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Mexico's Nearshoring Bonanza Is Not Yet Near

This article from Bloomberg may be of interest. Here is a section: 

But though the nearshoring story remains plausible, the data so far do not quite justify the exuberant optimism that North America can pull Mexico into the developed world.

Recent government trade data confirm that the US is moving away from China. Last year Chinese exports accounted for only 17% of US imports, down from 22% during President Trump’s first year in office. In 2023 they have cratered, accounting for only 13% of what the US bought from abroad in the first four months of the year.

But Mexico is not taking over. Its 15% share of US imports this year is only 1.3 percentage points higher than it was in 2017. Indeed, other Asian exporters are taking a larger chunk.

Moreover, the nearshoring boom is hard to detect in the investment numbers. Foreign direct investment into Mexico has been stronger in the last ten years than in the prior decade, but the data show no recent upsurge. Indeed, new investment — excluding reinvested earnings — seems somewhat lower.



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Key Takeaways From Fed Pause and Forecasts for Further Hikes

This article may be of interest. Here is a section: 

Here are key takeaways from the Federal Reserve's interest-rate decision and statement on Wednesday:

Federal Open Market Committee unanimously holds benchmark rate in target range of 5%- 5.25%, as expected, in first pause since starting cycle of increases in early 2022, to “assess additional information and its implications for monetary policy”
New projections show policymakers favor a half-point of additional increases this year, which would push borrowing costs to about 5.6% -- higher than most economists and investors have been expecting
FOMC statement gives clear signal that policymakers will resume tightening by referring to the “extent of additional policy firming that may be appropriate”; prior statement, in May, gave more leeway on whether to hike
Forecasts for economic growth and core inflation rose for 2023, while unemployment projections fell
Fed says economy has expanded at modest pace with robust job gains and low unemployment; inflation remains “elevated”



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Oil Extends Losses as Goldman Forecast Adds to Demand Concerns

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Oil extended losses as Goldman Sachs Group Inc. cut its price forecast again, adding to a drumbeat of concerns about the outlook for demand.

West Texas Intermediate slumped below $68 a barrel after Goldman — which has had one of the more bullish forecasts for crude — made its third downward price revision for the global benchmark in six months, trimming its estimate to $86 for the end of the year on rising supplies and waning demand.

“Beyond the fact that a vocal crude bull cut their crude forecast again, physical market indicators also are shaking confidence of bulls expecting the market to shift from a surplus to a deficit in the coming months,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “Time spreads, which are the holy grail for traders assessing supply and demand dynamics, continue to deteriorate, fueling a massive risk aversion and prompting shorts to maintain pressure on prices.”



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Tesla's GM Deal Is Bad News for EV Charger Firms

This article from Bloomberg may be of interest. Here is a section: 

itself, meaning patience is more than just a virtue here. Tesla built its proprietary network essentially as a loss leader to stoke demand for its EVs, and it could do that in part because of Musk’s rarified knack for persuading investors to cover his losses. The three charging companies mentioned above have a combined market cap of about $5 billion, cash on hand of $550 million and expected cash burn across this year and next of more than $600 million. Their life is complicated enough. And now this.

The path to turning a profit on public chargers is like any piece of industrial hardware: Get more people to use it so it doesn’t sit idle. The threshold for profitability with charging depends on many factors, though I’ve seen one useful estimate of 30%, or roughly seven hours of charging every day (see this). As it stands, EVgo, which is weighted more to fast-charging, said on its last earnings call that the top fifth of its charging stalls enjoyed utilization above 20%.



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Here's What Morgan Stanley to Goldman Say About Saudi Cut

This article from Bloomberg may be of interest to subscribers. Here is a section: 

RBC Capital Markets
While some will focus on Saudi Arabia not acting in concert with the rest of OPEC+, the fact that the kingdom is willing to shoulder the curbs alone adds to the credibility of the cut and signals real barrels coming off the market, analysts Helima Croft and Christopher Louney wrote in a note. Saudi Arabia has a track record of delivering on material cuts, they said.

ANZ Group Holdings Ltd
.“The move by Saudi Arabia is likely to come as a surprise, considering the most recent change to quotas had only been in effect for a month,” analysts Brian Martin and Daniel Hynes wrote in a note. “The oil market now looks like it will be even tighter in the second half of the year.”

UBS Group AG
“There has been some anticipation of a production cut, that is why the reaction this morning was a bit more muted,” Strategist Giovanni Staunovo said in a Bloomberg television interview. Still, “the market will react further when the cut is implemented in one month’s time, as soon as inventory dynamics show a drop or exports fall from Saudi Arabia.”



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China gas demand becomes more feasible at low LNG prices but challenges persist

Thanks to a subscriber for this article from S&P Global focusing on Chinese LNG demand. Here is a section: 

China's Shenzhen Energy closed a buy tender on May 30 seeking an August-delivery cargo,and the tender was awarded in the low $9s/MMBtu,according to several sources.

Prior to this, China's Guanghui Energy was heard to have partially awarded a buy tender for certain cargoes delivering from July 2023 to January 2024,S&PGlobal Commodity Insights reported earlier.

The prices of pipeline gas in China, which reflect crude prices 9-12 months ago, have been rising this year, with the average net import price above $8.5/MMBtu in April, showed calculations based on customs data

This means that the price advantage of pipeline gas over spot LNG is fading, which is expected to stimulate buying interest from importers who do not have sufficient long-term contracts in hand, market sources said.

"Rising prices of domestic pipeline gas in China could provide some incentive for downstream industries to switch to LNG," a Chinese importer said, adding that the current LNG prices were quite competitive and second-tier buyers could be more likely to come out to buy spot cargoes.



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Hubert's Peak Is Here

Thanks to a subscriber for this report from Goehring & Rozencwajg. Here is a section on shale oil production growth: 

Conventional wisdom believed the industry had improved its drilling and completion of shale wells. The ability to stay in the zone, the choice, and the volume of proppant and fluid were all said to have resulted in sharply higher drilling productivity. Wall Street and the energy industry both promoted a consistent narrative. We felt there were several unanswered questions and undertook a study to consider what was driving surging well productivity. If the industry had radically improved drilling techniques, it would ultimately be bearish for the sector. A previous low-quality Tier 2 location could now be transformed, through enhanced drilling and completion techniques, into a top-quality Tier 1 well. As a result, the inventory of best wells would explode, and the shale basins would continue to thrive for years to come. Modeling well performance is hugely complex. Shale basins are highly nonlinear with high degrees of variable inter-dependence. As a result, traditional statistical techniques, such as the linear regressions used by most analysts, fall short. We turned to advanced methods, including machine learning and neural networks, and achieved surprising results. Instead of improved drilling techniques, we concluded that two-thirds of the improved productivity between 2013-2018 came from favoring the best drilling locations. In 2013, 22% of Midland wells were Tier 1. By 2018, Tier 1 represented 50% of all wells. Since a Tier 1 well is nearly twice as productive as a Tier 2 well, the migration from lower to higher quality areas drove a massive amount of the improved well productivity.



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EPW Committee Advances Risch, Crapo Nuclear Energy Bill

Here are some of the key details of the nuclear bill passed today. 

Develop and Deploy New Nuclear Technologies

The bill reduces regulatory costs for companies seeking to license advanced nuclear reactor technologies.
The bill creates a prize to incentivize the successful deployment of next-generation nuclear reactor technologies.
The bill requires the NRC to develop a pathway to enable the timely licensing of nuclear facilities at brownfield sites.

Preserve Existing Nuclear Energy

The bill modernizes outdated rules that restrict international investment.
The bill extends a long-established, indemnification policy necessary to enable the continued operation of today’s reactors and give certainty for capital investments in building new reactors.

Strengthen America’s Nuclear Fuel Cycle and Supply Chain Infrastructure

The bill directs the NRC to establish an initiative to enhance preparedness to qualify and license advanced nuclear fuels.
The bill identifies modern manufacturing techniques to build nuclear reactors better, faster, cheaper and smarter.

Authorize funds for Environmental Cleanup Programs

The bill authorizes funding to assist in cleaning up legacy abandoned mining sites on Tribal lands.

Improve Commission Efficiency

The bill provides flexibility for the NRC to budget and manage organizational support activities to ensure the NRC is prepared to address NRC staff issues associated with an aging workforce.
The bill provides the NRC Chair the tools to hire and retain highly-specialized staff and exceptionally well-qualified individuals to successfully and safely review and approve advanced nuclear reactor licenses.
The bill requires the NRC to periodically review and assess performance metrics and milestone schedules to ensure licensing can be completed on an efficient schedule.



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Treasuries Gain as Investors Assess Debt-Ceiling Accord Impact

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Mounting rate-hike expectations have pushed short-term yields up relative to longer-term ones, flattening the Treasury curve. The flattening continued Tuesday as yields declined, briefly pushing 30-year yields below the five-year for the first time since March.

The trend has temporary support from Wednesday’s month-end bond index rebalancing, which may create demand for the long-maturity Treasuries created during the month in quarterly auctions. 

Later this week, Friday’s release of US labor market data for May has the potential to alter expectations for Fed policy. Job creation exceeded economists’ median estimate in April and each of the previous 12 months. However Fed officials in their public comments have been divided on how to balance an anti-inflationary stance with the possibility that the central bank’s 10 rate increases totaling 5 percentage points in the past 14 months warrant a pause in June.



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World's Largest Solar Manufacturer Is Fueling a Price War

This article from Bloomberg may be of interest. Here is a section: 

Chinese company Longi Green Energy Technology Co. cut wafer prices by as much as 31% on Monday. Wafers are silicon squares that are wired up and pieced together to form solar panels. 

The reduction comes after solar silicon prices have plunged by almost half since early February. A slew of new factories have ramped up production, ending a shortage of the material that disrupted the industry’s supply chain last year. 

Longi President Li Zhenguo warned last week that aggressive expansion in the solar supply chain could lead to excess capacity that forces more than half the companies in the industry out of business in the next few years. 



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