S&P Global —19 August 2024
Daily Update: August 19, 2024
Machine Tools: The New Focus of Russian Sanctions
By Nathan Hunt
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
Machine tools are fundamental to modern industry. There is scarcely an area of manufacturing that does not depend on computer numerical control (CNC) machine tools to shape metal according to the tighter tolerances required in modern industrial and military applications. It is therefore not surprising that sanctions focused on undermining Russia’s military and energy sectors would restrict access to machine tools. Nor is it surprising that Russian customers would attempt to circumvent sanctions by buying CNC machine tools through third parties.
At the end of February 2024, the Group of Seven and the Global Export Controls Coalition added CNC machine tools and components to a list of common high-priority goods that are subject to trade restrictions with Russia. While integrated circuits and chips were previously the focus of sanctions efforts, machine tools were added since they can easily be repurposed from industrial applications to armaments manufacturing.
The international market for high-end machine tools has historically been dominated by manufacturers in Japan and Germany, although China has become a bigger player. Trade from Europe to Russia fell off sharply following Russia’s invasion of Ukraine. For example, Germany exported $107 million of machine tools to Russia in 2021, but only $4 million in 2023. By May 2024, the total trade value was $1,000.
While it appears that sanctions have been effective, a majority of Chinese, Turkish and Indian machine tool exports went to Russia, and increased machine tool exports to countries such as Vietnam, Kazakhstan and Mexico may indicate transshipment, or the shipment of goods through an intermediate destination, to Russia. For example, in January 2024, Kazakhstan imported $4.1 million of machine tools and exported $3.3 million, 99% of which went to Russia.
South Korea, Germany, Japan and Taiwan are the world’s biggest manufacturers and exporters of sophisticated machine tools. All four markets have advised their corporations to respect and maintain Russian trade sanctions. Even countries such as China, India and Turkey, which have not committed to the new sanctions regime, are shipping machine tools to Russia in lower quantities.
Today is Monday, August 19, 2024, and here is today’s essential intelligence.
Listen: Sunburn: Solar Sector Seeks Relief As Supply Outruns Demand (Ep. 157)
Low-cost manufacturing of solar technologies has enabled one of the fastest growth trajectories of global low-carbon energy supply. The pace of growth, led by China, has led to both a glut in supply and protectionist measures from other countries looking to develop solar capabilities of their own. S&P Global expert Cormac Gilligan joins EnergyCents hosts Hill Vaden and Sam Humphreys to discuss the success of solar in decarbonizing electricity markets and share perspective on what the future may hold for the fast-growing sector.
—Listen and subscribe to the podcast from S&P Global Commodity Insights
Emerging Market Growth Slows As Manufacturing Expansion Cools
Emerging market economic growth was sustained at the start of the second half of 2024, according to S&P Global's PMI surveys, albeit at the slowest pace in eight months. A marked deceleration in manufacturing output growth underpinned the latest change while services activity rose at a faster pace. Meanwhile optimism about the business outlook remained subdued in July as the pace of new orders growth for emerging markets slowed amid concerns over future demand and elevated costs. Rising service sector price pressures were found to have largely offset slower increases in manufacturing sector prices.
—Read the article from S&P Global Market Intelligence
Private Equity Megadeals Surge In 2024, On Track To Challenge 22-Year Record
The volume and value of global private equity-backed deals worth $5 billion and above jumped in 2024, and the totals are on pace to challenge the 22-year record set in 2021. Megadeals numbered 13 for the year through July 29, up from eight such transactions for the entire 2023, S&P Global Market Intelligence data shows.
—Read the article from S&P Global Market Intelligence
Red Sea Snarls Help China Port Operators
Bottlenecks associated with the Red Sea conflict are among key factors that could boost profitability of rated China's port operators. Strong transshipment demand in Southeast Asian ports is spilling over to China's ports, including Hong Kong and Shanghai. Robust throughput growth favors operators with diverse assets such as China Merchants Port Holdings Co. Ltd.
—Read the article from S&P Global Ratings
Iraq's Ambition To Become Refinery Powerhouse Moves Closer To Fruition
Iraq's ambitions to expand its refining capacity to capture more exports of higher-valued refined products is closer to being achieved with two more refineries in the works even with existing plants operating below capacity. Refining capacity at OPEC's second biggest crude producer, excluding all but one refinery in the Kurdish region, has reached 1.215 million b/d, according to oil ministry data provided exclusively to S&P Global Commodity Insights. The two refineries in the works consist of the Fao Investment refinery with China to add 300,000 b/d of capacity while another one in Kirkuk to add 150,000 b/d was approved by the council of ministers on May 7.
—Read the article from S&P Global Commodity Insights
Broadcom Head Ranks As Highest-Paid S&P 500 CEO In 2023
Broadcom Inc. President and CEO Hock Tan's total adjusted compensation climbed to $161.8 million in 2023 with the receipt of a $160.5 million stock grant, making him the highest-paid CEO on the S&P 500 for the year, according to an analysis by S&P Global Market Intelligence. Tan's stock grant was front-loaded to cover five annual cash incentive payouts and five years of annual equity awards under an employment agreement with Broadcom, according to the company’s proxy filing. He was ranked as the sixth-highest compensated executive in 2022.
—Read the article from S&P Global Market Intelligence
Beyond ESG With Scaling Capital For The Energy Transition (Aug. 21, 2024)
Clean tech is key to scaling the energy transition, but its adoption remains stifled by the deployment of fossil fuel infrastructure far from the end of its economically useful life. How can investors and companies finance this shift, while the threat of early retirement of assets still looms large?
—Register for the webinar from S&P Global Sustainable1