2024-12-17 06:28

EU to tighten emissions rules on Jan. 1 Around 22% of cars sold must be electric to meet targets Based on 2024 sales, sector would pay 15 bln euros in fines Companies set to discount EVs to avoid penalties PARIS/GDANSK, Dec 17 (Reuters) - European automakers are raising prices of petrol cars and readying discounts on electric vehicles as they brace for yet another challenge - tougher emissions rules that threaten to further shrink profits across the struggling industry. The European Union will drastically lower its cap on automotive carbon dioxide emissions from Jan. 1, meaning at least one-fifth of all sales by most car companies must be EVs to avoid heavy fines. But so far this year only 13% of all vehicles sold in the region have been electric, data from the European Automobile Manufacturers' Association (ACEA) lobby group shows. "The gap is really big," said Marc Mortureux, director of French car lobby PFA. The tighter rules come as the sector is already dealing with excess capacity due to lacklustre sales and growing Chinese competition, prompting profit warnings from Volkswagen (VOWG_p.DE) , opens new tab, Stellantis (STLAM.MI) , opens new tab and others in recent months. Now the companies will need to sell more EVs, which cost more to make than traditional vehicles, at a time when political and economic uncertainties and declining EV subsidies are deterring consumption, said Mortureux. In a sign of the growing concern over the rules, Stellantis CEO Carlos Tavares abruptly resigned this month, partly due to disagreement with the board over how to deal with the issue. STEERING DEMAND With just weeks to go, Europe's politicians are urging Brussels to rethink the targets. But carmakers are getting to work, aiming above all to avoid fines that could reach 15 billion euros ($15.76 billion) based on current sales, ACEA chairman Luca de Meo has said. VW, Stellantis and Renault (RENA.PA) , opens new tab have raised the prices of petrol engine models by several hundred euros in the last two months, in what analysts say is an attempt to curb demand for heavier emitters and make pricier electric models appealing. "Carmakers have started with their pricing strategy to steer demand towards battery EVs in order to reach the CO2 targets and avoid potential fines," said Beatrix Keim of the Center for Automotive Research. Last month, Stellantis's Peugeot hiked prices in France of all of its models apart from fully electric ones by as much as 500 euros. Renault Group increased prices on some pure petrol models, for instance adding 300 euros or 1.6% to the Clio SCE 65, but kept prices of hybrid versions unchanged. Peugeot described the new pricing as an "economic rise", while Renault said a rise was "normal" over a car's lifetime. The strategy could backfire, however. Increasing petrol car prices should help close the gap with more expensive EVs, but given weak market growth, may not generate enough EV sales, said a source close to a major European automaker. Sales in the region are around a fifth lower than pre-COVID. "In reality, increasing the price of thermal engine cars means cutting production (...) and all the value chain and suppliers will suffer from this," the source added. DISCOUNTS AND POOLING The price rises will help fund future discounts on EVs, said Denis Schemoul, auto analyst at S&P Global, acting as "an indirect subsidy" for electric car buyers by combustion engine buyers, but very likely hurting margins. VW, expected to be hit hardest by the new targets due to its high sales volumes, has already cut the price of its ID3 electric compact car on several markets in recent months, bringing it below 30,000 euros in Germany. "This is probably what will happen next year," said Alastair Bedwell, head of powertrain forecasting at GlobalData, who predicts EV sales in Europe, including the EU as well as Britain, Iceland, Liechtenstein, Norway and Switzerland, will jump 41% from this year to 3.1 million units in 2025. Discounting to push sales comes at a cost, however. In the UK, the sector has warned that EV targets will cost automakers 6 billion pounds ($7.6 billion) this year, including about 4 billion pounds in discounts. "Pooling" emissions, or buying credits from those who have a large share of the EV market to lower emission averages, could be less costly, say Barclays analysts. Japan's Suzuki agreed in October to pool with Geely-owned Volvo in 2025, a spokeswoman said. That arrangement will almost completely remove any threat of fines for Suzuki, said Charles Lester, data manager at battery consultancy Rho Motion, given Volvo's large number of EVs on offer. ENOUGH IS ENOUGH All options will eat into meagre industry profits, however, and the industry is still hoping Brussels will ease targets. "At some point, enough is enough," PFA president Luc Chatel told reporters in October ahead of the Paris auto show. "I can't sell enough electric vehicles and I'm going to be penalized on my thermal vehicles. What do they want me to make, horse-drawn carriages?" ($1 = 0.9519 euros) ($1 = 0.7920 pounds) Sign up here. https://www.reuters.com/business/autos-transportation/europes-carmakers-discount-evs-hike-petrol-car-prices-new-emissions-rules-loom-2024-12-17/

2024-12-17 06:20

SEOUL, Dec 17 (Reuters) - South Korea's central bank governor said on Tuesday the dollar-won exchange rate had risen since the Dec. 3 martial law attempt, but the market was functioning normally and did not show any crisis-like signs that raise concern. The won traded at 1,438.1 per dollar as of 0611 GMT, compared with its two-year low of 1,442.0 hit on the day of President Yoon Suk Yeol's martial law declaration. Sign up here. https://www.reuters.com/markets/currencies/bank-korea-chief-sees-no-crisis-like-signs-forex-market-2024-12-17/

2024-12-17 06:15

Fed's two-day policy meeting starts on Tuesday Odds of 25 bps cut this week stand at 95% Heading into Fed meeting, risks for gold tilted to downside — analyst Dec 17 (Reuters) - Gold slipped on Tuesday under pressure from a strengthening U.S. dollar and climbing Treasury yields as investors focused on the Federal Reserve's final policy meeting of the year with growing expectations of a gradual pace of rate cuts in 2025. Spot gold was down 0.2% at $2,647.81 per ounce, as of 01:41 p.m. ET (1841 GMT). U.S. gold futures settled 0.3% lower at $2,662. The dollar (.DXY) , opens new tab rose 0.1%, making gold pricier for holders of other currencies, while U.S. 10-year Treasury yields hovered near a four-week high hit earlier in the session, ahead of the Fed's meeting, where a 25 basis-point rate cut is widely expected on Wednesday. Attention is also on the Fed's updated economic projections and the dot plot, which could reshape expectations for the rate trajectory through 2025 and 2026. "So the question is, if the Fed going to be more hawkish or more dovish than what the markets are expecting right now. Because of Trump's agenda, people are expecting the Fed to be more cautious in terms of being open to further rate cuts at this stage," said Fawad Razaqzada, market analyst at Forex.com. According to CME's FedWatch tool, the odds of a 25-basis-point rate cut this week stand at 95%, but the chances of a reduction in January are just around 16%. "Heading into the Fed meeting, risks for gold are actually tilted to the downside," said Zain Vawda, market analyst at MarketPulse by OANDA. Bullion generally thrives in a low-interest rate environment. Meanwhile, U.S. retail sales increased more than expected in November, adding to warmer inflation readings in recent months and suggesting that the Fed could pause rate cuts in January. Traders are also eyeing key U.S. GDP and inflation data later this week for further cues. In other metals, spot silver was down 0.1% at $30.51 per ounce, platinum shed 0.3% to $938.48, and palladium fell 1.2% to $935.39. Sign up here. https://www.reuters.com/markets/commodities/gold-prices-steady-ahead-fed-policy-meeting-2024-12-17/

2024-12-17 06:12

State broadcaster shows buildings collapsed, vehicles crushed U.N. reports damage to reservoirs and hospital Earthquake one of most violent experienced, witness says WELLINGTON, Dec 17 (Reuters) - An earthquake of magnitude 7.4 struck Vanuatu's capital Port Vila on Tuesday, with the United Nations reporting six unconfirmed deaths and that two reservoirs and a hospital had been damaged. State broadcaster VBTC showed footage of vehicles crushed under the debris of collapsed buildings and boulders strewn across a highway. Drone footage showed landslips near a shipping terminal. Communications networks on the Pacific archipelago were down, New Zealand said. Australia's Foreign Minister Penny Wong said there was significant damage and Australia was preparing to deploy assistance including urban search and rescue and emergency medical teams on Wednesday. Port Vila's international airport was closed, Vanuatu's High Commission in Canberra said. The U.N. Office for the Coordination of Humanitarian Affairs estimated 116,000 people had been affected by the earthquake. It said there were six unconfirmed deaths and damage to the two main water reservoirs. The structure of the hospital in Port Vila was affected, with the operating theatre not functioning and triage tents set up outside to manage the influx of patients, it said in a statement. Authorities were unable to communicate with the National Disaster Management Office until Tuesday evening, when Starlink satellite services were provided, it said. Dan McGarry, a journalist with the Organised Crime and Corruption Reporting Project based in Vanuatu, earlier told Reuters that police had said at least one person had been killed and injured people had been taken to hospital. Reuters was not immediately able to confirm the casualty figures, with communications outages making it hard to reach Vanuatu authorities for comment. "DEVASTATED FAMILIES" Fiji Prime Minister Sitiveni Rabuka said on Facebook he was "saddened by the news of the earthquake which has claimed lives and devastated families in Vanuatu", his comments also suggesting the death toll might be higher. Commonwealth Secretary General Patricia Scotland said on X many people had been injured and infrastructure had been destroyed. "It was the most violent earthquake I've experienced in my 21 years living in Vanuatu and in the Pacific Islands. I've seen a lot of large earthquakes, never one like this," McGarry said. Security camera footage from the moment the quake struck showed people scattering in panic in a garage and cars rocking on the ground. Footage posted on social media showed buckled windows and collapsed concrete pillars on a building hosting foreign missions in the capital, including the U.S., British, French and New Zealand embassies. A spokesperson for the U.S. Embassy in Papua New Guinea said its embassy in Port Vila had sustained "considerable damage". All personnel who were in the U.S. Embassy building were able to safely evacuate, the spokesperson added. New Zealand's High Commission building, which is co-located with the U.S., French and British missions, had "sustained significant damage", a foreign ministry spokesperson said in a statement. There were communications outages across the country, the New Zealand statement added, while the Australian High Commission in Vanuatu said its communication systems had also been affected. Vanuatu's government is in caretaker mode ahead of a national election, after the president dissolved parliament last month. The U.S. Geological Survey said the quake was at a depth of 10 km (6 miles). Half a dozen aftershocks hit Vanuatu following the initial quake, USGS data showed. Several were heavy enough to be felt in Port Vila, McGarry said. The U.S. Tsunami Warning System cancelled an initial tsunami warning for Vanuatu. Sign up here. https://www.reuters.com/world/asia-pacific/magnitude-74-earthquake-strikes-port-vila-vanuatu-says-usgs-2024-12-17/

2024-12-17 06:02

LITTLETON, Colorado, Dec 17 (Reuters) - U.S. liquefied natural gas exports are on track to climb to new highs in 2024, as record domestic natural gas production spurred the 10th straight year of volume growth in the lucrative LNG export sector. U.S. LNG shipments for 2024 look set to hit 86.9 million metric tons, according to ship-tracking data from Kpler. That total is around 720,000 tons or 0.8% more than in 2023, and so sustains the expansion trend of U.S. LNG exports despite brief outages at a number of export terminals in 2024 and delays at new projects that are under construction. BUMPY RIDE Despite the volume growth, it hasn't been an easy year for the U.S. LNG export sector, which became the world's largest last year. Record gas output at home combined with slowing gas demand in key markets resulted in a roughly 21% fall in average U.S. LNG export prices so far this year compared to 2023, according to the U.S. Energy Information Administration (EIA). From January through September, LNG export prices averaged $6.15 per thousand cubic feet, according to EIA. That compares to a $7.75 average over the same period in 2023 and a $12.20 average in 2022, which was when Russia's invasion of Ukraine triggered power sector turmoil and a sharp rise in LNG imports across Europe. This year's fall in U.S. LNG export prices was greater than the roughly 15% decline over the same period in Henry Hub natural gas futures - the U.S. benchmark gas price - and so helped squeeze LNG exporter revenues through much of 2024. MARKET MOVERS A 22% drop in purchases by top market Europe from 2023's levels also hurt U.S. LNG exporters by forcing them to find other buyers, often in more distant and dispersed locations that take longer and cost more to service. For 2024 as a whole, Europe is on track to purchase 43.8 million tons of LNG from the U.S., which is 12.7 million tons less than European buyers purchased in 2023 and the lowest full-year total since 2021, according to Kpler. To offset the lower orders from Europe, U.S. exporters had to dial up sales to Asia, where volumes climbed by 8 million tons on the year to 31.6 million tons this year. But shifting those volumes to buyers in Japan, South Korea, India and China costs more than the equivalent cargo loads to Europe due to the far longer journey times. The trip duration from Sabine Pass LNG export terminal in the U.S. Gulf to Sodegaura LNG import terminal in Japan is roughly 30 days - twice as long as the trip to Rotterdam port in the Netherlands, which is Europe's main gas hub. Longer journey times means higher freight costs as well more boil-off of the gas from storage tanks, which results in lower volumes that can be discharged upon delivery. PRICE TRENDS Rising global natural gas prices look set to boost earnings for gas sellers heading into 2025, and should see LNG exporter earnings pick up in the months ahead. Forward gas prices in the TTF gas trading hub in the Netherlands are currently projected to climb by nearly 12% in 2025 from the 2024 average, while Henry Hub futures are seen climbing by 32% from their 2024 average, according to LSEG. However, higher gas costs may also serve to undermine the appetite for LNG in cost-sensitive economies where coal and other power sources are cheaper and more abundant. Combined LNG purchases by India, Pakistan and Bangladesh are on course to hit a record of nearly 40 million tons in 2024, according to Kpler. But power producers in those countries rank among the most cost-sensitive in Asia, and are well versed in switching out gas for other fuels when price moves or other market forces dictate. In 2022, when global LNG and gas prices soared in the wake of Russia's invasion of Ukraine, combined purchases into South Asia dropped by 16%, or 6 million tons, from the year before as gas buyers balked at the high gas costs. In 2025, gas buyers in that region could again make a retreat from world markets if prices climb to uneconomical levels and justify the use of coal or other fuels instead. Even in wealthier Europe, gas buyers may also slow purchases if local industrial activity remains muted, or if renewables and other clean energy sources boost supplies enough to displace fossil fuel output. This level of LNG demand uncertainty means further growth in overall LNG export volumes is not guaranteed in 2025. The opinions expressed here are those of the author, a market analyst for Reuters. Sign up here. https://www.reuters.com/business/energy/us-keeps-its-lng-exports-crown-even-luster-fades-maguire-2024-12-17/

2024-12-17 05:57

LONDON, Dec 17 (Reuters) - Sri Lanka's restructuring of $12.55 billion in international bond debt is set to lead to the launch of a series of new, as-yet-untested instruments linked to economic growth and governance. Observers say it is one of the most complex set of instruments ever arranged in a restructuring. The bonds aim to give the country additional debt relief if the economy falters and to encourage it to improve its governance. Below are some aspects of the new bonds. HOW DO SRI LANKA'S GOVERNANCE-LINKED BONDS WORK? The governance-linked bond (GLB) is the first of its kind and is designed to reward Sri Lanka for transparency and effective economic management by reducing the interest on its debt. To earn that reduction, Sri Lanka must meet targets, or key performance indicators (KPIs), seen as indicating better governance. The first KPI demands that Sri Lanka exceed a baseline ratio set by the International Monetary Fund (IMF) for total revenue to GDP in both 2026 and 2027, which the Fund has projected at 15.3% and 15.4% respectively. The second target requires the finance ministry to prepare and publish a "Fiscal Strategy Statement" on its website in both 2026 and 2027. If Sri Lanka meets both targets, the bond coupon will be reduced by 75 basis points from late 2028. This would reduce its interest payments by $80 million over the remaining life of the instrument, which matures in 2035. HOW DO SRI LANKA'S MACRO-LINKED BONDS WORK? Fixed income instruments with payouts linked to economic performance have been used by countries from Argentina to Greece and Ukraine. However, this is the first time in recent history that a bond includes a provision to adjust payouts not only to the upside, in case of better-than-expected growth, but also to the downside if the economy falls short of forecasts. Sri Lanka's adjustment would come in 2028. The upside scenario would mean an increase in both capital and interest payments, while the downside scenario could reduce the principal of the bond owed to creditors - a new concept. IMF data serves as the baseline for the measurements. The country's 2025-2027 average nominal GDP in U.S. dollars will determine whether it triggers the upside or downside scenario, but there is an additional control variable measuring cumulative real GDP growth from 2024 to 2027. This ensures that Sri Lanka will not pay more in debt servicing if its economic strengthening - as measured in dollars - is driven by an appreciation in the Sri Lankan rupee. This aims to ensure it only pays more if there is better growth in real terms. Rothschild, advisers to some bondholders, have calculated that the downside scenario, if triggered, would provide $2.1 billion in additional debt relief. HOW WILL THESE BONDS FIT INTO THE MARKET? New bonds, in order to be widely held, must be rated by the Big Three agencies - Moody's, Fitch and S&P - and also be eligible for key bond indexes. Moody's has given both bond structures the nod, and the other agencies are expected to follow suit. The macro-linked bonds are also index-eligible, according to adviser Rothschild. JPMorgan, which runs the main index for emerging market hard currency sovereign bonds, declined to comment. If bonds are not rated or index eligible, major institutional investors are less likely to hold them, which makes them less liquid and ultimately can make debt more expensive for the country issuing them. WILL THESE BONDS BE A BLUEPRINT FOR OTHER ISSUERS? In short, only if they function well. Investors are watching to see if the instruments trade easily - and how difficult it is to determine a fair price for them given their complexities. Debt restructurings often serve as an incubator for experimental fixed income instruments that aim to address specific issues a government has faced and to help prevent a repeat. However, experience shows this does not necessarily mean they will become established in regular bond sales thereafter. Sign up here. https://www.reuters.com/markets/rates-bonds/sri-lankas-ambitious-governance-macro-linked-bonds-2024-12-17/