European Liquid CO2 Prices Surge Amidst Firm Beverage Demand

Hamburg (Germany): The European Liquid CO2 prices continued to follow an increasing momentum amidst the stable demand outlook from the carbonated drinks and other beverages sectors. Asian traders are once again active in the European Gas futures market, causing an imbalance in an already delicate European gas market. This raises concerns about Europe's ability to replenish its reserves before the next heating season.

While reserves haven't decreased as much as anticipated this winter, there's a lack of new deals to secure refilling, as Asian traders are purchasing the current cheap contracts. Italy's Saipem announced on Friday that it had entered a memorandum of understanding (MOU) to construct offshore infrastructure for the transportation and storage of carbon dioxide for a group of carbon capture projects in northern England.

The final prices of Liquid CO2 ranged between USD 195-215 per MT, FD Hamburg in Germany in mid-Q1 of 2024. Saipem will handle the engineering, supply, construction, and installation of a 145-kilometre (90 miles) offshore conduit for the NEP project, along with inspections for better Liquid CO2 supply. A combination of raised natural gas prices and higher demand for cooling in certain areas has resulted in an increase in the share of natural gas in the energy mix, proportionally raising the Liquid CO2 production cost.

The continued dominance of natural gas in power generation is part of a broader trend driven by the shale revolution. This shift aligns with environmental regulations at both the federal and state levels, presenting significant challenges to coal in the European power sector. As summer draws to a close and storage reaches near-full capacity, there could be an excess supply that will need to be either injected into underground storage facilities in Ukraine or stored on LNG vessels. This situation will require a larger summer-winter price differential to maintain market balance, which may not be adequately reflected in the current forward curve.

As a result, Q3 of 2024 prices are likely to face downward pressure consequently impacting the final Liquid CO2 prices. The upcoming quarter of 2024 seeks mixed market dynamics as inflation is expected to cool down amidst fluctuating prices of natural gas. Moreover, the increased demand for carbonated and alcoholic drinks will also govern the final prices of Liquid CO2. ChemAnalyst predicts that the rising demand for Liquid CO2 will dominate market dynamics, allowing retailers to capitalize on the opportunity and increase profits by raising prices for Liquid CO2.