Commodity Tracker: 4 charts to watch this week

Prices are in focus this week, with copper topping the list amid rising investments. Solar prices in Spain are expected to bounce back after hitting historic lows earlier in the year, while Canadian wheat prices are seen firm.

1. Copper price soars despite easing supply concerns

What's happening? The copper price is overshooting supply-demand fundamentals, driven by increasing money inflow from investment funds since March, according to S&P Global Commodity Insights analyst Ruilin Wang. The London Metal Exchange spot copper price was $10,295.21/mt May 22, up 22% year to date, according to S&P Global Market Intelligence data. The COMEX price has soared even higher on concerns about metal available for US delivery and short covering by investors taken off guard by copper's surge. While long-term demand looks set to grow on the back of the energy transition, the copper market is currently well supplied.

What's next? Analysts expect a pullback in prices to correct for the recent spike. Commodity Insights projects a surplus of 137,000 mt of refined copper in 2024, with surpluses continuing through 2026.

2. Spain solar prices poised for a summer rebound after record-low spring

What's happening? A boom in solar over the past years has lifted Spanish solar capacity to around 30 GW, with the technology forecast to lead Spain's power mix over the summer period, according to analysts at Commodity Insights. Spanish solar power plants are forecast to generate some 17.5 TWh between June and August, up 20% from last summer. This, alongside improved hydro on the Iberian Peninsula, is set to squeeze gas for power demand. Gas plants got marginalized in the spring amid record-low power prices, barely averaging Eur20/MWh, but the onset of summer and rising demand started to lift spot and month-ahead prices much closer to European average levels. Meanwhile, the Platts-Pexapark index for a standard 10-year solar PPA in Spain has stabilized after falling a quarter over the past year with the index pegged May 22 at Eur33.34/MWh.

What's next? Commodity Insights analysts forecast some 32 GW of utility-scale solar projects will be built in Spain over 2024 to 2028, with growth set to peak in 2025. Falling capture prices for solar could be a challenge, but prices this summer are set to rebound sharply with the Q3 contract up by almost a third since April, trading above Eur80/MWh.

3. Rail strike, Black Sea production concerns keep Canadian wheat prices firm

What's happening? The Platts Canadian Western Red Spring Wheat 13.5% assessments hit multiyear lows in April but nearby prices have jumped nearly $40/mt and deferred prices nearly $30/mt higher in the weeks since. Front-month prices have held firm with the potential for stalled logistics still looming amid an expected Canadian rail strike. More forward prices have increased as well, primarily as the market reacts to the updates on the current Russian crop which has been plagued by late frosts and dry weather.

What's next? Canadian producers are in the midst of planting and so far market participants are not expecting any significant concerns to arise. Instead, all eyes are on Black Sea wheat as production estimates have trended lower for Russia. If the Russian crop drops below 80 mmt for the marketing year 2024-25, global supply challenges are expected to keep wheat prices firm and shake up trade flows.

4. N-butanol and downstream butyl acetate prices drop on weak demand

What's happening? The n-butanol market is seeing bearish conditions amid passive sentiment and reluctance of consumers to commit to the market, resulting in limited activity. The lack of activity in the market has put downward pressure on prices for the fourth consecutive week. Market participants also said prospects of an improvement in the supply situation is unclear. In downstream butyl acetate, Asian imports as well as OQ Chemicals' return in operations continued to put pressure on the European market. While market players suggest that the plants are not running at full rates, supply has improved, leading to price downtrend. Meanwhile, demand remained subdued, and players continue to be reluctant to purchase material until prices drop even further.

What's next? N-butanol material availability will play a key role in the direction prices will move, as a further improvement of supply will entice consumers to push for deeper price reductions, as the recent increase in prices in March and April was supply driven. In butyl acetate, more imports from Asia are likely to lead to healthier supply, while no signs of recovery in demand might put further pressure on European production.

Reporting and analysis by Kip Keen, Andreas Franke, Ashya Kaderabek-vela, Maria-eleni Tsimeki, Ioannis Karamanos