months of the year saw a 3.1% drop in crude steel production. The Ministry of Industry and Commerce in China did not respond immediately to a request for comment. Sources familiar with the discussion confirmed that the document was accurate, stating it to be a final draft. The source requested anonymity because the subject is sensitive. Beijing's mixed signals sent to the steel industry about its aggressiveness in reducing excess capacity hampered a 2023 attempt to restructure that industry. Beijing's latest plan, which includes a goal of increasing the value-added in the steel industry by 4% per year, investing in new technology, and promoting steel in residential and infrastructure construction raises questions about Beijing’s intentions this time. (Reporting and editing by Clarence Fernandez, Amy Lv, and Lewis Jackson)
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UK Beef Farmers scramble to feed their hungry Herds despite the drought
David Barton, a farmer in the Cotswolds, west England, has been left with parched fields after months of heat and dryness. His 200 Salers, Herefords, and Sussexes have no choice but to graze on them. He kicked the ground and said "Look at it, dust." This is what you'd see in (the United) States or Australia. This is not what you see in England. It's ridiculous. According to UK Met Office data, it's because England has experienced its driest Spring in over 100 years. It also had the driest period between January and July since 1929. The UK Met Office says that summer 2025 is likely to be the warmest in the UK since records began, which will knock 2018 from the top spot. Barton stated, "This year has been extraordinary. I've never seen anything quite like it." Waitrose, an upmarket supermarket, and Hawksmoor, a restaurant chain, are among the customers of Manor Farm beef, which is in Barton’s family since three generations. He was forced to use his winter feed early this year like many other livestock farmers in England. This has dramatically increased his costs. Barton, who gave up grazing his cows two months ago to feed them a mixture of silage and hay, has been feeding the cows twice daily with this mix. After being fed, his herd still wants more food and runs after his tractor. WIDER CRISIS Barton’s situation is typical of the wider crisis facing British livestock farmers. Many are concerned about their animals' welfare and financial viability, despite already thin profit margins. According to the Agriculture Ministry, British beef production was valued at over 4 billion pounds ($5.4billion) in 2013. Barton spends about $1,000 a week ($1,351) more than he does normally at this time of the year on feed. He faces a costly winter due to the fact that his production costs are not usually linked to the price he sells. He said, "Unfortunately I will be forced to take this hit." Food prices have risen dramatically this year due to the crisis and rising producer costs. The official data released earlier this month revealed that UK food prices are 4.9% higher than they were a year ago, with beef being a major component. Brassicas like broccoli, cauliflower, and cabbage are in trouble, and there is a shortage of supply. Barton is the chair of the National Farmers Union’s national Livestock Board. He said that the UK government should have done more to support the industry. The industry is also suffering from the proposed changes in inheritance tax. He said that the government could have relaxed environmental regulations to allow land to be used for grazing sooner this year. Barton feared that some farmers who were financially strapped might be forced into reducing the size of their flocks. He said: "I am very concerned that farmers may decide to reduce the number of breeding cows, and that is just the last thing that we should do."
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Malaysia declares that China is willing to assist in rare earths processing
Malaysia said that China is willing to offer technical and technological assistance to Malaysia in the rare earths industry, but it only wants to work with state-owned companies. Malaysia is working to improve its rare earths processing and mining capabilities to capitalize on the growing global demand for these critical minerals, which are used in many products such as semiconductor chips, electric cars, and military equipment. China, which is the top rare earth miner and processor in the world, has tightened export restrictions to protect its position. Malaysia's Natural Resources and Environmental Sustainability minister Johari Abdul Ghani stated in a written parliamentary response that Chinese President Xi Jinping conveyed Beijing’s willingness to assist Malaysia in its ambitions for rare earths during a trip to Kuala Lumpur last April. Johari stated that "technology safeguarding was of great importance for China and he (Xi), requested that the collaboration only include government-linked businesses." He added that discussions were still in their early stages and that no agreement had been reached between the two nations. Johari stated that China's help in this matter was vital, given its global dominance in particular in the separation and purification of rare earth elements. Johari, who was referring to the rare earths processing facility operated by Australian miner Lynas, in Malaysia's Pahang State, said that it would enhance Malaysia's image in the sector, as the only nation to have both Chinese and non Chinese processing technology. Malaysia has banned exports of rare earths in their raw form, and only allows shipments of rare earths that have been processed. This is to prevent exploitation of the resources. Johari responded separately on Wednesday by stating that Malaysia has 16.1 million tons of rare earths deposits. This is according to an estimate from the Minerals and Geosciences Department in Malaysia for 2019. He warned, however, that further research is needed to determine the amount of coal that can be mined. Policies are in place to prohibit mining in protected areas, permanent forests and environmentally sensitive zones. (Reporting and editing by Martin Petty; Rozanna latiff)
Asia markets are rocky after Nvidia's drop, but China chipmakers blow up!
The Asian stock market experienced a volatile session Thursday, as concerns over the future of artificial intelligence leader Nvidia’s China business hit regional suppliers while sparking gains for its Chinese competitors.
The MSCI broadest Asia-Pacific index outside Japan fluctuated between gains and losses. It was last down by 0.4% as U.S. Equity Futures were pulled lower by a 3.1% drop in the shares of the chip manufacturer, which is now the most valuable company in the world.
Charu Chanana is the chief investment strategist for Saxo, a Singapore-based brokerage firm.
She added that "we should expect some spillover" even though it's unlikely to harm investor confidence.
The cleanest beta for Nvidia is from Asian chipmakers, especially those in Korea and Taiwan. They will feel the drag.
Early European trades saw pan-regional futures flatten out, while German DAX Futures rose 0.1%, and FTSE Futures rose 0.1%.
The European single currency remained unchanged at $1.1642, maintaining a three-week streak of gains that pushed its gains for this month up to 2%. Traders lowered their expectations about the impact on French government borrowing rates due to the deepening crisis in the country.
After Nvidia reported its results, S&P 500 futures dropped 0.1%, while Nasdaq's futures tumbled by 0.3%.
Investors' concerns about Nvidia were centered on its China operations, which were caught in the middle of the trade war between Washington, DC and Beijing.
Goldman Sachs analysts wrote in a report that they expect the stock price to drop modestly after a quarter in line and guidance, against the backdrop of high expectations going into the conference call. Management noted that no H20 products were shipped to China during the quarter.
Mark Matthews of Bank Julius Baer's Asia Research Department in Singapore, who is the head of research, expressed concern that the data centre revenues, at $41.1 billion, fell short of analyst estimates of $41.3 billion.
He said, "It was minor but it is strange for this company to miss."
Taiwan Semiconductor Manufacturing Company fell 2.5% and Samsung Electronics dropped 1%.
Nvidia's Chinese rivals surged. SMIC gained as much 9.3% and Cambricon Technologies shares, which almost tripled in value since mid-July added as much 8.2%. These two chipmakers boosted the STAR 50 Index of Chinese Growth Stocks to a gain of up to 5%.
After Kyodo reported that Japan's chief trade negotiator Ryosei Acazawa had cancelled his planned trip to the United States where he would have been expected to finalize the details of the agreement reached last month, Japanese stocks fluctuated from gains to losses. The Nikkei was up last 0.7%.
The shares of Mitsubishi Corp rose up to 3.2% after Warren Buffett’s Berkshire Hathaway announced that it had increased its stake.
The Bank of Korea held rates at 2.5% as economists had expected.
Hong Kong shares fell, with the Hang Seng Index dropping 0.9%. Meituan shares dropped as much as 11,4% after the Chinese food-delivery giant reported a decrease in profit for the second quarter on Wednesday.
The dollar is on the defensive in the currency market as traders bet more heavily that interest rates will drop next month. This follows the recent pivot of Federal Reserve Chair Jerome Powell to a more dovish stance, and President Donald Trump's move to take control of the largest central bank of the world.
Trump announced earlier this week that he was firing Federal Reserve Governor Lisa Cook. This caused some investors to worry about the Fed’s independence. Cook's attorney said that she would file a suit against the White House.
Trump pressed the Fed for lower interest rates in his first term as president. He has intensified this campaign in recent years while attempting to appoint key positions at the U.S. Central Bank. The president demanded a rate cut of several percentage points, and he threatened to fire Powell. He has since backed off from this threat.
The yield on the benchmark 10-year Treasury note fell to 4,2227% from its U.S. closing of 4,238% on Tuesday.
According to CME Group’s FedWatch tool, the market currently prices a probability of 88.7% that a 25 basis point rate reduction will occur at Fed's meeting on 17th September. This is up from 61.9% one month ago.
The dollar fell 0.2% to 147.135 against the yen.
Brent crude dropped 0.8% on the commodities market to $67.49 a barrel.
Gold prices were slightly lower. Gold was down 0.2% to $3391.60 a troy ounce.
(source: Reuters)