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Around the tracks: Chip supply concerns a hindrance to industry amid push for greater EV dominance

  • Featuring
  • Clement Choo
  • Commodity
  • Metals

Although global automakers encountered varying degrees of recovery in 2022, they are still concerned about the supply of semiconductor chips, especially for those pursuing electric vehicle growth.

Tight chip supply is foreseen in 2023 amid inflationary and recessionary concerns. Other factors have also entered the chip equation, such as the US CHIPS and Science Act of 2022, and the Inflation Reduction Act.

The former seeks to put the US in the forefront of semiconductor chip technology while the latter will provide eligible EVs with tax credits of up to $7,500 and $4,000 for new and used vehicles, respectively. The guidance for the required sourcing for the components and critical minerals used in EV batteries will be released by the US Treasury Department sometime in March although the tax credits are effective Jan. 1.

Simply put, the EVs must be assembled in North America, with a stated purpose of supporting a US battery supply chain.

Forward gear: Increased R&D into new secondary battery technologies

Reverse gear: Interest rate hikes and inflation woes could derail recovery


Automakers, who continue to struggle to restore production and sales to pre-COVID-19 levels, are expected to face challenges in securing sufficient chips to maintain production.

They will expand their tie-ups with secondary battery manufacturers to ensure their EV plans will proceed smoothly. Further developments will be seen in deals with steelmakers for "green" steel as the automakers strive to meet their zero-carbon emissions goals.

EVs typically focus on passenger vehicle models but more commercial vehicle models could be offered in 2023, especially for delivery operators.

Global market volatility will persist in the new year if Russia renews its war with Ukraine, amid a strong possibility that consumers will be thinking hard about buying or replacing their present vehicles.


Amid a mixed 2022, the direction of domestic vehicle makers has been, and will be, defined by the US' CHIPS and Science, and Inflation Reduction Acts.

Producers are aiming to secure battery materials for EVs and low-carbon-emissions materials.

It is quite likely that several of the leading vehicle makers will initiate research and development programs to develop a new generation of secondary batteries, perhaps ones that use little to no lithium and are lighter in weight.

  • Vehicle makers struggle to catch up with demand.
  • Greater push for "green" vehicles.
  • Platts US Domestic EXW Midwest price averaged $999.80/mt November, down more than half from $2,028.25/mt in January.


The European Union made monthly gains in most of 2022 but they were largely due to lower bases in 2021. Sales are still below pre-COVID-19 levels. For instance, although passenger vehicle registrations rose 16.3% year on year in November to 829,527 units, it was 196,000 units less than what was posted in November 2019.

Analysts project multiple headwinds ahead including high energy prices and tightening financial conditions. An acute squeeze on household real incomes will also weigh on consumer spending.

  • EU vehicle industry yet to reach 2019 levels.
  • Tighter household income weight on consumer spending.
  • Northern European cold-rolled coil prices averaged $748.77/mt in November 2022, plunging from a 2022 high of $1,557.31/mt in April.


The country's new energy vehicle sector continues to set new records. Over January to November 2022, sales of NEVs doubled year-on-year at 6.07 million units.

China's lifting of COVID-19 curbs has resulted in a spike of infections, which could slow consumption, dragging vehicle sales down. There will no doubt be a push in exports to offset weaker domestic demand. Nevertheless, China is likely to post a bullish performance for 2023.

As for conventional light combustion-engine vehicles, production fell 15.3% in November from a year ago to 2.16 million units as higher COVID-19 infections caused light vehicle production to slow down.

  • November vehicle sales fall 11.5% year on year to 2.11 million units.
  • Government incentives support NEV sales.
  • Vehicle production for 2022 estimated at 26.33 million units, a 6% annual rise.


The country has managed to restore sales to pre-COVID-19 levels over 2022 but it faces headwinds from interest rate increases as well as how China manages its COVID-19 policies, which could affect chip supplies.

Indian vehicle makers will raise their prices in January due to higher manufacturing costs and new vehicle models.

Local demand has exceeded supply, which has been hindered by the chip shortage. With higher interest rates, there is likely to be greater numbers of buyers on waiting lists cancelling their orders for new vehicles.

India might enhance its vehicle-scrapping policies to encourage consumers to trade in their old models for new models.

  • Demand outstripped supply as chip cuts chokes production.
  • Cancellation rates rise for vehicle bookings.
  • Higher import duty on certain steelmaking raw materials could increase steel costs.