Energy Crisis? Raw Material Crisis? Commodities Keep Going Up!

Kazakhstan riots cause price volatility of many commodities

On the 9th local time, the Office of the President of Kazakhstan said that some of the country's "strategic facilities" are being protected, but the situation in Kazakhstan has caused fluctuations in the prices of various commodities, including crude oil.

Kazakhstan is a very important link in the global supply chain and is becoming a very important transportation hub in Central Asia in recent years. In addition, it is an export-oriented economy and occupies an important position in world trade, especially in energy and some key strategic resources, Kazakhstan is the second largest non-OPEC crude oil producer in the OPEC+ group, The country's oil production averaged about 1.7 million barrels per day in November, according to the International Energy Agency. Its economic growth is also highly dependent on the export of crude oil, natural gas and related products, accounting for 73% of the export volume. In addition, ferrous metals, copper, aluminum and uranium are also Kazakhstan's main export products. Among them, uranium production accounts for about 40% of the world.

In addition, in 2021, Kazakhstan will become the second largest Bitcoin mining center in the world after the United States, and its computing power will account for 18% of the world. So, the recent riots have brought significant volatility to these markets.

Indonesia bans coal exports due to supply shortage

According to CCTV Finance, citing Agence France-Presse, the Indonesian Ministry of Energy and Mineral Resources recently stated that from January 1 to January 31 this year, Indonesia has banned coal exports, including coal carriers that are being loaded and have not yet been loaded. Priority will be given to domestic power plants. It is reported that the move is to alleviate the current shortage of coal supply in Indonesia and give priority to ensuring domestic power demand.

As the world's largest coal exporter, Indonesia's coal production in 2021 is expected to be 609 million tons, with exports of 435 million tons; in 2020, it will produce 564 million tons and export 405 million tons. In other words, about 70% of Indonesia's coal production is exported. According to relevant data, nearly 40% of the world's thermal coal exports come from Indonesia. The move means that 40% of the world's seaborne coal supply will go to zero overnight. At present, many countries around the world are actively dealing with the problem of power shortage, which may cause coal prices to soar again.

According to statistics, Indonesia is my country's largest source of coal/thermal coal imports. In addition, since 2021, my country's import restrictions on Australian coal have been relatively strict, and my country has increased its imports of Indonesian coal. In this case, the Indonesian government announced such a ban, which means that my country will lose 61% of imported coal in the first month of 2022.

Mexico "withdraws" to stop crude oil exports

On December 28, 2021, Pemex CEO Octavio Romero said at a press conference that in 2022, daily crude oil exports will be more than halved to 435,000 barrels per day, Sales to foreign customers will then be phased out in 2023.

Currently, Mexico's gasoline and diesel are mainly purchased from US refineries, and President Lopez wants to expand domestic fuel production and achieve a self-sufficiency strategy. The aforementioned plans are part of that ambition, but some say it's impossible. Like many major crude producers, Mexico lacks the processing capacity to convert its abundant crude into fuels and other end products.

Mexico's current international crude oil supply exceeds 1 million barrels per day, and according to the current plan, it will be reduced by 500,000 to 600,000 barrels per day in 2022. For a tightly balanced international crude oil market, this is a very large amount.

Analysts believe that Mexico's cessation of crude oil exports means a substantial withdrawal from OPEC+. OPEC+ currently exports about 6 million barrels per day. As soon as Mexico "exited", it was reduced by 1/6, leaving only 5 million barrels per day of total exports. Then, if the crude oil exports of 12 OPEC countries add up, they may not be able to catch up with the amount of Russia alone. Therefore, after Mexico "withdraws from the group", the power of the international crude oil discourse power will undergo a huge "rebalance". As for how to balance, it depends to a large extent on where Mexico's power will be integrated.

Commodity prices continue to rally

According to relevant price monitoring, in the first week of 2022, there are 120 commodities that have increased month-on-month in the list of commodity prices, which are concentrated in the chemical sector (48 in total) and non-ferrous sector (15 in total), with an increase of more than 5%. Mainly concentrated in the chemical sector; the top 3 commodities that rose were isobutyraldehyde (43.05%), n-butanol (industrial grade) (18.88%), and petroleum coke (13.39%).