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Coal remains a critical part of India’s energy mix, even as unpredictable supplies and growing environmental concerns push the rest of the world toward an energy transition.
In a report that came out on Feb. 9, the International Energy Agency (IEA) predicted that India would lead the world in increased energy demand over the next 20 years, consuming 8.7 million barrels of oil per day by 2040. India’s energy demand has already doubled since 2000 with 70% of demand met by coal and oil. The country's coal power capacity, presently at 203 gigawatts, is projected to grow to 220-230 GW by 2025.
"Even though the pandemic and its aftermath could temporarily suppress emissions, as coal and oil bear the brunt of the reduction in demand, it does not move India any closer to its long-term sustainable development goals,” according to the IEA’s report.
Supply chain disruptions and a drop in coal import demand due to high global prices is creating a crisis for India’s power sector. Some coal-powered electrical plants may be constrained in their ability to operate leading into the season that historically has seen the highest demand. Industry analysts have pointed to a procurement system that has moved away from longer-term contracts. With global demand for coal surging, Indian buyers avoided imports, instead relying on domestic sources that have now fallen to their lowest level in three years.
"India is more exposed to the international spot coal market as it does not have many longer-term supply contracts. So, when spot prices jump, you see a corresponding decrease in imports," said Matthew Boyle, manager of global coal and Asia power analytics at S&P Global Platts.
Despite environmental concerns, a switch away from coal to less carbon-intensive sources like natural gas is unlikely given that global prices are elevated for gas as well. Demand for electricity in India is expected to continue to grow, particularly in light of the country’s demographic situation.
Roman Kramarchuk, Platts Analytics head of scenarios, policy, and technology analytics, warned that demand is not likely to wane any time soon. "India is clearly not facing the situation in some Western economies and regions where power demand is flat or even dropping," he said.
Today is Tuesday, October 19, 2021, and here is today’s essential intelligence.
Uncertainty in the Global Economy
Economic Research: U.S. Real-Time Data: Feeling The Strain Of Supply Chain Issues And High Prices
As supply chain bottlenecks limit economic activity and raise prices, S&P Global Ratings reduced its 2021 U.S. GDP forecast by 1 percentage point to 5.7% in its September forecast—though that's still a 37-year high. Real-time pricing data continue to highlight higher inflation, with gas prices at a seven-year high and metal prices continuing to climb in October.
—Read the full report from S&P Global Ratings
U.S. Local Governments Credit Brief: California Counties And Municipalities
California counties and municipalities, or local governments (LGs), have demonstrated stable credit quality through the pandemic, and S&P Global Ratings expects credit quality for California LGs to remain stable in the near term. The stability is supported by growing property tax bases, strong budgetary performance, and very strong financial flexibility.
—Read the full report from S&P Global Ratings
Market Dynamics
Crypto Versus Gold – The Store Of Value Debate
Prior to 2021, some market participants viewed Bitcoin as a form of digital gold, sharing many of the same use cases, such as being a store of value. Others viewed Bitcoin as a mechanism for exchange or a technological platform. Today, cryptocurrencies have crossed the chasm into the mainstream investment universe and are starting to compete with gold and other asset classes for a slice of the investment portfolio.
—Read the full article from S&P Dow Jones Indices
Cat Losses, Inflation Among Focal Points During P&C Insurers' Q3 Earnings Season
All but one of the 20 largest U.S. property and casualty and multiline insurers for which estimates are available are expected to log lower EPS sequentially for the third quarter, though a strong majority are projected to post EPS growth on an annual basis, according to an S&P Global Market Intelligence analysis.
—Read the full article from S&P Global Market Intelligence
Banking Industry Under Pressure
Nigeria's 'Sledgehammer' Rules Stifle Lending To Real Economy
Nigerian banks are increasingly concerned about the impact of central bank rules on their ability to extend credit in Africa's largest economy. At the center of banks' concerns is the cash reserve ratio, or CRR, under which banks must leave a percentage of deposits with the Central Bank of Nigeria, or CBN. At 27.5%, Nigeria's CRR dwarfs those of regional peers such as South Africa, Kenya and Ghana.
—Read the full article from S&P Global Market Intelligence
Indonesian Banks Seek Non-Lending Routes To Boost Exposure To Small Companies
Indonesia’s central bank, Bank Indonesia, has asked domestic banks to increase their exposure to micro, small, and medium-sized enterprises, or MSMEs, to at least 30% of their loan book by 2024, from the current sector average of around 18%.
—Read the full article from S&P Global Market Intelligence
Technology & Media
Netflix Searches For Next Growth Opportunity Amid Maturing Streaming Market
Netflix's primary streaming business is battling other well-funded platforms such as The Walt Disney Co.'s Disney+ and Hulu, AT&T Inc.'s HBO Max, Apple Inc.'s Apple TV+ and Amazon.com Inc.'s Prime Video. Analysts say this competition, coupled with Netflix's incumbent position in the market, will make it harder for the company to add new subscribers.
—Read the full article from S&P Global Market Intelligence
European Sports Rights Chase Digital Dream In China
IQiyi Sports — jointly owned by Nasdaq-listed iQiyi Inc., a streaming service focused on Chinese, Japanese, and Korean drama and entertainment, and Super Sports Media Inc., a sports rights distributor and broadcaster with a focus on soccer — signed a four-season deal in July 2021 to show the English Premier League, or EPL, in China.
—Read the full article from S&P Global Market Intelligence
ESG in the Time of COVID-19
New Global Sustainability Board Aims To Cut Through Disclosure Confusion
The 26th U.N. Climate Change Conference, known as COP26, is scheduled to take place in Glasgow in November. And by the time it begins, the IFRS Foundation responsible for setting global accounting standards plans to create a new International Sustainability Standards Board. The new ISSB will guide companies on what sustainability disclosures ought to be made to investors to supplement financial statements.
—Read the full article from S&P Global Sustainable1
U.K. Unveils GBP5,000/Household Low-Carbon Heat System Fund
U.K. households will be able to apply for GBP5,000 ($6,868) grants under a GBP450 million Boiler Upgrade Scheme to help install low-carbon heating systems, the Department for Business, Energy, and Industrial Strategy said late Oct. 18.
—Read the full article from S&P Global Platts
Ineos Plans $2.3 Bil Green Hydrogen Investment In Europe
UK-based chemicals company Ineos plans to invest Eur2 billion ($2.3 billion) in renewable hydrogen production across Europe in the next 10 years, including a 100-MW plant in Germany, the company said in a statement Oct. 18.
—Read the full article from S&P Global Platts
Saudi's ACWA To Develop $30 Billion Of Renewable Projects By 2030 With Aramco, PIF
ACWA Power, the water and electricity company in which Saudi Arabia's sovereign wealth fund has a 44% stake, expects to take part in about $30 billion worth of renewable projects with partners Saudi Aramco and the fund, the company's CEO, Paddy Padmanathan told S&P Global Platts.
—Read the full article from S&P Global Platts
The Future of Energy & Commodities
Commodity Tracker: 5 Charts To Watch This Week
This week's selection of trends in energy and raw materials kicks off with global container shipping prices amid disrupted supply chains. S&P Global Platts editors and analysts also look at the relationship between energy and the dollar, U.S. oil output and more.
—Read the full article from S&P Global Platts
Credit FAQ: China's Power Outages—Get Used To It
As fuel shortages hit Europe and India, and global crude prices jump, China is dealing with its own energy crunch. Coal shortages have forced parts of the country to curtail output to industrial producers, saving power for residences.
—Read the full report from S&P Global Ratings
U.K. Balancing Costs Rocket In September On Tight Generation Margins
U.K. power system balancing costs ballooned in September on the back of tight generation margins, causing the cost of operating reserve to rise fivefold month on month, National Grid Electricity System Operator data showed Oct. 18.
—Read the full article from S&P Global Platts
Gasoline Rebound Makes Light Crude Flavor Of The Month In India
India's sharp revival in gasoline appetite to surpass even pre-pandemic levels has prompted its refiners to increasingly queue up to import lighter crudes in recent months, but the fourth quarter could see a tilt in the balance in favor of heavier grades as gasoil demand growth is expected to pick up speed.
—Read the full article from S&P Global Platts
Container Premiums: Surcharges Reduced Further Amid Supply Chain Anxiety
All-inclusive container rates for shipping from North Asia to West Coast North America were available at their lowest level in months as additional carrier options and a gloomy outlook on the overall supply chain resulted in a wide segmentation in the spot market.
—Read the full article from S&P Global Platts
Written and compiled by Molly Mintz.