Daily Update: September 21, 2020

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The global energy transition to a low-carbon economy will be challenging—since many industries and countries have become reliant upon cheap, expendable energy sources to power their growth. While there is evidence that businesses, investors, and policymakers have longer-term visions, the global community’s planning cycles are still out of sync with the systemic risks of global climate change. Against this backdrop, carbon dioxide emissions are likely to climb during the economic recovery from the pandemic.

Of the 20 goals to promote biodiversity agreed upon by global governments a decade ago as part of the U.N.’s Strategic Plan for Biodiversity, only six have been partially met, according to the international body.

“Humanity stands at a crossroads with regard to the legacy it leaves to future generations,” the U.N. said in a report last week. “Biodiversity is declining at an unprecedented rate, and the pressures driving this decline are intensifying. None of the Aichi Biodiversity Targets will be fully met [by year-end], in turn threatening the achievement of the Sustainable Development Goals and undermining efforts to address climate change.”

“The COVID-19 pandemic has further highlighted the importance of the relationship between people and nature, and it reminds us all of the profound consequences to our own wellbeing and survival that can result from continued biodiversity loss and the degradation of ecosystems,” the U.N. said.

Greenhouse gas emissions have fallen during the current crisis, as nations’ lockdowns to control the geographic spread of the virus limited economic activity and changed consumer behavior even after containment measures were lifted. Such effects reduced emissions far faster than the Paris Agreement, which targets limiting this century’s global rise in temperature to well below 2 degrees Celsius, has thus far been able to achieve. Emissions are expected to decline a remarkable 8% this year, according to the International Energy Agency’s outlook.

However, S&P Global Platts Analytics anticipates that the eventual economic recovery from the pandemic will likely cause fossil fuels’ share of the global energy mix to expand through 2025. In addition, the post-pandemic rebound could push global CO2 emissions back to 2018 levels by 2022, according to S&P Global Platts Analytics’ Scenario Planning Service.

Fossil-fuel generators aren’t turning their backs on the problem. Nearly every single international major oil producer made some form of low-carbon commitment by the end of the third quarter, according to S&P Global Platts Analytics. Still, the diverse measures outlined by energy companies like BP, Shell, and Total don’t all imply a full-scale business model transformation.

“Net-zero commitments could be considered both necessary and daunting, and companies and governments making them are not doing so lightly. It is not just a case of buying some relatively cheap trading [carbon] offsets and continuing business as usual,” S&P Global Ratings said in a recent report. “Companies and governments wanting to achieve their net-zero commitments may need to rely on the deployment of low-carbon, carbon capture, and other technological solutions. If action is not taken quickly to mitigate annual emissions, there could be few options left.”

One solution lies in biosequestration—the act of capturing CO2 in forests and agricultural soils to flatten the emissions curve. Doing so has the potential to offset 26% to 37% of annual global greenhouse gas emissions, according to S&P Global Ratings. Even if biosequestration were to be fully deployed, the world’s soils and forests don’t have enough carbon capacity to offset emissions by all companies, which could incentivize the transition to low-carbon alternatives.

“Evidence in our hands demonstrates the severe, widespread, and persistent consequences to people, cultures, economies, the climate, and the natural world if we continue along our current paths of behavior and decisions,” the U.N. said in its report. “We are reminded that when we destroy and degrade biodiversity, we undermine the web of life and increase the risk of disease spillover from wildlife to people. Responses to the pandemic provide a unique opportunity for transformative change as a global community.”

Today is Monday, September 21, 2020, and here is today’s essential intelligence.

Uncertainty in the Global Economy

September Retail Market: U.S. Sales Growth Slows; Bankruptcies Reach 10-Year High

U.S. retail sales trailed economist expectations in August as two retailers filed for bankruptcy in late August through mid-September, pushing the year-to-date bankruptcy total to a 10-year high, according to an S&P Global Market Intelligence analysis. Retail and food services sales rose 0.6% over July amid the coronavirus pandemic, missing the consensus estimate of economists polled by Econoday of a 1% increase.

—Read the full article from S&P Global Market Intelligence

The Future of Credit

Argentina Faces Challenges and Opportunities After its Restructuring

As Argentina has successfully concluded its US$100 billion commercial debt restructuring with bondholders, S&P Global Ratings expects the Alberto Fernandez Administration to fully focus on the Argentine economy. The pandemic has compounded recession and complicated the policy response needed to subdue a spike in inflation. Ratings considers tackling lackluster growth and persistently high inflation to be important because these factors have underpinned a decline in social conditions.

—Read the full report from S&P Global Ratings

Global Auto Sales Forecasts: Hopes Pinned on China

S&P Global Ratings expects global light vehicles sales will fall 20% this year compared with 2019 following sales and production disruption due to the COVID-19 pandemic. This forecast is at the more pessimistic end of the 15%-20% projection for global sales falls Ratings made in March this year. Sales in the first half of 2020 were down by one-quarter (24.6%), an unprecedented shock for the global industry.

—Read the full report from S&P Global Ratings

Deep Dive: Amid Pandemic, Airlines Forge New Survival Metric – Daily Cash Burn

Publicly traded airlines produce a remarkable number of metrics detailing financial performance, but the coronavirus pandemic has spawned a new one: daily cash burn. It measures just what its name implies: how much cash an airline expends each day to remain in operation. The need to measure and report daily cash burn rose out of necessity.

—Read the full article from S&P Global Market Intelligence

Trade Payment Risk is Not Necessarily Default Risk

Trade credits facilitate the purchase of goods or services without immediate payment in full and are commonly demanded by customers as a source of short-term financing. In a supply chain, a company can be a debtor to its upstream suppliers and a creditor to its downstream customers. One of the most vital risks from a company’s perspective is whether it will receive timely payment from its customers (i.e., trade payment risk) and, thus, have enough liquidity to pay its own suppliers.

—Read the full article from S&P Global Market Intelligence

Technology & Innovation

China COVID-19 Trends in TV, Video

The CCTV Spring Festival Gala, aired annually for the Lunar New Year holiday, streamed live to almost 170 countries and registered 1.23 billion viewers in 2020, according to gala broadcaster China Media group, up 59 million from 2019. The holiday in mainland China occurred around the time of the lockdown in Wuhan, and the Spring Festival Gala special saw a new segment added at the last minute to pay tribute to frontline workers in the battle against the pandemic. This marked the first major change within the broadcast industry in China.

—Read the full article from S&P Global Market Intelligence

SoftBank is Betting on Nvidia to Extract ARM's Untapped Value – Analysts

By striking a deal for its chip unit ARM Ltd. that includes a significant portion of shares in buyer NVIDIA Corp., parent SoftBank Group Corp. is hoping for long-term gains on its 2016 investment. But the transaction comes with valuation and execution risks for the Japanese tech company, analysts told S&P Global Market Intelligence. Nvidia agreed to pay SoftBank Group Corp. $10 billion in cash and $21.5 billion in common stock. Another $5 billion could be added to the deal price if Arm meets certain financial targets, pushing the gross transaction value to $36.5 billion.

—Read the full article from S&P Global Market Intelligence

Snowflake IPO Leads to Flurry of Trading; Nvidia Gets Boost from ARM Buy

A blockbuster market debut and a flurry of deal announcements drove movement for top tech and telecom stocks in the week ended Sept. 18. Shares in cloud data platform Snowflake Inc. popped then fell after the company opened trading Sept. 16 on the New York Stock Exchange under the symbol "SNOW" at $245, well above its IPO price of $120.

—Read the full article from S&P Global Market Intelligence

Aetion CEO: Data-Driven Approach to COVID-19 Requires Rigor, Transparency

Aetion Inc. CEO Carolyn Magill spoke with S&P Global Market Intelligence about the company's ongoing partnership with the FDA, which has taken a turn to focus on the COVID-19 pandemic; the need for safety and effectiveness monitoring when patients receive a vaccine; and the importance of clear, unbiased data to make healthcare decisions in a crisis.

—Read the full article from S&P Global Market Intelligence

With ARM, Nvidia Aims to Rule Cloud-Based, AI-Powered Future

The rationale behind NVIDIA Corp.'s acquisition of ARM Ltd. hinges on Nvidia CEO Jensen Huang's vision of a future increasingly dependent on cloud computing and artificial intelligence. If he is right, the combination of Nvidia's AI capabilities and ARM's processors could make Nvidia as critical to a cloud-based global IT infrastructure as Intel Corp. processors were to the development of the traditional enterprise data-center market, analysts said. The challenge for Nvidia will be on finding ways to ramp up ARM technology without alienating its existing business partners.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

In Summer of Darkness, Distributed Energy Offers Brighter Future for U.S. West

As communities throughout the western United States sort through the rubble from a series of extreme heatwaves, wildfires and wind storms that devastated the region in August and September, knocking out power for millions of residents, recognition grows of the need for a reimagined and restructured power grid to ensure that the lights stay on. "Grid reliability is a major problem," Edward Fenster, chairman and co-founder of San Francisco-based solar and energy storage developer Sunrun Inc., said in a recent interview. "People don't like living in the dark."

—Read the full article from S&P Global Market Intelligence

More than 485,000 Without Power After Sally, Laura Hit the Gulf Coast

Four weeks after Hurricane Laura and one day after Hurricane Sally made landfall, almost 485,000 power customers lack service in Alabama, Florida, Georgia and Louisiana, which has weakened power demand and power prices across the South. Meanwhile, a tropical disturbance in the southwestern Gulf of Mexico has a 90% chance of forming into another tropical depression, storm or hurricane, according to the National Hurricane Center.

—Read the full article from S&P Global Platts

Development of La Nina Poses Dryness Threat for Major Grain Producers: Maxar

The expected development of a moderate La Nina could result in prolonged dryness and warmer temperatures across some of the largest grain producing countries globally, according to Kyle Tapley, senior agricultural meteorologist with weather agency Maxar. During a Sept.17 webinar, Tapley said the countries most likely to be impacted are Argentina, Brazil and Ukraine, along with parts of the US and Russia.

—Read the full article from S&P Global Platts

Shell to Resume Oil and Gas Exploration in Alaska Arctic Offshore

Shell plans to resume oil and gas exploration in Alaskan Arctic offshore waters for the first time since 2015, according to exploration plans filed with the state Sept. 17. The company seeks state approval to form an exploration unit covering 86,400 acres and 18 Alaska Beaufort Sea state offshore leases held by Shell. The company has committed to seismic and exploration drilling over the next five years in west Harrison Bay, which is in offshore the National Petroleum Reserve-Alaska and 34 miles northwest of the Colville River delta where the onshore Alpine field is now producing.

—Read the full article from S&P Global Platts

Hydrogen, Ammonia Likely to Win Cleaner Shipping Fuel Race - Euronav CEO

The concept of a one-size-fits-all shipping fuel is in the past, with hydrogen and ammonia the leading candidates to meet cleaner fuel goals, shipping company Euronav's CEO Huge De Stoop said. "The winners have already been decided and that is going to be either hydrogen or ammonia," De Stoop told S&P Global Platts in an interview on Sept. 7. "The only problem that we have that we don't know when it's going to be ready and available," he added.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities

U.S. Oil and Gas Rig Count Up 6 at 293; Permian Slightly Slides: Enverus

The U.S. oil and gas rig count climbed six in the week ended Sept. 16 to an eight-week high 293, rig data provider Enverus said Sept. 17, but drilling activity across the major named basins edged lower. The number of oil-focused rigs climbed four to 200, while the number of rigs chasing mostly gas edged up two to 93, the highest since the week ended July 1.

—Read the full article from S&P Global Platts

Deal Agreed to Resume Libyan Oil Output, NOC Still to Lift Force Majeure

Two rival groups in Libya – the UN-backed Government of National Accord and the self-styled Libyan National Army – have agreed to reopen key oil ports, signaling the possible restart of more than 1 million b/d of crude. But sources close to the matter said Sept. 18 that state-owned National Oil Corporation was still to agree some of the terms of the deal. A spokesman at NOC declined to comment. The news of a return of Libyan barrels to a market already awash with crude hit oil prices.

—Read the full article from S&P Global Platts

Naphtha Cargoes set to Sail from USGC hit 800,000 mt so Far in September

Naphtha cargoes set to sail from the U.S. Gulf Coast so far in September registered 800,000 mt as regional market players were eager to get barrels of light naphtha off their hands, with a focus on feeding Asia's appetite for light paraffinic barrels. Light straight run naphtha barges hit their lowest level since late June earlier in September amid a saturated market. In the first ten trading days of September, the LSR naphtha barge price averaged 87.8 cents/gal.

—Read the full article from S&P Global Platts

U.S. Shipping Regulator Issues Warning After Container Rates Hit Record Highs

The U.S. Federal Maritime Commission is reviewing the container shipping market for possible non-competitive practices after container rates to the U.S. Atlantic and Pacific coasts set new records in the week to Sept. 17. The U.S. shipping industry regulator said in a statement on Sept. 16 that it was increasing its scrutiny of the three major container shipping alliances -- THE Alliance, 2M Alliance and Ocean Alliance -- in response to "unusual circumstances and challenges created by the COVID-19 pandemic."

—Read the full article from S&P Global Platts

Tight Global PVC Supply Pushes Prices to Multi-Year Highs

When coronavirus pandemic-related shutdowns and economic shocks gripped much of the world in April, demand for construction staple polyvinyl chloride careened to lows not seen since the global financial crash in 2008. Five months later, it's a starkly different picture. Months of reduced rates, turnarounds, demand recovery and some force majeures on PVC in the US and Europe have pushed prices to multi-year highs. Buyers want the powder that makes pipes, window frames, vinyl siding and other products amid an acute supply squeeze.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.