US rail group optimistic about 2025 rail demand

: Agriculture, Biofuels, Chemicals, Coal, Coking coal, Crude oil, Electricity, Fertilizers, Freight, LPG, Metals, Oil products, Petrochemicals, Petroleum coke
24/12/12

US rail volume is likely to start strong in 2025, but railroads will need to navigate changing federal policies, the Association of American Railroads (AAR) said.

Volume next year hinges on a few key factors, including the resilience of consumer spending, strength in the labor market, and the trajectory of inflation and interest rates, the group said.

Railroads will need to remain vigilant as these economic indicators will be critical in helping assess rail traffic and broader economic health in the months ahead, AAR said.

"Strong intermodal growth and stable consumer demand offers reasons for optimism," AAR said. "But railroads and the economy alike must navigate evolving policies and potential disruptions" as the US enters 2025 under a new administration, the group said.

The AAR'S optimism comes as rail traffic in November "while by no means stellar, suggests that the broader economy remains on stable footing", AAR said.

US intermodal rail volume set new records in November. The increase reflected strong consumer demand following job gains that pushed increased spending, AAR said. Intermodal traffic is made up primarily of consumer goods shipped in containers between different modes of transportation, although some scrap metal and specialty agriculture products ship this way.

US railroads loaded an average of 282,000 intermodal containers and trailers per week, up by 11pc from a year earlier. That was the highest weekly average for any November since AAR began tracking intermodal data in 1989.

Carload traffic fell by 3.8pc compared with November 2023. Carload traffic is primarily made up of commodities.

Coal was the "biggest problem", AAR said. US railroads loaded 15pc less coal last month compared with a year earlier, while year-to-date loadings were down by 14pc from the same 11 months in 2023.

If coal were excluded, monthly US carload traffic in November would have notched a 10th consecutive year-on-year increase.

Industrial products volume was down by 1pc from a year earlier. Manufacturing is a major driver of US carload traffic, and that sector remains sluggish, AAR said.

By Abby Caplan

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24/12/16

Viewpoint: Wheat farmers’ spot focus to squeeze traders

London, 16 December (Argus) — Farmers are likely to continue shifting their trading activity to the spot market in 2025, at the expense of forward sales, which is likely to pressure trading firms' margins because growers can largely afford to withhold product until bids reach a preferred level. For wheat specifically, currency volatility in major producing countries and more favourable prices for alternative crops could continue to disincentivise forward wheat selling into 2025. Higher on-farm storage capacity and, in the case of much of the Black Sea region, increasing government support for farmers, such as through more favourable loans for inputs, will facilitate this spot focus by alleviating pressure to offload stocks. Farmers' focus on prompt volumes is likely to be increasing volatility in the market — instead of steadier forward sales, farmers instead are more likely to come to the market simultaneously, resulting in more concentrated bursts of selling of spot supplies. Black Sea farmers eye traders' short positions Producers in the Black Sea — with the exception of Russia — have all shifted to prompt-only selling. Farmers keep their focus on the spot market, benefiting from their ability to hold back from selling until trading firms need product to execute previously agreed sales when vessels arrive at port. This can leave trading firms under pressure to source volumes at a farmer-set price, because the former often take further-out short positions in destination markets. This is especially true of volumes sold under buy tenders, where trading firms may have offered on an origination basis, leaving no room for competition pressure. This trend of prompt selling is reflected in Romania's Constanta port, which has a heavy line-up for November and a December line-up that is filling quickly, the latest port data show, while positions for January are so far empty. The traditionally more spot-focused market of Russia is set to continue limiting activity to the near term, deterred from forward markets by floating export duties, which change week-on-week, and a volatile rouble-dollar exchange rate. Sellers freeze out high-protein market Two major producers of high-protein milling wheat, Canada and Australia, have largely held back from farmer selling so far this year, with stock retention encouraging farmers in both countries to continue holding onto product in anticipation of higher prices. Canada and Australia typically compete in similar high-protein import markets, particularly in Asia. But both have so far resisted pressure from forecasts of higher output and exports for 2024-25, according to the Argus AgriMarket Outlook. Australian and Canadian are opting to hold onto wheat stocks in the hope of more favourable prices and the return of China to the global wheat import market. A slow start to Australia's wheat harvest campaign, and subsequent quality concerns as crops extend their exposure to recent wet weather, have deterred producers from forward selling, instead choosing to let go of stocks on an as-needed basis. And Australian farmers have been further disincentivised from letting go of wheat crops, opting instead to take advantage of attractive global chickpea prices, in combination with a forecast for Australia's chickpea output to more than double on the year to 1.9mn t in 2024-25. Chickpeas have priced at a premium after India's temporary removal of tariffs on the pulse crop. Canadian sellers have, in turn, found incentive to withhold sales, eyeing potential support to Canadian Western Red Spring (CWRS) prices as global exportable high-protein wheat supplies tighten. And Canadian producers have enough storage for up to two harvests' worth of crop, market participants said, further weighing on any incentive to sell. Sellers in the US have taken a similar stance, refraining from forward selling as increased wheat production from a year earlier has pressured prices, causing producers to adopt a wait-and-see attitude for those that have ample storage to hold onto harvested volumes. By Megan Evans Canada wheat production vs exports mn t Australia wheat production vs exports mn t Canada wheat export pace mn t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Al market hopes for alumina supply recovery

24/12/16

Viewpoint: Al market hopes for alumina supply recovery

London, 16 December (Argus) — Alumina prices reached record highs in late 2024 as supply disruptions in several major supplying regions and strong demand in China sent buyers scrambling for units. While new projects set to come on line next year could help a return to balance and a subsequent fall in prices, alumina markets remain more susceptible to supply shocks now than in years past, and the availability of the intermediate raw material needs to be closely monitored in 2025. Alumina prices surged by more than 70pc in 2024, and prices in both China and Australia reached record highs above $780/t in November after a series of production stoppages and supply route disruptions which affected most major supplying regions. In Australia, alumina exports fell this year as environmental regulations hit suppliers, while production was affected by lower natural gas supply from March following a fire-related disruption in Queensland. Anglo-Australian miner Rio Tinto declared force majeure on third-party contracts from its Queensland alumina operations in May due to the gas shortage. In Brazil, US aluminium producer Alcoa also declared force majeure on bauxite shipments out of Juruti Port in early November, when the nearby Santarem harbour master declared the waterway inoperable after the terminal access channel was blocked. Santarem accounted for 99.7pc of Brazilian bauxite exports of 4.5mn t so far this year, according to customs data. And in Guinea, bauxite shipments from a subsidiary of UAE-based Emirates Global Aluminium (EGA) were suspended by customs in October, leading to further supply concerns, even though EGA said the suspension would not immediately affect operations at its Al Taweelah alumina refinery. This followed an overall reduction in monthly bauxite shipments of almost 40pc in September due to the country's rainy season disrupting operations. Aluminium production has continued rising to new highs this year. Chinese output reached record levels after new capacity came on line in Inner Mongolia in the second quarter, while output in Yunnan province has been unaffected by power restrictions like last year, with adequate rainfall in 2024 to feed the province's hydropower generators. But China's alumina capacity growth has not kept pace with the rise in primary metal output, so alumina imports into China have increased. In the first nine months of the year, alumina imports into China grew to more than 123mn t, up by a third from the same period in 2023. The subsequent tightness in global alumina supply has begun to hit aluminium production rates. Russian aluminium producer Rusal announced in November it is curtailing production because of high alumina prices. Rusal is one of the world's largest producers of alumina, but still requires third-party material for more than a third of its requirements. Alumina tightness is expected to ease over the next two years. China has more than 13mn t of new capacity slated for 2025, while high prices will incentivise increased use of its current 103mn t/yr capacity, from around 84pc at present. In India, Vedanta Resources is planning a new 6mn t/yr alumina refinery to come on line by 2026, and in Guinea EGA is planning its own 2mn t/yr refinery also by 2026. Swiss bank UBS expects a 960,000t alumina surplus in China next year, from a deficit of 235,000t this year. Globally it expects a surplus of 890,000t, from a 920,000t deficit this year. But tight bauxite supply is a constraint in China, with environmental regulations restricting bauxite output in Shanxi and Henan provinces since 2022. At least 70pc of Chinese alumina production will remain dependent on imported bauxite next year. And bauxite output in Guinea, source of 72pc of Chinese imports from January-September this year, will continue to face obstacles from seasonal rains, labour disputes and underdeveloped infrastructure. With global alumina supply now more dependent on fewer sources than in the past, the potential for supply shocks in 2025 cannot be dismissed, and alumina supply could remain a big factor for aluminium prices in 2025. By Jethro Wookey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

CBAM to drive low-carbon NH3 market: Woodside Q&A

24/12/16

CBAM to drive low-carbon NH3 market: Woodside Q&A

London, 16 December (Argus) — Ahead of the Argus Clean Ammonia Conference Europe in Rotterdam this month, Argus spoke to Rick Beuttel, vice president for new energy at Australia's Woodside Energy, about its recently acquired carbon capture and storage (CCS) ammonia production project in the US Gulf. Edited highlights follow. Tell me about Woodside Energy and how you ended up buying OCI's 1.1mn t CCS ammonia project in Beaumont, Texas? Woodside is a global energy company founded in Australia, providing reliable and affordable energy across the world. Our global portfolio includes LNG, oil and gas assets across Australia, the Gulf of Mexico, the Caribbean, Senegal, Timor-Leste and Canada. Our capital allocation framework also includes target investment criteria for new energy opportunities as we work towards creating a diversified and flexible portfolio that can respond to changes in demand and supply for our products. With respect to the Beaumont Clean Ammonia project, our acquisition positions Woodside to be an early mover in the lower carbon ammonia industry and meet growing customer demand globally. It supports our strategy to thrive through the energy transition with a low-cost, lower carbon, profitable, resilient and diversified portfolio. How is the Beaumont plant progressing? Is it still on track to start producing in 2025, with CCS operational from 2026? Woodside continues to target first ammonia production from 2025 for phase 1. Lower carbon ammonia production is targeted for 2026, following commencement of CCS operations to be provided to Linde by ExxonMobil. How is the regulatory market shaping up in Europe and what affect does this have on you as a producer? We believe that Europe's carbon border adjustment mechanism (CBAM) is going to be the driving force that pushes consumers of ammonia or hydrogen to adopt lower carbon molecules from 2026 onwards as a way to remain compliant and reduce costs. But Europe is not the only end market. There are tenders for lower carbon ammonia in Asia, and the OCI team and now Woodside have been active in pursuing those opportunities. In Asia, buyers prefer long-term contracts. European opportunities follow more closely the traditional ammonia market, whether for fertilizer or as a chemical feedstock, and are shorter term contract durations. Beaumont gives us the opportunity to have a balanced portfolio, both geographically and from a contract perspective. How achievable are premiums for low-carbon ammonia in the current market and do you expect CBAM implementation will aid this? For Woodside, phase 1 of the project exceeds our capital allocation targets. And we'd love a huge premium on day one. But you have to be pragmatic. While there is a great deal of climate sensitivity, people are running businesses and cost is a concern. In our view the return on investment is there and the premium will increase as the CBAM percentage increases. You also have to consider the underlying cycle of the ammonia market, global events, Europe's position with respect to gas supply and the efficiency or competitiveness of existing ammonia assets. All of these will likely cast as long a shadow as CBAM, particularly in the early years. The Woodside project adds 1.1mn t to the market in 2026. Do you see enough demand from new cases to consume the additional supply? There is also another project in Texas City, which will come on line soon. Of course, these two new assets coming on stream will have an impact. But if we look at the underlying competitiveness of the Gulf Coast, with low-cost gas and these new, large scale, very efficient assets, we believe they will compete. But we are not going to be running the facility at full rates from day one and we are more looking forward to trading the lower carbon ammonia. Some of that will go to Europe and some to Asia. Speaking of which, have you participated in either the Japanese or Korean tenders? We are looking at all markets where there is lower carbon ammonia activity, whether that is power generation, bunkering or other markets. Looking at power generation markets in Asia, Woodside has long-standing relationships with many of the countries from an LNG perspective. Making lower carbon ammonia from natural gas and shipping it around the world is very much analogous to shipping LNG. By Lizzy Lancaster Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Asia bio-bunkers to gain from EU regulations

24/12/16

Viewpoint: Asia bio-bunkers to gain from EU regulations

London, 16 December (Argus) — New regulations in Europe should support Asian demand for marine biodiesel in 2025. The scope of emissions covered under the EU's Emissions Trading System (ETS) will rise to 70pc next year from 40pc this year, and this will be accompanied by the introduction of the FuelEU Maritime regulations at the turn of the year. FuelEU Maritime requires a reduction of greenhouse gas (GHG) intensity of fuels by 2pc in 2025 and up to 80pc by 2050, against a 2020 baseline level of 91.16 grammes of CO2 equivalent (gCO2e) per MJ. These upcoming regulatory changes in Europe should support buying interest for marine biodiesel blends because biofuels compliant with the EU's Renewable Energy Directive (RED) will have a zero CO2 emissions factor under the ETS next year. And waste-based biodiesel produced from feedstocks such as used cooking oil (UCO), which typically provide higher GHG emissions against fossil comparators under RED than crop-based biofuels, will be a viable alternative for many shipowners looking to reduce the GHG intensity of their conventional vessels. The regulations will not only support demand for marine biodiesel in Europe. They encompasses various flexibility mechanisms, aimed at supporting shipowners in meeting the required reductions, including a system that allows two or more vessels to create a pool in which compliance can be achieved across all vessels within the group as long as the total overall compliance balance of the pool is positive. Vessels operating between Asia and Europe will have half of energy consumed on those voyages subject to FuelEU Maritme regulations. The energy consumed from a marine biodiesel blend bunkered in Singapore, for example, could be mass balanced to be fully accounted for under this scope. Shipowners with vessels operating on the east-west route could therefore look to bunker marine biodiesel in Singapore or other parts of Asia, and then pool that vessel along with other vessels in their fleet that operate solely within Europe to achieve compliance using a non-European bunkered product. This dynamic will be supported by anti-dumping duties (ADD) imposed on Chinese biodiesel imports into Europe. The European Commission announced earlier this year provisional ADD measures on China-origin biodiesel and hydrotreated vegetable oil (HVO), with definitive measures set for mid-February 2025. In anticipation of the provisional duties, exports of Chinese biodiesel to the EU fell by over 50pc to 563,440t in the first half of this year compared with the same period of 2023. At the same time, exports of Chinese biodiesel to Singapore hit a monthly high of 16,500t in August, which was mainly attributed to marine biodiesel blends being bunkered at the port. This pushed Argus price assessments of B24 dob Singapore, a blend comprising used cooking oil methyl ester (Ucome) and very low sulphur fuel oil (VLSFO), to an average discount of about $90/t against B30 Ucome dob ARA in August-October. The more competitive pricing led to a shift in voluntary demand for marine biodiesel blends away from the Amsterdam-Rotterdam-Antwerp (ARA) hub in northwest Europe and towards Singapore. Marine biodiesel blend sales in Singapore hit a monthly high of 116,200t in October, according to data from the local maritime and port authority. The option to bunker marine biodiesel blends in Asia to meet European regulations will not be limited to Singapore. China's Zhoushan Port Authority said it will obtain a domestic blend permit by the end of this year, which will pave the way for suppliers to provide marine biodiesel blends to local and international shipowners. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Policy changes support European biodiesel

24/12/16

Viewpoint: Policy changes support European biodiesel

London, 16 December (Argus) — European biodiesel participants are looking at a changed market in 2025 as new trade barriers, increasing mandates and a reset of the German greenhouse gas (GHG) savings quota support expectations of improved margins after a sustained squeeze. But continued uncertainty over what a second Donald Trump US presidency will mean for global biofuels markets has stymied some participants and could reshape trade flows again. Just like the old days? Recent policy changes affecting European biofuels are seemingly intended to return the biodiesel market to the period before the rapid increase in imports from China in early 2023, which weighed on prices. But the 2025 market also faces higher mandates and probably higher feedstock costs. In August, the EU imposed provisional anti-dumping duties on imports of biodiesel and hydrotreated vegetable oil (HVO) from China, and definitive anti-dumping duties of 11.1-36.6pc are due to come into force by February. The UK is currently conducting its own anti-dumping investigation into the same products from China, with a provisional recommendation expected by March and final recommendation in August. The duties have significantly slowed imports from China, with Chinese customs data showing biodiesel exports to the EU in August to October at 98,822t, down by 73pc from the same period in 2023. Low demand and high starting stocks continued to weigh on European prices for several months before supply levels tightened because of the drop in imports. Support for some European producers has not completely materialised, with high crop feedstock prices continuing to pressure production margins. European biodiesel supply levels have been further pressured by crop-based producers being unable to secure positive margins in the spot and forward markets, and cutting production, which may persist in 2025. China recently announced the cancellation of its UCO export tax rebate from 1 December, which could raise waste feedstock costs by 13pc from the major exporter. Indonesia also imposed export restrictions on palm oil mill effluent (Pome) oil, supporting advanced feedstock prices. The German cabinet approved a law in November removing the option for companies to carry over excess GHG quota certificates into 2025 and 2026, starting the market from scratch in 2025. In 2023, obligated companies exceeded their quota requirements by around 8mn t of CO2 equivalent, suppressing physical biofuel demand throughout 2024 as tickets were the cheaper option. With the change, Germany is expected to return to an Advanced Fame-focused market. Once the advanced fuel sub-mandate of 0.7pc by energy content has been met, advanced biofuels used towards the GHG quota can be double counted without a cap. When anti-dumping duties were announced, participants expected Chinese advanced producers to switch to feedstock pre-treatment and export to advanced biodiesel producers in Europe or Latin America. But the anticipated ramp-up in production outside China has not materialised, and now it seems that strong German demand may support the arbitrage from China reopening despite the duties imposed. The US outlook Across the Atlantic, a lack of clarity about Trump policies has stalled the market. Most uncertainty hinges on two points — the planned transition from the blender's tax credit to the Inflation Reduction Act's 45Z producer tax credit and Trump's plans to impose import tariffs on various countries . The blender's tax credit is due to expire at the end of this year and be replaced by a production tax credit based on carbon intensity, although official guidance has not yet been published. Exports of finished biofuels to the US would no longer receive the same tax benefit as domestic production, and flows could switch to primarily feedstocks, cutting off one option for European producers to recover thin domestic margins during low demand periods. It is also not clear if Trump will support 45Z or if the blender's tax credit will be extended following industry pressure. If Trump imposes tariffs on Chinese UCO imports, the door could open for European feedstocks and US biofuels could become more expensive. Currently, the UK imports large volumes of HVO from the US at a discount to European HVO to meet mandates — if that arbitrage closes, the UK would probably return to being a Ucome-focused market. By Simone Burgin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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