Covid, inflation top risks to global economy: Australia

Spanish Market: Coal, Coking coal, Metals, Natural gas
04/02/22

The largest risks to the global economy were health-related, on the Covid-19 pandemic, and inflation concerns, which could trigger tighter monetary conditions that might impact commodity prices and demand, the Reserve Bank of Australia (RBA) said.

The most significant downside risks to global and domestic economies are health related, the RBA said in its latest quarterly statement on monetary policy. The economic outlook from the RBA is similar to that of the International Monetary Fund last month.

The global outlook is also subject to a range of risks outside the health sphere. "If the upswing in global inflation turns out to be larger or more persistent than currently expected, it could trigger an earlier and larger tightening in global monetary policy," the RBA said.

This could be disruptive, particularly for some emerging market economies, it added. The Chinese economy is subject to some specific risks related to the various policy trade-offs that the authorities have made.

"There are also risks to the Chinese economy should a widespread outbreak of Covid-19 occur and require large-scale suppression measures there. Geopolitical risks have also come to the fore in recent weeks," the RBA said. China is Australia's largest trading partner, accounting for around 34pc of Australia's total exports in 2021.

A larger-than-expected slowdown in China's economy would reduce demand for iron ore and other commodities. "This would be particularly relevant to Australia," the bank said. "Alongside lower resource export volumes, this could result in a decline in commodity prices, impacting Australia's terms of trade, corporate profits and tax revenues. Further trade restrictions could also delay the recovery in Australian exports."

Australia's terms of trade are expected to decline over the forecast period to June 2024, after reaching a record high level in the July-September 2021 quarter, it said. Australia reported a record trade surplus of A$122bn ($87bn) in 2021.

An increase in energy-related export prices, particularly for LNG and thermal coal, is offset by higher import prices in the forecasts. Iron ore prices have been above $100/t since the end of 2021, but are forecast to gradually decline to around $80/t by the end of the forecast period, the bank said.

Iron ore prices have been volatile in recent months, in contrast to energy commodities, but remain well below their historically high levels in early 2021. Prices fell early last year as Chinese authorities enforced steel production curbs, but have retraced about half of the fall in the past two months because of a stronger outlook for steel demand from the real estate and infrastructure construction sectors, the RBA said.

Australian households' confidence and willingness to spend their accumulated savings could be higher if health outcomes are better than expected, the central bank said.

By Kevin Morrison

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31/01/25

Trump tariffs on Canada, Mexico to include oil: Update

Updates with comments from Trump, plan for 10pc crude tariff. Washington, 31 January (Argus) — President Donald Trump said late Friday he will proceed with plans to impose 25pc tariffs on imports from Canada and Mexico on 1 February, with crude imports likely to be taxed at a lower 10pc rate. Trump separately plans to impose tariffs on imports from China on 1 February. Asked if his Canada tariffs would include crude imports, Trump said, "I'm probably going to reduce the tariff a little bit on that," he told reporters at the White House. "We think we're going to bring it down to 10pc." Trump, who previously tied tariffs on imports from Canada, Mexico and China to their alleged inability to stem the flow of drugs and migrants into the US, today insisted that the tariffs he plans to impose on Saturday in fact have a strictly economic rationale and are non-negotiable. The tariffs expected on Saturday "are not a negotiating tool", Trump said. "No, it's pure economic … we have big deficits with all three of them." Trump, in a wide ranging gaggle with reporters, separately mentioned that he would impose tariffs on imported chips and oil and natural gas. "That'll happen fairly soon, I think around 18 February," he said. It was not clear from his remarks if he meant that all oil and gas imports into the US would be taxed, or if he referred to supply only from Canada and Mexico. Trump said he would also raise tariffs on imported steel, aluminium and eventually copper as well. Trump brushed away criticism of potential negative impacts from his tariffs. "You will see the power of the tariff," Trump said. "The tariff is good, and nobody can compete with us, because we have by far the biggest piggy bank." The looming face-off on tariffs has unnerved US oil producers and refiners, which are warning of severe impacts to the integrated North American energy markets if taxes are imposed on flows from Canada and Mexico. Industry trade group the American Petroleum Institute has lobbied the administration to exclude crude from the planned tariffs. Canadian prime minister Justin Trudeau reiterated today that Ottawa would retaliate against US tariffs. Mexican president Claudia Sheinbaum also said her country has prepared responses to US tariffs . Nearly all of Mexico's roughly 500,000 b/d of crude shipments to the US in January-November 2024 were waterborne cargoes sent to US Gulf coast refiners. Those shipments in the future could be diverted to Asia or Europe. Canadian producers have much less flexibility, as more than 4mn b/d of Canada's exports are wholly dependent on pipeline routes to and through the US. Canadian crude that flows through the US for export from Gulf coast ports would be exempt from tariffs under current trade rules, providing another potential outlet for Alberta producers — unless Trump's potential executive action on Canada tariffs eliminates that loophole. Tariffs on imports from Canada and Mexico would most likely have the greatest impact on US Atlantic coast motor fuel markets. New York Harbor spot market gasoline prices are around $2/USG, meaning a 25pc tariff on Canadian imports could up that price by as much as 50¢/USG. This could prompt buyers in New England or other US east coast markets to look to other supply options. Canadian refiners could also start sending their product to west Africa or Latin America. US refiner Valero said that the tariffs could cause a 10pc cut in refinery runs depending on how the tariffs are implemented and how long they last. Gas, petchems, steel and ags threatened The tariffs may affect regional natural gas price spreads and increase costs for downstream consumers, but there is limited scope for a reduction in gas flows between the two countries — at least in the short term. The US is a net gas importer from Canada, with gross imports of 8.36 Bcf/d (86.35bn m³/yr) in January-October, according to the US Energy Information Administration (EIA). The US' Canadian imports far exceeded the 2.63 Bcf/d it delivered across its northern border over the same period, EIA data show. Tariffs on Canadian and Mexican imports also will disrupt years of free flowing polyethylene (PE) and polypropylene (PP) trade between the three countries, market sources said. North American steel trading costs could rise by as much at $5.3bn across the three nations, since Mexico and Canada are expected to issue reciprocal tariffs against the US, as it did when Trump issued tariffs in his first term. The tariffs could also disrupt US corn and soybean sales , since China and Mexico account for 48pc of US corn exports and 61pc of US soybean exports since 2019, according to US Department of Agriculture (USDA) data. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Canada’s tariff response will be ‘forceful’: Trudeau

31/01/25

Canada’s tariff response will be ‘forceful’: Trudeau

Calgary, 31 January (Argus) — Canadian prime minister Justin Trudeau is planning an immediate retaliation should US president Donald Trump impose a 25pc tariff on imports tomorrow, 1 February. "If the president does choose to implement any tariffs against Canada, we are ready with a response," said Trudeau at a meeting of the Council on Canada-US Relations in Toronto. "A purposeful, forceful, but reasonable, immediate response." "It's not what we want, but if he moves forward, we will also act," he said. Trump has accused Canada and Mexico of facilitating trafficking of fentanyl and illegal migration and has threatened tariffs to persuade the two countries to tighten borders they share with the US. "Our border is safe and secure," said Trudeau. "We're committed to keeping it that way by addressing current challenges and strengthening our capacity." Mexican president Claudia Sheinbaum said this week Mexico is also ready to respond to US tariffs. "We will always defend respect for our sovereignty and a dialogue as equals, but without subordination," she said. Canada in mid-December said it would spend C$1.3bn ($900bn) on border security measures over six years, which Trudeau reiterated Friday while highlighting recent progress. The 8,891-kilometre (5,525-miles) US-Canada border is the longest in the world. Trump has also railed against the US' trade deficit with Canada, which is on track to settle at about C$65bn in 2024 , according to TD Bank. The bank notes the deficit is largely a result of America's thirst for energy and should not be confused with a "subsidy". Canada has increased deliveries of crude to the US beyond 4mn b/d and supplied 8.36 Bcf/d (86.35bn m³/yr) of natural gas in January-October, according to the US Energy Information Administration (EIA). US refiners that process Canadian crude would not easily find alternative supplies, according to the American Fuel and Petrochemical Manufacturers (AFPM). "We won't relent until tariffs are removed, and of course, everything is on the table," Trudeau said of Canada's potential retaliation, a message that has drawn concern from the premier of oil-rich Alberta who wants the unfettered flow of energy. All told, the two highly-integrated countries exchange about C$3.6bn of goods and services each day, only slightly less than daily US-Mexico trade, TD Bank said last week. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Mexican GDP growth in 4Q lowest since 2021

31/01/25

Mexican GDP growth in 4Q lowest since 2021

Mexico City, 31 January (Argus) — Mexico's economy slowed in the fourth quarter to its lowest pace since early 2021, as the agriculture and industrial sectors dragged on growth. Mexico's gross domestic product (GDP) growth slowed to annualized rate of 0.6pc, statistics agency Inegi reported. This is down from an annual 1.6pc in the third quarter and 2.1pc growth in the second quarter, which was the strongest quarter last year. The result marks the slowest growth in 15 quarters for Mexico, coming in below estimates. This was largely due to annualized 4.6pc decline in the agriculture sector, swinging from 4.1pc growth in the third quarter as drought conditions return. Inegi reported the industrial component of GDP also contracted, down 1.7pc in the fourth quarter, compared with a 0.5pc expansion in the previous quarter, on slowing construction and persistent declines in the oil component. Services, meanwhile, expanded an annualized 2.1pc in the fourth quarter, compared with a 2.2pc expansion in the previous quarter. Inegi reported full-year GDP growth at 1.5pc in 2024, slowing from 3.3pc in 2023 and the lowest level since the pandemic-stricken downturn in 2020. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump tariffs to hit Canada, Mexico, China on 1 Feb

31/01/25

Trump tariffs to hit Canada, Mexico, China on 1 Feb

Washington, 31 January (Argus) — President Donald Trump will proceed with plans to impose 25pc tariffs on imports from Canada and Mexico and 10pc on imports from China on 1 February, the White House said today. The White House pushed back on reports that the tariffs would be delayed and declined to confirm whether Trump made a decision on whether to exclude Canadian and Mexican crude from the tariffs. "Those tariffs will be for public consumption in about 24 hours tomorrow, so you can read them then," the White House said. The looming face-off on tariffs has unnerved US oil producers and refiners, which are warning of severe impacts to the integrated North American energy markets if taxes are imposed on flows from Canada and Mexico. Industry trade group the American Petroleum Institute has lobbied the administration to exclude crude from the planned tariffs. Trump on Thursday acknowledged a debate over the application of tariffs to oil but said he had yet to make a decision on exemptions. The White House dismissed concerns about potential inflationary effects of Trump's tariffs. "Americans who are concerned about increased prices should look at what President Trump did in his first term," it said. Canadian prime minister Justin Trudeau reiterated today that Ottawa would retaliate against US tariffs. Nearly all of Mexico's roughly 500,000 b/d of crude shipments to the US in January-November 2024 were waterborne cargoes sent to US Gulf coast refiners. Those shipments in the future could be diverted to Asia or Europe. Canadian producers have much less flexibility, as more than 4mn b/d of Canada's exports are wholly dependent on pipeline routes to and through the US. Canadian crude that flows through the US for export from Gulf coast ports would be exempt from tariffs under current trade rules, providing another potential outlet for Alberta producers — unless Trump's potential executive action on Canada tariffs eliminates that loophole. Tariffs on imports from Canada and Mexico would most likely have the greatest impact on US Atlantic coast motor fuel markets. New York Harbor spot market gasoline prices are around $2/USG, meaning a 25pc tariff on Canadian imports could up that price by as much as 50¢/USG. This could prompt buyers in New England or other US east coast markets to look to other supply options. Canadian refiners could also start sending their product to west Africa or Latin America. US refiner Valero said that the tariffs could cause a 10pc cut in refinery runs depending on how the tariffs are implemented and how long they last. The tariffs may affect regional natural gas price spreads and increase costs for downstream consumers, but there is limited scope for a reduction in gas flows between the two countries — at least in the short term. The US is a net gas importer from Canada, with gross imports of 8.36 Bcf/d (86.35bn m³/yr) in January-October, according to the US Energy Information Administration (EIA). The US' Canadian imports far exceeded the 2.63 Bcf/d it delivered across its northern border over the same period, EIA data show. Tariffs on Canadian and Mexican imports also will disrupt years of free flowing polyethylene (PE) and polypropylene (PP) trade between the three countries, market sources said. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

DeepSeek undermines AI power demand forecasts

31/01/25

DeepSeek undermines AI power demand forecasts

Gas and power suppliers predicting an AI demand boom hope that greater efficiencies could still underpin their plans through wider use, writes Julian Hast New York, 31 January (Argus) — Unexpected efficiency achievements by Chinese artificial intelligence (AI) firm DeepSeek have cast a shadow over a bullish narrative on booming US electricity demand in the coming decade to power data centres running AI software. Share prices for US independent power producers, natural gas producers and gas pipeline companies fell sharply at the beginning of the week as investors feared DeepSeek's achievement implied significantly less electricity might ultimately be needed to run and train AI models than has been expected. This greater efficiency "calls into question the significant electric demand projections for the US", as the investment case for independent power producers and integrated utilities is "dependent on data centres", US bank Jefferies says. DeepSeek's apparent ability to achieve comparable results to some major US AI companies using far less computing power — and so far less electricity — may also be bad news for what is widely expected to be the main fuel source to generate incremental power for AI this decade — natural gas. EQT, a leading US gas producer, has called growing power demand from planned data centres the "cornerstone" to its "natural gas bull case". Large US gas pipeline companies such as Williams, operator of the Transcontinental pipeline, have also touted recent forecasts showing surging demand for gas-fired power, as greater gas generation would require greater pipeline capacity to move those incremental volumes from wellhead to generator. Even the US oil majors are getting in on the act. Chevron announced this week a team-up with investment firm Engine No 1 and energy firm GE Vernova to build gas-fired generation plants to power data centres. DeepSeek's achievement could even cast doubt on the investment case for nuclear power, which has been recast as a silver bullet for US technology giants looking to secure zero-emission electricity to enable AI development. Revise the revisions? News of DeepSeek's efficiency achievements are a shock to prevailing expectations for surging US power demand in the coming decade, when those expectations have already been substantially revised over the past year, following decades of stagnant power demand. PJM, the largest US grid operator, on 24 January released a report showing significant upward revisions in its peak seasonal power demand projections. Peak summer power demand in PJM's territory in the mid-Atlantic was projected to surge to 210GW in 2035 and 229GW in 2045, substantially steeper than PJM's load forecast just one year earlier, which showed peak summer power demand rising to 177GW in 2034 and 191GW in 2039. Consultancy firm McKinsey recently forecast US data centre power demand to reach 606TWh by 2030, up from 147TWh in 2023. Under this scenario, data centres at the end of the decade would comprise 12pc of total US power demand. If efficiency gains in AI reduce power demand as much as some investors fear, those big forecasts might require big revisions. But efficiency improvements can go two ways — they can reduce demand for fuel, or simply increase output. In the case of AI, more efficient operations could be exploited to accelerate the development of more powerful models — using the same amount of power that was previously expected, but to greater effect. That latter explanation is why, "despite uncertainties", data analytics firm FactSet's head of power markets Matthew Hoza tells Argus he remains "bullish" on power demand growth in the coming years. "With AI's increasing integration into company tech stacks and its growing presence in daily life through AI agents, we anticipate continued growth in AI adoption and the resulting power needs," Hoza says. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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