Tuesday 28/09/21

1. In ENERGY, FUEL & MACRO NEWS, China power outages hit supply chains, US LNG exporters aim to step in, the UK’s fuel problem spreads, the case for nuclear power strengthens, oil prices head for $80 and the Bank of England is open to interest rate rises
2. In JOBS-RELATED NEWS, the end of furlough in the US, Europe and UK nears, US retailers can’t find staff, the UK leisure industry keeps the pressure on for visas and airport towns brace themselves
3. In CAR-RELATED NEWS, Ford commits more to EVs, Polestar does a SPAC deal, Evergrande’s EV division cancels a listing and Jony Ive teams up with Ferrari
4. In MISCELLANEOUS NEWS, Facebook suspends Instagram Kids, Aldi wants to expand and all eyes are on graphene
5. AND FINALLY, I bring you an incredible Ed Sheeran lookalike…

So China has power problems as well, US LNG exporters aim to benefit from Europe, UK fuel problems continue, nuclear power comes up in conversation, oil prices rise and the Bank of England says it’s ready to raise interest rates if needed…

China power outages pose new threat to supplies of chips and other goods (Wall Street Journal, Stella Yifan Xie, Yang Jie and Stephanie Yang) highlights China’s current travails as the government’s efforts to limit energy consumption (remember what I said recently about the reason behind an aluminium price spike?) and cut carbon emissions is leading to power outages in many of its manufacturing hubs. Some manufacturers have been told to shut down factories and/or limit working hours and the rising price of coal is adding to the problem. A number of semiconductor-related companies announced to the Taiwan Stock Exchange that they will be closing facilities until the end of September and some Apple suppliers, including Eson Precision Engineering and Unimicron Technology have also been affected. * SO WHAT? * China is trying to cut emissions by limiting the growth in use of electricity to a rate that does not exceed GDP growth but earlier this year electricity use grew by a considerably wider margin, prompting mandated power cuts from some local governments. I think that this is particularly interesting because it seems like China is willing to make sacrifices now in order to spark structural reforms in some areas. Such actions are likely to continue to have repercussions around the world.

Further to all that recent chat about rising gas prices causing a number of major kerfuffles, US LNG exporters plan projects to capitalise on European shortages (Financial Times, Justin Jacobs and Derek Brower) shows that American natural gas exporters are looking at ways to benefit from supply shortages in Europe in a stunning turnaround in fortunes given that it was only last year when they were mothballing capacity due to oversupply during

the pandemic and worrying about gas’s role in a low-carbon future. * SO WHAT? * Some analysts are now saying that plans to make new LNG facilities will soon make the US the world’s #2 exporter of LNG, behind Australia at #1, but this isn’t going to happen overnight. However, the investment necessary to make such facilities entails huge up-front costs and so the future needs to look pretty good for these projects to be viable long-term, especially as pressure increases to wean ourselves off fossil fuels. This is something that companies will have to weigh up. For now, though, prospects are looking strong!

All of this talk has sparked interest in old conversations with Nuclear: energy price spike renews case for low-carbon maverick (Financial Times, Lex) which harks back to the days when nuclear power generated over a sixth of the world’s energy at its high point and suggests that a more stable energy source could be a decent addition to the renewables mix, which has recently proved to be somewhat unreliable. Investment in nuclear power plants has been, rather unsurprisingly, quite tricky since Fukushima in 2011. Given that costs to build them have gone up as the price of generating power from renewable sources has dropped, you can see why they have fallen out of favour. However, the current shortfall of renewable power generation has highlighted the fact that there is still a need, which is where the Small Modular Reactors (SMRs) being developed by Rolls-Royce could come in handy.

Meanwhile, UK fuel crisis threatens to hit health services and industry (Financial Times, David Sheppard, Harry Dempsey, Jonathan Eley and Sebastian Payne) highlights the ongoing fuel nightmare that we are experiencing in the UK at the moment and Oil heads for $80 as energy crisis escalates (Daily Telegraph), just underlines this.

I thought that All MPC members ready to raise UK rates this year if needed, says Bailey (Financial Times, Chris Giles) was worth mentioning because it identifies a significant change in the Bank of England’s stance of denial, although this could just be an 🍑-covering exercise given that market expectations are currently set for February for a rate rise. As I have said before, I believe that the UK and/or the US will raise interest rates before the year is out because inflation is going bananas and they are running out of excuses not to raise them to curb spending.

The end of furlough approaches in the US, Europe and UK while staff shortages continue for US retailers, the UK leisure industry keeps the pressure on and airport towns brace for impact…

End of Covid job schemes still leaves US, EU and UK short of workers (Financial Times, Delphine Strauss) is an interesting article which suggests that, despite the fact that furlough measures are coming to a conclusion in the US, Eurozone and UK, tight labour markets are likely to persist – and US retailers compete to entice workers in face of labour shortage (Financial Times, Obey Manayiti) just provides yet more proof of this.

Restaurants and hotels press UK ministers to ease visa rules for staff (Financial Times, Alice Hancock) reiterates how tricky the situation is over here as industries continue to apply pressure to the government to ease its visa restrictions in order to address staff shortages but then, on the other hand, Airport towns braced for jobless spike as furlough scheme ends (Daily Telegraph, Tom Rees) highlights the problem that the available jobs aren’t necessarily where the people are, with places such as Crawley and Luton likely to be particularly badly affected. As things stand, Luton already has the country’s fourth highest proportion of its population on jobseekers’ help and could rise to #1. Slough, which is near Heathrow, is also expected to suffer. * SO WHAT? * As I’ve said before, I don’t think that those who need the jobs are necessarily mobile enough to go TO the jobs that are available. Unfortunately, that is a problem that is going to have to be addressed over time but the end of the furlough safety net will no doubt provide even more incentive for some workers to retrain or seek employment elsewhere.

Ford invests more in EV production, Polestar does a SPAC deal, Evergrande’s EV division cancels its plans to list and Jony Ive starts working with Ferrari…

The car industry continues to develop apace what with Ford fortifies EV bet with four new factories in Tennessee and Kentucky (Wall Street Journal, Mike Colias), as the company shows intent and Electric car maker Polestar valued at $20bn in Spac deal (Daily Telegraph, James Titcomb) highlights the Geely-owned car company’s latest move that will help it in its efforts to challenge the likes of Tesla in the high-growth electric vehicle market. Polestar/Geely: electric vehicle maker offers challenge to Tesla (Financial Times, Lex) reminds us that this SPAC deal is financing an EV company that has form (rather than the usual pie-in-the-sky stuff) and proper backing (from Geely, which own’s Polestar’s parent, Volvo Cars). At least this company has style and substance!

Meanwhile, in other developments, Evergrande electric car division cancels Shanghai listing (Financial Times, Hudson Lockett and Thomas Hale) reflects more gloom for the embattled property developer Evergrande as it turns out that its car division, Evergrande New Energy Vehicle, will no longer go ahead with a listing. It had already warned on Friday about a “serious shortage of funds”, so this may not come as too much of a surprise. It just goes to show that not all EV makers are winners!

Then in Apple guru teams up with Ferrari (The Times, Ashley Armstrong) we see that Sir Jony Ive, previously of Apple designer fame, has signed a deal with a Ferrari and Exor (which is the company that controls the supercar maker) to engage in various “creative projects in the business of luxury” that could range from cars to fashion. Ive was the designer behind the iPhone, iPad and iMac but left the company in 2019 after 27 years. Nice.

Facebook suspends work on Instagram Kids, Aldi announces expansion plans and graphene comes up in conversation again…

Facebook to halt Instagram Kids project amid pressure from lawmakers, parents groups (Wall Street Journal, Matt Grossman) shows just how much flak Facebook is experiencing at the moment as it said that it would suspend development of its Instagram app for kids due to concerns about its effects on the mental health of young people. * SO WHAT? * The company said that it has halted work in order to listen to concerns and try to demonstrate the positives of the kids’ version that won’t have ads and allows parents to monitor activity. It’ll be interesting to see how this goes, but I would imagine that it will go ahead, maybe with some revisions as I can’t imagine Facebook taking this lying down.

Then in Aldi to create 2,000 jobs in £1.3bn UK expansion plan (The Guardian, Kalyeena Makortoff) we see that Aldi has expansion in mind as it outlines plans to open an additional 100 stores across the UK over the next two years in a renewed push to take more market share. It is currently the UK’s fifth biggest supermarket.

How ‘wonder material’ graphene became a national security concern (The Guardian, Jasper Jolly) is a really interesting article detailing why a proposed takeover of a small company called Perpetuus by Taurus International, a company with Chinese connections, is attracting the attention of our government. Graphene was discovered in 2004 at the University of Manchester and a huge amount of excitement then surrounded its development given that it is 200x stronger than steel and has high electrical and thermal conductivity meaning that it could have a huge number of civilian and military uses, but interest has gone from boom to bust over the years given that it is very expensive to make. I would definitely recommend you have a read of the full article as it is fascinating – and it certainly sounds like graphene is a material to watch for the future!

…in other news…

I just thought I’d leave you today with the uncanny Ed Sheeran lookalike ‘forced to live life in disguise’ as crazed fans chase after him (The Mirror, Paige Holland). Clearly he must love it really because if you hated it that much you’d do everything you could to not look like him!