Commodity spotlight: Coal supply squeeze, copper collapse, iron ore under pressure

Coal: The gift that keeps on giving

Newcastle coal futures rallied past US$400/t with ease last week as the gas-hungry Europe begins to turn back towards coal power.

Adding to the bullish momentum behind the supply tight, elevated demand narrative for coal this week:

• Germany will stop importing Russian coal from August 1 and crude oil from December 31

• Rumors about China reversing its unofficial ban on Australian coal imports due to mounting supply uncertainty, according to Reuters

  • Dozens of Chinese cities issued heat wave warnings this week as temperatures surged past 40 degrees, boosting power consumption and straining the power grid

Coal majors including New Hope Corporation (ASX: NHC) and Whitehaven (ASX: WHC) broke out of recent trading ranges this week.

Copper: It won't stop falling

Copper is giving a BNPL price chart a run for its money, down -30.8% from June highs to a 20-month low of US$3.185/lb.

Copper futures (Source: TradingView)

Fundamentals seem to exhibit two extremes.

On the demand side, copper and industrial metals have come under substantial pressure amid concerns about global growth and more aggressive interest rate hikes.

Weaker-than-expected Chinese GDP figures on Friday and growing Chinese real estate woes further exacerbated demand concerns.

Copper inventories is clashing with demand fears, with LME warehouses holding just 696,109 tonnes of registered metal at the end of June, according to Reuters.

That figure stands as the lowest amount this century and forecast to fall even further.

Iron ore on thin ice

Iron ore futures briefly dipped below US$100 a tonne.

Sentiment has plummeted on global growth concerns, Chinese real estate troubles and a sharp slowdown in second quarter Chinese GDP data.

Daily consumption of imported iron ore sintering fines at Chinese steelmakers declined to a 3-month low of 510,6000 tonnes a day for the week ending July 13, according to MySteel.

In Europe, reduced activity in manufacturing and construction sectors could weaken steel production by -10%, and more than -20% below historical levels, according to CRU.