EV producers look for independence from China
Carmakers are looking for secure battery supply chains independent from the current dominance of Chinese cell makers, seeking to challenge Chinese hegemony in the global battery markets.
The industry's over-reliance on China has been highlighted in recent weeks weeks as the coronavirus outbreak in Wuhan resulted in disruptions to the supply of components. Several carmakers around the world have warned that the ongoing crisis could affect production because of a shortage of batteries.
Fiat Chrysler warned that its European plant was weeks away from halting production after struggling to source key parts from Chinese suppliers. Other global carmakers — including PSA Group, General Motors, Daimler and Ford — have plants that produce parts in and around Hubei, the epicentre of the outbreak.
Volkswagen has delayed the reopening of its Chinese plants until 17 February. Toyota and BMW will also wait until 16 February and 17 February, respectively, to restart production in China.
In Asia-Pacific, some production facilities have already closed. Hyundai was forced to close a plant in South Korea and Nissan halted production at a facility in Japan. Honda and Toyota are reviewing their inventories.
New Asia-Pacific ventures to challenge China's battery dominance
Batteries are one of the areas in which China dominates automotive production.
Not only is China home to the largest battery maker in the world, CATL, but much of the raw materials are produced in the country. Cobalt sulphate, nickel sulphate, high-purity manganese and other battery raw materials are almost exclusively produced in China. On 11 February, Argus assessed Chinese prices for minimum-20pc cobalt sulphate at 50,000-55,000 yuan/mt ex-works. Prices for minimum-22pc nickel sulphate were Yn24,000-31,000/mt ex-works China on that date (see chart).
Outside China, supply is dominated by South Korea and Japan.
LG Chem, Panasonic, Samsung SDI and SK Innovation are dominant players. Carmakers in Asia-Pacific, Europe and the US have secured battery supply from these producers for the next few years.
Toyota and Panasonic recently announced a joint venture to produce batteries in Japan. Prime Planet Energy and Solutions will employ 5,100 workers in Japan but has yet to specify the capacity of the enterprise.
Panasonic and Tesla work together to produce batteries at Gigafactory 1 in the western US state of Nevada. This has ensured a stable supply of batteries and enabled Tesla to make a profit for the first time this year.
LG Chem supplies batteries for the Jaguar I-Pace SUV, which is produced in Graz, Austria, and the Audi E-Tron. But this supply has run into problems, with battery shortages occasionally forcing both producers to halt production.
General Motors and LG Chem in December formed a $2.3bn joint venture aimed at mass-producing batteries in the midwestern US state of Ohio. Planned capacity is about 30GWh, and the unit will employ about 1,100 people. Work is expected to begin in the middle of this year.
Europe nears gigafactory production
In Europe, several joint ventures are expected to begin production from 2022-25.
Europe's largest carmaker, Volkswagen, has already opened a pilot plant for battery cells. It plans a full-scale plant with a capacity of 16 GWh in a joint venture with Northvolt. It is expected to open in 2023-24.
Northvolt also plans to open a 16GWh production plant in Ett, Sweden, by 2023, with construction starting in early 2021. The plant will ramp up to 32GWh by 2024. By June last year, it had already taken about $13bn worth of orders and long-term supply agreements, the company said.
Europe's second largest carmaker, Groupe PSA, has its own large-scale production plans with French energy giant Total. A pilot plant will open in 2021, after which a decision will be taken on whether to proceed. If the project continues, construction of an 8GWh plant will begin in northern France, with production starting in 2023. The plant would ramp up to 24GWh in about 2025 and to 48GWh by 2030.
Demand for electric vehicles in Europe is expected to rise to 1.4-1.6mn, most industry experts say. European sales of fully electric vehicles reached 459,387 last year, up by 52pc from the previous year, data from the European Automotive Manufacturers Association show.
It will be difficult for EU carmakers to be fully independent from the Chinese supply chain based on demand forecasts, but Gigafactory plans will help European carmakers meet their sales forecasts, with more plants expected to be announced this year.
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US Fed signals rates likely to stay high for longer
US Fed signals rates likely to stay high for longer
Houston, 1 May (Argus) — Federal Reserve policymakers signaled they are likely to hold rates higher for longer until they are confident inflation is slowing "sustainably" towards the 2pc target. The Federal Open Market Committee (FOMC) held the federal funds target rate unchanged at a 23-year high of 5.25-5.5pc, for the sixth consecutive meeting. This followed 11 rate increases from March 2022 through July 2023 that amounted to the most aggressive hiking campaign in four decades. "We don't think it would be appropriate to dial back our restrictive policy stance until we've gained greater confidence that inflation is moving down sustainably," Fed chair Jerome Powell told a press conference after the meeting. "It appears it'll take longer to reach the point of confidence that rate cuts will be in scope." In a statement the FOMC cited a lack of further progress towards the committee's 2pc inflation objective in recent months as part of the decision to hold the rate steady. Despite this, the FOMC said the risks to achieving its employment and inflation goals "have moved toward better balance over the past year," shifting prior language that said the goals "are moving into better balance." The decision to keep rates steady was widely expected. CME's FedWatch tool, which tracks fed funds futures trading, had assigned a 99pc probability to the Fed holding rates steady today while giving 58pc odds of rate declines beginning at the 7 November meeting. In March, Fed policymakers had signaled they believed three quarter points cuts were likely this year. Inflation has ticked up lately after falling from four-decade highs in mid-2022. The consumer price index inched back up to an annual 3.5pc in March after reaching a recent low of 3pc in June 2023. The employment cost index edged up in the first quarter to the highest in a year. At the same time, job growth, wages and demand have remained resilient. The Fed also said it would begin slowing the pace of reducing its balance sheet of Treasuries and other notes in June, partly to avoid stress in money markets. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
New US rule may let some shippers swap railroads
New US rule may let some shippers swap railroads
Washington, 30 April (Argus) — US rail regulators today issued a final rule designed to help customers switch railroads in cases of poor rail service, but it is already drawing mixed reviews. Reciprocal switching, which allows freight shippers or receivers captive to a single railroad to access to an alternate carrier, has been allowed under US Surface Transportation Board (STB) rules. But shippers had not used existing STB rules to petition for reciprocal switching in 35 years, prompting regulators to revise rules to encourage shippers to pursue switching while helping resolve service problems. "The rule adopted today has broken new ground in the effort to provide competitive options in an extraordinarily consolidated rail industry," said outgoing STB chairman Martin Oberman. The five-person board unanimously approved a rule that would allow the board to order a reciprocal switching agreement if a facility's rail service falls below specified levels. Orders would be for 3-5 years. "Given the repeated episodes of severe service deterioration in recent years, and the continuing impediments to robust and consistent rail service despite the recent improvements accomplished by Class I carriers, the board has chosen to focus on making reciprocal switching available to shippers who have suffered service problems over an extended period of time," Oberman said today. STB commissioner Robert Primus voted to approve the rule, but also said it did not go far enough. The rule adopted today is "unlikely to accomplish what the board set out to do" since it does not cover freight moving under contract, he said. "I am voting for the final rule because something is better than nothing," Primus said. But he said the rule also does nothing to address competition in the rail industry. The Association of American Railroads (AAR) is reviewing the 154-page final rule, but carriers have been historically opposed to reciprocal switching proposals. "Railroads have been clear about the risks of expanded switching and the resulting slippery slope toward unjustified market intervention," AAR said. But the trade group was pleased that STB rejected "previous proposals that amounted to open access," which is a broad term for proposals that call for railroads to allow other carriers to operate over their tracks. The American Short Line and Regional Railroad Association declined to comment but has indicated it does not expect the rule to have an appreciable impact on shortline traffic, service or operations. Today's rule has drawn mixed reactions from some shipper groups. The National Industrial Transportation League (NITL), which filed its own reciprocal switching proposal in 2011, said it was encouraged by the collection of service metrics required under the rule. But "it is disheartened by its narrow scope as it does not appear to apply to the vast majority of freight rail traffic that moves under contracts or is subject to commodity exemptions," said NITL executive director Nancy O'Liddy, noting it was a departure from the group's original petition which sought switching as a way to facilitate railroad economic competitiveness. The Chlorine Institute said, in its initial analysis, that it does not "see significant benefit for our shipper members since it excludes contract traffic which covers the vast majority of chlorine and other relevant chemical shipments." By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Oversupply and fragmentation challenge steel market
Oversupply and fragmentation challenge steel market
London, 30 April (Argus) — Participants in the Turkish and European long steel markets at a major industry event this week anticipated a difficult remainder of 2024, expecting demand to be generally supplied by local capacities. With the Chinese Metallurgical Industry Institute forecasting a 1.7pc drop in Chinese steel demand in 2024 and the country's steel output expected to remain stable, Chinese exports are likely to continue putting pressure on global rebar prices. China's overall steel exports this year so far are on course to exceed the 91.2mn t shipped in 2023. Traders were concerned over the Chinese real estate sector, which, along with infrastructure construction, drives the bulk of Chinese steel demand but has been plagued by a mismatch between housing demand and supply in recent years. Markets outside of China are also likely to be well-supplied for the rest of the year or longer, with a weak construction outlook in Europe and with steel capacity on an upward trend in India and southeast Asia. Government investment in construction projects is likely to drive Indian steel demand to at least 190mn t by 2030, said Somanath Tripathy of the Steel Authority of India Limited (SAIL). But in the near term Indian demand growth has been sluggish while output has increased, with steelmakers Tata and JSW both reaching record steel output in the financial year of 2023-2024. Meanwhile, participants had weak expectations for the European and Turkish rebar markets for the rest of the year. Expectations of a recovery in the European steel sector have largely been pinned on the likelihood the European Central Bank will reduce interest rates at some point in the second half of the year. But a German trader noted while this move would lend some support, high interest rates are far from being the only challenge for the sector. The EU construction sector faces increasingly high costs, partly caused by sustainability requirements, participants noted, slowing investment and weighing on property demand by pushing up prices. The combination of high interest rates and inflation in Turkey, as well as dwindling export options, means several Turkish steel mills are currently running at near 50pc of capacity. Turkish rebar exporters face stiff competition in most export markets from Chinese suppliers, whose fob prices are currently around $70/t lower than Turkey, as well as from north African producers. The challenge for Turkish exporters is structural, with the business model of importing scrap and exporting steel no longer as viable due to higher scrap demand from other regions as well as the significantly lower energy costs of north African and Middle Eastern producers. Some market participants noted in this context, the introduction of the European Carbon Border Adjustment Mechanism (CBAM) could favour Turkish EAF mills in the long run, who are no longer competitive in terms of price in most markets, but whose use of scrap versus direct reduced iron (DRI) makes their production less carbon-intensive than other EAF-based producers in the region. Turkish producers are working to make sure they will be compatible with EU environmental requirements, a Turkish mill source said. But government support for these efforts has been lacking, he added. Overall, protectionist measures have significantly harmed Turkey's export options, as has the outbreak of conflicts and tensions in the region over the past two years. Some Turkish mills have lost up to half of their regular export sales as a result of the halt of exports to Israel and a slowdown in sales to Yemen as a result of the conflict in Gaza and Houthi vessel attacks. Until European prices pick up significantly and north Africa is selling at capacity, Turkish long steel exports will not be competitive in the near future, a trader noted. By Brendan Kjellberg-Motton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Climate change to heavily disrupt mining: PwC
Climate change to heavily disrupt mining: PwC
London, 30 April (Argus) — More than 70pc of the world's production of copper, cobalt and lithium could face significant or high drought risks by 2050, up from less than 10pc currently and posing a significant challenge to future supply growth, according to accounting firm PwC. Under a low-emissions scenario — which imagines global carbon emissions rapidly decreasing — more than 70pc of cobalt and lithium production and around 60pc of the world's bauxite and iron production will be at risk by 2050, according to PwC's 2024 Climate Risks to Nine Key Commodities Report . More than half of the world's copper production will be disrupted by 2050 in a low-emissions scenario and over 70pc in a high-emissions scenario. PwC warns that unless commodity producers and buyers take preventive action now, their operations are likely to be increasingly disrupted. "Climate change is already fracturing the stability of the natural world, and it will increasingly fracture the stability of global supply chains unless adaptive measures are taken," said global sustainability leader Will Jackson-Moore. Some companies are responding to the growing drought risk by investing in water management systems to prevent wastage. Others are considering infrastructure adaptations, such as building elevated storage facilities in flood-prone areas. Several mining companies in Chile have invested in desalination plants, the report notes. According to PwC's 2024 Annual Global CEO Survey , 47pc of chief executives have taken proactive measures to safeguard their workforces and physical assets from climate change. To continue building resilience and adapting to climate risks, businesses must assess impacts, work with suppliers and communities, establish a climate strategy, make transparent disclosures, leverage adaptive products and services and participate in multi-stakeholder efforts, the latest report concludes. By Cristina Belda Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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