Daily Global Market Summary - 21 January 2022
All major European and US, and most APAC equity indices closed lower. US and benchmark European government bonds closed higher. European iTraxx and CDX-NA closed wider across IG and high yield. Natural gas closed higher, while the US dollar, oil, gold, copper, and silver all closed lower on the day.
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- All major US equity indices closed lower; DJIA -1.3%, Russell 2000 -1.8%, S&P 500 -1.9%, and Nasdaq -2.7%.
- The S&P 500 equal weighted index has outperformed the S&P market cap weighted index by 1.8% YTD.
- 10yr US govt bonds closed -4bps/1.77% yield and 30yr bonds -5bps/2.07% yield.
- CDX-NAIG closed +1bp/58bps and CDX-NAHY +3bps/326bps, which +5bps and +21bps week-over-week, respectively.
- DXY US dollar index closed -0.1%/95.64.
- Gold closed -0.6%/$1,832 per troy oz, silver -1.6%/$24.32 per troy oz, and copper -1.3%/$4.52 per pound.
- Crude oil closed -0.5%/$85.14 per barrel and natural gas closed +3.6%/$3.78 per mmbtu.
- In this bi-weekly US rig update, we continue to see the rebound
in onshore rig activity play out with 21 rigs added, largely in
liquids-directed plays. The continued recovery in rig activity,
which could reflect in part the early signs of implementation of
2022 budgets, is in line with our base case expectations and should
support an acceleration of growth in 2022. Although many people are
rightfully pointing to decelerating DUC wells unwinding requiring
an increase in rigs just to hold flat, rig increases in recent
months have started to materially exceed maintenance levels and
enter growth territory. (IHS Markit Plays and Basins' Imre
Kugler and Prescott Roach, and Energy Advisory's Karim
- Another important signpost over the past two weeks is public E&Ps and majors (ExxonMobil and Chevron in particular) driving the majority of rig increases, an important component of the acceleration in supply growth this year as some of the relatively dormant engines of US supply growth start getting revved up. We are also starting to see some low-grading in the Permian and rigs returning to smaller plays, indicative of an industry that is getting more comfortable with higher prices. With WTI forward curves flirting with $80/bbl in 2022, comfortably in the money for most acreage quintiles across most major plays, we will continue to watch for any inflection point in activity that would suggest growth could overshoot.
- The US lower-48 onshore rig count rose by 21 over the past two weeks to reach 647 rigs on 19 January. Horizontal rigs drove nearly all recent gains to reach 552. Vertical and directional rig counts, for their part, climbed by two net units to reach 95; vertical and directional rig counts have remained rangebound since May 2021. Liquids-directed plays accounted for virtually all growth in rig counts over the past two weeks, while activity in major gas plays remained unchanged.
- Although private operators have been at the vanguard of the recovery in rig counts over the past 18 months, independent and global E&Ps accounted for virtually all incremental gains over the past two weeks. Since 6 January, independent E&Ps have added 13 net horizontal rigs while global E&Ps added four net rigs. Among majors, ExxonMobil and Chevron led the charge in terms of recent additions: ExxonMobil added three net rigs over the past two weeks, while Chevron added two net rigs.
- Rig activity in the SCOOP/STACK fully returned to pre-pandemic levels during the week of 19 January. Only the Utica and Haynesville plays had previously attained this milestone. Notably, the SCOOP/STACK represent the only liquids-directed plays to have reached such levels. Nevertheless, other liquids-prone plays appear poised to reach pre-pandemic levels: the Wolfcamp Midland and Eagle Ford/Austin Chalk rig counts are just 11% and 13% below February 2020 levels, respectively. Other plays have significant gaps to make up: Bakken and Wattenberg rig counts remain more than 40% below pre-pandemic levels, while activity in the prolific Delaware Basin remains 30% below its February 2020 level.
- In a sign that operators believe in oil market strength, Permian operators returned to pre-pandemic acreage targeting in late 2021 following significant high-grading in 2020 and 1H2021.
- Witnesses from the bitcoin mining industry told a US House
panel on January 20 that energy efficiency and clean energy are
among their concerns, while other witnesses called into question
this nascent industry's energy consumption patterns. The US House
Committee on Energy and Commerce held a January 20 hearing called
"Cleaning up Cryptocurrency: The Energy Impacts of Blockchains."
One of the participants at the hearing was Subcommittee on
Oversight and Investigations Chair Diana DeGette, D-Colorado. (IHS
Markit PointLogic's Barry Cassell)
- DeGette noted in her prepared testimony: "Cryptocurrencies rely on blockchain technologies, which are essentially networks made up of many computers working collaboratively to record and verify data. Blockchain technology has numerous potential applications beyond cryptocurrency that will likely soon make our lives more efficient and secure. Health care records, for example, will become more portable and accessible to patients. Energy management will improve through the use of smart contracts. And, due to data being distributed across a network rather than in a centralized location, our online information will be more secure. New, innovative uses of blockchain technology are being explored every day, and we should continue to encourage that. As this innovation continues, however, it is important that we keep energy efficiency and the reduction of carbon emissions at the forefront of the discussion."
- DeGette said about a primary concern from some industry critics: "Some cryptomining companies have based their facilities in communities with cleaner and less expensive renewable energy, such as hydroelectric, wind, and solar. Others, however, have revitalized or prolonged the use of otherwise-shuttered fossil fuel plants. For example, one company in upstate New York upgraded a previously closed coal-power plant to run on natural gas—a plant which now operates primarily for the purpose of the company's bitcoin mining activities. Another company restarted two coal-fired plants in Pennsylvania in order to generate power for its cryptomining operations."
- Full committee Chairman Frank Pallone, Jr., D-New Jersey, said in his opening statement: "Right now, some blockchains are consuming enormous amounts of energy. One estimate found that the energy required to process transactions on the Bitcoin network could power a home for more than 70 days. Last year, there were hundreds of thousands of transactions on this network. Just imagine the climate implications. Another estimate found the 2021 carbon emissions from Bitcoin and Ethereum cryptomining to be 78.8 million tons of carbon—roughly equivalent to the tailpipe emissions from more than 15.5 million gasoline powered cars on the road every year. As this Committee continues its work to combat the worsening climate crisis, it is critical that we examine these impacts."
- The Insurance Institute for Highway Safety (IIHS) and Consumer Reports, separate US non-profit organizations that provide independent assessments of vehicle safety, have both announced new methods of rating automated driver-assistance systems. Consumers use ratings from these organizations when making decisions on new-car purchases, while automakers use the feedback from the organizations to assist in vehicle improvements. The new ratings systems are an attempt to provide realistic information for consumers considering purchasing vehicles with automated driver-assistance equipment, but also to help with consumer education on what a driver should expect such systems to do. Neither organization has any regulatory authority, but each is respected by consumers and automakers. The efforts to provide feedback on the relative performances of the systems come ahead of the development of US government regulations on how the systems should operate. (IHS Markit AutoIntelligence's Stephanie Brinley)
- More automakers have indicated plans to advertise during this year's US National Football League (NFL) Super Bowl championship game, since Nissan announced in December 2021 that it would have a marketing presence at the 2022 game. Other automakers planning to advertise during the 2022 Super Bowl game, to be played on 13 February, include BMW, General Motors (GM), Kia, and Toyota. GM's advertising presence at the game will be for the third consecutive year, but Kia is coming back after sitting out the 2021 event. Kia is among the automakers most dedicated to advertising at the game in recent years, having participated for 13 years prior to sitting out in 2021. Automotive News reports a US spokesperson for BMW confirmed the automaker's return to advertising at the game this year, with no further details given. BMW has not participated in Super Bowl advertising since 2015. In addition, used-car platform Vroom is to advertise during the game. The annual NFL Super Bowl championship football game is consistently one of the most-watched single sporting events on TV in the world, although viewership has been declining. With the high cost of TV advertising time during the game - the estimated cost was USD5.5 million for a 30-second slot in 2021 - automakers most frequently use the annual event as part of brand-building efforts or for key new product launches. In 2021, only three automakers participated in advertising during the Super Bowl game. Therefore, with five automakers having committed to Super Bowl advertising in 2022, as of 20 January, the tally is definitely higher this year. (IHS Markit AutoIntelligence's Stephanie Brinley)
- Pony.ai revealed its sixth-generation autonomous vehicle (AV) system that is designed for mass production and is capable of Level 4 autonomous operations. According to a company statement, the system will be deployed in the Toyota Sienna Autono-MaaS (S-AM) vehicles, which will start road testing in China this year and will be used for a robotaxi service in 2023. The system features 23 sensors: four LiDARS on the top of the car, three LiDARs on the two sides and the rear end, four millimetre-wave angle radars on the top corners, one front-facing long-range millimetre-wave radar, and 11 cameras. Pony.ai is also introducing its next-generation mass-produced autonomous computing unit built on the NVIDIA DRIVE Orin SoC (system-on-chip). NVIDIA DRIVE Orin has more than 250 TOPS (trillion operations per second) of computing performance required for advanced artificial intelligence (AI) -powered computer vision processing. (IHS Markit Automotive Mobility's Surabhi Rajpal)
- It was not a particularly strong start to Canada's traditional
holiday shopping season, as around half of retailers reported
softer sales. A combination of consumer reluctance, widescale
floods, and perhaps a lack of Black Friday discounts led to the
sales miss. The most significant increase was the 4.9% m/m rise in
gasoline station sales, which was 1.4 percentage points lower in
real terms. (IHS Markit Economist Evan Andrade)
- Retail sales edged up 0.7% month on month (m/m) to $58.1 billion in November 2021, coming in far below the advance estimate's projected increase of 1.2% m/m.
- Retail volumes rose at a slower 0.2% m/m, as goods prices continued to increase. Retail trade looks to be a secondary contributor to November real GDP by industry growth.
- Fully capturing the effects of the Omicron variant and flooding in British Columbia, preliminary data suggests sales fell 2.1% m/m in December.
- Building material and gardening store sales advanced for a fourth consecutive month, but the sales level remains below what was seen earlier in 2021. Supermarkets offset softer sales from other food and beverage stores.
- The largest decline was in sports, book, and hobby stores, which saw an unusual jump in October sales. Vehicle and parts dealer sales fell back 0.3% m/m, as non-car dealerships gave up sales gains over the previous two months. With inflation reaching highs not seen in decades, retail volumes were just 0.1% above its November 2020 level.
- All major European equity markets closed lower; UK -1.2%, Spain -1.4%, France -1.8%, Italy -1.8%, and Germany -1.9%.
- 10yr European govt bonds closed higher; UK -6bps, Germany -4bps, France/Spain -3bps, and Italy -1bp.
- iTraxx-Europe closed +2bps/55bps and iTraxx-Xover +8bps/269bps, which +3bps and +11bps week-over-week, respectively.
- Brent crude closed -0.6%/$87.89 per barrel.
- The UK has started subsidizing onshore wind and solar
photovoltaic (PV) projects again after a six-year pause, a gift to
developers stuck in planning limbo. The country's government closed
bidding in an auction for subsidies for 12 GW of renewable energy
on 14 January, the largest ever round in terms of funding offered,
seeking to fund a wider array of technologies. (IHS Markit Net-Zero
Business Daily's Cristina Brooks)
- Winning developers will receive Contracts for Difference (CFDs) that subsidize renewable and low-carbon projects by guaranteeing income. The winning bids are set to be announced in the third quarter of 2022.
- Renewable energy association RenewableUK estimated the round could see £20 billion ($27 billion) of investment in renewables. Developers of more capacity than the amount tendered were likely to seek funds, meaning the auction would spark competitive bids.
- The £285 million a year in funding will go not only to proven technologies such as offshore and onshore wind, but also to emerging ones like floating offshore wind, remote island-based wind power, as well as tidal stream facilities that rely on ocean currents to generate power.
- Most of the funding, over two-thirds, will be poured into offshore wind, as the UK aims to remain at the top of capacity tables by installing 40 GW of capacity, with planned wind farms recently announced in Scotland.
- The latest auction reserves a much smaller, £10-million pot for onshore wind, solar, and hydropower, but it's the first time in six years the first two have seen any type of support. It is expected to subsidize 5 GW of new onshore wind and solar capacity.
- IHS Markit noted in its recent report on the auction that there was a pipeline of over 6 GW of unbuilt wind and solar projects in the UK with planning permission, meaning that the projects might apply for subsidies under the round.
- Planning data shows 3.2 GW of wind projects and 3.1 GW of PV projects fall into this category, according to the report.
- Of the larger (over 10 MW) solar farms, BP joint venture Lightsource BP is the largest single developer with 438 MW of solar farms under development. The pipeline also includes the biggest solar project of any that is yet built or permitted, the 350-MW Cleve Hill project near Canterbury in southeast England.
- Of the 10-MW-capacity and larger onshore wind projects, Scottish utility SSE's Viking Energy wind farm in the Shetland Islands is the largest project proposed, with a planned capacity of 443 MW.
- The final eurozone Harmonised Index of Consumer Prices (HICP)
data for December 2021 confirm the main points from the prior
'flash' release, as follows (IHS Markit Economist Ken
- Headline inflation edged up to 5.0%, a new record high and above the initial market consensus expectation (4.7%).
- Energy inflation moderated for the first time in seven months, although only marginally and energy still contributed half of the overall inflation rate.
- Unprocessed food inflation jumped by almost three percentage points to 4.7%, pushing the contribution of food to overall inflation up to 0.7 percentage point, the highest since April 2020.
- HICP inflation excluding energy, food, alcohol, and tobacco prices was stable at 2.6%, matching the prior month's record high.
- Non-energy industrial goods (NEIG) inflation jumped to a new record high of 2.9%.
- Services inflation partly reversed November 2021's rise, slipping back to 2.4% in December, although it remained well above its pre-pandemic rate (1.6%).
- Following Eurostat's final HICP release each month, IHS Markit updates various alternative inflation metrics for the Eurozone, which provide a broader perspective of underlying price trends.
- Our super core inflation rate includes only the HICP items that are sensitive to changes in the eurozone's output gap. It rose again in December to 2.6%, the seventh increase in succession and the highest inflation rate since September 2008.
- Luminar has announced that it has partnered with Mercedes-Benz for deploying LiDAR technology; Mercedes intends to use Luminar's Iris LiDAR technology, being prepared for series production, according to a Luminar statement. Luminar founder and CEO Austin Russell said, "This partnership is a landmark moment in the industry, demonstrating how substantially increased safety and autonomous driving functions on consumer vehicles are going from sci-fi to mainstream. Mercedes-Benz has always been a technological leader and first mover for the industry, with the brand synonymous with automotive innovation, safety, luxury, and quality." Markus Schäfer, Member of the Board of Management of Daimler AG and Mercedes-Benz AG, Chief Technology Officer responsible for Development and Procurement, said, "Luminar is the perfect addition to our existing roster of first-class cooperations with leading and cutting-edge tech companies. Mercedes-Benz's achievement of SAE Level 3 already marked a huge milestone for automated driving and I am absolutely convinced that partnerships will increase our level of ambition for what is possible in the future. Cooperation is an essential part of Mercedes-Benz's strategy. Therefore, I am highly delighted to have Austin Russell and Luminar on board for our journey." According to an Automotive News report, Mercedes-Benz receives 1.5 million shares of Luminar stock in the partnership agreement as well. The Iris system is being developed to be able to spot objects at a maximum of 600 meters and reach 250 meters at 10% reflectivity, which helps with detecting objects in the dark. (IHS Markit AutoIntelligence's Stephanie Brinley)
- The French Anti-Trust and Fraud Office (DGCCRF) has conducted a
survey between 2019-20, detecting that 23% of analyzed samples (26
from 113) did not fulfil France's vanilla regulations. Inspectors
visited 450 control actions. DGCCRF analyzed the composition and
labelling of vanilla products (pods, extracts and aromas) and
vanilla flavored food products to detect possible fraud or
misleading commercial practices. The French organization decided to
start the research after receiving claims about the falling quality
in the Madagascan vanilla combined with booming prices.
Investigators researched all the domestic processors, importers,
distributors, retailers and food manufacturers, taking samples in
177 installations. Some inspections were developed outside France.
DGCCRF detected the following irregular practices, listed below
(IHS Markit Food and Agricultural Commodities'
- Several pods sold to consumers were waste from the extraction of aromatic substances from vanilla.
- White powder labelled 'vanilla' was found to be mostly sugar flavored with non-vanilla vanillin.
- A sample of vanilla extract labelled as 'vanilla concentrate' was vanilla-flavored extract mixed with water.
- Vanilla extracts were misrepresented as 'natural vanilla extracts' when the term 'extract' is used by default for natural preparations.
- Half of the natural vanilla flavors sampled were non-compliant. These flavors had an insufficient vanillin content or a proportion of vanillin resulting from biotechnological processes that could be up to more than 90% (proportion considered incompatible with the denomination 'natural vanilla flavor'). Some of the flavors contained aromatic caramel, which was wrongly presented as a support for the flavors when in practice it fulfils a coloring role.
- 13 flavored foodstuffs out of 38 sampled were non-compliant. The three samples of vanilla sugar taken contained very little vanillin, or none at all.
- The Turkish central bank put its rate cut cycle on pause in
January, holding the one-week repo rate at 14%. Although inflation
remains far above the policy rate, at least the ending, for now, of
the rate cuts adds some added support for the lira. Additionally,
state intervention, the deposit scheme, soft capital controls, and
new foreign support from the UAE have all contributed to the
stabilization of the currency. (IHS Markit Economist Andrew
- The Central Bank of the Republic of Turkey (TCMB) held its main policy interest rate, the one-week repo rate, steady at 14.0% at its regularly scheduled, 20 January, monthly meeting of the Monetary Policy Committee. The Bank paused what had previously been a four-month rate-cutting cycle that brought the rate down by a combined total of 500 basis points.
- Expectations were high that the rate would indeed be held unchanged at the January meeting, as previously, TCMB Governor Şahap Kavcıoğlu had indicated that following the December rate cut, there was no further room for action. In the December press release, the Monetary Policy Committee had also suggested that it would "monitor" the effects of its previous monetary policy decisions throughout the first quarter of 2022.
- In the January press release, the Committee removed a definite time period, but did state that it would continue to "monitor" the impact of monetary policy decisions. This slight shift does raise risks somewhat that the rate-cutting cycle could begin again sooner than anticipated.
- In immediate post-trading activity, the lira traded slightly stronger against the US dollar. At the close of 20 January, the exchange rate was TRY13.46/USD1.00, 2.3% stronger against the dollar than its 2022 low-point on 7 January and only 0.8% weaker than it had been at end-2021.
- The pause in the rate-cutting cycle - assuming it lasts for at least a few more months - will add support to the lira moving forward. The lira remains extremely vulnerable to sharp losses, but a series of events since mid-December has at least stemmed the collapse of the currency that had occurred following the November rate cut.
- Opibus, a Swedish-Kenyan technology company engaged in the development, design, and manufacture of electric vehicles (EVs) for the African continent, has announced the introduction of an electric bus in Kenya, reports CleanTechnica. The electric bus can be mass produced for the pan-African market by the end of 2023. According to the source, the bus has been designed in Kenya using in-house local engineering while utilizing local manufacturing partners. The new bus, powered by a 121-kWh lithium iron phosphate battery (LiFePO4), has a driving range of 120 kilometers (km) and produces a power output of 225 kW and 706 Nm of peak torque. The top speed of the bus is 85 km per hour and it comes with features such as regenerative braking, electric power steering, IP67 waterproof-rated powertrain, and liquid cooled motor. Dennis Wakaba, Opibus project coordinator for public transport, said, "This first electric bus is set to be launched commercially mid this year. Following this, the platform will be tested at scale in commercial deployment of 10 buses during the second half of 2022. In doing so, we ensure that we gather valuable feedback to continue the development of the product for an optimized market fit. It feels great to be the first movers in this very exciting space." Kenya is in the nascent stages of shifting to electric mobility. The country plans for at least 5% of vehicles registered in the country to be EVs by 2025. Other African countries, such as Ethiopia, Nigeria, Algeria, and Kenya, are also taking steps to move to EVs. In 2019, Rwanda was the first African nation to partner with Volkswagen and Siemens to introduce charging stations as well as EVs in the country. The Kenyan government reduced the excise duty for electric cars to 10% from 20% in the 2019-20 budget to promote EV sales. In March 2021, Estonian-based ride-hailing firm Bolt announced the launch of Bolt Green in Kenya, a new category that offers rides in hybrid and EVs. (IHS Markit AutoIntelligence's Tarun Thakur)
- Most major APAC equity indices closed lower except Hong Kong +0.1%; India -0.7%, Japan -0.9%, Mainland China -0.9%, South Korea -1.0%, and Australia -2.3%.
- Mainland Chinese electric vehicle (EV)-maker Human Horizons is considering a plan to list its shares in Hong Kong SAR. According to a Reuters report, the initial public offering (IPO), which could happen this year, would help the startup EV company to raise up to USD500 million. Human Horizons is said to be working with UBS and Morgan Stanley for a potential listing, while details such as the fundraising amount and timeline could change. Human Horizons said on 19 January that the production of its first model, the HiPhi X, has reached 5,000 units. The HiPhi X is a battery electric vehicle (BEV) with a starting price of CNY560,000 (USD88,300) and the top-of-the-line variant is priced at CNY800,000. Despite the hefty price tags, Human Horizons said demand for the HiPhi X has been strong and that last year, it sold more than 4,200 units of the HiPhi X in China. To further expand its luxury EV product line, Human Horizons is looking to begin production of its second model, the HiPhi Z, this year. The planned IPO in Hong Kong will enable the startup to raise funds to support the development of the HiPhi Z and upcoming new models. It will be interesting to see the capital market's response to the listing of a Chinese EV startup that specializes in the production of luxury EVs. In November 2021, Human Horizons had already secured a credit line of CNY5 billion from China's state-run bank, Bank of Communications. (IHS Markit AutoIntelligence's Abby Chun Tu)
- Dongfeng Motor Group (Dongfeng) has started building a new production facility for off-road electric vehicles (EVs) in Wuhan, reports electrive. The new plant is scheduled to start production in 2023, with planned capacity for 100,000 vehicles. Local media reports suggest that Dongfeng intends to enter the off-road utility vehicle segment with a freshly developed product line consisting of both battery electric vehicles and hybrid vehicles. New products planned will be based on a new off-road platform developed by Dongfeng called MORV. In the new energy vehicle (NEV) market, Dongfeng has already launched the Voyah brand, which targets mass-market EV buyers. Monthly sales of its first model, the Voyah Free, reached over 3,000 in December 2021. Dongfeng also said that its Aeolus product line will have a fully electrified product line by 2025. Dongfeng has already introduced several EVs to the Aeolus product line, including the E60 and E70. However, both models are designed primarily for the ride-hailing market, and do not really appeal to private vehicle buyers. (IHS Markit AutoIntelligence's Abby Chun Tu)
- Japan's CPI rose by 0.1% month on month (m/m) on a seasonally
adjusted basis and by 0.8% year on year (y/y) in December 2021. The
y/y changes for the full-year 2021 ended up in negative territory
for the first time in five years, moving down by 0.2%. The CPI
excluding fresh food (the core CPI) also rose by 0.1% m/m but y/y
growth remained at 0.5% y/y. The CPI excluding food and energy (the
core-core CPI) held at November's level, but deflation worsened to
a 0.7% y/y drop. (IHS Markit Economist Harumi
- Faster increases in prices of fresh food (up 8.0% y/y) and energy (up 16.4% y/y) were major drivers for the y/y change of the CPI. However, the faster decline in the core-core CPI reflected softer increases in prices of household durables goods and consumables in line with easing demand related to stay at home/work from home lifestyle. Increases in prices of culture and recreation services including accommodation fees were also weakened. A decline in mobile phone charges remains the major reason behind the weakness of the core-core CPI.
- Japan's CPI is likely to increase gradually, reflecting a faster increase in energy prices, particularly after the drop-out of the impact of cuts in mobile phone charges by major carriers in April 2021. A number of companies have announced increases in retail prices of consumer goods due to higher input costs. However, such increases are likely to remain modest due to concerns about declines in sales volumes because of households' weaker purchasing power (due to high costs of food and energy, associated with weak wage increases). The reintroduction of travel subsidies, once the rapid spread of the Omicron variant of the COVID-19 virus is contained, will be a factor to contain CPI inflation.
- Japanese multinational conglomerate Sony Group is planning to add technology partners to help it transform electric vehicles (EVs) into entertainment spaces, reports Reuters. According to the report, the move is driven by the expectation that autonomous vehicles and 5G connectivity will reshape the automotive industry by turning cars into mobile platforms for information and entertainment and shared mobility services. Sony's senior general manager, Izumi Kawanishi, said that the future transformation of cars will in some ways be similar to how information technology turned phones into smartphones. Sony has been working in the direction of autonomous vehicles (AVs) since at least 2015. As vehicles incorporate more technology, the door opens for non-traditional suppliers such as Sony. (IHS Markit AutoIntelligence's Nitin Budhiraja)
- The South Korean government has decided to downsize subsidies on electric vehicle (EV) purchases in 2022, reports the Maeil Business Newspaper. Only EVs priced at KRW55 million (USD46,172.8) or less will be eligible for 100% of the central government subsidy, down from the current ceiling of KRW60 million or less. This implies that EVs with a price tag between KRW55 million and KRW60 million will only receive half of what they received last year. For example, buyers of the Genesis GV60, whose base price begins at KRW59.9 million, will receive a KRW3.5-million subsidy rather than last year's KRW8-million subsidy. EVs that cost more than KRW85 million will not be eligible for any subsidies this year. Under the new policy, the maximum subsidy for passenger EVs will be reduced from KRW8 million to KRW7 million, and that for small e-trucks will reduced from KRW16 million to KRW14 million. Furthermore, twice the number of EV buyers, or 207,500 will be entitled to get subsidies of up to KRW7 million in South Korea this year - 164,500 for passenger models and 41,000 for cargo delivery vehicles. According to the South Korean Ministry of Environment official, industry feedback is being collected but if there are no issues, the new policy will be implemented before February, with consumers receiving actual subsidies beginning in March. The latest development will have a significant impact on EV sales because EV prices are often higher than those of internal combustion engine vehicles in the same class. (IHS Markit AutoIntelligence's Jamal Amir)
- South Korea's Hyundai-Cosmo Petrochemical (HCP) is trimming its
paraxylene (PX) production rate further, to 60% of total capacity
amid poor margins, a market source said on Friday. The company was
running its PX units at an overall operating rate of 70% before
this reduction, said the source. (IHS Markit Chemical Market
Advisory Service's Chuan Ong)
- This latest cut represents another 10% reduction in its total production capacity.
- "HCP was running its PX lines at a 70% rate, which has unfortunately been their baseline," the source added.
- Its PX production has been challenged due to high feedstock costs, particularly in isomer-grade mixed xylenes (MX), the source said.
- The company produces PX through three separate lines.
- According to HCP, its #1 BTX unit uses naphtha to produce PX via a reformate splitter. OPIS data indicates that this unit can produce 420,000 mt/year of PX.
- The #2 BTX unit is HCP's biggest PX line with an 800,000 mt/year capacity, using isomer-MX as a feedstock.
- The company also runs a new unit which has a relatively smaller 160,000 mt/year capacity.
- "The MX-based unit has been running minimally for more than two years due to its terrible (financial) performance," said a source close to HCP.
- Convergence Energy Services Limited (CESL) has floated a tender for 5,580 electric buses (5,450 single decker and 130 double decker) to be deployed in five major Indian cities - Delhi, Kolkata, Surat, Bengaluru, and Hyderabad, reports Moneycontrol. The value of the tender is said to be around INR55 billion (USD738 million) and the first batch of buses is expected to be on the roads by July, according to the report. Called the Grand Challenge Tender, it aims to remove procurement and deployment bottlenecks for different state transport undertakings. The tender is in line with the country's Atmanirbhar Bharat initiative and commitments made towards making India a net zero nation by 2050. The states ordering the buses as part of the Grand Challenge will benefit not just from better air quality but also lower prices for the buses thanks to aggregate demand; high-quality benchmarked technology; and access to Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) incentives, state incentives, and domestic and international sources of finances. (IHS Markit AutoIntelligence's Nitin Budhiraja)
- The State Bank of Vietnam (SBV) issued directive number
01/CT-NHNN on 13 January, but the SBV only published the English
press release on 18 January. According to the press release, the
SBV's governor Nguyen Thi Hong expects credit growth for the
country to be 14% in 2022. In addition to the expected credit
growth rate, the governor also stated specific policies: promoting
healthy banks, maintaining the non-performing loan (NPL) ratio at
below 3%, implementing solutions to restructure weak banks,
promoting digital transformation, and improving banks' legal
frameworks. (IHS Markit Banking Risk's Angus
- Vietnamese authorities normally set credit growth target for the whole sector at the start of the year, and specific targets for banks, depending on how far they have achieved Basel standards and also their general health. In this case, since the SBV expects the credit growth rate to be 14% in 2022, we take this to mean the target for the whole sector will be 14%.
- Owing to the planned nature of the economy and bank loan disbursements, it is highly likely, that the sector will achieve at least this rate of loan growth, as it has in the past few years. Last year had seen banks overextending loans in the beginning of the year, which had pushed them to needing to ask for a higher loan target in the latter half of 2021.
- As per IHS Markit's previous assessments, and as stated above, the SBV is likely to allow stronger banks to lend more while limiting the credit growth of weaker banks because they likely have poorer lending standards.
- Regarding the NPL ratio, maintaining the ratio at less than 3% bears little meaning to us; because of the poor loan classification and the confusing policy of allowing banks to retain interests in bad loans sold to the Vietnam Asset Management Company, NPL ratios are under-reported in the country.
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
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