China emissions prices surge as ETS starts operations

: Coal, Crude oil, Emissions, Metals, Natural gas, Petrochemicals
21/07/16

Prices of China emission allowances (CEAs) have risen sharply on the first day of trading in the country's national emissions market.

China's emissions trading scheme (ETS) started operations at 9.30am local time in Shanghai today, coming on line following years of preparations and several weeks later than planned. The market opened at 48 yuan/t (€6.30/t or $7.40/t) of CO2 equivalent (CO2e) and rose as high as Yn52.8/t, the maximum 10pc increase allowed under market rules.

Prices closed up by 6.7pc at Yn51.23/t. Total trading volumes were 4.1mn t for a value of Yn210mn.

The prices are well below those in the EU ETS, where December 2021 allowances traded last week at €54.25/t CO2e, around eight times higher than today China's ETS closing price at the equivalent of €6.70/t.

About 4.5bn t/yr of CO2 emissions are covered in the initial stage of the ETS, making it the world's largest such trading scheme, Huang Runqiu, China's environment and ecology minister, said at today's opening ceremony.

The ETS will initially cover only the thermal power sector, with around 2,200 coal- and gas-fired power generation plants included in the scheme. The first compliance cycle ends on 31 December this year covering emissions allowances for 2019-20.

Ten state-owned companies, accounting for a large proportion of the emissions covered, participated in today's trading. These comprised power utilities Huadian, Huaneng, Datang, China Energy Investment, SPIC and CR Power; provincial energy firms Shenergy and Zhejiang Energy; and state-controlled oil and gas giants Sinopec and PetroChina, which have captive power plants.

Some state-owned power firms have set up carbon asset management teams to represent their multiple power generation plants across the country, and to trade allowances in the ETS on their behalf.

Sinopec trading arm Unipec and PetroChina International are representing the captive power plants at the two companies' refineries and oil fields. The two firms have a total of 31 power subsidiaries covered by the ETS entities.

Market participants are not expecting much liquidity in the ETS any time soon, as only the 2,200 entities with physical power plants are allowed to participate. There is not yet any clear timeline for third-party traders, such as financial firms and independent carbon asset management companies, to enter the market.

China has been operating pilot emissions trading schemes since 2013 in provinces and cities including Beijing, Tianjin, Shanghai, Chongqing, Guangdong, Hubei and Shenzhen.

Total traded volumes in these pilot projects were 480mn t as of June, valued at Yn11.4bn ($1.76bn), while the weighted average carbon price in the past two years was around Yn40/t of CO2e, according to environment and ecology ministry (MEE) figures.

The MEE plans to expand the ETS to include other emissions-intensive sectors including steel, nonferrous metals, cement, petrochemicals, chemicals, paper and aviation in the longer term.

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24/12/18

Viewpoint: More US met coal consolidation ahead

London, 18 December (Argus) — Expectations that weak seaborne coking coal prices in the last quarter of 2024 will carry over to 2025 in the face of low steel prices is pointing to further consolidation among US coking coal producers. Consol Energy and Arch Resources set up the most significant merger of 2024 for the US market , with the merged company expected to generate $110mn-140mn of cost savings and "operational synergies" within 6-18 months of the close of the transaction. But continuing cost pressures will likely lead to closures of smaller high-cost mines, not uncommon in the past when US coking coal prices have reached a down cycle. The fob Australia premium low volatile (PLV) coking coal price fell from this summer's high of $260/t in early July to average $203.46/t from the start of October, translating to prices that are below cost for many US producers. In recent years, price volatility and lack of liquidity, particularly in the Atlantic market, has meant many buyers have chosen to buy at index-linked prices, often with fob Australia indexes. The fob US east coast price has averaged $192.84/t for the current quarter, while the high volatile A fob Hampton Road price has averaged $186.47/t in the same period, prices cited by many US producers at near or even below cost after taking into consideration rail and port handling charges. Lower cost longwall miners like Alpha Met Resources reported an average sale cost of $114.27/short ton ($125.96/t) in the third quarter for metallurgical coal, Arch Resources reported $93.81/st for the same and Warrior Met Coal indicated $120.21/st. But others such as Corsa are in clear loss-making territory at $169/st. After freight and handling charges, many of these producers will have fob equivalent costs closer to $170-190/t or even above $200/t for smaller continuous mining operations. The poor margins has also meant US producers like Ramaco have cut back their guidance while lost output capacity has failed to lift prices . Last month, many US producers have already looked to reduce shifts by extending time off for the holidays and hunting season. But this has still failed to stem supplies, particularly in the high volatile coal segment where traders and suppliers that had secured tonnes earlier this year or more recently via term contracts have been offering prices at steep discounts for on-water cargoes to Asia and port stocks in China. US producers have been focusing their efforts on sales to Asia in the face of weak demand in Europe, leading to the absence of much incremental coking coal demand in the region since last year. In a time of high fob Australia prices, margins for US sales to Asia might have been attractive. But with low Australian prices and competition from Russia and Mongolia continuing to grow, the second half of 2024 has seen poor margins for US sales to Asia. While Russian mining costs have risen, they are still well under the levels in the US. Industry sources peg average production cost for open-pit mining in the Kuzbass region at $18.37-35.75/t, excluding value-added tax (VAT), while underground mining stands at $24.83-60.58/t, excluding VAT, according to sources at Russian coal mining companies. Russian coal is also typically discounted to account for sanctions and difficulties with payments, and more recently the export duty on Russian coking coal was removed. US president-elect Donald Trump's threat to impose import tariffs on all imports from China has drawn concern in the market about China imposing retaliatory tariffs on US coal. In a well-supplied market and the presence of strong competing producing countries at key import destinations, many US producers expect they will have to absorb any increase in tariff to secure sales to China. At a recent industry conference in Prague, several participants indicated the fob Australia PLV index should be in the region of $220-225/t to be sustainable for the wider industry. By Siew Hua Seah Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

India’s AMNS in talks to build Suvali LNG terminal

24/12/18

India’s AMNS in talks to build Suvali LNG terminal

Mumbai, 18 December (Argus) — Indian steel manufacturer ArcelorMittal Nippon Steel (AMNS) is in advanced talks to build a 5mn t/yr LNG import terminal at Suvali, Surat city, in India's western state of Gujarat, a source close to the matter told Argus . The terminal will be part of its plan to build a new captive port at Suvali which would handle 60mn t of bulk cargoes and finished goods, the source added. The firm has yet to announce the timeline for the terminal and the port. It received environmental clearance in 2023. The LNG terminal is being built in response to higher regasification charges, pipeline tariffs and storage fares at Shell's 5mn t/yr Hazira facility, the source said. Shell's 5mn t/yr LNG terminal charges one of the highest regasification rates in the world at $0.75/mn Btu, industry sources said. The Suvali terminal will be located 10km from Shell's 5mn t/yr Hazira LNG terminal. AMNS has reduced its imports to Hazira terminal with no deliveries in 2023 and 2024 compared with 12 cargoes totalling 820,483t received in 2022, data from market intelligence firm Kpler show. The firm only received nine LNG cargoes at Dahej this year totalling 596,000t, Kpler data show. AMNS has largely stopped using Shell's Hazira terminal, only using one slot in 2024 as compared to around 10-16 slots every year previously, the source said. Petronet's 17.5mn t/yr Dahej import terminal provides more than 30 days of free storage, while Hazira provides only 16 days, the source added. A slot refers to utilisation of an LNG cargo from its evacuation to regasification facility. AMNS is likely to invest a total of $1.95bn to build the Suvali terminal. It will have two LNG storage tanks, a sea-water based regasification unit, pumps and cryogenic piping with pipelines to supply regasified LNG to AMNS' 9mn t/yr crude steel plant. The terminal will be designed to handle LNG carriers with capacities of 20,000-26,5000m³, the source added. But it remains to be seen if this will materialise as it will be in competition with several LNG terminals in close proximity, including GSPC's 5mn t/yr Mundra LNG terminal and HPCL's upcoming 5mn t/yr Chhara LNG terminal in Gujarat. Further terminal plans Adani Ports and Special Economic Zone (APSEZ) also has plans to expand the capacity of its Hazira port and may even consider setting up an LNG facility as the port currently handles bulk cargoes, liquid chemicals, and oil products. India currently has seven operational LNG terminals with a combined capacity of 47.7mn t/yr, with the highest utilisation in Petronet at 103pc during April-October, followed by Shell's Hazira at 44pc. Utilisation in other terminals remains in a nominal range of 20-35pc, an oil ministry report shows. This is due to lack of a breakwater facility or weak pipeline connectivity from terminals to end users. India's state-controlled gas distributor Gail has bought a total of 25 slots equating to 1.5mn t/yr of LNG at Shell's Hazira LNG terminal for 2025, prompting speculation that its 5mn t/yr Dabhol LNG terminal might not be operational for the whole of next year, another source told Argus . Gail was planning to operate the Dabhol LNG facility at full capacity throughout the year from 2025 as it has resumed construction on its breakwater facility after a monsoon this year, director of finance Rakesh Kumar Jain said in an investor call on 31 July. The construction of the breakwater facility has been delayed since 2022 because of conflicts with local communities. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Japan to continue filling bulk scrap demand

24/12/18

Viewpoint: Japan to continue filling bulk scrap demand

Shanghai, 18 December (Argus) — Asian steel scrap buyers will probably remain risk-averse next year and continue to focus on purchasing Japanese scrap in small bulk cargoes over US scrap on large vessels. Japanese scrap, which has a shorter lead time and more flexible shipment sizes, is often considered by Asian buyers to be lower risk compared with US scrap, which has a longer delivery period and less wiggle room in parcel sizes, particularly when steel and scrap demand is weak. South Korean scrap imports fell by 44pc year on year to 1.83mn t in the first 10 months of 2024, but Japanese scrap's market share increased to 72pc from 70pc the previous year. Vietnamese buyers, which have been largely absent from the US scrap export market for over a year, imported 2mn t of Japanese scrap in January-October, rising by 63pc on the year and accounting for 44pc of Vietnam's total imports. The Philippines, once a net exporter of ferrous scrap, has imported more scrap in recent years, with Japan supplying 92pc of its scrap imports during the first three quarters of 2024. The growing steelmaking capacity and infrastructure investments in southeast Asia will further drive demand for Japanese scrap in the region in the coming years. Japanese scrap suppliers may also have greater appetite to sell to overseas markets in the coming year because lower domestic scrap demand in the country and the weaker yen against the US dollar have widened the price spread between domestic and exported scrap. The spread between Vietnam imported scrap prices and Japan domestic collection prices increased to $77/t on 6 December from around $53/t on 5 January after Tokyo Steel — the domestic scrap price setter in Japan — made multiple price cuts of more than ¥10,000/t ($66/t) since July, while prices for HMS 1/2 80:20 cfr Vietnam have dropped by only around $40/t. Japan's leading steel mills plan to transit more production from blast furnaces to electric arc furnaces, which may increase domestic scrap demand after 2027. But in the short term, prices are still expected to remain largely dependent on conditions in the wider ferrous market. Japanese crude steel production in the first 10 months of 2024 totalled 70.2mn t, down by 3.7pc year on year. Major steelmakers in Japan have cut their production forecasts for the 2024-25 fiscal year, citing a weaker domestic market. Demand for building materials is expected to decline further owing to rising construction costs and persistent labour shortages. Japanese steel imports rose by 10pc year on year to 2.8mn t in April-September, the highest since 2014, according to the finance ministry. Many Japanese mills fear that rising imports could further pressure the domestic steel market in 2025 if there is no government intervention. With the Japanese ferrous market expected to remain clouded by lower domestic steel production and higher steel imports, any excess scrap supply will be sold in the export market to reduce sales pressure in the domestic market. Japanese scrap exporters are facing challenges such as volatile exchange rates and vessel shortages, which have limited their export appetite in the past few months. Freight rates for scrap cargoes from Japan have increased by over $10/t since October and led to lower offers from Japanese suppliers and a wider bid-offer spread in the last quarter of 2024. But traders anticipate that this bottleneck will gradually ease in early 2025. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: EU PVC margins to hold below average in 2025

24/12/18

Viewpoint: EU PVC margins to hold below average in 2025

London, 18 December (Argus) — European polyvinyl chloride (PVC) margins are likely to remain subdued in 2025, with a repeat of the sluggish demand and rising ethylene costs seen in 2024. Weakening European PVC consumption throughout 2024 was mainly underpinned by lower construction activity, a key demand driver. Construction purchasing managers index (PMI) data, compiled by S&P Global and Hamburg Commercial Bank (HCOB), show the eurozone construction PMI for 2024 peaked in October at 43.0, still way below the 50 mark that separates contraction and expansion. PVC market participants are cautiously optimistic that recent declines in interest rates from the European Central Bank (ECB) may help stimulate demand for home-builds in 2025, and improved PVC demand will follow. The ECB reduced rates three times in 2024, to 3.25pc. Rates may continue to ease in the short term, but as witnessed in 2024 this would take time to filter through to European PVC demand. Because of this, buyers are contemplating either maintaining or reducing contractual PVC volume commitments for 2025, noting struggles with passing raw material costs to customers. Anti-dumping duties (ADDs) on s-PVC imports from the US and Egypt helped to reduce excess supply in 2024, and while this is likely to continue into 2025 there is limited interest from buyers to source additional supply because of lower demand. Asian s-PVC imports remained minimal, with volatility in freight costs and longer lead times likely to suppress buying interest into 2025. Re-balancing act Domestic PVC producers focused on reducing inventories and operating rates for much of 2024 to keep the market balanced, with average operating rates between 60-70pc for s-PVC production and at the higher end of the range for specialty grades. But re-balancing proved to be a slow process in light of weakening demand, forcing European producers to keep operating rates and margins low for much of the year. Argus calculated s-PVC net production margins, based on feedstock ethylene costs in northwest Europe, averaged around €287.04/t between January-November 2024, lower by €109.04/t than during the same period in 2023 and around €73.40/t lower than the Argus 2015-23 average. Easing electricity costs in 2024 helped to suppress further PVC margin loss, but demand weakness throughout the year remained in favour of buyers as contract prices settled predominantly below the implied ethylene cost. With European ethylene prices likely to increase and PVC demand expectations suppressed throughout 2025, there could be another year of below-average margins for PVC producers. Argus assessed the December suspension PVC (s-PVC) preliminary contract marker for northwest Europe at €1,120/t on 20 December, reflective of a preliminary contract delta for December at minus €5/t. This is comparable to an ethylene monthly contract price (MCP) movement of minus €7.50/t for December. This raises the possibility of further supply consolidation in Europe to re-balance the market in the medium term, with smaller producers announcing potential closure of PVC production units in central and eastern Europe in 2025. Others plan to mothball some specialty PVC production lines, while others are seeking import licenses to supply PVC into emerging markets such as India. This is difficult to achieve because of cost-competitiveness. A rise in regional construction activity, and therefore PVC demand, will remain the quickest way to re-balance the market, helping to raise operating rates and margins back to above-average levels as buyers commit to more contractual volumes. By George Barsted and Michael Vitiello Integrated s-PVC NWE net margins €/t Eurozone construction PMI Index Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Japan eyes methanol as marine bridging fuel

24/12/18

Viewpoint: Japan eyes methanol as marine bridging fuel

Tokyo, 18 December (Argus) — Japanese demand for methanol as an alternative marine fuel is expected to increase, especially after 2027, but it is likely it will mainly be used as a transition fuel before the commercial launch of ammonia- and hydrogen-fuelled vessels. The Japanese shipping industry is expected to launch more methanol-fuelled vessels from 2027 ( see table ), to help reduce greenhouse gas (GHG) emissions from the global maritime sector. Global regulatory body the International Maritime Organization (IMO) in 2023 pledged to achieve net zero emissions in international waters by or around 2050. To help achieve the IMO's target, a total of 26 methanol-powered vessels are expected to be commissioned worldwide by the end of this year, followed by 54 ships in 2025 and 96 carriers in 2026, according to a report released in November by Japanese classification society ClassNK. This would increase global methanol demand to 4.5mn t/yr by 2026, said the report. As of June, there are 33 methanol-fuelled vessels currently in use. Methanol-fuelled vessels can refuel at around 130 major ports all over the world, except in Japan, according to Japanese shipowner Mitsui OSK Lines (Mol). The city of Yokohama in the eastern prefecture of Kanagawa, in co-operation with Mitsubishi Gas Chemical (MGC) and Maersk, launched a study on methanol and green methanol bunkering in the port of Yokohama in December 2023. Since then, the group, in collaboration with new partners — Japanese refiner Idemitsu, MGC's shipping subsidiary Kokuka Sangyo, domestic shipping firm Uyeno Transtech and Yokohama Kawasaki international port — has conducted a ship-to-ship bunkering simulation at the port of Yokohama in September. Expectations of the increase in methanol use, especially cleaner e-methanol, have led Japanese firms to become more involved in upstream projects to secure the fuel. Japanese firms have invested in more than 10 e-methanol production projects both in and outside of Japan ( see table ), with the number of projects likely to increase, according to the ministry of economy, trade and industry. Japanese firms are developing new carriers, but at the same time are also trying to modify existing vessels — which currently use fuel oil, LNG, LPG and methanol — to be able to burn renewable fuels such as biofuels, e-methane and e-methanol. It would be easy to increase the number of methanol-fuelled ships, given their relatively low initial or modification costs compared with LNG-fed vessels, according to Mol. Methanol is also a stable liquid at room temperature and atmosphere pressure, making it easy to transport and store compared to other alternative fuels, Mol added. Fellow shipping company Nippon Yusen Kaisha (NYK line) is also mulling the development of smaller methanol-fuelled handymax ships that are unable to be equipped with large ammonia fuel tanks, to aid with decarbonisation. Methanol a temporary solution But Japanese firms see methanol mostly as a "bridging fuel" rather than a zero-emission fuel, as methanol can reduce GHG emissions only by 15pc compared to traditional bunker fuel, although it can curb sulphur oxide and nitrogen oxide emissions by up to 99pc and 80pc, respectively. It would be vital to begin introducing much cleaner marine fuels, such as ammonia and hydrogen, to meet the maritime sector's net-zero goal. Tokyo is trying to promote the development of ammonia and hydrogen-fuelled ships by providing financial support, while the utilisation of such clean vessels could materialise from around 2030, the ministry of land, infrastructure, transport and tourism (Mlit) said. Japan's state-owned research institute Nedo plans to provide ¥35bn ($229mn) to support the development of engines, fuel tanks, fuel supply systems and other core technologies for zero-emission ships that use hydrogen and ammonia, as well as LNG and e-methane, under its ¥2.76 trillion green innovation fund. But the grants are much larger than those for the development of methanol-fuelled ships, which are currently available only from Mlit and the environment ministry, with the amount of ¥100mn per vessel over two to three years. The scheme has been open for application every year since 2023. But the ministries' scheme also targets LNG-fuelled ships, with a breakdown of allotment for methanol-powered vessels unclear. By Reina Maeda and Nanami Oki Japanese firms' methanol projects Methanol-fuelled ships Company # of vessel Type Target commercialisation Announcement Mitsubishi Gas Chemical, Mitsui OSK Line 1 Ocean-going methanol carrier Jul-05 May-23 Toyofuji Shipping, Mitsubishi Heavy Industries 2 Ro-Ro vessel 2027-28 fiscal year Jun-24 Mitsui OSK Line 1 Coastal methanol carrier Dec-24 Jul-24 NS United Kaiun, Nihon Shipyard, Jaman Marine United, Imabari Shipbuilding Multiple Bulk carrier After 2027-28 fiscal year May-24 Orix, Tsuneishi Shipbuilding 2 Bulk carrier Jul-24 Production Company Product Country Target commercialisation Target capacity (t/yr) Mitsui E-methanol US Jan-24 1630000 Mitsubishi Gas Chemical Bio-methanol Japan Jun-24 Small amount Mitsubishi Gas Chemical, Kobelco E-methanol Japan NA NA Cosmo, Toyo Engineering E-methanol Japan NA NA Sumitomo Chemical E-methanol Japan 2030s NA Mitsui, Asahi Kasei Bio-methanol US Jun-23 NA Toyo Engineering E-methanol India 2030 NA Investment Company Product Country Target commercialisation Target capacity (t/yr) Mitsui E-methanol Denmark NA 42,000 Idemitsu E-methanol Brazil, US, Chile, Uruguay, Australia 2,030 4,000,000 JOGMEC E-methanol Brazil, US, Chile, Uruguay, Australia 2,030 4,000,000 Mitsu OSK Line E-methanol Brazil, US, Chile, Uruguay, Australia 2,030 4,000,000 Table source: Firm's company releases Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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