Weak Global Economy Weighs On Energy Transition Material Growth – Bad For Investment, Sets Stage For Future Inflation

Daily Chemical Reaction

Weak Global Economy Weighs On Energy Transition Material Growth – Bad For Investment, Sets Stage For Future Inflation

Key Points

• The C-MACC Clean Energy Mineral Index fell to a new YTD low in November, as weak economic conditions influence demand more than energy transition growth and favor slowing investment.
• This setting could persist well into 2024, with the recovery afterward exposing sizable critical mineral shortages because of the investment lag – more of an issue for the West than for China.
• We discuss China’s graphite export controls targeting the US, ammonia price support and US margin improvement due to cost relief, and the set-up for increased global chemical sector M&A.
• We highlight US refinery margins falling to a YTD low this week and the November decline in China refinery operating rates amid export fuel quotas – both are weighing on crude oil demand.
• China, US, Japan, and Eurozone manufacturing activity contracted in November, which we flag along with showing recent weakness in crop prices, though they are much higher than in 2019.

Exhibit #1: The C-MACC Clean Energy Mineral Index fell ~8% MoM to a new YTD low in November.

Source: Bloomberg, C-MACC Analysis, December 2023

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