Daily Update: January 30, 2023

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

EVs Ain’t Easy

Electric vehicles have pivoted from a peculiar novelty a decade ago to a common sight today. By 2030, EVs will outsell vehicles powered by the internal combustion engine, or ICE. This transition represents the greatest shift in automotive technology since the days of Henry Ford. However, EVs are not easy to produce or own. They require new types of raw materials, depend on unstable supply chains and necessitate the creation of new transportation infrastructure with thousands, if not millions, of additional charging stations.

While there is nothing simple about the supply chains that produce ICE vehicles, the relative stability of global demand for cars means huge industries have developed to provide the necessary gasoline, steel, rubber, plastics and aluminum. With EVs requiring new materials such as lithium, cobalt, various rare earth elements and electrical steel, the existing supply chains are stretched thin to meet exploding demand. Many of the sources for these raw materials are either politically fragile or subject to geopolitical trade tensions, placing additional strain on supply chains. Currently, China leads in the mining and refining of many of the metals used in EV batteries and has threatened to reduce their export in the past.

The biggest challenge of the nascent EV revolution is the risk of a raw materials shortage. S&P Global projects that lithium-ion battery demand from the automotive sector will rise more than 500% from 2022 to 2030. Without huge investment in lithium mining and refining, the shortage of lithium will limit the number of EVs that can be produced and sold. 

Battery technology is always evolving frequently to replace one rare and expensive element with another more common and cheaper element. This process is called thrifting. U.S. and European battery-makers have begun to produce nickel-manganese-cobalt batteries to thrift away from lithium. But China is responsible for about 90% of global manganese refining capacity. That places supply of this crucial battery metal in the hands of a country frequently at odds with the U.S. and Europe over trade issues.

Even assuming the raw materials deficit can be addressed in time to allow for the rapid adoption of EVs globally, there is still the issue of mining for these rare earth elements. Mining for cobalt, nickel, copper and a variety of rare earth elements creates a substantial environmental impact, particularly in areas of the world without environmental and worker safety protections.

EVs are also subject to semiconductor shortages like the rest of the automotive industry. With supply chain issues for the semiconductor industry expected to extend into late 2023 — and potentially exacerbate due to geopolitical concerns — EV manufacturers will be competing with ICE vehicle manufacturers to secure the chips their cars run on.

Charging stations are another challenge for EVs. Currently, there are more than 140,000 EV charging stations across the U.S. However, data from S&P Global Mobility indicates the number of EV chargers must quadruple between 2022 and 2025, and grow more than eightfold by 2030, given anticipated demand from the growing number of EV owners. If you’ve ever found yourself waiting impatiently in a parking lot while someone “tops off” their Nissan Leaf at the only working charger, you know the pain of early EV adoption.

On the plus side, EV sales this year are expected to be resilient, despite the weaker economy. Last year, the EV market experienced 50% growth. While that growth is expected to moderate over the next decade, it will probably be another good year for EV manufacturers in 2023.

Today is Monday, January 30, 2023, and here is today’s essential intelligence.

Written by Nathan Hunt.

Economy

Economic Research: Global Macro Update: Post-Davos, We Reaffirm Our View

The macro mood post-Davos has improved noticeably. This mainly reflects relief over the resilience of the European economy including gas availability, and optimism over China's surprising early (and abrupt) exit from its zero-COVID policy. While both developments are positive for the global economy, S&P Global Ratings believes they add fuel to the dominant macro risks: inflation and rate rises.

—Read the report from S&P Global Ratings

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Capital Markets

The S&P China 500 Rebounded 7.1% In Q4 2022, Recovering A Portion Of Its 2022 Losses

The S&P China 500 gained 7.1% in Q4 2022, gaining back some of the losses exhibited earlier in 2022. Despite the strong quarter, Chinese equities underperformed global and emerging markets in Q4, as these segments broadly bounced back from the heavy losses of Q3. The S&P China 500 declined 24.4% in 2022, likewise underperforming global and emerging market indices. For the final quarter of 2022, Communication Services, Health Care and Financials sectors led the gains, all up over 10%.

—Read the article from S&P Dow Jones Indices

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Global Trade

Surging European Ton-Mile Demand Fails To Lift Inbound Panamax Coal Freight

Vessel oversupply in the Atlantic Basin has pushed Panamax freight rates to multiyear lows in January, despite robust growth in ton-mile demand for inbound coal shipments in Rotterdam fueled by lingering security of supply concerns and European sanctions on Russian coal. Freight performance so far in 2023 appears to have little in common with the surging Atlantic dry bulk markets of the past two years, with the daily Panamax rates on key routes sliding to hire levels last seen in 2020.

—Read the article from S&P Global Commodity Insights

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Sustainability

Men Dominated 2021 Ranks Of Highest-Paid CEOs In S&P 500

Women are nearly absent from the group of top-earning CEOs at S&P 500 companies, according to an analysis of the most recent data by S&P Global Market Intelligence. Nineteen of the 20 highest-paid S&P 500 CEOs were men in 2021. Companies will largely report 2022 compensation data later this year in annual proxy statements to shareholders. Women have long been underrepresented in leadership roles in corporate America. Companies with female executives are generally more profitable, more socially responsible and offer better customer service, according to a 2021 Harvard Business Review analysis of academic studies on the matter.

—Read the article from S&P Global Market Intelligence

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Energy & Commodities

U.S. Generating Capacity Additions Down YOY In 2022; Solar Takes Top Spot

The U.S. added 24.7 GW of new generating capacity to the grid in 2022, an 11.6% decline from the previous year, according to an S&P Global Market Intelligence analysis. Over the same time period, 16.0 GW of capacity was retired, netting an additional 8.8 GW available to the U.S. power grid, a drop of 54.8% compared to 2021's net additions. Data collected Jan. 11 show solar, wind and gas capacity dominated new additions, accounting for 37.6%, 27.1% and 25.9% of total, respectively. Solar surpassed wind as the leader, adding 9.3 GW in 2022.

—Read the article from S&P Global Market Intelligence

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Technology & Media

Wave Of Tech Layoffs Fails To Dent Historically Tight U.S. Labor Market

The most resilient U.S. labor market in generations has yet to show signs of cracking even as the fiscal hangover in Big Tech hits workers through widespread layoffs. Despite tens of thousands of layoffs at Alphabet Inc., Meta Platforms Inc., Amazon.com Inc. and Microsoft Corp. in recent months, U.S. unemployment touched its lowest level in decades in December 2022, as the jobless rate was just at 3.5%. In California, the state with the highest number of technology workers, the unemployment rate was at a pre-pandemic 4.1% last month.

—Read the article from S&P Global Market Intelligence

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Upcoming Events

CERAWeek by S&P Global — Navigating A Turbulent World: Energy, Climate and Security

Join global leaders, policymakers and executives from across energy, climate, finance and technology industries at CERAWeek 2023 for timely dialogue, shared learning and connection.

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