US inflation slows to 2.5pc in August

: Metals, Natural gas
24/09/11

US inflation slowed in August to the lowest rate since February 2021, marking a fifth month of easing inflationary pressures and paving the way for a widely expected cut in the Federal Reserve's target rate next week.

The consumer price index (CPI) slowed to an annual 2.5pc in August from 2.9pc in July, the Bureau of Labor Statistics reported today. So-called core inflation, which strips out volatile food and energy prices, rose by 3.2pc in August, matching the July reading, largely due to an uptick in monthly shelter costs.

After the report, the CME's FedWatch tool signaled an 83pc probability that the Fed will cut its target rate by a quarter point at next week's Fed policy meeting from 66pc odds Tuesday. Probabilities of a half point cut fell to 17pc from 34pc the prior day.

The energy index contracted by an annual 4pc in August, following a 1.1pc gain in July, while the gasoline index contracted by 10.3pc in August, accelerating from a 2.2pc decline in July. Energy services eased to an annual gain of 3.1pc following gains of 4.2pc in July.

Food costs rose by 2.1pc in August, slowing from a 2.2pc gain in July. Shelter rose by 5.2pc after a 5.1pc gain in July. Transportation services rose by 7.9pc in August, slowing from 8.8pc in July.

Headline CPI rose by 0.2pc in August from the prior month, matching July's monthly gain. Core CPI accelerated a tick to 0.3pc in August following a monthly 0.2pc gain in July, largely as shelter rose to 0.5pc from a prior 0.4pc and transportation services surged to a 0.9pc monthly gain from 0.4pc.

After falling to 3.1pc in January, inflation reaccelerated to as high as 3.5pc in March, prompting the Federal Reserve to hold off on widely expected rate cuts after holding its target rate at 23-year highs since July 2023 to contain inflation, which surged as high as 9.1pc in June 2022.

By Bob Willis

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24/12/20

US House votes to avert government shutdown

Washington, 20 December (Argus) — The US House of Representatives voted overwhelmingly today to extend funding for US federal government agencies and avoid a partial government shutdown. The Republican-controlled House, by a 366-34 vote, approved a measure that would maintain funding for the government at current levels until 14 March, deliver $10bn in agricultural aid and provide $100bn in disaster relief. Its passage was in doubt until voting began in the House at 5pm ET, following a chaotic intervention two days earlier by president-elect Donald Trump and his allies, including Tesla chief executive Elon Musk. The Democratic-led Senate is expected to approve the measure, and President Joe Biden has promised to sign it. Trump and Musk on 18 December derailed a spending deal House speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump lobbied for a more streamlined version that would have suspended the ceiling on federal debt until 30 January 2027. But that version of the bill failed in the House on Thursday, because of opposition from 38 Republicans who bucked the preference of their party leader. Trump and Musk opposed the bipartisan spending package, contending that it would fund Democratic priorities, such as rebuilding the collapsed Francis Scott Key Bridge in Baltimore, Maryland. But doing away with that bill killed many other initiatives that his party members have advanced, including a provision authorizing year-round 15pc ethanol gasoline (E15) sales. Depending on the timing of the Senate action and the presidential signature, funding for US government agencies could lapse briefly beginning on Saturday. Key US agencies tasked with energy sector regulatory oversight and permitting activities have indicated that a brief shutdown would not significantly interfere with their operations. But the episode previews potential legislative disarray when Republicans take full control of Congress on 3 January and Trump returns to the White House on 20 January. Extending government funding beyond 14 March is likely to feature as an element in the Republicans' attempts to extend corporate tax cuts set to expire at the end of 2025, which is a key priority for Trump. The Republicans will have a 53-47 majority in the Senate next month, but their hold on the House will be even narrower than this year, at 219-215 initially. Trump has picked two House Republican members to serve in his administration, so the House Republican majority could briefly drop to 217-215 just as funding for the government would expire in mid-March. Congress will separately have to tackle the issue of raising the debt limit. Conservative advocacy group Economic Policy Innovation Center projects that US borrowing could reach that limit as early as June. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Copper volatility, uncertainty ahead in 2025

24/12/20

Viewpoint: Copper volatility, uncertainty ahead in 2025

Houston, 20 December (Argus) — US copper prices are expected to remain volatile in 2025 because of uncertain market conditions, including Chinese demand, electric vehicle (EV) rollouts and falling borrowing costs. Following a two-year downturn prompted by China's economic slowdown in the wake of the Covid-19 pandemic, the next active price on the Chicago Mercantile Exchange (CME) hit an all-time record high of $5.106/lb on 21 May 2024. Expectations of increased demand in China, the prospect of looming US interest rate cuts, and projected ramped-up demand for copper in EVs and the green energy sector fueled copper price gains into the mid-year. These expectations proved partly exaggerated, leading copper to fall back to an average of $4.33/lb over the second half of 2024. US copper market participants expect those same factors, albeit to varying degrees, to retain a prominent role in determining prices for 2025. Macroeconomic uncertainties Suppliers and consumers widely expect volatility to persist in the global copper trade as broader macroeconomic factors — chiefly Chinese demand and stimulus, US Federal Reserve interest rate decisions — and delayed US EV ramp-up plans pull the market in diverging directions. President-elect Donald Trump's pledge to implement import tariffs have further complicated the picture for US participants, with likely retaliatory tariffs clouding the picture even more. Trade disagreements and tariffs would not only raise costs but also curb demand as the flow of various goods is dented, market sources said. Meanwhile, US Federal Reserve policymakers on 18 December signaled they are likely to cut the target rate by only 50 basis points next year, paring back their expectations from a prior 100 basis points as inflation remains sticky. The DXY dollar index, which tracks the greenback against six major currencies, surged after the Fed announcement to its highest in two years. A strong dollar puts downward pressure on copper prices because it tends to weaken demand from holders of other currencies. Tariffs are also expected to spur inflation and may prompt the Fed to further slow the pace of rate cuts, or even hike rates, effectively lending support to the dollar, making it more expensive for holders of other currencies to buy into copper. The US Dollar index, DXY, surpassed 108.2 on 19 December, the highest since November 2022. Goldman Sachs has forecast that the greenback will remain strong in the near-term. Automakers slow EV transition Although the green energy transition — generally covering solar, wind, and EV markets for copper markets — is expected to contribute to US consumption of copper, automakers have signaled their interest in delaying EV deployments. Wind and solar markets are widely expected to remain growth sectors with US projects and installations scheduled to rise next year . Still, the picture for EVs, which could ultimately contribute to copper demand heavily, is murkier. EVs utilize copper in motor coils for engines, and the cabling for charging stations among other components, and each EV requires 183 lbs of copper, nearly four times more than equivalent internal combustion engine vehicles. Several automakers, including GM, Ford and Toyota, have either delayed EV plans or shifted more towards hybrids instead this year. Price outlooks diverge Market participants broadly expect the copper market to slide into a deficit by 2026, chiefly because of growing demand from the renewable sector but until then are split on the direction of prices. The CME next active month price through November averaged $4.24/lb in 2024, up from a $3.86/lb average for the same time period in 2023. Investment bank Goldman Sachs said copper prices will average $4.61/lb for 2025, forecasting upside risk from potential further stimulus while simultaneously seeing downside risk from likely US-China trade tensions. Other financial organizations have forecast copper to range from $3.97-4.99/lb in 2025. Citigroup forecast copper at $3.97/lb, Bank of America dropped its outlook to $4.28/lb while UBS was at $4.76-$4.99/lb. Most copper traders and analysts agree that 2025 will likely be a year of transition for the red metal market, buffeted by ongoing uncertainty. By Mike Hlafka Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US government agencies set to shut down

24/12/20

US government agencies set to shut down

Washington, 20 December (Argus) — US federal agencies would have to furlough millions of workers and curtail permitting and regulatory services if no agreement is reached by Friday at 11:59pm ET to extend funding for the government. US president-elect Donald Trump and his allies — including Tesla chief executive Elon Musk — on 18 December upended a spending deal US House of Representatives speaker Mike Johnson (R-Louisiana) had negotiated with Democratic lawmakers in the House and the Senate. Trump endorsed an alternative proposal that Johnson put together, but that measure failed in a 174-235 vote late on Thursday, with 38 Republicans and nearly every Democrat voting against it. Trump via social media today indicated he would not push for a new funding bill. "If there is going to be a shutdown of government, let it begin now, under the Biden Administration, not after January 20th, under 'TRUMP,'" he wrote. There was little to indicate as of Friday morning that Trump, Republican congressional leadership and lawmakers were negotiating in earnest to avert a shutdown. The House Republican conference is due to meet in the afternoon to weigh its next steps. President Joe Biden said he would support the first funding deal that Johnson negotiated with the Democratic lawmakers. "Republicans are doing the bidding of their billionaire benefactors at the expense of hardworking Americans," the White House said. Any agreement on funding the government will have to secure the approval of the House Republican leadership and all factions of the Republican majority in the House, who appear to be looking for cues from Trump and Musk on how to proceed. Any deal would then require the support of at least 60 House Democrats to clear the procedural barriers, before it reaches the Senate where the Democrats hold a majority. The same factors will be in play even if the shutdown extends into early 2025. The Republicans are set to take the majority in the Senate when new Congress meets on 3 January. But their House majority will be even slimmer, at 219-215, requiring cooperation of Democratic lawmakers and the Biden administration. What happens when the government shuts down? Some agencies are able to continue operations in the event of a funding lapse. Air travel is unlikely to face immediate interruptions because key federal workers are considered "essential," but some work on permits, agricultural and import data, and regulations could be curtailed. The US Federal Energy Regulatory Commission has funding to get through a "short-term" shutdown but could be affected by a longer shutdown, chairman Willie Phillips said. The US Department of Energy, which includes the Energy Information Administration and its critical energy data provision services, expects "no disruptions" if funding lapses for 1-5 days, according to its shutdown plan. The US Environmental Protection Agency would furlough about 90pc of its nearly 17,000 staff in the event of a shutdown, according to a plan it updated earlier this year. The Interior Department's shutdown contingency plan calls for the Bureau of Land Management (BLM) to furlough 4,900 out of its nearly 10,000 employees. BLM, which is responsible for permitting oil, gas and coal activities on the US federal land, would cease nearly all functions other than law enforcement and emergency response. Interior's Bureau of Safety and Environmental Enforcement, which oversees offshore leases, would continue permitting activities but would furlough 60pc of its staff after its funding lapses. The US Bureau of Ocean Energy Management will keep processing some oil and gas exploration plans with an on-call group of 40 exempted personnel, such as time-sensitive actions related to ongoing work. The shutdown also affects multiple other regulatory and permitting functions across other government agencies, including the Departments of Agriculture, Transportation and Treasury. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Investment funds cut net long positions on Ice TTF

24/12/20

Investment funds cut net long positions on Ice TTF

London, 20 December (Argus) — Investment funds have cut their TTF gas net long positions on the Intercontinental Exchange (Ice) by nearly 50TWh from their historic peak at the end of November, while commercial undertakings' positions have moved strongly in the opposite direction. Investment funds' net long position had climbed steadily from 202TWh in the week ending 18 October to an all-time high of nearly 294TWh by 29 November. But in the two weeks since that point, their net position has dropped again by 48TWh ( see graph ), leaving their 246TWh net long position at the smallest since 8 November, according to Ice's latest commitments of traders report. However, only around 30pc of the decrease in the net long position came from closing long positions, with the large majority coming from opening up more shorts. Total long contracts were cut to 445TWh on 13 December from 461TWh on 29 November, but short contracts jumped to 200TWh from 167TWh in the same period. Such a large trimming of the net long position contributed to falling prices over the period — the benchmark Argus TTF front-month price fell from €48.45/MWh at the start of the month to €41.10/MWh at the close on 13 December. The front-quarter, front-season and front-year contracts all fell by roughly the same amount, as the entire price curve shifted down. While investment funds reduced their net long position over these two weeks, commercial undertakings — predominantly utilities — moved in the opposite direction, with their net short position falling to 37TWh from 102TWh. This was driven entirely by opening up more long contracts, which jumped to 947TWh from 877TWh, while shorts increased by just 5TWh between 29 November and 13 December to 984TWh. Commercial undertakings' total open interest therefore soared to 1.93PWh by the end of last week, triple the volume of investment funds' total open interest. Investment funds have in the past two weeks bought "risk reduction" contracts — generally used for hedging purposes — for the first time since May 2021. This suggests that some investment funds hold physical positions that they want to hedge their exposure to, although the volumes are small at around 300GWh for both shorts and longs. While utilities' positions in the futures markets are mostly risk-reducing to offset the risk held in physical positions, investment funds' positions are typically not risk-reducing because they are bets on the direction of prices. That said, utilities and other commercial undertakings such as large industrial buyers have increasingly set up trading desks that compete with hedge funds to capitalise on price trends and volatility in recent years. Risk reduction contracts account for around 69pc of commercial undertakings' open interest, meaning the other 31pc of contracts — amounting to 600TWh — were more speculative in nature. This 600TWh of speculative total open interest is only just below the 645TWh held by investment funds. By Brendan A'Hearn ICE TTF net positions TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: PGM demand from hydrogen sector to rise

24/12/20

Viewpoint: PGM demand from hydrogen sector to rise

London, 20 December (Argus) — Demand for platinum and iridium from the hydrogen industry will rise in 2025, albeit at a slower pace than anticipated because of delays to hydrogen project development. Demand from the hydrogen industry for platinum group metals (PGM) has increased significantly in recent years. The World Platinum Investment Council (WPIC) reported a 123pc increase in demand for platinum from hydrogen applications year on year on 26 November, from a small base. The WPIC anticipates a further 32pc growth in 2025. PEM electrolysers and hydrogen fuel cells both utilise platinum and iridium, opening up a new end-market for some PGMs. Demand from hydrogen applications may offset falling autocatalyst demand from the automotive industry in the long term. Hydrogen industry demand for platinum, iridium and ruthenium will also support demand for palladium, even though palladium is not utilised in hydrogen applications. As demand for platinum from the hydrogen industry increases, palladium will increasingly be substituted for platinum in internal combustion engine (ICE) vehicles, increasing automotive palladium demand and lifting PGM prices overall. More than $300bn in global hydrogen investments are earmarked through to 2030. Many governments seeking to reach their ambitious climate goals are investing in hydrogen, with 61 governments adopting hydrogen strategies as of 2024. "We know that all areas of the world will not shift to hydrogen in the same way as Europe, but we see technology advancing and costs falling, which gives us confidence that the hydrogen economy will be a big driver for platinum and iridium demand in the future," Heraeus Precious Metals Germany head of trading Dominik Sperzel told Argus . According to the WPIC, 11pc of global platinum demand will come from hydrogen application in 2030, totalling 900,000oz. By the late 2030s hydrogen energy production is expected to be the largest end-market for platinum, with 3.5mn oz of demand expected by 2040. "We have seen the hype over the past four to five years. Iridium prices started to increase in 2020 because of supply disruptions and on the demand side, people were excited about new technology announcements and projects entering the pipeline," Sperzel said. Johnson Matthey iridium prices increased by 285pc from the start of 1 June 2020 to 1 June 2021, reaching a peak of $6,300/troy ounce (toz). But they have since fallen by 29pc to $4,450/toz on 12 December as hydrogen demand failed to meet expectations. The development of the hydrogen economy has underperformed in recent years relative to expectations, and expected demand for PGMs has not yet materialised, according to PGM market participants. Many hydrogen projects remain unfinanced, and much of the hype has since abated. There are several challenges inhibiting the development of a widespread hydrogen economy, including the lack of existing infrastructure for hydrogen delivery. Another has been the availability of government subsidies, as significant funds have been earmarked for hydrogen investment but not yet disbursed. "Since 2022 to this year, subsidies available for green hydrogen projects have gone from $50bn to $300bn, but the funds haven't been flowing until early this year. It was only in June that the first of the European subsidies really began to be distributed to support the construction of these facilities. Now that subsidies are beginning to flow, development will accelerate quickly, driving consumer demand for fuel cell electric vehicles," World Platinum Investment Council research director Edward Sterck told Argus . The outlook for hydrogen as an energy source is improving, particularly in Europe and China, as a result of public sector investment and policy focus. The EU in April included over €100mn in grant funding for the construction of hydrogen refuelling stations across seven EU countries, including Poland, in a larger package of €424mn for zero-emission mobility. The EU in May 2024 adopted its hydrogen and gas decarbonisation package, which introduced a regulatory framework for dedicated hydrogen infrastructure. According to the Hydrogen Council, in July 2024 alone, six European hydrogen projects reached final investment decision (FID) status. Investment in hydrogen projects reaching FID globally has increased sevenfold since 2020 from 102 committed projects to 434 in 2024. "We remain positive about the project pipeline and PGM demand. The open question is if the push will happen in the next year, or take longer," Sperzel said. By Maeve Flaherty Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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