Energy long-term power forecast 2050

Gas industry representatives say sector must pursue integrated planning for efficient energy transition This means focus must shift from competing against power to how to balance renewables and hard-to-abate sectors European Commission must focus on necessary gas infrastructure investments in next mandate BRUSSELS (ICIS)–The gas industry needs better integrated planning with the electricity sector to achieve the energy transition and ensure efficient and cost-effective infrastructure investments, stakeholders said on 18 April. Discussing the outlook for gas in 2040 and beyond, panellists at the Eurogas annual conference in Brussels discussed the steps needed in the EU’s next political cycle to support a shift to renewable gases. Tatiana Marquez Uriarte, a member of European energy commissioner Kadri Simson’s cabinet, said the conversation had shifted from how to use gas as a transition fuel to how to use renewable fuels to balance electrification. The next European Commission will need to focus on adjusting infrastructure to use biomethane and hydrogen, she said, and handle the decentralised production of these gases. The viewpoint is similar to ongoing discussions in the power sector, where the urgency of upgrading networks, led to the release of the Commission’s grid action plan in November 2023. There is particular focus on distribution grids for the volumes of renewable energy they will carry. Marquez Uriarte said renewable gases such as biomethane would be locally produced and injected into the distribution grids, which meant upgrades and investments were required. “It is clear that we need to decarbonise big time and […] we need to have an integrated planning in order to make sure that we are not building parallel infrastructure,” said Walburga Hemetsberger, CEO of industry group SolarPower Europe. Egbert Laege, CEO of Germany’s SEFE, told the conference that the company was trying to break the chicken-and-egg question around infrastructure by starting to invest the billions of euros required. This means the investment would be done this decade and the infrastructure ready when biogas and hydrogen will be ready for transport. Both Hemetsberger and Laege called for policymakers and industry to take decisions on technologies in order to bring clarity for investors. “We have very much been thinking of electricity and gas systems as separate, and we urgently need to stop that, because I think it is very clear the green transformation will be predominantly driven by green electrons,” Laege said. This would allow the gas industry to learn how to support the transition, clarify where to invest and align infrastructure plans.

22-Apr-2024

CHARLOTTE, North Carolina (ICIS)–The US remains an outlier among advanced nations and continues to power forward. Inflation has moderated and central banks are eyeing rate cuts later this year. Global manufacturing has stabilized and is recovering in most major economies. Output is strongest in emerging economies. There are signs that China’s recovery has re-engaged and that Europe’s economy may be stabilizing, with recovery later this year. The US economy is outperforming most other developed countries, keeping the dollar strong. Based on a string of hotter-than-expected readings on inflation, it appears that interest rates will be higher for longer. The headline March Consumer Price Index (CPI) was up 3.5% year on year and core CPI (excluding food and energy) was up 3.8% year on year. Progress on disinflation appears to be stabilizing. Economists expect inflation to average 3.1% this year, down from 4.1% in 2023 and 8.0% in 2022. This is above the US Federal Reserve’s target of 2%. Inflation is forecast to soften to 2.3% in 2025. As a result, interest rate futures are now moving towards fewer cuts. The case is even being made for no cuts. US MANUFACTURING FINALLY IN EXPANSIONTurning to the production side of the economy, the March ISM US Manufacturing PMI came in at 50.3, up 2.5 points from February and above expectations. This expansionary reading ends 16 months of contraction in US manufacturing. Production moved back into expansion, as did new orders. Order backlogs contracted at the same pace. Inventories contracted at a slower pace, which could provide a floor for output. The long and deep destocking cycle could be ending, with the possibility for restocking later this year. Nine of the 18 industries expanded and demand remains in the initial stages of recovery, with obvious signs of improving conditions. The ISM US Services PMI fell 1.2 points to 51.4, a reading indicating slower expansion. The Manufacturing PMI for Canada remained in contraction during March while that for Mexico expanded for the sixth month. Brazil’s manufacturing PMI expanded for a third month. Eurozone manufacturing has been in contraction for 21 months. However, the region appears to be skirting recession. China’s manufacturing PMI was above breakeven levels for the fifth month. Other Asian PMIs were mixed. AUTOMOTIVE AND HOUSING HOLDING UPTurning to the demand side of the economy, light vehicle sales eased in March, and although inventories have moved up, they still remain low. Economists see light vehicle sales of 15.8 million this year, before improving to 16.3 million in 2025. The latest cyclical peak was 17.2 million in 2018. Pent-up demand continues to provide support for this market. Homebuilder confidence is guardedly optimistic. Housing activity peaked in spring 2022 before sharply falling by July 2022. From then and into mid-2023, housing reports were mixed. ICIS expects that housing starts will average 1.45 million in 2024 and 1.50 million in 2025. We are above the consensus among economists. Demographic factors are supporting housing activity during this cycle. There is significant pent-up demand for housing and a shortage of inventory. But mortgage interest rates have moved back up in recent weeks and will hinder affordability and, thus, demand. US RETAIL SALES, EMPLOYMENT STRONGNominal retail sales made another solid gain in March. Sales growth was marked across most segments. Sales at food services and drinking establishments also advanced. Spending for services is holding up, but the overall pace may be slowing. Job creation continues at a solid pace, and the unemployment rate is still at low levels. There are 1.4 vacancies per unemployed worker, off from a year ago but at a historically elevated level. This is still fostering wage pressures in services. Incomes are still holding up for consumers. Our ICIS leading barometer of the US business cycle has been providing signals that the “rolling recession” scenario in manufacturing and transportation may be ending. The services sector continues to expand, albeit at a slower pace. Real GDP rose 5.8% in 2021 and then slowed to a 2.5% gain in 2022. The much-anticipated recession failed to emerge and in 2023, the economy expanded by 2.5% again. US economic growth is slowing from the rapid pace in the third and fourth quarters, but those gains will aid 2024 performance of an expected  2.4% increase. The slowdown in quarterly economic activity suggests that in 2025, the economy should rise by 1.8% over average 2024 levels.

19-Apr-2024

Japanese power demand falls below last year’s weak base LNG storage demand persists as restocking falters Coal-fired output to decline by 11% on 2023 SINGAPORE (ICIS)–Despite weak power demand and high nuclear availability, Japanese LNG-to-power demand looks stable in April, with displacement primarily hitting coal-fired output. LNG storage also remains below average, increasing the likelihood of higher imports in the second quarter compared to the same period last year. Power demand: A pattern of weak power demand has returned, with the first two weeks of April showing consumption close to flat on year, but down 7% from the 2018-2022 average. Data from the latest week is more bearish, with demand falling below last year for the first time since February. Storage: LNG storage for power generation started to recover in early April but remained flat on week by 14 April, with stocks at 1.61m tonnes. With weak power demand, the storage rebuild is likely to be a key driver of year-on-year import growth in the second quarter. Inventory is expected to rebound by about 0.8m tonnes by mid July. Nuclear: Kansai Electric’s 870MW Takahama 4 is returning from regular maintenance on 26 April, after a three-week extension caused by damage to its steam generator. Nuclear generation is forecast to remain higher year on year, by about 20% in May and 12% in June. But despite potential restarts of idled reactors in Chugoku and Tohoku in the third quarter, nuclear output is likely to fall close to flat in July and down on 2023 in August. Coal: Coal plant availability is set to dip 8% year on year in April, with coal-fired output falling further because of weak utilisation, currently hovering around 60% of available capacity. As such, coal-fired generation could decline by about 11% year on year in April, counteracting the impact of bearish drivers on LNG. A restart date is currently unavailable for the following coal plants: Hokuriku Electric’s 500MW Nanao-Ota 1 and 700MW Nanao-Ota 2 – offline since the earthquake on 1 January – JERA’s 1070MW Taketoyo 5 – after a fire incident on 31 January, and JERA’s 700MW Hekinan 2, offline since 29 March. For more information on ICIS LNG supply & demand forecasts contact joachim.moxon@icis.com

19-Apr-2024

SINGAPORE (ICIS)–Oil prices rose on Thursday, reversing sharp losses in the previous session, after the US re-instated oil sanctions on Venezuela, and amid discussions by the EU about implementing new restrictions on Iran. EU leaders mull fresh sanctions against Iran at Brussels summit Market uncertainty tied to potential Israeli response to Iran Poor economic data from China cap crude gains Product ($/barrel) Latest (at 04:27 GMT) Previous Change Brent June 87.57 87.29 0.28 WTI May 82.87 82.69 0.18 Both crude benchmarks fell overnight by nearly $3/barrel on demand concerns, with the US showing a higher-than-expected build in crude inventories. The US on 17 April announced it would not renew a license expiring on Thursday which had previously eased sanctions on Venezuelan oil, opting to re-instate punitive measures due to President Nicolas Maduro's failure to fulfill his election commitments. The US’ six-month sanctions relief for Venezuela took effect on 18 October 2023. Meanwhile, EU leaders are in Brussels, Belgium for a two-day summit (17-18 April) to discuss intensifying sanctions against Iran following Tehran's missile and drone attack on Israel on 13 April, an incident that prompted global powers to attempt averting a broader Middle Eastern conflict. "We have to adjust, to expand them [the sanctions] on Iran," French President Emmanuel Macron said in Brussels ahead of the summit. "We are in favor of sanctions that can also target all those who help manufacture drones and missiles that were used in the attacks last Saturday and Sunday [13-14 April]." Israel has indicated its intention to retaliate, although it has not specified the means of response. Iran and Venezuela, which are among the founding members of oil cartel OPEC, have substantial oil reserves, with Iran having the world’s fourth-largest proven oil reserves and Venezuela holding the largest. Despite their influence on global oil prices, international sanctions have curtailed their production and export capabilities and market impact. "The lack of direction in the market reflects the significant uncertainty about Israel's possible response to Iran’s attack over the weekend," Dutch banking and financial information services provider ING said in a note. "However, for oil, sanctions are already in place, the issue is that they have not been strictly enforced for the last couple of years. And the big question is whether they will be enforced more rigorously now," it said. Keeping a lid on prices was poor March economic data from China, the world’s second-biggest economy. Chinese exports in March fell by 7.5% year on year, the biggest fall since August last year. March retail sales and industrial output also missed expectations, heightening concerns of muted demand from the world’s largest crude importer. The US, on the other hand, showed improved in economic activity from late February to early April, with firms indicating expectations for steady inflation pressures, based on a Federal Reserve survey released on 17 April. The Federal Reserve is currently not considering interest rate cuts in the near term due to a combination of resilient economic activity and persistently high inflation. In March, US employers added more than 300,000 jobs – the most in nearly a year – and retail sales exceeded expectations after expanding by 0.7% month on month. Focus article by Nurluqman Suratman An oil tanker at the dock of the El Palito oil refinery at Puerto Cabello, Carabobo, Venezuela – 13 March 2022. (Juan Carlos Hernandez/ZUMA Press Wire/Shutterstock)

18-Apr-2024

SAO PAULO (ICIS)–Argentina’s latest cut to interest rates had more to do with shoring up the central bank’s balance sheet, possible thanks to currency controls implemented by the prior Administration, than the actual control of price rises, according to the director at Buenos Aires-based Fundacion Capital. Carlos Perez said the so-called Cepo currency controls limiting the ability to buy or sell any foreign currency may be causing losses for savers getting returns on their deposits below the rate of inflation, but they are helping the central bank to kick off a much needed shoring up of its balance sheet. Effectively, savers who have their pesos in the Argentinian banking system are paying with their losses certain stabilization for the central bank's balance sheet. Stability is something the Banco Central de la Republica Argentina (BCRA) could do much with. First introduced by Cristina Fernandez de Kirchner’s cabinet in 2011, the restrictions became informally known as Cepo cambiario (Spanish for 'exchange clamp'). They were lifted by the center-right cabinet of Mauricio Macri in 2015 but implemented again by his successor Alberto Fernandez in 2020. Argentina’s new President Javier Milei blasted the Cepo controls during the electoral campaign and has promised to lift them in due course but, for now, some old regime tools are coming in handy to shore up the new regime. Last week, the BCRA lowered the main interest rate benchmark from 80% to 70%. One day after that, the country’s statistics body Indec said the annual rate of inflation had jumped to nearly 290% in March, although it noted a fourth consecutive slowdown in monthly price increases. See bottom graphs for monthly and annual inflation rates. Lowering rates amid rocketing inflation: just the opposite of what is meant to be done, as the global inflation crisis has just showed us. MAKING SENSE OF IRRATIONALSo, while trying to get Argentina back into the realm of "normal economic policy", according to Perez, some irrational measures are still being used. But, at least, the central bank is quickly consolidating its position and starting to resemble a normal central bank, the economist went on, and not just the printer of money, or lender of last resort, it had become under the prior Administration, who used it to finance its recurrent spending, fueling inflation along the way. Milei’s two more controversial proposals – dismantle the central bank and dollarize the economy – are now forgotten: Argentina was far from having the necessary dollars to dollarize, and the central bank, like in any economy, has in these four months proved a useful tool to start stabilizing runaway inflation. Perez said the current interest rates – nominally, monthly at around 5% – are well detached from the monthly rate of inflation, now at around 11%. Effectively, savers’ deposits are losing 6% of their value. But this sacrifice, added the economist, had to be seen considering the wider stabilization of the system. “In Argentina right now we have economic variables which are running at speed, like inflation; others which are walking, such as the interest rates; and others which are crawling, such as the peso's official exchange rate,” said Perez. “In this situation, Cepo controls take center stage. By law, most deposit holders have almost no way to dollarize their savings, for instance. Their money is imprisoned, so to speak. Thus, the central bank is effectively cleaning up its balance sheet by liquidizing little by little the liabilities it holds.” Financial institutions and banks will place their deposit holders’ savings within the central bank, like in any other economy; the Argentinian specific feature lies in that the bank itself is charging savers by keeping their returns well below inflation. Milei has hinted at lifting the Cepo controls by mid-2024 – but it remains to be seen whether more sacrifices from suffering savers will be required. It is worth noting that a lot of Argentinian money left Argentina years ago. Some estimates say Argentinians hold around $250 billion in assets abroad. “Therefore, the logic behind a real negative interest rates can only be found in the Cepo system. If the economy was free of those restrictions, we would be probably facing a massive capital flight, now contained by the law,” said Perez. “Will the government lift the Cepo system? It will be facing a dilemma. While Cepo is in place, a progressive clean-up of the central bank’s balance sheet can take place. Without restrictions, returns on deposits will have to match or surpass the inflation rate, if a large-scale capital flight is to be avoided.” INFLATION DOWNSo, asking savers to make sacrifices is one leg of the plan to stabilize the central bank’s balance sheet and, with it, the economy. To stabilize runaway inflation, a second leg has been stopping all issuance of bonds by the central bank to finance recurrent public spending, a vice the prior Administration became too addicted to. Printing money became virtually the sole financing method for the Administration as finding investors abroad willing to buy Argentinian debt became a rarity and the IMF’s bailout would only partly cover the spending needed in what was at the time one of the most subsidized economies. A third leg has come from the fiscal adjustment implemented by the government. Milei’s “chainsaw” which propelled him to fame when he was just a libertarian, media-prone economist, has started making its early rounds: subsidies have been severely curtailed and recurrent spending is on the cards with a plan to implement large-scale redundancies among civil servants. ECONOMIC RULEBOOK, AT LAST The recession is hitting hard the real economy, said Perez, but voters who overwhelmingly backed Milei seem, at least for the moment, be putting up with the pain. This time, Argentinian world-famous, violent-at-times, media-grabbing street protests have so far been absent. Global investors and the IMF alike also like the tune of what is being done. But no-one hides that the recession is hitting consumers hard, and poverty levels have jumped over 50%, according to official figures. With the hit to consumers' purchasing power comes the hit to the petrochemicals-intensive manufacturing sectors, which official figures confirm are registering hefty falls in output. Petrochemicals sources in Argentina have said to ICIS this week they are registering falls in demand between 30% and 50%; for now, stocks are still catering for depressed demand. Perez, ordinary voters struggling to make ends, and global investors alike are for now giving a vote of confidence to a cabinet which is playing by the book set out in the electoral campaign. Milei never shied away from the fact it had to be a "brutal" adjustment if past errors were to be mended. Perez said that, at least, the measures being implemented are all within the realm of ordinary economic policy, a terrain Argentina had left years ago, he added. “The first four months have been quite positive. From one day to the other, Argentina went from an irrational economic policy to a reasonable one,” he said. “The fiscal adjustment has been severe, relative prices are starting to adjust positively, the central bank is shoring up its reserves – albeit they are still in the red; the relationship with the IMF is good; and the cabinet is working hard to shore up its economic policy with political support in Parliament, where Milei’s party is in a minority.” Argentina’s fertilizers- and export-intensive agricultural sector should also register a positive harvest in the second quarter, which will continue propping up much-needed dollars reserves within the central bank. “Right now, the positive financial feelings contrast with how hard the recession is hitting the real economy. At Fundacion Capital we expect GDP to contract by around 6% in Q1, year on year. In Q2, output will also fall, but the hit will be lessened by agriculture,” said Perez. “The first half of 2024 will be very hard for ordinary Argentinians. And let’s not forget, the challenges for the government remain daunting: the fiscal adjustment still lacks sustainability, i.e. political support. And despite the improvements, the central bank’s reserves are still negative: a genuine, sustainable flow of dollars into Argentina is yet to take place.” ARGENTINA MONTHLY INFLATION RATE In % change Source: Indec ARGENTINA ANNUAL INFLATION RATEIn % change Source: Indec Front page picture source: Shutterstock Interview article by Jonathan Lopez

16-Apr-2024

LONDON (ICIS)–Chemicals production growth in France could be limited to 1% in 2024 as many companies prepare to implement structural cost saving measures and limit investments for growth, the trade group France Chimie said on Tuesday. The industry in France is weakened by an “unprecedented crisis” as is the sector across Europe, it suggested, with basic chemicals, including petrochemicals and polymers, under intense pressure. The basic chemicals sector in France was dealt a blow last week with the ExxonMobil Chemical France decision to close its steam cracker and polymer units at its Gravenchon site in Port-Jerome-sur-Seine, in Normandy. The closures – following €500m of losses from the site since 2018 – will result in the loss of 677 jobs, ExxonMobil France said on 11 April. Chemicals production in France fell by 1% last year compared with a drop of 8% in Europe, France Chimie said. The number excludes pharmaceuticals and fine chemicals. France is a leader in industrial exports, fourth in terms of patent filings in Europe and has a growing workforce, the trade group added. The headline figure, however, does not reflect the deeper contraction in parts of the sector. Perfumes and cosmetics chemicals have grown 15% since 2021 while specialty chemicals output has contracted 4% compared to a -13% in Germany, France Chimie noted. Basic chemicals in France, on the other hand, are contracting at a similar rate to their counterparts in the rest of Europe. “These activities are suffering from a loss of competitiveness aggravated by the pressure from international competition that is not always subject to the same regulatory requirements, “ it said in a statement translated from French. France Chimie expects growth investments in chemicals in France to fall by 40% this year in favor of what it calls regulatory and maintenance investments growth of around 20%. The sector needs an ambitious EU industrial policy that is in line with the Green Deal objectives to restore industrial sovereignty and preserve high quality employment, it said. In France, France Chimie is pressing for the next regulation of nuclear power to preserve the attractiveness of competitive electricity prices. It wants to see the France 2030 plan allowing competition on equal terms with the Inflation Reduction Act (IRA) support in the US. It calls for the use of trade defence mechanisms to restore fair international competition; simplified and stabilized regulations adapted to merging sectors of the economy; and support for research competitiveness, particularly through France’s Research Tax Credit. "The chemical industry is waiting for strong measures from the European and French public authorities to restore its development momentum,” France Chimie president Frederic Gauchet said. “The objective is not only to contribute to the development of European sectors (battery, hydrogen, health, bio-based products, recycling, etc), but also to support our existing sites so that chemistry continues to contribute fully to a sovereign and decarbonized economy and preserves quality employment in France.” Focus article by Nigel Davis. Thumbnail photo: A plant operated by France's TotalEnergies in Antwerp, Belgium (Source: TotalEnergies)

16-Apr-2024

South Korea LNG storage levels healthy Official data from January ICIS estimates for March SINGAPORE (ICIS)–South Korea LNG inventories were estimated at 5.1m tonnes in March 2024, according to ICIS data, a healthy level that has benefited from weak LNG consumption, rising power generation from alternative fuels and renewables and a mild winter. The estimates also align with the KESIS monthly energy statistics released this week that showed January at 4.5m tonnes, 16% higher than the same month last year, and 50% above the five-years-average. For the March estimate by ICIS, 19% of LNG imports were stored in the tank for winter gas supply security purposes. In November 2023, state-run KOGAS and private LNG importers vowed to actively cooperate and ensure no disruption of LNG-to-power generation until the end of winter in March 2024.

16-Apr-2024

Additional reporting by Ed Martin LONDON (ICIS)–Deputy European gas editor Ed Martin and deputy Gas in Focus editor Marta Del Buono discuss European gas highlights from week 15 Snowpack surplus may curb Italian power and gas prices Italy increases TAG gas imports in March amid low Austrian VTP prices Wider TTF-NBP May ’24 spread needed for reverse BBL flows

11-Apr-2024

SINGAPORE (ICIS)–South Korea's legislative elections on 10 April will unlikely have a material impact on the country's near-term economic policies, but a majority win by the conservative People Power Party (PPP) would allow President Yoon Suk-yeol to implement his fiscal priorities. His People Power Party does not control majority of the 300-seat National Assembly, which is dominated by its rival Democratic Party since 2020. "President Yoon Suk-yeol could find it easier to advance his fiscal and economic reform agenda if the opposition’s current majority in the National Assembly is reduced or overturned," Fitch Ratings said in a note. Yoon, who was elected as South Korea’s president in March 2022, has proposed to eliminate capital gains tax but this continues to face opposition from the Democratic Party. In January, the South Korean government leader pledged to overhaul the country's tax system, which he perceives as excessively burdensome, discouraging stock investments. "Passage of the administration’s fiscal rule, which is under discussion in the [legislative] body, could help anchor fiscal policy in the medium term," Fitch Ratings said. If the ruling PPP wins, it is expected to have a positive effect on tax reforms, corporate value-up programs, and lifting a short-selling ban, as the government pushes for these reforms in the National Assembly, Global Markets Research said in a note. However, should the opposition democratic party win, they are likely to urge increased fiscal spending in 2025 and beyond, aligning with their preference for an expansionary fiscal policy, it said. With the democratic party currently in the majority, South Korea's budget for 2024 was passed with few changes to the government’s original proposal. "However, both parties are calling for some kind of fiscal stimulus – the DP argues for a cash transfer programme, while the PPP prefers a reduction in value-added tax (VAT) – and fiscal policy may, therefore, turn more supportive for growth in the second half of this year," ING said. "Although the general election will likely change the current political landscape, we expect the election results to have a limited impact on economic policy, as the National Assembly does not have executive powers," Nomura said. "We believe the general election results will have no impact on monetary policy as the Bank of Korea (BoK) will remain independent, regardless of the election results,” it added. The BoK, which is scheduled to meet two days after the parliamentary elections, is expected to deliver a dovish hold on interest rates in response to intensifying slowdown in the domestic economy, Nomura said. "We expect the BOK to enhance its dovish signals, including a dovish tweak to the policy statement and lowering the dot plot, which would support our forecast for a first 25 basis point cut in July, and subsequently take the policy rate down substantially to 2.5% by end-2024, from the current 3.5%." In March, South Korea’s central bank indicated interest rate cuts were unlikely in the first half of 2024 as inflation remains above target. It has left its benchmark interest rate unchanged at 3.50% since January 2023. Consumer inflation in March stood at 3.1%, unchanged from February, amid higher oil prices. South Korea is Asia's fourth largest economy – after China, Japan and India – and a major petrochemical net exporter. Its GDP growth weakened to 1.4% last year from 2.6% in 2022, weighed down by high interest rates; economic slowdown by China, its biggest trading partner; and poor global demand for memory chips, its primary export. Focus article by Nurluqman Suratman

09-Apr-2024