– Gas and power prices have spiked across the central U.S. while Texas regulators ordered rolling blackouts as an Arctic blast froze wind turbines. Herein is the paradox: The less we use fossil fuels, the more we need them. Cold snaps happen, as do heat waves. Yet the power grid is becoming less reliable due to growing reliance on wind and solar, which can’t provide power 24 hours a day, seven days a week and have a reserve for emergencies. Blame a perfect storm of government policies, timing, and weather. Coal’s share of Texas’s electricity plunged by more than half in a decade to 18%. Wind’s share has tripled to about 25% since 2010 and accounted for 42% of power last week before the freeze set in. About half of Texans rely on electric heat pumps for heating, but the pumps use a lot of power in frigid weather. So while wind turbines were freezing and solar panels were covered with snow, demand for power was surging. Enormous new demand coupled with constrained supply caused natural gas spot prices to spike to nearly $600 per million British Thermal Units in the central U.S. from about $3 a couple weeks ago. Future wholesale power prices in Texas soared to $9,000 per megawatt hour from a seasonal average of $25. I’ve talked to people living in Houston who are worried about what their household electric bill will look like. There is talk that it could be $400 per day. Europe and Asia are also importing more fossil fuels for heat and power this winter. U.S. LNG exports increased 25% year-over-year in December while prices tripled in northern Asian spot markets and doubled in Europe. Germany’s public broadcasting recently reported “Germany’s green energies strained by winter.” The report noted that power is “currently coming mainly from coal, and the power plants in Lausitz” are now “running at full capacity.” California long ago banished coal. But a heat wave last summer strained the state’s power grid as wind power dissipated and solar ebbed in the evenings. After imposing rolling blackouts, grid regulators resorted to importing coal power from Utah and running diesel emergency generators. New green power grids need to be tested and modified to handle current and future demand as well as reserve power for emergencies (like power grids used to be).
– Crude oil and pump prices will soon be more expensive than the highest price of 2020 despite low demand. At the end of last week, crude was priced at $59.47/bbl. That’s just under $4/bbl less than last year’s most expensive price of $63.27/bbl (seen on January 6, 2020). Since the end of November, we’ve seen the price of crude increase as much as $5/bbl a week, meaning we could see 2021 crude oil prices top 2020 as early as this week. With the price of crude consistently increasing, so have gas prices because crude oil accounts for more than 50% of the price at the pump. Nearly 40 state gas price averages are already more than last year, with half of those averages seeing double-digit increases. Refineries operated at 83.1% of capacity.
+ Truck rates are declining.
+ Some of the world’s largest container-shipping lines are ordering new vessels amid surging demand for ocean-cargo services, giving a long-awaited boost to the outlook for shipyards in Asia. The number of container ships on order rose by 23 to 201 last week, the biggest weekly gain in two years, according to IHS Markit data. ZIM Integrated Shipping Services Ltd., an Israeli company that went public in late January, and Taiwan’s Evergreen Marine Corp. have announced recent purchases or chartering deals. Before the pandemic, new orders for the ships that carry about 80% of global goods trade struggled to recover from the 2016 bankruptcy of South Korea’s Hanjin Shipping, then one of the top-10 players. That shock disrupted supply chains for weeks but also made it tougher to secure longer-term financing needed to purchase ships that can cost $150 million each and take two years to build. The global health crisis reversed those fortunes, leading to a surge in online demand for goods that allowed the carriers to charge three to four times higher rates for freight across the Pacific than they could a year ago. The No. 1 company, Denmark’s A.P. Moller-Maersk A/S, last week predicted global container demand will increase 3% to 5% this year.
+ Housing Starts in January fell 6% but permits (pointing to the near future) were up over 10% from last month and over 22% from January last year.
+ Business Inventories were up .6% while business sales were up .8%, bringing the inventory to sales ratio to 1.32 to 1 from 1.39 to 1 a month ago.
+ Industrial Production rose .9% in January, led by mining output. Total capacity utilization in the USA was up to 75.6%.
– The Producer Price Index (inflation at the producer level) jumped 1.3% (the largest jump since the start of this index in 2009). Costs escalated at financial services, hotels, wholesale vehicles, trucking costs, and clothing/apparel.
+ #1 heavy melt scrap fell to $360 per ton while #1 busheling scrap remained at $480 per ton.
+ Raw steel output jumped to 76.9% of capacity.
– Iron ore FOB Chinese ports is up to $160 per dry metric ton.
– Zinc prices are staying high.
– Flat rolled imports For February might beat January’s performance.
– Fastmarkets’ price assessment for steel hot-dipped galvanized coil (cold-rolled base), fob mill US climbed to $69.25 per cwt from $67.50 per cwt a week earlier. The assessment is now up for a 27th consecutive week, leaping 123% since August 2020.
+ For the seventh year in a row, BMW is number one in automotive exports from the USA. The Spartanburg plant in South Carolina exported 218,820 vehicles last year, with an export value of more than $8.9 billion. Despite more difficult general conditions because of the Covid pandemic, the plant achieved a new production record in the second half of the year.
– Toyota Motor Corp. said it will suspend production at nine plants in Japan because of supply disruptions from a weekend earthquake that rattled the country’s northeast. The world’s biggest automaker said the interruption is caused by suppliers affected by the Saturday night quake. Toyota said it wouldn’t disclose which parts are affected or the suppliers. Toyota also declined to say how many units of output would be lost. The downtime hits 14 of the carmaker’s 28 lines in Japan and such nameplates as the Toyota RAV4, C-HR and Harrier crossovers, and several Lexus models. Affected Lexus vehicles include the LS and IS sedans, the RC and LC coupes, as well as the LX, NX, UX and RX crossovers and SUVs. The 7.3 magnitude tremor struck off Japan’s northeast coast near the epicenter of the devastating Tohoku earthquake that hit 10 years earlier, killing more than 16,000. The latest quake injured some 160 people and caused blackouts to nearly 1 million households.
– Volkswagen Group says bad planning on the part of its suppliers has compounded a computer chip shortage blighting the global auto industry, claiming it gave ample notice that the coronavirus’ hit to car production would be limited. VW in December was the first automaker to warn of a chip supply crunch that has hit global automakers, forcing them to cut or halt production as the semiconductor industry struggles to keep up with a recovery in the car sector. The company told its suppliers in April last year — when much of global car production was idled due to the coronavirus pandemic — that it expected a strong recovery in the second half of 2020, a VW executive, who declined to be named, told Reuters. VW says it was made aware of the chip shortage by one of its suppliers at the end of November, but that that warning came too late. As well as identifying potential weaknesses in the automotive supply chain, the question over who is responsible for the shortages could play a decisive role in any legal disputes. VW said last month that it is in talks with its main suppliers about possible claims for damages. The current shortages are seen as stemming from a combination of factors, as automakers compete against the consumer electronics industry for chip supplies.
– Car shoppers can expect to see an impact in the availability of certain car models due to the chip shortage, as well as a price increase. The Toyota Tundra was one of the first cars to see a halt in production. The Tundra has seen a drop in inventory of almost 27% for the month of February. Shoppers can expect to see some pressure on the Honda Accord, Civic, Insight, and Odyssey, as well as the Acura RDX.
Nissan models that have seen slowdowns for the carmaker include the Nissan Altima, Frontier, and Titan. Subaru models impacted by the cut include the Subaru Ascent, Impreza, Legacy, and Outback.
The car models that will be impacted by cuts at Ford plants include the Ford Escape and Lincoln Corsair, which are produced at the Louisville plant. Cars.com said there will also be declines in production of the Ford Edge and Explorer, as well as the Lincoln Aviator and Lincoln Nautilus. GM closures are expected to impact the Buick Encore, Cadillac XT4, and GMC Terrain. The company’s Chevrolet line will also see some slowdowns, as the sites that produce Chevrolet Equinox, Malibu, and Trax have been impacted. Fiat Chrysler suspended operations at plants in Ontario and Mexico. The slowdowns will impact several Chrysler, Dodge, and Jeep products. Cars.com said dealerships will likely have lower inventories for the Chrysler 300, Pacifica, and Voyager. The Dodge Challenger and Charger may be in shorter supply, as well as the Jeep Cherokee and Compass. The Volkswagen Atlas, Atlas Cross Sport, and Passat have already been impacted by the supply disruption.
– EV owners apparently spend a lot less time behind the wheel than do motorists who drive conventional, gasoline powered vehicles, according to a new study. The study raises a classic chicken-and-egg question: do EV owners drive less because most battery-electric vehicles offered relatively limited range, or because their lifestyles involve less travel? “EVs travel 5,300 miles per year, under half of the U.S. fleet average,” according to a summary of the new study put together for the National Bureau of Economic Research (NBER). Depending upon the source, the general estimate is that the typical American motorist clocks between 12,000 and 15,000 miles annually.
– Ford Motor Co. shut down production of its highly profitable 2021 F-150 pickup trucks and Transit Vans for a full week in Missouri. “Due to unseasonably cold temperatures in the midsection of the United States, Ford was warned that the availability of natural gas could be restricted in the Kansas City area in the coming days,” said Kelli Felker, global manufacturing and labor communications manager. “To ensure we minimize our use of natural gas that is critical to heat people’s homes, we have decided to cancel operations,” she said.