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S&P Global — 8 October 2024
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
The road to the energy transition is paved with lithium, nickel and copper, among other metals. With the early days of the battery metals gold rush now past, the discussion at last week’s LME Week turned to the practicalities of securing strategic metals through mining and refining at a price that reflects the delicate economics of the energy transition. S&P Global Commodity Insights attended LME Week, an annual gathering of the global metals community at the London Metal Exchange, and offered insights on its discussions and trends that will shape global metals markets in the coming year.
Discussions of battery metals often begin and end with lithium. China maintains a forbidding lead in lithium production and refining, but the Western hemisphere is beginning to show signs of life. Brazil has shown surprising growth potential, with three operational plants and eight more planned. The country’s relatively low cost of production for lithium, ranging between $400 and $500 per metric ton, contrasts favorably with other countries, where costs generally exceed $700/metric ton. Lithium production in Brazil is modest at the moment compared with leaders such as Australia, China, Argentina and Chile, but with anticipated fivefold growth over the next five years, the country should join the ranks of the top producers.
Chile possesses incredible mineral wealth, boasting the world’s largest reserves of copper and lithium. Mining companies are clamoring to spend billions to tap this natural abundance, but the country is looking to balance increased production with environmental aims. State copper company Codelco has goals covering emissions, water use, recycling and improving relationships with skeptical communities living near its facilities.
In September, S&P Global Commodity Insights announced the launch of daily South America Lithium Triangle price assessments. The Lithium Triangle comprises Argentina, Bolivia and Chile, and is the second-largest lithium-producing region in the world.
In North America, the need for a stable supply of critical materials has led to the development of a battery hub. While an estimated $10 billion will be spent on lithium and nickel projects in North America by the end of the decade, 75% of the lithium and nickel used in US electric battery production is expected to come from nondomestic sources. Approximately 125 lithium extraction projects are underway in the Western US, hoping to leverage advantages such as proximity, supply chain security, government support and sustainable practices to build a US battery industry. The US Energy Department recently announced a conditional commitment of up to $1.2 billion for a direct loan to battery separator, extruder and engineering services company Entek to finance a lithium-ion battery separator facility in Indiana.
Market observers have suggested that North America will eventually require fewer battery metals imports, once recycling old batteries becomes commercially viable. So far, very few customers have proven willing to pay the “green premium” required to purchase recycled lithium.
Today is Tuesday, October 8, 2024, and here is today’s essential intelligence.
As airlines look to decarbonize and governments crack down on heavy industry carbon emissions, some in the aviation industry are turning to sustainable aviation fuel (SAF). In this episode, correspondents Camellia Moors and Camilla Naschert speak with experts from across the SAF industry about what SAF is, how it's being used, its potential to curb carbon emissions and the biggest challenges and opportunities in its global uptake.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Despite geopolitical risks increasing and rates remaining high through most of this year, credit remains resilient. Refinancing activity has been strong across most ratings and sectors. Upgrades continue to outpace downgrades, and defaults have started to moderate in recent months. S&P Global Ratings expects the default rate to fall, but at a slower pace than it rose due to residual strain for the lowest-rated borrowers.
—Read the article from S&P Global Ratings
Strong issuance has supported the growth of global rated corporate debt outstanding — it reached $23.98 trillion as of July 1, 2024, up 3.3% ($776 billion) over the past 12 months. Investment-grade, which increased by 4.0% ($718 billion), primarily drove the growth, while speculative-grade debt increased by 1.1% ($58 billion).
—Read the article from S&P Global Ratings
Loading demand rather than a largely unchanged risk profile is driving tanker freight rates from the Middle East, which have shown little reaction to the latest ramp-up in hostilities between Israel and its adversaries. Two merchant vessels sustained damage in the Red Sea while another vessel was hit in the Indian Ocean Oct. 1 in the first attacks by Iran-backed Houthi militants for a month, amid Israel's invasion of Lebanon and a ballistic missile attack on Israel by Iran. Attacks have caused vessels to redirect in droves from the Red Sea route between East and West to the longer voyage via the Cape of Good Hope since the end of 2023.
—Read the article from S&P Global Commodity Insights
Stockpiles of oil products at the UAE's Port of Fujairah rose 2.5% in the week ended Sept. 30 after plummeting to a 2 1/2-year low a week earlier, according to Fujairah Oil Industry Zone data published Oct. 2. The total increased to 15.001 million barrels from 14.635 million barrels a week earlier, the lowest since Feb. 14, 2022, according to the FOIZ data compiled by S&P Global Commodity Insights. Stockpiles have now shrunk 13% since the end of 2023.
—Read the article from S&P Global Commodity Insights
It’s been a turbulent four years for the US auto industry, from the COVID-19 pandemic to inventory fluctuations and supply chain disruptions. But unfortunately for some of the industry’s most important stakeholders, the turbulence isn’t over yet. Automakers and their captive financing groups are facing intensified competition and difficulty attracting customers, due to several converging trends. These range from a recent surge in vehicle inventory and affordability concerns to fluctuating incentives and evolving consumer behaviors. In this Fuel for Thought podcast episode, our host Guido Vildozo speaks with the experts to break down how these trends are playing out in 2024, and what they mean for OEMs and captive lenders.
—Listen and subscribe to the podcast from S&P Global Mobility
As investors increasingly allocate capital across private markets, evolving macro and financial conditions may necessitate greater transparency. Join us at S&P Global Ratings’ Private Markets Conference in Paris on Thursday, October 17th, to gain valuable insights on the future of private markets and connect with thought leaders.
—Register for the in-person event from S&P Global Ratings