Gasoline Prices Could Surge On The East Coast

1. Gasoline Might be a Problem for US East Coast

• As US gasoline stocks have fallen to their lowest for this time of the year since 2012, at 222 million barrels, the specter of a gasoline shortage is haunting the most vulnerable states.

• European gasoline imports into PADD 1 have been greatly curtailed by the ongoing French strikes which debilitated most refineries in the country, with flows dropping to their lowest since April 2020.

• Freight costs are also limiting gasoline arbitrage into US East Coast, with a transatlantic fixture now trending at more than $45,000 a day, the highest for this time of the year in 13 years.

• National average gasoline prices have been hovering around $3.50 a gallon recently, but as the US heads into the high-demand summer season, a surge is on the cards.

2. Gold Prices Are Set for a Record Spike

• Prices of gold have risen above the $2,000 per ounce mark and are eyeing the all-time high set level in August 2020 ($2,075) as the safe-haven appeal of the bullion becomes ever more marked.

• The most recent support for gold has come from slackening business activity in the US, which feeds into a larger narrative of a potential recession being around the corner.

• With market estimates for the next Federal Reserve meeting now going 50-50 between a 25 bps rate hike and no change, fears that the Fed would retreat are pushing investors into gold.

• Simultaneously, central banks across the world have been buying up gold over the past year, with OTC demand for the bullion jumping 18% year-on-year, the largest reading in 11 years.

3. Chinese Interest Reappears in Australia's Coking Coal

• The overall decrease in coking coal prices made Australian coking coal exports into the largest potential outlet - China - much more realistic, only weeks after Beijing lifted restrictions on trade with the country.

• Declining prices have led Chinese authorities to incentivize imports and suspend the return of coking coal import tariffs from Russia and the US, initially expected to kick back in from April 1.

• Coking coal prices have been weakening on the back of slower steel production, with China remaining the only major producer to see year-on-year increases, with India, Japan, the US, and Russia all edging lower.

• Having lost some $100 per metric tonne since February, Australia's premium hard coking coal (HCC) is now priced at around $300/mt, overtaking Chinese domestic prices.

4. Hydrogen Roll-out Calls for Massive Pipeline Upgrades

• Europe and North America dominate the world of hydrogen transportation today, with the two representing 90% of global coverage worth some 4,300 km of existing infrastructure.

• At the same time, continental Europe is lagging behind the UK in reinforcing their pipes against hydrogen embrittlement - two-thirds of British gas pipelines are already upgraded with polyethylene inserted into the pipe.

• Recent studies have shown that repurposing existing natural gas pipelines for hydrogen transport is four times more cost-effective than building new ones, so any country would naturally tilt towards that.

• According to Rystad Energy, the overall length of pipelines will increase almost tenfold to 30,300km by 2035 as the 91 planned pipeline projects steadily come to fruition.

5. Coal Drives India's Power Generation Drive, Buttressed by Solar

• India's power generation grew at the fastest pace in more than 30 years in fiscal year 22-23, soaring an impressive 11.5% year-on-year to 1,591 kWh as both coal and renewable energy saw huge increases.

• Coal accounting for more than 73% of all electricity generation in India, the highest share since 2019, it is believed that the country's CO2
emissions went up by some 16% to 1.15 billion tonnes.

• As spiking natural gas prices made gas-fired generation too expensive, leading to a 29% decline from that segment, coal was given top priority to avoid power shortages, which nevertheless turned out to be the highest in six years.

• Renewable energy has been the second largest source of growth, especially solar power which more than tripled in the last 5 years to just a tad below 65 GW of capacity.

6. China Cuts Lithium Supply to Halt Price Freefall

• The spectacular collapse of lithium prices in 2023 so far has led Chinese producers, accounting for 25% of the metal's production worldwide, to collectively cut production.

• Even though lithium prices are five times higher than their peak pandemic low in 2020, lithium carbonate prices have plunged from $70,000 per metric tonne to some $30-31,000/mt currently.

• Shutting in of lithium production has so far been limited to Jiangxi province, where Chinese authorities have already cracked down on lithium extraction from lepidolite earlier this year.

• Global EV sales have fallen off the cliff so far this year with January 2023 down nearly 50% compared to December 2022 with inflation eating into consumer behavior.

7. The Glencore-Teck Megamerger Almost Happened

• Trading and mining giant Glencore (LON:GLEN) almost clinched one of the biggest mining takeovers of the past 15 years when it offered $22.5 billion for Canada's copper miner Teck Resources (NYSE:TECK).

• The private offer was rejected by Teck's stakeholders who argued that a potential merger would expose them to Glencore's massive coal business, a jurisdictional risk that could reduce the company's value.

• Glencore's all-share offer was equivalent to a 20%% to Teck's then-closing stock price (it happened on March 27), and there are rumors there might be another one coming at a higher rate.

• The initial proposal included a plan to spin off the companies' thermal and metallurgical coal businesses and rebrand them under the name of GlenTeck.