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Most major US equity indices closed higher, while APAC and
European markets closed mixed. US and benchmark European government
bonds closed sharply higher. CDX-NA closed modestly tighter across
IG and high yield, iTraxx-Xover was also tighter, and iTraxx-Europe
closed flat. Copper, silver, gold, and natural gas closed higher,
while the US dollar and oil were lower on the day.
Please note that we are now including a link to the profiles of
contributing authors who are available for one-on-one discussions
through our Experts
by IHS Markit platform.
Americas
Most US equity indices closed higher except for DJIA flat;
Nasdaq +0.7% <span/>and
Russell 2000/S&P 500 +0.3%.
10yr US govt bonds closed -3bps/1.54% yield and 30yr bonds
-7bps/2.03% yield, with rates increasing sharply to +3bps for both
during the minutes following the CPI report before rallying for the
remainder of the day.
CDX-NAIG closed -1bp/54bps and CDX-NAHY -4bps/311bps.
DXY US dollar index closed -0.5%/94.08, surging +0.2% shortly
after the CPI report to peak at 94.50 and then selling off for the
remainder of the day.
Gold closed +2.0%/$1,795 per troy oz, silver +2.9%/$23.17 per
troy oz, and copper +4.4%/$4.52 per pound.
Crude oil closed -0.2%/$80.44 per barrel and natural gas closed
+1.5%/$5.59 per mmbtu.
The US Consumer Price Index (CPI) rose 0.4% in September
following a 0.3% increase in August. The core CPI, which excludes
the direct effects of moves in food and energy prices, rose 0.2% in
September after a 0.1% increase in August. The headline CPI was
boosted by price increases for food (0.9%) and energy (1.3%). (IHS
Markit Economists Ken
Matheny and Juan
Turcios)
During September, large price swings occurred in several
components, both negative and positive. Notable declines occurred
for used vehicles (0.7%), apparel (1.1%), and several
travel-related components including airline fares (6.4%), lodging
away from home (0.6%), and car and truck rental (2.9%). The price
of used vehicles declined for the second consecutive month but was
42.3% above June 2020.
The price of new vehicles rose 1.3% in September and is up 8.6%
over the six months, as severe supply-chain bottlenecks have
resulted in extraordinarily lean inventories and have encouraged
dealers to raise prices.
Rent inflation rose sharply in September, a potential harbinger
of large increases in coming months as the surge in house prices
translates into higher rents. Owners' equivalent rent (OER) rose
0.4% on the month, the largest increase in five years. Rent of
primary residence (RPR) rose 0.5%, the largest increase in two
decades. Annual (12-month) rent inflation readings were low in
historical context in September, at 2.9% for OER and 2.4% for RPR,
but are likely to rise notably in coming months.
The 12-month change in the overall CPI edged up to 5.4% while
the 12-month change in the core CPI remained at 4.0%. IHS Markit
experts anticipate that 12-month inflation readings will moderate
over the course of 2022 as base effects recede and supply-chain
issues are addressed.
The minutes of the last meeting of the Federal Open Market
Committee (FOMC), held on 21 and 22 September, were released today.
Policymakers discussed upcoming changes to the Fed's program of
securities purchases, progress toward its maximum employment and
price stability goals, and risks to the outlook. The pace of
recovery in labor markets had slowed at the time of the FOMC
meeting, while, for some participants, concerns had intensified
that inflation could remain elevated for an extended period and
cause longer-run inflation expectations to rise above the Fed's
inflation target. Policymakers made no formal decision about when
to begin reducing the pace of the Fed's securities purchases, but
they did signal that a change was likely soon. The discussion
revealed in the minutes was consistent with our expectation that
the Fed will begin tapering asset purchases soon according to a
plan to end such purchases around the middle of next year.
Policymakers' concern about upside risks to inflation and inflation
expectations reinforced our expectation that the first increase in
the target for the federal funds rate could occur in early 2023.
(IHS Markit Economists Ken
Matheny and Lawrence Nelson)
Global solar module prices will take another two years before
they stabilize following the current supply chain tightness, which
in the near term will delay construction and installations,
analysts told the recent Solar and Storage Finance Summit. (IHS
Markit Net-Zero Business Daily's Amena
Saiyid)
"We expect to see [solar] module prices return to the normal
price decline in the next year or so," Ravi Manghani, managing
director of Denver, Colorado-based Clean Energy Associates, said
during a 6 October presentation at the summit, which UK-based Solar
Media Tech hosted. But, Manghani said, it will take until the end
of 2024 for solar module prices to reach 23-24.5 cents/watt prices,
"which is where we effectively would have been prior to the upswing
in commodity and logistics prices."
The global weighted-average levelized cost of electricity
(LCOE) of utility-scale, solar photovoltaic (PV) plants declined by
85% between 2010 and 2020, from $0.381/kWh to $0.057/kWh in 2020,
owing to "improving technologies, economies of scale, competitive
supply chains, and improving developer experience," the
International Energy Agency said in a June 2021 report.
At the start of 2020, solar module prices were in the
mid-to-low 30 cents/watt and currently they are in the mid-to-high
30 cents/watt, Manghani said.
On October 13, FERC approved August 19 applications from SE
Athos I LLC and SE Athos II LLC for market-based rate authority for
solar projects in California (Dockets ER21-2713 and ER21-2714).
These are project affiliates of SoftBank Group Corp. (IHS Markit
PointLogic's Barry Cassell)
The 250-MW (nameplate) Athos I Facility, a solar photovoltaic
project, would be located in Riverside County, California, within
the California ISO market. Athos I includes a tenants-in-common
interest in an approximately nine-mile, 230-kV generator-tie line
to be jointly owned with Athos II. The tie line is expected to be
energized later this year, and Athos I is expected to achieve
commercial operation in 2022.
Athos II is developing, and will own and operate, an
approximately 200-MW (nameplate) photovoltaic facility in Riverside
County. The Athos II Facility has been expected to achieve
commercial operation later this year.
The New York Power Authority (NYPA) and New York Transco
announced October 12 that they are collaborating on proposed
solutions to improve transmission capacity that will inject more
renewable energy from future offshore wind facilities into the
statewide energy grid. (IHS Markit PointLogic's Barry Cassell)
Their proposed "Propel NY Energy" solution will efficiently
deliver clean energy to customers, including those living and
working on Long Island and in New York City and Westchester County.
Propel NY Energy proposals for new transmission solutions were
submitted to the New York ISO on October 11 in response to the
NYISO's Long Island Offshore Wind Export Public Policy Transmission
Need Project Solicitation.
Propel NY Energy represents the first collaborative
transmission solution proposals between the New York Power
Authority and New York Transco. NYPA is the largest state public
power organization in the nation, operating 16 generating
facilities and more than 1,400 circuit-miles of transmission lines.
New York Transco is a New York-based owner, operator and developer
of bulk electric transmission facilities.
New York-based Plug Power announced separate renewable
power-sourced, green hydrogen deals with French aircraft
manufacturer Airbus and Houston-based Phillips 66 aimed at helping
to decarbonize the aviation and industrial sectors, respectively.
In partnership with Airbus, Plug Power will study how green
hydrogen can be used to decarbonize air travel and related
operations. Alongside Phillips 66, the company will "explore ways
to deploy Plug Power's technology within Phillips 66's operations,
leveraging Plug Power's experience as a full value chain provider
within the hydrogen economy." Green hydrogen has the potential to
decarbonize the most energy-intensive sectors of the economy. As
countries emerge from the pandemic and attempt to kickstart their
economies, companies like Plug Power offer industries a low-carbon
alternative to fossil fuels. Plug Power provides a range of
solutions, from developing fuel cells to producing green hydrogen
and blue hydrogen, which is produced from oil and gas facilities
equipped with carbon capture. Less than a month ago, Plug Power
announced plans to build a 30 metric ton (mt) a day electrolyzer
plant in California that will be powered by a new 300-MW solar
farm. In previous announcements, the company said it intends to
build plants in New York, Tennessee, and Georgia. Combined, the
facilities will have a total production capacity of 500 mt/day by
2025. Industrial uses will be the biggest driver of growth, as
hydrogen offers an option for reducing the carbon footprint of
energy-intensive processes such as making steel and cement. (IHS
Markit Net-Zero Business Daily's Amena
Saiyid)
According to the 2019 Health Care Cost and Utilization Report
published by the non-profit Health Care Cost Institute (HCCI),
healthcare spending for individuals under the age of 65 who receive
employer-based health insurance coverage increased by 2.9% in 2019
to reach USD6,001. This contributed to a cumulative increase in
healthcare spending of 21.8% between 2015 and 2019, which
corresponds to USD1,074 per person. The increase was driven partly
by greater utilisation and partly by increased prices, with the
latter having risen every year since 2015. In 2019, average prices
grew by 3.6%, which meant that average prices in 2019 were 18.3%
higher than in 2015. The figures include the amount paid for
medical and pharmacy claims, but do not include manufacturer
rebates for prescription drugs. The HCCI report, which is available
here, examined trends within four categories of service:
inpatient admissions, outpatient visits and procedures,
professional services, and prescription drugs. Of the total
USD6,001 spend in 2019, 31.4% was accounted for by professional
services, 27.8% by outpatient visits and procedures, 21.6% by
prescription drugs, and 19.3% by inpatient admissions. (IHS Markit
Life Sciences' Milena
Izmirlieva)
General Motors (GM) and LG Electronics have announced an
agreement regarding the costs of the recall of all the Chevrolet
Bolt and Bolt electric utility vehicle (EUV) electric vehicles
(EVs) produced; LG Electronics will pay USD1.9 billion of the
USD2.0 billion price tag, according to a GM statement. The brief
statement notes that GM will recognize an estimated recovery in
third-quarter earnings of USD1.9 billion as a result. Shilpan Amin,
GM VP of global purchasing and supply chain, was quoted as saying,
"LG is a valued and respected supplier to GM, and we are pleased to
reach this agreement. Our engineering and manufacturing teams
continue to collaborate to accelerate production of new battery
modules and we expect to begin repairing customer vehicles this
month." Automotive News reported that LG Chem and LG Electronics
have agreed to share a combined USD1.2 billion for the recall. The
LG Group companies noted that talks over the issue had ended, and
that some were booked in the July-September quarter and some
earlier. LG Chem owns the LG Energy Solutions unit, which provides
the batteries; LG Electronics assembles the cells into battery
modules and packs. (IHS Markit AutoIntelligence's Stephanie
Brinley)
Fisker CEO and chairman Henrik Fisker has been quoted as saying
that Fisker would like its upcoming electric vehicle (EV) program
to be produced by Foxconn at the current Lordstown Motors plant,
presuming a Foxconn-Lordstown deal materializes. In early October,
Foxconn and Lordstown Motors announced a deal for Foxconn to
purchase Lordstown's plant, located in Lordstown, Ohio. According
to Motor Authority, soon after the CEO was quoted as saying, "If
Foxconn ends up acquiring [the Lordstown plant] and if the deal
closes, it's our intent to make the Pear with Foxconn in
Lordstown." (IHS Markit AutoIntelligence's Stephanie
Brinley)
Lucid claims that its Air sedan will be the first production
vehicle in the United States with purpose-built LiDAR sensors, as
the company announced its DreamDrive and DreamDrive Pro set of
advanced driver assistance systems (ADAS). The DreamDrive Pro
system, with cameras, radars, and LiDAR, will enable autonomous
parking capability, assist with freeway driving, and assist with
moving at low speed in traffic. It uses up to 32 on-board sensors,
a driver-monitor system (this is not an eyes-free, autonomous
system), and on-board ethernet networking for "lightning-quick"
communication. The autonomous parking feature will identify
parallel or perpendicular parking spots, select gears, and drive
forward and reverse to enter or exit a parking spot or position the
vehicle in a spot. The sensor kit specifically includes 14
visible-light cameras, five radar units, four surround view
cameras, ultrasonic sensors, and "the first automotive installation
of LIDAR in North America". Lucid said that the suite enables the
system to detect objects a human driver cannot. (IHS Markit
AutoIntelligence's Stephanie
Brinley)
The Argentine crop protection market fell by 3.9% to $2,202
million in 2020, according to data from stablemate publication Crop
Science Market Data and Analysis. Sales in all segments were down
on the previous year. The major segment, herbicides, which is
dominated historically by glyphosate, declined by 2.8% to $1,518
million. Sales of fungicides saw the largest fall, dropping 7.1% to
$327 million, while that of insecticides slid 5.8% to $334 million.
(IHS Markit Crop Science's Robert Birkett)
Europe/Middle East/Africa
Major European equity indices closed mixed; France +0.8%,
Germany +0.7%, UK +0.2%, Italy -0.1%, and Spain -0.6%.
10yr European govt bonds closed higher; UK -6bps, Germany/Spain
-4bps, France -3bps, and Italy -2bps.
iTraxx-Europe closed flat/53bps and iTraxx-Xover
-3bps/269bps.
The Office for National Statistics (ONS) reports that the UK
economy grew by 0.4% month on month (m/m) in August after a
downwardly revised drop of 0.1% m/m in July. The figure for August
was below the market consensus, which had predicted a 0.5% m/m gain
during the month. (IHS Markit Economist Raj
Badiani)
Moreover, this was after real GDP rose by 5.5% quarter on
quarter (q/q) in the second quarter of 2021, revised up from an
initially published 4.8% q/q increase.
The level of real GDP in August was 0.8% below the level before
the first COVID-19-related lockdown in February 2020.
Furthermore, the ONS reports that real GDP grew by 2.9% in the
three months to August when compared with the previous three months
(March to May). This partly reflects the reopening of accommodation
and food service activities and an increase in school
attendance.
The largest contributor was the continued recovery in
consumer-facing services, which grew by 1.2% m/m in August but
remained 4.7% below its pre-pandemic. Accommodation and food
service activities and arts, entertainment, and recreation
performed well during August, rising by 9.0% m/m. Importantly,
festivals, bars, and restaurants in England enjoyed a whole month
without COVID-19-related restrictions.
Production output increased by 0.8% m/m in August, mainly
because of the continued increase in the extraction of crude
petroleum and natural gas after the recent temporary closure of
oilfield production sites for planned maintenance. The reopening of
oilfields triggered a gain of 16.0% m/m in mining and quarrying
output in August, after a 17.7% m/m increase in July.
The extraction of crude petroleum and natural gas is back at
levels last seen in December 2020, but it remains low by historical
standards, with output still 16.3% below its August 2019
level.
Meanwhile, the manufacturing sector grew by 0.5% m/m during
August, following a downwardly revised 0.6% m/m fall in July. The
ONS reports rising output in 9 of the 13 manufacturing sub-sectors
during August, with the best-performing sector being the
manufacture of motor vehicles after global microchip shortages
disrupted production in June.
UK consumers will have to deal with an increase in food prices,
Kraft Heinz chief executive Miguel Patricio said during an
interview with BBC. Patricio explained that increase in raw
material prices, measures to control the COVID-19 virus, labor
shortage and higher transport costs, have all contributed to
increase production costs for a large range of products. Higher
wages and energy prices have also added to the burden for
manufacturers. The food giant has already increased prices on more
than half of its products in the US and more markets will follow.
Prices of tomato paste rose by 30% y/y in the US with the 31% hot
break (HB) in 300 gallons bin quoted today at $1,058/ton ex-works
and the 31% HB in 55 gallons drum is 24% costlier at $1,102/ton.
The tomato crop is well below initial processing intentions due to
the drought in California, while stocks are at a record-low. The
Chinese triple concentrate is stable at $830/ton fob for the
moment. Due to high transport costs and delays in shipping produce,
China is the only large tomato producer which had some stocks left
before the start of the current season. Chinese processors expect
to see their stocks reduced before November when the shipping of
the 2021 crop should start. (IHS Markit Food and Agricultural
Commodities' Cristina Nanni)
Eurozone industrial production fell by 1.6% month on month
(m/m) in August, the biggest fall since April 2020. The decline
matched the market consensus expectation (according to Reuters'
survey). (IHS Markit Economist Ken
Wattret)
However, July's initially reported rise of 1.5% m/m has been
revised down marginally to 1.4%, while manufacturing production in
August contracted by an even larger 2.0% m/m. The first increase in
energy production for four months (+0.5% m/m) accounted for the
difference.
As the eurozone industrial production data can be very volatile
from month to month, IHS Markit also tracks the
three-month-on-three-month rate of change. This has flatlined since
April and was barely positive (just 0.1%) in August.
Net of the various updates and revisions, as of August eurozone
industrial production was 1.3% below February 2020's pre-pandemic
level.
Eurozone retail sales volumes, meanwhile, rose by a negligible
0.3% m/m in August, well below the initial market consensus
expectation (of +0.8% m/m, according to Reuters' survey). July's
already large 2.3% m/m decline in sales has also been revised down
to a 2.6% m/m drop.
The pandemic has reduced the availability of some
sub-categories in the retail sales data. Still, in brief, there was
a strong divergence of sales of food, beverages, and tobacco (-1.7%
m/m) and other sales (+1.8% m/m) in August.
There was a strong rebound in mail-order and internet sales
(9.0% m/m) following successive sharp declines in June and July.
Relative to their pre-pandemic level, mail-order and internet sales
were up by 33% in August.
Final September data based on national methodology from
Germany's Federal Statistical Office (FSO) have confirmed the flash
data release of 30 September, posting 0.0% month on month (m/m) and
4.1% y/y. This 28-year high contrasts starkly with average
inflation of 1.4% in 2019 and 0.5% in 2020. (IHS Markit Economist
Timo
Klein)
The European Union (EU)-harmonised CPI measure even increased
0.3% m/m in September, raising its - recently lagging - annual rate
from 3.4% to equally 4.1% y/y. This exceeds the eurozone average of
3.4% in August. January's reweighting of (only) the harmonized rate
to the changed consumer spending patterns in 2020, favoring those
categories that showed the largest price increases in 2020, had led
to a higher harmonized than national inflation rate during
January-April, and a lower one during May-August, but they should
now stay broadly similar for the remainder of 2021.
The national measure of core CPI (ex-food and energy) has edged
up further from 2.8% to 2.9% y/y in September, more than twice as
high as the 1.4% average during January-April and even further
above the December 2020 level of 0.4%. Although this partly owes to
the temporarily lower VAT rate during July-December 2020, input
price pressures from global supply chain bottlenecks, higher energy
prices, and the loosening of pandemic-related restrictions since
May have been contributing too.
The French government has set a new target for the number of
locally built electric and hybrid vehicles as part of its new
industrial plan announced yesterday (12 October). Under the 'France
2030' plan laid out by President Emmanuel Macron, the country aims
to invest EUR30 billion over five years to boost a range of sectors
in the country. Of this, EUR4 billion will be spent on transport
and mobility, and it has a target for output of 2 million electric
and hybrid vehicles per annum being built at this point. (IHS
Markit AutoIntelligence's Ian Fletcher)
French President Emmanuel Macron has unveiled an EUR30-billion
(USD35 billion) plan to "reindustrialize", reduce "overdependence"
on certain raw material imports, support decarbonization and
environmentally sustainable manufacturing, and generally boost the
country's high-technology sectors, including pharmaceuticals. The
proposed France 2030 strategy arrives six months ahead of a French
presidential election campaign in which Macron is seeking a second
term. However, the concept of France strengthening its
manufacturing autonomy long predates the upcoming election. While
the strategy clearly has political drivers, it should not be
construed as merely a last-minute pitch to voters. The financial
package proposed by Macron would result in EUR4 billion in capital
investment and about EUR30 billion in budget spending over around
five years. The first tranche of between EUR3 billion and EUR4
billion is envisaged to be allocated from January 2022. The details
of the plan relating to the pharmaceutical and healthcare sectors
remain vague, except for a headline commitment to develop and
produce "at least 20 biomedicines [or biopharmaceuticals] against
cancer, emerging diseases and chronic illnesses", as well as rare
diseases, by 2030. The industrial impact of this plan on the
pharmaceutical sector is potentially significant, particularly in
terms of financing start-up biotechs, supporting the growth of
domestic French manufacturers, and investing in research and
development (R&D) centers. (IHS Markit Life Sciences' Eóin
Ryan)
In response to industry demand, LM Wind Power, a GE Renewable
Energy business, is doubling its 107-meter wind turbine blade
manufacturing capability at its Cherbourg factory in France through
the launch of its second blade mold. GE will also be investing in
further upgrades to the plant. The Cherbourg factory, which was
opened in April 2018, will look to recruit 200 more employees,
above its current 600 headcount. (IHS Markit Upstream Costs and
Technology's Melvin Leong)
Through the first eight months of 2021, Turkey's
current-account deficit of USD13.992 billion was nearly USD12
billion smaller than it had been in the same period of 2020,
according to data from the Central Bank of the Republic of Turkey
(TCMB). A 37.0% year-on-year (y/y) recovery of merchandise exports
was primarily responsible for the substantial reduction of both the
merchandise-trade and current-account deficits. (IHS Markit
Economist Andrew
Birch)
Additionally, the nascent service export recovery also
contributed to the sharp reduction of the external imbalance. In
January-August 2021, total service exports were up by 55.0% y/y in
nominal dollar terms - with transport service exports rising by
over USD4 billion y/y and travel service exports up by over USD5
billion y/y.
Somewhat offsetting the improving merchandise-trade and
services balances, however, the primary income deficit grew by over
USD1.8 billion y/y. With interest rates falling and financial
volatility increasing, investment income outflows jumped by over
USD2.3 billion y/y.
Turkish industrial production growth gained momentum in August,
defying regional trends. That month, total output grew by 5.4%
month on month (m/m) in seasonally and calendar-adjusted data. The
upturn was stronger than expected, with output recovering from what
had been a disappointing July. (IHS Markit Economist Andrew
Birch)
Among the sectors to contribute most strongly to the August
revival of output, the manufacture of automobiles and their parts
were a surprising source of momentum, adding 1.3 percentage points
to headline m/m expansion.
After the imposition of anti-pandemic measures in the second
quarter to battle a surge of COVID-19 infections, the government
eased lockdowns in June and July, with most restrictions gone by
the end of July. The relaxation of measures contributed to the
August recovery.
The easing of restrictions had a quicker impact on retail
trade. Growth there surged by over 15% m/m in June, with subsequent
increases in July and August much more modest, but still
continuing.
On 12 October, the EU and Ukraine signed arrangements allowing
the latter to join the EU's Common Aviation Area Agreement (ECAA),
obliging it to implement European air aviation standards and rules,
and allowing carriers based in ECAA member states to fly freely to
Ukraine as well as airports in other ECAA signatories. The talks
about Ukraine joining the ECAA have been ongoing since 2007, and
the initial proposals on an 'Open Skies' agreement since 2013, but
they were delayed by unrelated factors such as a UK/Spanish dispute
over the status of Gibraltar airport. The new agreement will allow
EU airlines to fly unrestricted to Ukraine, with Ukrainian airlines
receiving reciprocal access. In the past Ukraine had established
'Open Skies' arrangements with individual EU member states, such as
Poland and Italy, which boosted bilateral flights and passenger
numbers on these routes. The liberalization of civilian aviation,
both for passenger and cargo flights, is a risk-positive
development, reducing the regulatory burden for the industry and
encouraging an increase in the number of direct flights between
Ukraine and EU airports. Ryanair, EU's biggest low-cost airline,
which began flying to Ukraine in 2018, already announced plans to
expand its presence in the country from five to 12 airports. (IHS
Markit Country Risk's Alex
Kokcharov)
Asia-Pacific
Major APAC equity indices closed mixed; South Korea +1.0%,
India +0.8%, Mainland China +0.4%, Australia -0.1%, and Japan
-0.3%.
Mainland China's merchandise export growth accelerated from
25.6% year on year (y/y) in August to 28.1% y/y in September in
terms of US dollar, according to the General Administration of
Customs (GAC). However, merchandise imports rose 17.6% y/y,
dropping from a 33.1% y/y expansion the previous month. In terms of
2020-21 average, September exports growth rose by 1.4 percentage
points from the previous month and was the fastest since the
beginning of the year. (IHS Markit Economist Yating
Xu)
By trade partners, the headline export growth was largely
driven by strong demand from the United States with its purchase
improving from an expansion of 17.8% y/y in August to 25.5% y/y in
September. However, exports to the European Union and Japan
moderated, and ASEAN's purchase accelerated only marginally. By
export commodities, mechanical and electronic products, especially
cellphone that rose 70% y/y, led the headline export growth.
Meanwhile, exports of pandemic-control products improved from
contraction to expansion, and consumer goods such as toys and bags
continued to accelerate, reflecting the sustained global
supply-chain disruption caused by the Delta variant spread and the
inventory replenishment in Western countries.
The decline in import growth was partially due to the declining
commodity imports under the decarbonization policy as well as the
high baseline in the same period last year. The import volumes of
steel, copper, and crude oil registered a double-digit contraction
in September, driving a significant slowdown in value growth
despite the sustained high prices. However, the volume of coal
imports in September rose to their highest this year as power
plants scrambled for fuel to boost electricity generation to ease
the power crunch. Meanwhile, imports of electronic and agricultural
products expanded at slower paces compared with August.
Trade surplus continued to increase from USD58.3 billion in
August to USD66.8 billion in September as export growth accelerated
while import growth slowed. The cumulative surplus growth rate
picked up to 35% y/y from 28.8% y/y a month earlier. Trade surplus
with the United States rose further from USD37.7 billion in August
to USD42 billion in September.
New vehicle sales in mainland China fell y/y for a fourth
consecutive month during September, due to softer demand for
passenger vehicles and commercial vehicles (CVs). According to data
released by the CAAM, new vehicle sales on a wholesale basis
decreased 19.6% y/y to 2.067 million units last month, while
production was down by 17.9% y/y to 2.077 million units. In the
year to date (YTD), new vehicle sales are up 8.7% y/y at 18.623
million units, while production volumes are up 7.5% y/y at 18.243
million units. New vehicle sales in China declined y/y for a fifth
consecutive month in September, mainly due to the semiconductor
shortage affecting global automakers this year. According to IHS
Markit's latest forecasts, production losses in mainland China as a
result of this issue stood at 364,000, 420,000, and 685,000 units,
respectively, during the first, second, and third quarters of this
year. The running total for the fourth quarter was kept at 60,000
units last week. Just before the end of September and in the run-up
to the national holiday, it was reported that power outages had
been experienced in several regions as energy production was cut
back to align with quarterly targets. These outages affected the
vehicle operations of FAW-Toyota and FAW-Volkswagen (both in
Changchun) and SAIC-General Motors (GM) in Shenyang. Initial
estimates put the direct impact of this at a combined 5,000 units
in the final week of September, while a further direct impact on
OEMs and an indirect impact via supplier stoppages are expected to
be visible this week and next. (IHS Markit AutoIntelligence's Nitin
Budhiraja)
A consortium of Semco Maritime and PetroVietnam Technical
Services Corporation (PTSC) have signed a preferred supplier
agreement for the delivery of two offshore substations for the
1,044 MW Hai Long offshore wind project. As part of the scope of
work, the consortium will undertake the design, engineering,
procurement, construction (EPC) and commissioning work for for the
topsides and jacket foundations. The design will be carried out
together with ISC Consulting Engineers in the fourth quarter of
2021 , and fabrication will be carried out at PTSC M&C's yard
in Vungtau, Vietnam. Work is expected to be completed by 2024, in
time for offshore installation. Commissioning is targeted for 2026.
The Hai Long project will be developed in three phases, 2a, 2b, and
3, with construction expected to start in 2023. The wind farm is
located 50 kilometers off the coast of Changhua county. (IHS Markit
Upstream Costs and Technology's Melvin Leong)
Japan's private machinery orders (excluding volatiles), a
leading indicator for capital expenditure (capex), fell by 2.4%
month on month (m/m) in August following a 0.9% m/m rise in July.
The weakness stemmed from a 13.4% m/m drop in orders from
manufacturing, which offset a 7.1% m/m increase in orders from
non-manufacturing. Orders from the public sector slipped by 1.3%
m/m in August following a 14.0% m/m rise in July. Orders from
overseas also declined by 14.7% m/m in August after a 24.1% m/m
surge in July. (IHS Markit Economist Harumi
Taguchi)
The first drop in five months in orders from manufacturing was
largely due to declines in orders from electrical machinery,
general-purchase and production machinery, and shipbuilding. On the
other hand, the improvement in orders from non-manufacturing was
thanks largely to rebounds in orders from wholesale and retail
trade, transportation and postal activities, and
telecommunications. Demand for machinery related to online shopping
and 5G-related hardware helped lift machinery orders from
non-manufacturing.
The August results were weaker than IHS Markit's expectations,
but softer orders from manufacturing and a faster increase in
orders from non-manufacturing (excluding volatiles) were in line
with the industry's outlook for the third quarter of 2021. Orders
for metal-cutting machine tools (one type of production machinery)
suggest that domestic demand remained resilient in September.
Japan's ENEOS Holdings is splashing out nearly $2 billion to
acquire a compatriot renewable energy project developer, a deal
that would help the country's largest oil firm reach its renewable
target earlier than scheduled. The Tokyo-listed company 11 October
agreed to acquire Tokyo-based Japan Renewable Energy (JRE) for ¥200
billion ($1.76 billion) from US investment bank Goldman Sachs and
Singaporean sovereign wealth fund GIC. JRE, 75% of which is owned
by Goldman Sachs and 25% by GIC, had renewable assets totaling 877
MW as of 30 September in the solar, onshore wind, and biomass
sectors in Japan and Taiwan. These included 419 MW that is
operational and 458 MW under construction. With a target to achieve
carbon neutrality by 2040, ENEOS was planning to expand its total
renewable power generation capacity to more than 1 GW by the end of
fiscal 2022, or 31 March 2023. The company's capacity is expected
to exceed 1.22 GW when the JRE transaction is completed in January.
(IHS Markit Net-Zero Business Daily's Max Lin)
Tata Motors has entered into a binding agreement with TPG Rise
Climate whereby the latter, along with its co-investor ADQ, will
invest in Tata subsidiary TML EVCo, reports Autocar India.
According to the source, TPG Rise Climate will invest INR75 billion
(USD1 billion) for an 11-15% stake in TML EVCo (translating to an
equity valuation of up to INR673 billon), while Tata Motors intends
to expand its electric vehicle (EV) portfolio to 10 models by 2026
with a INR150-billion investment in the EV business. TML EVCo will
help Tata Motors channel future investments into EVs, dedicated
battery electric vehicle (BEV) platforms, advanced automotive
technologies, charging infrastructure, as well as battery
technologies. The first round of investment is due to be completed
by March 2022, while the remainder will be invested by the end of
2022. Tata Motors chairman Natarajan Chandrasekaran said, "I am
delighted to have TPG Rise Climate join us in our journey to create
a market-shaping electric passenger mobility business in India. We
will continue to proactively invest in exciting products that
delights customers while meticulously creating a synergistic
ecosystem. We are excited and committed to play a leading role in
the Government's vision to have 30% electric vehicles penetration
rate by 2030." Tata Motors is also implementing Project Helios,
under which it has confirmed plans to expand its portfolio to 10
India-specific EVs by 2026, as well as a transition to a modular
multi-energy platform. (IHS Markit AutoIntelligence's Tarun
Thakur)
Posted 13 October 2021 by Chris Fenske, Head of Fixed Income Research, Americas, S&P Global Market Intelligence
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