Raw Materials Chronicle

New cereal surge thwarts Egypt’s tender

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Wheat, soybeans and especially corn… World cereal prices have been on the rise again since Tuesday 12 January. The latest report from the US Agriculture Agency is fueling this new outbreak, which is dissuading Egypt from buying wheat for the time being.

Cereals are definitely starting the year 2021 with a bang. Corn prices hit their maximum daily upside on the US futures market on Tuesday. On Wednesday, the surge continued from Paris to Chicago. At 5.39 dollars a bushel, corn is at its highest since mid-2013, soybeans and wheat are at their highest since 2014. In Paris, a tonne of wheat is worth nearly 230 euros.

On January 12, the US Agriculture Agency (USDA) report surprised markets, downgrading the last US corn crop by 8 million tonnes from December. The drought damage to the yields of the Great Plains had been underestimated. US soybean and wheat harvests are also downgraded, fears about new harvests in the southern hemisphere, Argentina and Brazil.

► Also to listen: Brazilian soy soon to be shunned by European buyers?

From China to Morocco, a strong demand for cereals

We are worried about the lean season between now and next September, given the strong international demand. All importing countries, China in the lead, wishing to replenish their stocks, which the Covid has not always allowed. Morocco is more than ever in purchases to compensate for its weak harvest and Rabat has removed its import tax to facilitate them.

Faced with this surge in grain prices, Egypt however abandoned its last call for tenders. For the world’s largest wheat importer, the proposals were too few and too expensive. Even Russian wheat is no longer competitive, Russia imposed an export tax to calm wheat inflation at home and she is thinking of overtaking her soon.

According to FranceAgriMer, this elimination of Russian wheat could allow French wheat to regain market share in North Africa and West Africa in the second part of the season.

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Towards a new graphite industry outside China for electric vehicles

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A key ingredient in electric mobility, graphite has seen its mining production decline in 2020 due to Covid-19. But new projects are being relaunched this year, including a complete sector outside China.

With the rise of electric mobility, mining graphite production is expected to grow by 8% this year, analysts at Global Data estimate. A rebound after the decline of last year, when the supply of natural graphite fell by 15.5%. Blame it on Covid-19 which had disrupted work on many deposits and which had slowed down demand from steelworks, where graphite is traditionally used to compose the electrodes of electric furnaces.

70 kilos in an electric vehicle

Demand for electric vehicles had also stalled. However, graphite is a key ingredient in batteries, along with lithium, nickel, cobalt and manganese, since an electric vehicle battery contains no less than 70 kilos of graphite.

But with the brake on the Covid, China, the world’s largest supplier, had reduced its production by 5% in 2020. Brazil, the third producer of graphite, had cut it by 4%. Mozambique had gone from 2th to 6th world rank by completely suspending the operation of the Balama site, operated by the Australian Syrah Resources.

New extraction projects in Africa

Activity should soon resume on this Mozambican deposit and the offer should even expand with new projects in the next two years, with the start of the Molo deposit in Madagascar in 2021, Montepuez in Mozambique and Lindi Jumbo in Tanzania in 2022. These new African sources of supply could allow the development of a new graphite sector outside China, since Syrah Resources, which operates the Mozambican deposit, has launched a battery anode manufacturing plant in the United States. United: in Vidalia, Georgia.

US Battery Anode Plant

A way to escape China, which not only concentrates two-thirds of the world’s production of graphite ore, but above all which transforms more than 90% of the world’s graphite flakes into spherical graphite, the key ingredient in anodes of batteries.

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The northern hemisphere cold snap completely overturns the gas market

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The sudden onset of winter in Asia and Europe is causing gas shortages from Pakistan to Japan. Spot prices for liquefied natural gas are propelled to record levels, when they were at their lowest in March 2020, because of the Covid-19. LNG producers have for the first time reduced their summer production.

The cold wave in the northern hemisphere has completely turned the gas market upside down. The drop in temperatures surprised many countries in Asia, very dependent on imports of liquefied natural gas and which had not taken their precautions. Gas had been so cheap since last March on the spot market that importing countries expected to continue buying it as and when needed. Two months ago, India even gave up on its long-term supply agreement with Tellurian. Today she struggles to provide herself.

India and Pakistan had abandoned long-term contracts

Same thing in neighboring Pakistan. The country is suffering from a real shortage of gas and therefore of electricity, which turns into a political crisis. The population uses fuel and wood for cooking and heating. Even Japan, which imports all its liquefied gas by ship, also lacks power for its power plants, while its nuclear reactors are still not working at full capacity.

Everyone wants LNG when there is none on the market. For the first time in their history, in fact, the gas liquefaction units, from Australia to the United States, stopped this summer to limit surpluses and financial losses, after the plunge in spot prices in the month of March because of the Covid.

Produce less to earn more, a new mantra for the LNG industry

« Out of 150 billion m3 of unused gas capacity in the world, 50 billion m3 have been put on hold by LNG producers, i.e. the equivalent of French consumption, emphasizes sector specialist Thierry Bros. It’s a new model for the LNG industry: produce less to earn more. By not producing this summer, they erased the coronavirus effect. They would have produced this summer we would not have the high prices we have today. »

A warning for importing countries

In Asia the million Btu reached 25 dollars against less than 2 dollars last March! LNG carriers cannot be found at less than $ 200,000 a day, three to four times more than 4 months ago, observes expert Pierre Terzian. Price anomalies that will not last, he says, but which are a warning that the spot market cannot solve all problems. But today, with contracts of less than three years, it represents 25% of the world gas market, which is a lot. While the share of long-term contracts is only 75%.

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Indonesia is developing an integrated nickel industry, from mine to battery

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As the world’s leading supplier of nickel, Indonesia is stepping up agreements with global manufacturers of electric batteries. The Jakarta authorities have been pursuing a proactive policy of industrial development using this mineral resource for years.

Indonesia could be the first country to develop an integrated nickel industry, from mine to battery. The latest initiative, revealed last week by authorities in Jakarta, South Korean battery maker LG has signed an agreement to invest $ 9.8 billion not only in a battery factory, but in the development of a nickel mine and refinery in the Moluccas Islands. The first developments should start in February.

« LG has the market and the technology, but Indonesia has immense reserves of raw materials, comments the Indonesian Investment Coordination Office. If we combine the two, he continues, this investment will make Indonesia one of the world’s major electric vehicle players. »

Volunteerism of the authorities

For years the authorities in Jakarta have sought to develop the downstream side of their nickel industry. Their method? Successive embargoes on raw ore exports to push processors to settle in the archipelago to refine the metal. ” This is what many Chinese steelmakers had to do in the 2010s, who needed Indonesian nickel for their stainless steel. », Recalls Didier Julienne, specialist in metals.

Now it is the electric transport revolution that is pushing investors to take an interest not only in the transformation of the ore into electrolytic nickel, of battery quality, but in the establishment of battery factories in Indonesia to control the supply of nickel. ” Manufacture where it costs the least », Comments the expert.

Project by LG, GEM, Tesla

The coronavirus has delayed to 2022 the start of a similar project in the Morowali industrial park, in the east of the island of Sulawesi. But the Chinese GEM, supplier of components for electric batteries, has just risen to 76% in the capital of the joint venture.

Finally, a delegation from Tesla, the American electric car champion, is expected in Indonesia later this month.

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OPEC + ready to continue to carefully open the oil valves

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The Energy ministers of the Opep + alliance are meeting virtually on Monday. At the start of 2021, the cartel led by Saudi Arabia and Russia wants to increase its production of crude again. But in a very moderate way, given the uncertainties that Covid-19 still raises over oil demand.

The Opep + alliance would like to definitively turn the page on 2020 and reopen the oil floodgates. But it is caution that should again prevail at the meeting of energy ministers on Monday.

Last month, despite the Covid-19 vaccine announcements, the Saudi-Russian-led cartel gave up on increasing production by 2 million barrels per day from January. He had opted for a gradual increase of half a million barrels, and could stop there in February or at most increase the supply by an additional half a million barrels.

Gradual increase in production

OPEC + watches the oil market like milk on fire. Never before has the alliance of 23 exporting countries met so often. Never has the oil market seemed so uncertain, since the collapse of global consumption last year due to measures taken against the pandemic.

Since then, of course, Chinese demand for crude has rebounded. The global petrochemical industry has made a strong recovery, including in Europe, thanks to increased needs for plastic materials, particularly in the sanitary products industries.

Petrochemicals in good shape, transport still depressed by the Covid-19

Oil prices, although they did not reach the $ 70 of January 2020, after venturing into negative territory in New York in April, have risen to $ 50 and they remain there. OPEC + therefore does not want to let American shale oil producers take advantage of this improvement alone.

But fuel consumption in transport remains depressed. And we do not know what the long-term consequences of Covid-19 will be on consumer behavior, OPEC recognizes.

Libya is back in force, and soon Iran?

In its latest report, the cartel downgrades its consumption growth forecast for 2021 to 96.89 million barrels per day, against less than 90 million barrels in 2020, but still far from 100 million barrels per day from 2019.

There is no question of suddenly and collectively reopening the floodgates, when Libya, not subject to quotas, is already providing more oil and Iran hopes to do the same later this year, thanks to a more lenient US administration.

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2020, a dark year for French beet growers

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Sugar beet producers have suffered enormously this year in France. The crop collapsed due to the yellowing of the plants. The industry is also worried about the consequences of Brexit.

2020 will have been a dark year for the French sugar beet industry. The harvest is 30% lower than the average for the past five years. It’s unheard of for 30 years. The losses of beet growers are estimated at 280 million euros.

Plant yellows caused by aphids is the main cause of this crisis. In question, the ban in France since September 2018, of neonicotinoids, a pesticide which protects plants against these aphids but which is dangerous for biodiversity because it attacks pollinating insects such as bees.

However, the horizon is clearing up for 2021. Under the pressure of a sector which has 25,000 farmers and generates 46,000 jobs, the government reintroduced in December the temporary use of neonicotinoids while waiting for another technical solution to fight against jaundice. . Added to this is the prospect of a rise in sugar prices next year, two factors which will allow beet growers to find resources.

But 2021 could be marred by the consequences of Brexit. France is the main European supplier of sugar and ethanol to the United Kingdom, which thus absorbs the production of 15% of the French beet area. The beet-sugar sector fears above all that Great Britain, no longer subject to European rules from January 1, will buy raw sugar at low prices from third countries such as Brazil, since it refines it on its territory. and re-exports it to Europe. This could destabilize the French sector because France is the leading producer in Europe of sugar and bio-ethanol.

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Biofuels have also suffered from the pandemic

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Biofuels have also suffered from the pandemic and its economic consequences. Demand fell this year, a first in 20 years. It is a hard blow for the whole industry.

Due to the fall in oil prices linked to the health crisis, the demand for biofuels has fallen this year. The latter have become less competitive against black gold. Cheap petroleum therefore penalizes the consumption of fuels produced from organic matter. In its annual report published in November, the International Energy Agency estimated the drop in demand for biofuels at 11.6% in 2020. The outlook for 2021 is also uncertain as to a possible rise in oil prices for reach pre-crisis levels.

Another uncertainty weighs on the demand for biofuels: the development of the electric car and in the longer term hydrogen engines. The airline sector, which consumes a lot of fuel, could be the solution. But this requires binding regulations for airlines. During the “Paris air forum” conference held last November, the executives of Air France, Safran and Total spoke in this direction. They called for European regulations to set a minimum rate for the use of biofuels in aircraft fuel, since they are mixed. This would avoid unfair competition between companies, because biofuel for airplanes is much more expensive than conventional fuel.

Such regulation would allow the sector to significantly reduce the carbon footprint. So oil groups like Total are starting to take this seriously. Indeed, the French giant will invest 500 million euros to convert the Grandpuits refinery, south-east of Paris, into a bio-refining site where biofuels will be produced mainly for air transport.

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In 2020, oil experienced its worst crisis in its history

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2020 was a fatal year for oil. The health crisis caused an unprecedented shock to the oil sector and probably started its decline.

Remember, in April, when the price of US oil briefly fell into negative territory, at -37 dollars per barrel, a first in history! In effect, suppliers paid buyers to get rid of their stock of crude. At the same time, a barrel of Brent, the oil from the North Sea, was hovering around $ 20, unprecedented since the 1990s. The pandemic and containment measures had caused a sharp slowdown in the global economy , causing a drop in demand and an overabundance of supply which led to this plunge in the price of black gold.

Since then, prices have slowly recovered, but they are still very low today compared to pre-crisis levels. Weakened, the oil majors have accumulated record losses, laid off workers and thus reduced their investments in exploration and production by 20 to 35%. Some shale oil producers in the United States have even gone bankrupt, others have fallen prey to bigger than themselves and have been bought out.

The crisis has also hit the poor countries heavily dependent on oil manna; this is the case, for example, of Venezuela, Iran, Angola or Algeria. Their income is greatly reduced because of the low prices of crude. 2020 was also a year of transformation for the European oil giants. Shell, Eni, BP or Total have announced an acceleration of their investments in renewable energies, estimated at 170 billion dollars by 2030. They are also committed to carbon neutrality by 2050. Unlike the American companies which believe Even in the future of oil, the European groups have well understood the fact that in the future, the demand for crude will fall due to the energy transition and the fight against climate change.

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Senegal: the prospects for oil and gas operations in the face of Covid-19

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What is the impact of the coronavirus crisis – in the short term – and of the energy transition – in the long term – on future oil and gas exploitation in Senegal? The country is preparing to enter the club of producing countries. But according to a recent report, forecasts for the offshore sector could be called into question. The players remain optimistic.

« The great uncertainty “… or even” the cold shower »… In this month of December, the Senegalese press relayed the conclusions of a report published by Open Oil. For this consulting company based in Germany, in a context of “ structural price reduction “Hydrocarbons in the world,” the offshore sector will not make any significant contribution to Senegal’s public finances », « revenues will barely reach 2% of the annual budget, only from the 2030s “, And” oil and gas revenues cannot alleviate the country’s public debt »

Two projects are under development in Senegal: the Grand Tortue gas field, shared with Mauritania, operated by the British giant BP, and the Sangomar oil field, managed by the Australian company Woodside. The first cubic meters of gas and barrels of black gold, scheduled for 2022, are now expected in 2023 after operational delays linked to the health crisis.

But the offshore sector remains ” a growth engine »According to Demba Gaye, energy expert. For the person in charge of relations with institutions at the National Institute of Oil and Gas, “ the Open Oil report did not take into account the future production of electricity from gas, which will reduce Senegal’s heavy energy bill ».

However: the construction of a plant to transform gas into electricity would represent an investment of at least 5 to 10 billion dollars and would take years before being fully operational, underlines a specialist in the sector. But Manar Sall, CEO of Petrosen Aval adds: These resources will allow “ improve people’s access to electricity “. For its part, the subsidiary of the national company is working in particular on the development of its own network of service stations.

Between the pessimistic and optimistic prospects, we must keep a cool head, believes for his part the economist Mubarack Lô. Will production actually start in 2023? ” Given the lack of visibility, no one can answer this question ” according to him. The main thing, he emphasizes, is to develop a real industrial ecosystem, with jobs to be found in gas and oil, ” more important than the resources themselves ».

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China’s coal shortage is rationing electricity in some of the country’s provinces

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Offices without heating and streets plunged into darkness at night in some Chinese provinces. Has the ban on imports of Australian coal resulted in power cuts in recent weeks in China? The Chinese authorities prefer to mention electricity shortages linked to the harshness of the winter and a sharp increase in demand.

Officially, it is the early arrival ” one month in advance “Extreme cold, associated with a record increase in consumption and energy production capacity” retrograde Which would explain the decision of the authorities of Hunan, in southern China, to authorize electricity consumption only between 10:30 am and noon and 4:30 pm and 8:30 pm.

Same alternative delivery during the day depending on rush hour in neighboring Jiangxi province. As in Zhejiang where radiators can only be turned on when temperatures drop below 3 degrees. Huang Guochao, is a department manager in a retail company in this province on China’s east coast.

« To reduce unnecessary energy consumption, our company has taken measures. We have stopped using the elevator, for example, to access the offices, we have cut the lights in the public spaces that are used for breaks, and we have also set up a program to switch off the lights in the dormitory. ‘company, he explains. But these measures are also applied externally. At the exit of the factory, there are dark streets. All street lights on the roads are turned off, and neon shop signs are also off. »

These blackouts or interruptions of electricity would be voluntary in Yiwu and in several cities of Zhejiang so as to meet the carbon reduction objectives set by the authorities recently announced the secretary general of the National Development and Reform Commission during a press conference December 21. This “rule of minus 3 degrees” is applicable until December 31 in Zhejiang, which disrupts some businesses and has caused disruptions on the assembly lines.

« These measures obviously have repercussions on production. Our factory is not yet too affected, but suppliers who manufacture cardboard packaging that we work with have had to suspend their activity due to these electrical restrictions. I also learned that a glass manufacturing plant in Jinhua City now allows its staff to work one day and take a day off, to meet regulatory requirements for energy reduction. Other factories rushed to buy power generators, causing a shortage of generators. »

Power cut, rush on generators, many analysts are finding that these electricity shortages, organized or not, coincide with the ban on imports of Australian coal as part of the diplomatic standoff between Beijing and Canberra.

Australia accounts for 57% of China’s coal imports. On December 13, the National Development and Reform Commission authorized all power plants to import coal without restriction, except from Australia, in order to stabilize prices.

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