The EU Allows Members to Ban Russian LNG as Imports Climb

1. EU Allows Banning Russian LNG as Member States Buy More

- The European Parliament approved rules this week allowing the regional bloc’s respective governments to ban Russian LNG imports on a national level by preventing Russian firms from booking gas infrastructure capacity.

- Meanwhile, Europe’s reliance on Russian LNG has been increasing, according to Kpler data last year saw record imports of liquefied gas with 15.54 million tonnes discharged into EU ports.

- In 2024 so far the pace of Russian imports is even higher, with Russia currently accounting for 16% of the continent’s LNG supply, up from 12.75% for the first four months of 2023.

- Most of the Russian LNG exported to Europe comes from the Yamal LNG plant, in which European energy majors such as TotalEnergies and Naturgy have long-term offtake agreements with end dates between 2038 and 2045.

2. Proliferation of AI Power Centres Creates Huge Drag on Electricity Grids

- Global electricity consumption from data centers is expected to double over the next three years, reaching 460 TWh in 2022 and surging past 1,000 TWh by 2026, equal to Japan’s power use.

- Northern Virginia leads the world in total power capacity with over 2,500 MW installed, surpassing Beijing which boasts a little below 2,000 MW of capacity, as utilities are increasingly tapping into the lucrative opportunities offered by AI.

- US utility firm Dominion Energy (NYSE:D) has been the most proactive in satiating data center demand, connecting more than 80 data centers to its grid since 2019, however since mid-2023 it has been warning of delays in new facilities as the Virginia grid might be overwhelmed by the surge in demand.

- According to the IEA, electricity consumption from data centers currently accounts for 1-1.5% of global power demand, emitting some 330 million tonnes of CO₂ equivalent in the process.

3. The Coal Decline That Didn’t Really Happen

- Global coal power generation capacity rose by 2% last year to 2,130 GW, the highest year-over-year increase since 2016, driven by China’s continuous buildup and decommissioning delays elsewhere.

- Chinese players dominate the coal power plant landscape, adding 47.4 GW of new capacity in 2023, equivalent to 70% of the 70 GW new capacity additions globally, whilst also starting construction on 70 GW of new coal plants as well, 20 times more than the rest of the world combined.

- Sapping hopes for a swift goodbye to coal, coal-fired capacity outside China also grew last year as new additions of some 23 GW surpassed decommissioned plants which totaled only 21.1 GW.

- The IEA believes that in order to keep global temperature increases below 1.5° C, global coal power capacity needs to be eliminated by 2040, although that would require an average of 126 GW of closures every year.

4. EU Picks a Renewable Fight with China

- The EU’s commissioner for competition Margrethe Vestager announced that Brussels is launching an early-stage investigation into Chinese involvement in wind parks in Spain, Greece, France, Romania, and Bulgaria. 

- Were Brussels to be able to prove that Chinese wind turbine makers have been receiving unfair subsidies from Beijing, the EU could block state takeovers of European companies or even suspend tenders.

- With less than 3% of solar panels installed in the EU being of European origin and China fully controlling the solar industry, Europe now seems to be protecting its producers as Chinese wind turbines have been on average 40-50% cheaper than European ones.

- EU countries exported wind turbines worth almost $2 billion to the rest of the world in 2023, importing only $265 million worth of material, but China’s 163 GW turbine production capacity (60% of global capacity) has been pressuring European producers.

5. Heightened Supply Risks Fuel Tin Price Rally

- The price of tin on the London Metal Exchange (LME) surged to an almost two-year high this week on the back of depleted inventories and regional conflicts potentially disrupting supply.

- After mining was suspended in Myanmar’s Man Maw mine, the metals industry is now fearing another high-impact event as rebels from Congo’s M23 have taken over the North Kivu province, home to the prolific Bisie tin mine that accounts for 5% of global supply.

- Up until now, there have been no delays in Congolese deliveries, but the risk of them materializing has pushed the three-month LME tin futures to $31,675 per metric tonne by the end of this week, up 14% since the beginning of April.

- As LME tin stocks have plummeted by 46% since early January to 4,145 metric tonnes, it is no wonder speculative investors are back in the tin game, with hedge funds’ net length the highest since March 2022.

6. Latin America Set to Double Down on Geothermal

- Rystad Energy expects geothermal investments in Latin America to spike over the coming years, moving from $570 million this year to $1.3 billion in 2027 as the continent still only harnesses 6% of its potential capacity.

- Governments will be leading the clean energy drive, with Mexico’s state-owned utility CFE having a project pipeline totaling more than 1 GWe, pulling ahead of Central American peers Costa Rica and El Salvador.

- For Andean countries, geothermal energy could revolutionize lithium production, allowing direct lithium extraction (DLE) techniques that are less detrimental to land use, water consumption, and emissions.

- Oil companies, having the drilling know-how that could be also applied to geothermal wells, could be tempted to invest, too, with Colombia’s Ecopetrol participating in the country’s pilot Caldas project alongside Baker Hughes.

7. Surging Ahead, Cocoa Is This Year’s Top Commodity

- Having increased by more than 125% in 2024 to date already, cocoa futures continue their steep upward rally, rising for five consecutive trading sessions this past week and surpassing the $10,000 per metric tonne mark for the first time in history.

- Citi warned that cocoa grindings in May-June might be a bifurcation point for cocoa futures – in case demand does not drop on higher prices, the upside for cocoa would be all the way up to $11-12,000/mt.

- Supply disruptions have been the main cause of the price rally with Ghana informing buyers of upcoming delays due to lack of beans, whilst Ivory Coast asked its clients to wait until the mid-crop for any new supply.

- The world’s two leading producers, Ivory Coast and Ghana have been hit by the double whammy of heavy precipitation and then dry heat, aggravated by the proliferation of the cocoa swollen shoot virus, spread by insects.