U.S. INTEREST RATE traders expect the central bank to increase its target fed funds rate by two more quarter-points before July 2023 reaching 5.00-5.25% up from 4.50-4.75% at present. The forecast has increased by a quarter-point following stronger than expected employment data for January. The interest rate path has been repeatedly revised upward over the last year as inflationary pressures have proved more persistent than expected:
¹ When policymakers appeal to “patriotism,” or decry its absence, it usually means they have run out of good arguments. When I hear arguments based on patriotism and its variants, I am instinctively suspicious about the speaker’s motivations, and try to work out how someone is trying to mislead or distract attention from their own failures.
² Coal-fired units need roughly four hours to reach full generation from a warm start and 10-12 hours from a cold start. The grid’s instruction to start warming up ensures the two massive coal-fired units at Drax will be available to help meet electricity consumption during the evening peak on December 12. Before privatisation of the U.K. electricity industry, the state-owned Central Electricity Generating Board (CEGB) would often keep at least one coal-fired power station warmed up but not generating so it could be brought into service at relatively short notice. Long ramping times for coal-fired units, and the enormous quantity of fuel burned before commercial generation starts, are one reason gas-fired units are more efficient and have largely supplanted them.
CHINA’s semiconductor (integrated circuits) trade – export earnings have grown rapidly, but the cost of imports has risen even faster, so the country’s trade balance has become increasingly adverse:
BRENT’s six-month calendar spread has softened to a backwardation of less than $1 per barrel compared with more than $9 at the end of September and a peak of almost $22 in early March shortly after Russia’s invasion of Ukraine. The spread between January and February 2023 has moved from backwardation into a small contango. Refiners and traders increased buying ahead of the planned introduction of the price cap in case it disrupts Russia’s crude exports, creating at least a temporary pause in new buying and putting pressure on the calendar spreads for nearby months:
THE NETHERLANDS was the fourth-largest gas consumer in the European Union in 2021 accounting for 11% of the total. The country’s gas consumption was down almost -33% in October 2022 compared with the prior ten-year seasonal average as a result of above-average temperatures, high prices, and energy conservation measures to reduce reliance on imported gas from Russia following the invasion of Ukraine:
CONTAINER shipping costs were down by more than -50% in November 2022 compared with the same month in 2021, as freight volumes fell and supply chain delays eased:
¹ Food and energy shortages have always been about prices and affordability rather than physical supplies and availability. Higher-income and wealthier households will always find ways to put food on the table and heat their homes, it is lower-income and poorer households that lack financial resources that are unable to cope and hit hardest (“Corn supply of ancient Rome”, Rickman, 1980).
SOUTHERN CALIFORNIA’s ports are experiencing a sharp drop in container traffic reflecting contentious labour negotiations and the threat of a strike as well as the slowdown in global merchandise trade and efforts by U.S. manufacturers and distributors to cut excess inventories. Combined container traffic through the neighbouring ports of Los Angeles and Long Beach was just 0.84 million twenty-foot equivalent units (TEUs) in October, down from 1.07 million TEUs in the same month in 2021, and the lowest for the time of year since the recession of 2009:
NORTHWEST EUROPE faces the first test of whether it can lower energy consumption this winter. After warmer than normal temperatures in the first half of September, temperatures were below average in the second half, creating the first significant heating demand earlier than normal:
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