US Fed cuts rate by half point, signals more to come
The US Federal Reserve cut its target interest rate by 50 basis points today, the first rate cut since 2020, with officials signaling they expect to make another half point worth of cuts by the end of 2024.
The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, which was a two-decade high. The Fed had kept the target rate unchanged since July 2023 after hiking it for more than a year in the most aggressive increase campaign in four decades to quash inflation, which peaked at 9.1pc in mid-2022.
"The committee has gained greater confidence that inflation is moving sustainably toward 2pc and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement after the two-day meeting. "Job gains have slowed, and the unemployment rate has moved up but remains low."
The Fed board and policymakers, in their latest economic projections, expect the target rate range will end 2024 near a midpoint of 4.4pc compared with an end of year midpoint of 5.1pc projected in June, which implies further cuts amounting to 50 basis points by the end of 2024.
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Hurricane Helene shuts in 29pc of US Gulf oil
Hurricane Helene shuts in 29pc of US Gulf oil
New York, 25 September (Argus) — Hurricane Helene, which is forecast to intensify as it heads for a late Thursday landfall in Florida, has shut in about 29pc of US Gulf of Mexico oil output. Around 511,000 b/d of US offshore oil output was off line as of 12:30pm ET, according to the Bureau of Safety and Environmental Enforcement (BSEE), while 313mn cf/d of natural gas production, or 17pc of the region's output, was also off line. Operators have so far evacuated workers from 17 offshore platforms. Helene was last about 110 miles north-northeast of Cozumel, Mexico, according to a 2pm ET advisory from the US National Hurricane Center, with maximum sustained winds of 80 mph. Helene is expected to be a major hurricane, with winds of at least 111mph, when it reaches the eastern Florida coast on Thursday evening. "A turn toward the north and north-northeast with an increase in forward speed is expected later today through Thursday, bringing the center of Helene across the eastern Gulf of Mexico and to the Florida Big Bend coast by Thursday evening," the center said. Shell restarting some production Although the hurricane will largely pass to the east of most offshore oil and gas production areas, companies have taken precautionary measures. Given a shift in the forecast track, Shell said late Tuesday that it had started to ramp up production at the Appomattox platform to normal levels, and was in the process of restoring output at the Stones facility, both off the coast of Louisiana. It paused some drilling operations. Chevron said earlier it was shutting in production at company-operated facilities in the Gulf of Mexico, and evacuating all workers. Equinor said it was shutting down the Titan oil platform. BP had earlier this week started to shut in production at its Na Kika and Thunder Horse platforms, southeast of New Orleans, and was curtailing output from its Argos and Atlantis facilities, as well as removing non-essential staff. US offshore production was disrupted earlier this month when Hurricane Francine made landfall, with up to 42pc of production was offline at one point. The offshore Gulf of Mexico accounts for around 15pc of total US crude output and 5pc of US natural gas production. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
LNG glut coming and may catch many by surprise: Orsted
LNG glut coming and may catch many by surprise: Orsted
London, 25 September (Argus) — There will be an oversupply of LNG on the global market in the coming years, which may contribute further to "the decade of turmoil", Danish utility Orsted senior vice-president Rune Sonne Bundgaard-Jorgensen told Argus . "The [energy] crisis is absolutely not over. To me, an energy crisis is one of uncertainty and volatility," Bundgaard-Jorgensen said on the sidelines of the Energy Trading Week conference in London. "We are going to see an LNG glut which we all in this [conference] room see is coming but the rest of the world does not necessarily. That is going to catch a lot of people by surprise," he said, adding that "surprises are never good when it comes to energy". According to Bundgaard-Jorgensen, "we are going to see an ongoing decade of turmoil. Who knows where the war in the Middle East with the latest attacks on Hezbollah and Israel is going to take us," he said. Among other concerns, he mentioned "uncertainties in the Far East, around the South China Sea". "So, though the current energy crisis of decoupling from Russian pipe gas is over, the continued crisis of where we are going to get sustainable, long-term energy from is far from over," Bundgaard-Jorgensen said. Commenting on Orsted's long-term gas plans, Bundgaard-Jorgensen stressed that Orsted is "constantly evaluating" its gas portfolio. He refused to say whether Orsted is negotiating another long-term deal with Norwegian state-controlled Equinor after their previous contract expired in April. Orsted entered an agreement with Equinor at the end of 2022, after Russian state-controlled Gazprom halted deliveries to the firm from June 2022 following Orsted's refusal to pay for its supply in roubles . "We are quite happy that we are out of our long-term contract with Gazprom," Bundgaard-Jorgensen said. "As a company we believe in decarbonisation — but I also need to believe in a resilient portfolio. So, we are constantly looking to optimise. Gas is not a strategic core of Orsted but it is a very important tool of securing our portfolio," he said. Bundgaard-Jorgensen refused to comment on whether the firm is planning to appeal a decision made by the Danish Supply Authority in July that the tariff levied by Orsted on the Tyra-Nybro pipeline to Denmark from 2011 to October 2012 was too high. The authority reduced the tariff in the period by almost 30pc to 7.20 Danish kroner/m³ from DKr10/m³. By Alexandra Vladimirova Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Tight supply remains Europe Al driver
Tight supply remains Europe Al driver
London, 25 September (Argus) — European aluminium markets have barely stirred following the slow summer months, as demand in the automotive and construction markets continues to disappoint and sales opportunities for traders and distributors remain sparse even after the holiday period definitively ended. But premiums have remained steady throughout September, as tight supply remains the main driver of the European aluminium market, even more so than earlier in the year, when premiums were climbing amid moderate demand. European aluminium premiums rose by two-thirds over the first five months of the year, with the Argus assessment of the P1020 duty-paid spot in-warehouse Rotterdam premium hitting an 18-month high of $320-350/t in May. Demand, although unimpressive compared with stronger years, increased sufficiently to tip the market balance against tight supply. Availability in Europe was severely limited by low production following sizeable cuts over the previous two years, the absence of Russian metal owing to self-sanctioning by consumers and official sanctions by governments in the UK and US, and aggressive Chinese importing from most international regions. Premiums subsequently edged back slightly to $320-340/t and then began an unprecedented run of flatness over the June-August summer period, as demand fell away in Europe but the sustained tight supply environment stopped premiums from falling back. Throughout the slow summer months, there was a sense that premiums were primed to race higher as soon as demand picked up in the autumn, led by automotive markets that were expected to at least show some improvement after slowing from the middle of the year. But that has not happened, and premiums have continued to flatline at $320-430/t in September, as demand has failed to stir in either the automotive or construction sectors. Europe's largest economy Germany has seen particular weakness in its consumer industries, with the construction sector having been in decline throughout this decade, while major carmaker Volkswagen recently told its employees that it is considering closing some factories. In July, Germany's manufacturing output index hit its lowest since June 2020, according to climate and economy ministry BMWK, with total industrial production down by 2.4pc from June this year and 5.3pc lower than in July 2023. "There has been no bounce-back from the end of the summer. Stockists and distributors still have empty inboxes, which is very unusual for this time of year," one analyst said. "The automotive market is bad and the construction market is terrible." But premiums have not budged against such a bleak demand picture, as supply remains very tight even against that stark lack of buying. The factors that reduced availability in Europe over the past few years remain very much in play, while China's appetite for imports has grown even stronger this year. China's primary aluminium imports in the year to August rose by more than 50pc on the year to 2.58mn t, customs data show. That trend is likely to continue, as domestic Chinese aluminium production is bumping up against the country's output cap of 45mn t/yr. Some had expected earlier this year that China could raise the cap but few are of that view now, especially given the damage done this year to the country's steel industry by excess production. Additionally, most provinces have now mandated efficiency targets. The best way to achieve them is to limit energy use, and aluminium smelters are one of the biggest energy users. "The Chinese production cap is key, and China is within a few hundred thousand tonnes of it already," a second analyst said. "They don't even need to see better demand to keep increasing imports." Tightness in the alumina market will feed through to the smelting industry, limiting output further. UK-Australian mining firm Rio Tinto's alumina output fell by 10pc on the quarter and the year to 1.68mn t in the second quarter, following an incident at its third party-operated Queensland gas pipeline in March, while record Chinese aluminium production this year has also drained alumina supplies. There is little in the way of imports flowing to Europe from other regions. Freight costs remain high, and suppliers in the Middle East and India are showing little inclination to bear the cost of deliveries to Europe without greater price and premium incentives. Consequently, the European market will remain very tight in the fourth quarter, leaving it susceptible to any stirring of demand that could cause premiums to jump. But there seems little chance of any such demand growth until 2025, with few suppliers even reporting discussions for further activity this year. By Jethro Wookey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU steelmakers lobby for US Section 232-style tariff
EU steelmakers lobby for US Section 232-style tariff
London, 25 September (Argus) — EU steelmakers are lobbying for emergency restrictions on imports in light of continuing market penetration, according to numerous sources. European steel association Eurofer has met with the European Commission to discuss high imports, at a time when weak demand is already putting pressure on local steel prices. Multiple sources suggest it is lobbying for a tariff similar to the US' Section 232, which applies a blanket tax on all finished steel imports. "The commission of course is aware of the concerns of the sector, it's a sector with which we have a strong ongoing contact and dialogue. Any new trade defence cases are looked at on a case by case basis on their own merits," a commission spokesperson told Argus in Brussels on Tuesday. The commission understands the concerns of mills, but at the same time has to balance the interest of steel users, sources suggest. Imports to the EU's hot-rolled coil (HRC) market have increased dramatically since China started ramping up exports in the third quarter of last year. Imports since July 2023 have constituted around 25pc of all EU market supply when safeguard quotas reset at the start of each quarter, up from 11-15pc in the previous months. Imports rose to a record 1.56mn t in July, and would have been even higher if not for 175,000t being pulled back from clearance to avoid additional tariff rate quota duties. The EU imported 6.2mn t of HRC in January-July, the highest on record, despite tightened safeguards. The share of imports in overall supply is higher on cold-rolled coil and hot-dip galvanised (HDG), where the impact of comparatively higher energy costs is even more problematic for local mills. Steelmaking sources suggest that the existing safeguard is not fit for purpose as a result, and they also question the ability of importers to hold back supply to avoid duties. But others suggest the impact of the existing 15pc other countries cap and continuing dumping investigation has not been felt yet, and that these measures will help tighten the market when demand strengthens. Vietnam is a major source of HDG supply to the EU and sources expect this could be the next dumping case, especially given the country's high usage of Chinese HRC. By Colin Richardson and Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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