China's Carbon Market Expands and Sees Surge in Trading Volumes

Europe's weak economic growth has led to a significant drop in the continent's usage of diesel and naphtha fuels, impacting economies and oil markets worldwide [2937091a]. The decline in demand is due to a combination of long-term structural trends, such as a preference for petrol-powered vehicles and electric cars, as well as Europe's economic malaise [2937091a]. China, on the other hand, is experiencing a boom in demand for diesel and naphtha fuels due to massive investment in petrochemical capacity and efficient supply chains [2937091a]. Chinese exports of refined petroleum products, including diesel, are set to rise in October compared to September [c058af56]. Chinese refineries may prioritize diesel production and exports over jet fuel based on market signals [c058af56]. With the West facing higher consumption of heating oil and gasoil during the winter season and low diesel stocks, China's potential role in mitigating diesel shortages is crucial [c058af56]. Demand for seaborne thermal coal in Asia is increasing ahead of peak winter consumption, but prices remain weak due to soft European imports [4cd36e43]. Asia's imports of seaborne thermal coal rose in October, with China and India leading the gain [4cd36e43]. However, Japan and South Korea recorded small declines in October arrivals [4cd36e43]. Chinese buyers prefer Australian coal, while Indonesian coal prices have fallen since the end of last year [4cd36e43]. Europe's imports of thermal coal were slightly higher in October compared to September, but still less than half of the imports in October last year [4cd36e43]. Exporters are shifting cargoes from Europe to Asia, with Asia's imports from South Africa and the US increasing [4cd36e43]. Weaker Chinese domestic prices and declining European demand are expected to keep pressure on seaborne thermal coal prices in Asia [4cd36e43].

Thermal coal prices are expected to remain weak due to oversupply in the Chinese market caused by increased domestic production and imports [59ff7fec]. Australian and South African coal prices have already dropped, and the conflict in the Middle East has led to a slight increase in coal prices [59ff7fec]. The Newcastle benchmark price is forecasted to decline from almost $180 per tonne in 2023 [59ff7fec]. China has boosted coal production to prevent power shortages and has seen a 73% increase in coal imports [59ff7fec]. Factors contributing to the drop in prices include fuel substitution, declining natural gas prices, high EU Emissions Trading System allowance prices, and high levels of storage [59ff7fec]. The Australian Chief Economist Office predicts possible price growth in the second half of 2023 due to increased gas prices and thermal coal demand during the northern winter [59ff7fec]. Global coal production slowed in the first half of 2023, and assuming no escalation of conflicts in the Middle East, coal prices are forecasted to fall in the coming years but remain above the 2015-19 average [59ff7fec]. Upside risks to coal prices include an escalation of the Israel-Hamas conflict and weather disruptions like heat waves and droughts induced by El Niño [59ff7fec].

The Carbon Black market in Europe remains subdued in early 2024, with prices traded around USD 1800/mt at the Hamburg port deflating to USD 1200/mt by December 2023 [202866ac]. This indicates a deep demand crisis in the European Carbon Black markets [202866ac]. Rising interest rates, bullish energy and electricity prices, and EU regulations on Carbon Black and recycling mandates have led to a fall in end-use consumption of Carbon Black-derived tires and rubber products [202866ac]. Demand for replacement tire markets is weaker due to higher gasoline and gas prices, high interest rates, and debt [202866ac]. EU regulations and recycling mandates have pushed producers into negative cash flow territory [202866ac]. Europe importing Carbon Black from other markets is pulling up purchaser prices, reducing margins for downstream suppliers [202866ac]. Houthi attacks triggering shipping companies to avoid the Red Sea are causing CIF prices globally to rise, leading to a container shortage [202866ac]. The shipping crisis may push the Carbon Black market recovery back to 2025 [202866ac]. Asian and American markets are expected to show a slow recovery in Carbon Black prices [202866ac]. The US and China are gradually recovering [202866ac].

The rubber-derived unrefined pyrolysis oil market in Europe is witnessing significant growth due to its potential as a renewable fuel and feedstock substitute [fb0cc04d]. Sales of rubber-derived unrefined pyrolysis oil are projected to increase at a healthy CAGR of 5.5% and top a valuation of US$ 12,202.5 Thousand by 2032 [fb0cc04d]. Demand for rubber-derived unrefined pyrolysis oil is anticipated to witness a CAGR of 5.5% in Europe market [fb0cc04d]. Rising investment in waste management systems, including converting waste like tires into hydrocarbon-based products, is expected to fuel the demand for rubber-derived unrefined pyrolysis oil [fb0cc04d]. Germany, France, and the U.K. are expected to create about two-fifths of the overall revenue generated in the Europe market [fb0cc04d]. The fast pyrolysis production process is expected to create an incremental $ opportunity of US$ 2,846.1 Thousand between the period of 2022 and 2032 [fb0cc04d]. Key players in the market include Fortum Oyj, Twence B.V., Green Fuel Nordic Corporation, Quantafuel AS, Kartepe Endüstriyel Geri Dönüsüm SAN. ve TIC. A.$., and Pyrum Innovations AG [fb0cc04d].

China's national carbon emissions trading scheme (ETS), the world's largest carbon market, has seen trading volumes surge as it expands coverage to more sectors [fcdeff69]. The scheme, which currently covers 2,257 key emitters from the country's power sector, has reached cumulative trading volumes of 465 million tonnes of carbon emissions allowances, with a transaction value of 26.9 billion yuan (US$3.7 billion) [fcdeff69]. The carbon price on the ETS has nearly doubled over the past three years, closing at 87.05 yuan per tonne on Monday [fcdeff69]. However, analysts note that the Chinese carbon market still has a long way to go before catching up with its European peers in terms of trading volumes and carbon prices [fcdeff69]. Unlike the EU ETS, which uses a cap-and-trade system, China's national ETS uses a rate-based system [fcdeff69]. China's Ministry of Ecology and Environment plans to reduce carbon allowances over allocation through a new draft plan, which could enhance the effectiveness of the ETS [fcdeff69]. Trading volumes are expected to increase as more sectors are included, with the carbon price projected to rise steadily [fcdeff69]. The ETS is also expected to expand its coverage to the cement and aluminium sectors in the near future [fcdeff69].