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Uncertainty over European energy sources and energy supplies complicates BASF’s 2023 budget planning

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who supplies natural gas to europe

Uncertainty over European energy sources and the outlook for Europe’s energy supplies is complicating BASF’s budget planning for 2023, the German chemical company’s Chief Financial Officer, Hans Ulrich Engel said.

BASF is considering at least one more scenario in addition to the traditionally developed, optimistic and pessimistic scenarios, Engel told The Wall Street Journal.

Who supplies natural gas to Europe? 

The company uses natural gas to generate electricity for its plants, and its energy costs have increased several times over as gas prices have skyrocketed. In the second quarter of 2022, they were 800 million euros higher than in the same period of the previous year, totaling 1.1 billion euros.

“Now we have days in Europe when gas prices go up and down by 50 euros per megawatt hour. We see huge fluctuations in short periods of time,” Engel notes.

The day-ahead, TTF spot gas price in the Netherlands on Oct. 7 is 119 euros per MWh, down substantially from levels at the end of August when it was 300 euros per MWh, the WSJ said.

Forecasting tools based on artificial intelligence have become more important in the current operating environment, said Engel, who is also BASF’s director of digital technology. The company has begun updating forecasts more often, as well as analyzing daily sales and orders to estimate future energy needs, he said.

BASF is also working on replacing gas with other energies and ramping up power generation with alternative sources, but so far the effect of these measures is negligible. The company expects to be able to substitute only about 7 to 8 percent of its gas consumption, Engel said. According to him, BASF is preparing for possible gas shortages but is confident that it will be able to maintain its main plant in Ludwigshafen even if Germany is forced to ration its electricity consumption.

Earlier, we reported that private investors are selling off shares at the fastest pace since 2020.

Forex

Inflation rate in the eurozone is close to a peak – ECB chief economist

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inflation rate in the eurozone

Inflation rates in the eurozone are close to a peak, said Philip Lane, chief economist at the European Central Bank (ECB).

“It is too early to conclude that inflation has peaked, but I can say with confidence that we are close to peaking,” Lane told Italian newspaper Milano Finanza.

“We expect that further interest rate hikes will be needed, but we have already done a lot,” Lane said. – The starting point is different now, given that rates have already been raised by 200 basis points (bps). We will consider the scale of what has already been done.

Euro inflation rate forecast

The ECB raised all three key interest rates by 75 bps at its October meeting. The benchmark lending rate was raised to 2%, the deposit rate to 1.5% and the rate on margin loans to 2.25%. Since July this year, the ECB has raised key rates by 200 bps.

Experts expect that in December the rate on loans will be raised to at least 2% from 1.5%. Today it is worth noting that in the Euro / U.S. Dollar pair the European currency started to strengthen a bit. 

According to preliminary data from the Statistical Office of the European Union, inflation in the Eurozone slowed to 10% y/y in November from 10.6% in October. A decrease in the growth rate of consumer prices was recorded for the first time in 1.5 years. According to Lane, an acceleration in inflation in early 2023 cannot be ruled out.

“After the first few months are over, in the spring or summer, we are likely to see a major slowdown in inflation. However, it will take time for it to slow down to the ECB’s 2% target,” Lane said.

Asked whether inflation could slow to 6-7% in 2023, he said that “initial easing as a result of rate hikes will bring the rate of price growth to about that level,” and the slowdown will continue thereafter.

Earlier we reported that the Eurozone unemployment rate fell to 6.5% in October and the EU unemployment rate fell to 6.0%.


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Eurozone annual inflation rate slowed to 10% in November

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eurozone inflation rate

Eurozone inflation rate rose 10% now. Inflation has slowed down from 10.6% in October, when the rate was at its highest since the start of calculations. Analysts polled by Trading Economics had expected inflation to slow to 10.4 percent.

Eurostat Eurozone inflation – current data

Consumer prices declined by 0.1% compared to the previous month. Consumer prices excluding volatile factors such as energy, food and alcohol (CPI Core Index tracked by the ECB) rose 5% year-on-year in October after rising the same amount in October.

Energy prices slowed to 34.9% in November after rising 41.5% in October. Manufactured goods prices rose 6.1%, the same as a month earlier. The U.S. is about the same, putting pressure on stock markets and even Apple stock prices today.

The cost of food, alcohol and tobacco products rose 13.6% after an increase of 13.1% in October. Services rose 4.2% (+4.3% a month earlier).

The highest inflation in annual terms was recorded in Latvia (21.7%), Estonia, and Lithuania (21.4%). The lowest price growth was observed in Spain (6.6%), France (7.1%) and Malta (7.2%).

Earlier we reported that the dollar is getting cheaper against major currencies.

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Dollar is getting weaker against major currencies

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the dollar is going to crash

The dollar is getting weaker against major currencies in trading Thursday morning after U.S. Federal Reserve (Fed) Chairman Jerome Powell spoke the day before.

During a speech at the Brookings Institution on Wednesday, Powell reiterated that the Fed could slow the rise in the benchmark rate as early as December. “The time to moderate the pace of rate hikes may come as early as the next meeting,” Powell said.

The Fed chair, meanwhile, tried to balance those words with “hawkish” signals. Market Watch notes. He said that the U.S. Central Bank will have to raise the rate higher than could be expected a few months ago. Also, Powell made it clear that the issue of rate cuts is irrelevant at the moment. Against this background, the stock market and Tesla stock prices today in particular rose.

Another Fed official, Board of Governors member Lisa Cook, is confident that the regulator needs to keep raising the rate because inflation is still too high. “We’ve started to get more favorable inflation data. But I would be cautious about drawing big conclusions on just one month’s worth of data,” Cook said during a speech at the Detroit Economic Club.

Is the dollar going to crash? It’s premature to make such statements. So far, the euro has gained 0.36% against the dollar to $1.0443 against $1.0406 at the close of the session on Wednesday. The dollar/yen exchange rate declined 1.14% to 136.50 yen from 138.07 yen at the end of the previous session. The pound gained 0.31% to $1.2095against $1.2058 the day before.

The ICE-calculated index showing the dynamics of the US dollar against six currencies (euro, Swiss franc, yen, Canadian dollar, pound sterling and Swedish krona) is down 0.4%, while the broader WSJ Dollar Index is losing 0.6%.

Earlier we reported that unemployment in the Eurozone fell to 6.5% in October and in the EU to 6.0%.

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