S&P Global — 8 January 2025
Daily Update: January 8, 2025
Europe Struggles to Build Out EV Industry
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
In a less-protectionist era, Europe and the US allowed China to build a dominant share of the electric vehicle battery market. China was willing to manage the environmental challenges of industrial production and could offer lower prices for EV batteries, which drove down the cost of battery electric vehicles and hastened the energy transition.
However, in this era of increasing resource nationalism, the US and Europe perceive China’s dominance in batteries and battery metals as a threat to their industrial policies.
Europe has struggled to develop a domestic battery industry. Despite some progress, hurdles to growth have emerged. According to S&P Global Commodity Insights, 10 planned battery factories have been canceled in Europe from 2018 through the first half of 2024. As a result, European EV manufacturers face a projected 72% undersupply of batteries, leaving the industry critically dependent on imports from China.
On Oct. 30, 2024, the EU imposed tariffs on battery-electric passenger cars imported from China, citing unfair subsidies offered by the Chinese government to Chinese manufacturers. China is disputing the tariffs through the World Trade Organization and attempting to negotiate a minimum price for exports with the European Commission. Given the lower prices for Chinese EVs, the tariffs may not have significant impact on European imports of Chinese passenger cars.
But dependence on Chinese batteries is far from the only issue facing the European car industry. The demand for EVs has slowed in Europe. S&P Global Mobility expects European battery demand in 2028 to reach 1,852 GWh — 22% lower than the 2,382 GWh forecast in August 2023.
Battery chemistry is also an issue. Most European batteries are high-performance nickel-manganese-cobalt (NMC) batteries. While these batteries have superior energy density, they have been losing share to cheaper Chinese lithium-iron-phosphate (LFP) batteries. According to S&P Global Mobility, the cost of an EV battery is a significant factor in the total price of an EV. This forces original equipment manufacturers and suppliers to make trade-offs in selecting the right battery chemistry for their use case. Increasingly, the lower cost and lower range of LFP batteries has become attractive to manufacturers and consumers.
European regulations make approval processes for battery manufacturing facilities and battery metals sourcing very difficult. Timelines for approval of new facilities can often extend to three to five years, depending on the complexity of the project.
Finally, US subsidies are enticing manufacturers to relocate or build out their facilities in the US. While these subsidies are likely to be reevaluated under incoming President-elect Donald Trump, existing incentives have made the US an attractive manufacturing center.
Today is Wednesday, January 8, 2025, and here is today’s essential intelligence.
Prices and Policies: Forging the Green Steel Market
As the world pivots toward a sustainable future, the steel industry finds itself at a critical crossroads. While steel trade flows are global, the emergence of a "green steel" premium has been uneven — and regional — with disparities across Europe, Asia and the Americas. Demand for low-carbon emission steel is being driven by end-users such as the automotive, offshore wind and construction industries, as well as by regulatory pressures within the EU.
—Read the article from S&P Global Commodity Insights
Diversifying Exceptionalism
Despite recent sharp US market declines after the Federal Reserve signaled fewer than expected rate cuts, much of recent year-end market commentary has been focused on US exceptionalism and the divergence of US equities compared to the rest of the world. The S&P 500® was up 24.8% through Dec. 18, 2024, reaching 57 all-time closing highs in the year, propelled by robust economic growth, AI-related enthusiasm and optimism surrounding President-elect Trump’s return.
—Read the article from S&P Dow Jones Indices
US 2024 Year in Review: Insurers See Rate Turnarounds in Auto and Homeowners
As befitting an election year, there was no shortage of drama and intrigue in 2024 for US insurers. Property and casualty carriers faced severe weather, including five hurricanes in four months, a bridge collapse, long-awaited changes in the country's largest market and soaring rates for the private auto and homeowners lines of business. In managed care, the year began with changes in the Medicare landscape and ended with a CEO being gunned down in New York, which intensified the scrutiny of the claims practices of the insurers, while the life insurance sector saw regulatory changes and a record year for annuities.
—Read the article from S&P Global Market Intelligence
Trump Likely to Expand Oil Sanctions on Iran, but May Broaden Tactics
President-elect Donald Trump is widely expected to expand oil sanctions on Iran and its trading partners to deter Tehran from sprinting to obtain a nuclear weapon, but some experts say he may shift tactics in his second term and use more military intervention in the region as well. In addition to the potential for a change in strategy, Trump will face challenges implementing strict sanctions, since Iran has had years to figure out how to evade them. And Trump's actions will be tempered by concerns about gasoline prices.
—Read the article from S&P Global Commodity Insights
Load Growth Focuses Power Sector on Residential Rates, Interconnection Clarity
As datacenter-driven load growth increasingly takes shape, US utilities and power providers in 2025 will aim to take advantage of those opportunities in ways that protect residential customers. A related priority is to wring clarity from regulators on how interconnection and supply deals with tech companies can proceed. In 2024, merchant generators Constellation Energy Corp. and Talen Energy Corp. signed high-priced contracts to provide electricity to Microsoft Corp. and Amazon.com Inc. for their datacenters. Struggling independent power producers' stock prices ballooned, while utilities also contemplated financial upside from AI's insatiable power needs.
—Read the article from S&P Global Market Intelligence
Listen: Next in Tech | Ep. 199: Drones Everywhere
Mysterious lights are seen in the sky above New Jersey, throwing many into a panic. Is this the current concern about drones or the War of the Worlds radio broadcast 86 years ago? There are interesting similarities and analyst Johan Vermij returns to the podcast to kick off the New Year discussing aliens, drones and the more recent furor in the Garden State.
—Listen and subscribe to the podcast from S&P Global Market Intelligence
Webinar: What's in Store for The Global Oil and Gas Industry in 2025 (Jan. 14, 2025)
Please join S&P Global Ratings sector leads for the oil and gas industry for a live interactive webinar on the key drivers and what we expect for in 2025. Look for our published outlook in advance of this webinar.
—Register for the webinar from S&P Global Ratings