US economy contracts for 2nd consecutive quarter
The US economy contracted at an annual rate of 0.9pc in the second quarter, marking a second consecutive quarter of contraction and signaling the economy may be in a recession by a commonly viewed measure.
The contraction in the second quarter, according to the "advance estimate" from the Bureau of Economic Analysis (BEA), followed a 1.6pc annual contraction in the first quarter. A second estimate, with more complete data, will be released on 25 August.
The decrease in GDP reflected decreases in private inventories, home construction and federal, state and local government spending. These decreases were partly offset by increases in exports as well as slowing, but still positive, personal consumption. Imports, which subtract from GDP, increased.
Today's report comes as the Federal Reserve has embarked on its steepest course of rate hikes in decades to curb inflation that spiked at 9.1pc in June. The Fed yesterday hiked its target rate by 75 basis points, its second such consecutive increase, and Fed chairman Jerome Powell reiterated that the Fed could achieve its goal of slowing the economy without inducing a recession.
Two consecutive quarters of economic contraction are frequently viewed as technically signaling a recession, even as the official arbiter of recessions, the National Bureau of Economic Research, adheres to a definition of recessions that is broader. Its definition reflects a significant decline in activity over more than several months encompassing measures of personal income, nonfarm payroll employment, personal consumption, wholesale-retail sales and industrial production.
Residential investment fell at a 14pc pace in the quarter, reflecting the downturn in home building on the heels of the Fed's recent rate increases. Federal government spending fell by 3.2pc, with nondefense spending off by 10.5pc, reflecting the end of Covid-19 stimulus to individuals and companies.
Offsetting the declines, exports rose by 18pc and imports climbed by 3.1pc. Personal consumption rose by 1pc after a 1.8pc annual gain in the first quarter.
The resilience of the labor market is the main stalwart against arguments for recession as the unemployment rate holds at 3.6pc, near the pre-pandemic low, and job growth averaged about 455,000/month in the first half of the year.
"I don't think it's likely that the US economy is in a recession because we do see a very strong labor market," Fed chair Powell said yesterday in a press conference.
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Limited strike on Iran opens door to de-escalation
Limited strike on Iran opens door to de-escalation
Dubai, 19 April (Argus) — A limited aerial assault on the central Iranian city of Isfahan earlier today could mark the beginning of the end of the latest escalation in the Mideast Gulf. Iranian state media reported in the early hours of Friday, 19 April, several explosions over Isfahan at 04:00 local time. These were later confirmed by the Iranian military to have been the result of air defences bringing down three small drones over the city. Isfahan is the home to a number of strategically important facilities, among them the Shekari airbase that houses some of Iran's F-14 Tomcat fighter planes and SU-24 Sukhoi bombers, and a uranium conversion facility. There was "no impact or damage" to either, according to Iranian army commander-in-chief Seyyed Abdolrahim Mousavi. Other Iranian officials also sought to downplay the strike. Hossein Dalirian, spokesman for Iran's National Center for Cyberspace, said on social media platform X that it was so minor "it would not be considered an attack anywhere in the world." Ice Brent crude futures rose by nearly $3/bl earlier today, but are now trading below the previous settlement level. Iran and the wider Mideast Gulf region were on high alert as Israel weighed its options for a response to Tehran's assault on Israeli territory last weekend. That attack, involving more than 300 drones, ballistic missiles and cruise missiles, was the first ever direct assault on Israel from Iranian territory. As yet, there has been no official confirmation from either side that today's attack originated from Israel. Media reports quoted unnamed US and Israeli officials saying Israel had launched the drones, and Oman's foreign ministry condemned Israel "for its attack this morning on Isfahan". Iran's attack on Israel last weekend was itself in response to a suspected Israeli air strike on an Iranian diplomatic compound in the Syrian capital, Damascus, at the start of April. That killed seven members of Iran's powerful Islamic Revolutionary Guard Corps (IRGC), including two generals. Despite its magnitude, the Iranian retaliation was not only highly choreographed, but also telegraphed to key stakeholders beforehand in an effort to limit damage and casualties. Israel said immediately after the attack that almost all of Iran's drones and missiles were intercepted with the help of allied forces in the region and that there were no fatalities, only "light" damage to the Nevatim military base in Israel's Negev desert. De-escalatory strike The limited nature of Iran's strike prompted Israel's western allies to urge it to show restraint. The US appealed to Israeli prime minister Benjamin Netanyahu to "take the win" and claim victory for its defence. But as it became increasingly clear that a response without a military dimension would be unpalatable for Israel, the US and Europe turned their efforts to making sure whatever Israel chose to do was also limited and fell below a threshold that could trigger yet another escalation in tensions. "This was probably the level of attack that on one hand was necessitated by internal Israeli calculations within the security cabinet and broader political coalition, and by virtue of the pressure by allies and what the US was willing to countenance," said Geneva Graduate Institute senior research associate Farzan Sabet. "It was a limited strike with the message that we can hit you anywhere, anytime, and without having to resort to a major strike involving 300-plus missiles." In the days following Iran's attack on Israel, several key IRGC figures said Tehran had "decided to create a new equation with Israel" ꟷ specifically that Tehran would retaliate to any Israeli attack on its interests or citizens from Iranian territory. This would be a shift from the previous status quo, which would see Israel regularly target Iranian interest and officials in third countries, many times without response from Tehran. But the limited nature of Israel's latest attack, and the very concerted effort by Iranian officials, military personnel and media to downplay its severity and impact so far, suggests it could feasibly provide a de-escalatory off-ramp for Iran. "Should Israel's response be limited to this, the Islamic Republic will not be under pressure to retaliate," said Arab Gulf States Institute senior fellow Ali Alfoneh. But is too early to say whether today's incident is the totality of Israel's response. "We're running up to [the Jewish holiday of] Passover [on 22-30 April]. The Israelis may not have wanted to carry out a major retaliation ahead of Passover so as to avoid the threat of war hanging over the country during the holiday," Sabet said. "So it is very possible that more [retaliatory attacks] could come after Passover." By Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
India mulls using more natural gas in steel sector
India mulls using more natural gas in steel sector
Mumbai, 19 April (Argus) — India's steel ministry is considering increasing natural gas consumption in the sector as it aims to lower carbon emissions from the industry. Steelmakers held a meeting with the steel ministry earlier this month, to discuss challenges and avenues to increase gas allocation to the sector, according to a government document seen by Argus . Steel producers requested that the government set gas prices at an affordable range of $7-8/mn Btu for them, to make their gas-based plants viable, as well as for a custom duty waiver on LNG procured for captive power. India's LNG imports attract a custom duty of 2.5pc. City gas distribution firms sell gas at market-determined prices to steel companies. Representatives from the steel industry also requested for the inclusion of gas under the purview of the country's goods and service tax, and to be given higher priority in the allocation of deepwater gas, which has a higher calorific value. Deepwater gas is currently deployed mostly to city gas distribution networks. Steelmakers are currently undertaking feasibility tests for gas pipeline connectivity at various steel plants. But a gas supply transmission agreement requires a minimum five-year period for investment approval. The steel industry is heavily reliant on coal, and the sector accounts for about 8-10pc of carbon emissions in the country. A task force of gas suppliers including IOC, Gail, BPCL, Shell, and HPCL and steel producers like Tata Steel, AMNS, All India Steel Re-roller Association and the Pellet Manufacturers Association has been set up, and the team is expected to submit a report on increasing natural gas usage and lowering carbon emissions by 15 May, the government document said. This team is one of the 13 task forces approved by the steel ministry to define the country's green steel roadmap. The steel ministry aims to increase green steel exports from the country in the light of the policies under the EU's Carbon Border Adjustment Mechanism (CBAM), which will take effect on 1 January 2026. Under the CBAM, importers will need to declare the quantity of goods imported into the EU in the preceding year and their corresponding greenhouse gas emissions. The importers will then have to surrender the corresponding number of CBAM certificates. CBAM certificate prices will be calculated based on the weekly average auction price of EU Emissions Trading System allowances, expressed in €/t of CO2 emitted. This is of higher importance to Indian steelmakers as the EU was the top finished steel export destination for Indian steelmakers during the April 2022-March 2023 fiscal year with total exports of 2.34mn t, and has been the preferred choice for Indian steel exports in the current fiscal year owing to higher prices compared to other regions. Indian steelmakers have started to take steps to lower their carbon emissions by announcing collaborations with technology companies to decarbonise, and are trial injecting hydrogen in blast furnaces, and increasing the usage of natural gas in ironmaking. By Rituparna Ghosh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Pilbara Mining sees continuing Li demand
Australia’s Pilbara Mining sees continuing Li demand
Singapore, 19 April (Argus) — Australian mining firm Pilbara Minerals' sees continuing lithium demand from its customers, while the firm continues to focus on cost optimisation. Pilbara in March accepted a pre-auction offer of $1,106/dry metric tonne (dmt) for 5,000dmt of 5.5pc-grade lithium concentrate (spodumene) cif China. The price equates to approximately $1,200/dmt 6pc-grade lithium concentrate (spodumene) cif China, said Pilbara, which reflects the "ongoing demand and positive pricing for unallocated production volume". "When you look at the past 60 days up to mid-April, the increases [in lithium prices] are fairly material," said the firm's managing director and chief executive Dale Henderson during the latest quarterly earnings call, adding that the recent uptick in lithium pricing is "comforting". Argus -assessed prices for 6pc-grade lithium concentrate (spodumene) held stable at $1,100-1,200/t cif China on 16 April from a week earlier, rebounding from an all-time low of $850-1,050/t on 27 February. But a standoff has more recently formed between spodumene producers and lithium refineries, with the former maintaining their offer prices and consumers rejecting them. Pilbara's spodumene realised price in January-March fell by 28pc on the quarter to $804/dry metric tonnes (dmt) cif China, despite the average grade of spodumene shipments rising by 0.1 percentage point to 5.3pc, which translates to $927/dmt for 6pc-grade lithium concentrate (spodumene). But the realised price during the quarter remained above its unit operating cost of $519/dmt cif China, which fell by 1pc on the quarter. Pilbara's ending cash balance came in at A$1.8bn ($1.15bn) as at 31 March, down from A$2.1bn a quarter earlier. Output Pilbara's output during January-March rose by 2pc on the quarter and by 21pc on the year to 179,000dmt. The output was propped up by a record monthly production of over 80,000dmt in March, partly because the P680 primary rejection facility reaching its nameplate production capacity in the second half of the quarter. But its chief operating officer Vince De Carolis said the peak performance should not be construed as an annualised run rate. The firm said it is not stockpiling its production volume as it sees "ongoing customer demand". Pilbara's spodumene sales volumes rose by 3pc on the quarter and by 14pc on the year to 165,121dmt for an average 5.3pc grade. Pilbara earlier in February defended its lithium downstream strategy and last month signed a binding agreement with Chinese refiner Ganfeng to carry out a joint feasibility study as they explore building a downstream conversion plant. The two firms are exploring building a lithium hydroxide and/or lithium carbonate conversion plant with 32,000 t/yr of lithium carbonate equivalent capacity, alongside a potential intermediate lithium chemical facility in the country. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Karoon cuts 2024 guidance on lower US output
Karoon cuts 2024 guidance on lower US output
Sydney, 19 April (Argus) — Australia-listed oil producer Karoon Energy has cut its production guidance for 2024 to reflect lower production from its stake in the Who Dat floating production system in the US' Gulf of Mexico. Who Dat's weaker well and facility performance has led to the lower guidance, with Karoon now expecting to produce 29,000-34,000 b/d of oil equivalent (boe/d) in 2024, down from a previous 31,000-37,000 boe/d guidance. Karoon said it and joint-venture partner LLOG Exploration will continue to prioritise higher value oil production over gas for the remainder of the year. The firm's January-March output rose by 17pc against October-December 2023 . Who Dat's production on a net revenue interest (NRI) basis was 9,000 boe/d for January-March, with Karoon downgrading its forecast NRI production from 4mn-4.5mn boe in 2024 to 3-3.5mn boe. But output from Karoon's Bauna asset offshore Brazil was 15pc lower than the previous quarter because of continuing reliability problems with Bauna's floating production, storage and offloading (FPSO) vessel, the shut-in of the SPS-88 well for the full period and natural field decline. Production for January-March at Bauna was 24,000 b/d, down from 28,000 b/d the previous quarter. Karoon expects to resume production from the well during July-September following an intervention, assuming no delays in regulatory approval. Bauna's annual maintenance will take place next month with a three-week shutdown of the FPSO planned to boost reliability. By Tom Major Karoon Energy results Jan-Mar '24 Oct-Dec '23 Jan-Mar '23 y-o-y % ± q-o-q % ± Sales revenue ($mn) 197 209 144 37 -6 Production (b/d) 34,000 29,000 22,000 55 17 Sales volume (b/d) 30,000 28,000 22,000 36 7 Average prices ($/bl) Bauna oil price 76 83 73 4 -8 Who Dat sales gas ($/mn ft³) 2.95 2.22 n/a n/a 33 Who Dat oil, condensate, NGLs 78 73 n/a n/a 7 Source: Karoon Energy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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