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    States are spending billions on electric vehicles in battle to replace automotive capital Michigan

    Stay Tuned: Top States for Business will be revealed on July 13, 2022

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    Electric vehicle manufacturing is a major battleground as states vie for leadership in rebuilding the U.S. supply chain.
    Southern states including Georgia, North Carolina, Tennessee and Kentucky have won major plants with Ford, Rivian, Hyundai, and Volkswagen by offering huge incentives.
    Not to be outdone, Michigan is trying to retain its status as the automotive capital by offering hefty incentives of its own, including a $1 billion deal with GM.

    For as long as there has been an auto industry, Michigan has been its epicenter. But now, the industry is making clear that it is not bound by tradition.
    The move to electric vehicles — rapidly accelerating as the price of fossil fuels rises and battery technology improves — is easily the biggest shakeup in the industry since mass production began in Michigan at the start of the 20th century. And it has left Michigan’s status as the nation’s automotive capital deeply in jeopardy.

    Startups including Amazon-backed Rivian and VinFast from Vietnam are spending billions to build factories in the Southeast — Georgia and North Carolina, respectively. Korea’s Hyundai has announced that it will set up shop in Georgia. Volkswagen has a massive facility in Tennessee and is looking to expand there.
    But Michigan took a body blow last year when one of its most iconic companies — Ford — announced it would spend $11.4 billion to build a manufacturing complex dubbed “Blue Oval City” in Tennessee, and a pair of battery plants nearby in Kentucky. The company says the expansion will create nearly 11,000 jobs.

    Rendering of Ford’s $5.6 billion “Blue Oval City” campus in Tennessee.

    “No one wants to see that, right?” said Michigan Gov. Gretchen Whitmer in an interview. “I mean, it was kind of a shock.”
    It was enough of a shock to get Whitmer, a Democrat, and the Republican-controlled state legislature to agree in record time on a package of incentives aimed at matching the deals that helped other states win EV manufacturers. Georgia is doling out $1.5 billion in state and local incentives to Rivian, for example. North Carolina agreed to pay up to $1.2 billion to lure VinFast. Ford stands to collect $883 million from Tennessee and another $250 million from Kentucky.
    So, in December, just weeks after Ford’s bombshell announcement, Whitmer signed a package of legislation including a new $1 billion incentive fund for “strategic outreach and attraction.”

    If anyone in Michigan is annoyed about having to put up that kind of money just to retain an industry that is already there, they are not showing it.
    “It’s my job to make sure that we’ve got all of the resources we can focus, so that we are competitive with what other states are throwing at these companies to try to earn their investment,” Whitmer said.
    Sure enough, another homegrown Michigan company, General Motors, happily took the bait.
    In January, GM announced it would spend $7 billion to expand its electric vehicle business in the state, including a new battery plant in a joint venture with South Korea’s LG Energy Solution, and expanding GM’s electric vehicle production at its Lake Orion, Michigan, assembly plant. That work had been slated to be done in Mexico.
    In exchange, GM stands to collect around $1 billion in incentives, including $600 million from the new incentive fund.
    “The future of mobility is very much happening in the state of Michigan,” Whitmer said.
    The head of the state’s economic development arm said the new incentives will help bolster Michigan’s sales pitch as it tries to win more business.
    “Michigan is a state that put the world on wheels, created Motown, tremendous advances in the life sciences and medical devices. We’re still that state of inventiveness,” said Quentin L. Messer, Jr., CEO of the Michigan Economic Development Corporation.

    But one site selection consultant, who says he worked on several electric vehicle deals, warns that most of the big deals have already been done.
    “I think we are at peak EV in terms of the frenzy,” said Tom Stringer, managing director in charge of the site selection and incentives practice at BDO in New York. “I think you see this reflected in the stock prices. The froth is off the market. Now, it’s ‘prove it.’ Do customers want these vehicles? Can these manufacturers go to scale and deliver?”
    Stringer said that all the states have been careful to structure their incentives so the companies must first create the jobs before they can cash in.
    “There have been no giveaways in this industry, which is great for from a taxpayer standpoint,” he said.
    Still, subsidy watchdog Greg LeRoy of the nonprofit group Good Jobs First believes states have gotten caught up in the hype, to the potential detriment of the taxpayers.
    “It’s understandable, governors want to get in on the ground floor of a rising industry, electric vehicles, in the future.” But, he said, “spending a billion dollars on a single facility, you’re never going to break even from a tax revenue point of view.”

    United Auto Workers in the EV era

    Another Michigan institution with a major stake in the EV battle between the states is the United Auto Workers.
    “We’re headquartered here, we were founded here,” said UAW President Ray Curry in an interview. “We’re always going to advocate for Michigan. It’s always about the home team.”
    Regardless, the union is still seeking to organize the facilities in less union-friendly states. It has had some successes, including at Ford’s Blue Oval City complex. But most of the other plants, like Rivian in Georgia, are non-union.
    Even in Michigan, there are no guarantees. GM’s battery joint venture, called Ultium Cells, is non-union, at least for now. Curry is vowing to change that.
    “It’s a very critical time for the UAW,” he said. “This transformation piece is about our future. It’s about 86-plus years of longstanding history.”
    Messer, the state economic development official, believes Michigan’s deep union history may have hurt the state due to what he said are misconceptions among business leaders.
    “The unions have been very focused on talent development, workforce development, getting young people into the trades,” he said. “These are critically important things that I think people don’t appreciate.”
    Stringer said many companies are taking a new look at unions, no longer strictly as adversaries, but also as sources of badly needed talent.
    “I think the ability to get skilled workers, whether they’re union or non-union, is critical,” he said. “If unionized states can show that value proposition, that if you hire our individuals, they’re going to be better, faster, more effective over the long term, those states are winning projects.”  More

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    Casino industry urges federal prosecutors to crack down on illegal operators

    The American Gaming Association says illegal operators are a “serious threat.”
    The industry trade group is asking Attorney General Merrick Garland and the Department of Justice to enforce existing laws.
    FanDuel’s CEO says unregulated, offshore sites have an unfair advantage because they don’t pay state and local taxes and don’t invest in compliance or lobbying for the expansion of sports gambling in the U.S.

    American casinos, gaming companies and lawmakers are calling on federal prosecutors to crack down on illegal offshore gambling sites that they say are evading consumer protection regulations. 
    The push comes as sports gambling has quickly expanded in the U.S. in recent years, with more than 30 states and Washington, D.C., allowing it.

    “What maybe at one point in time was a relative nuisance, is now becoming a serious threat to the legal, licensed gaming industry,” Bill Miller, CEO of the American Gaming Association, told CNBC in a recent interview.
    In a letter to Attorney General Merrick Garland this spring, the AGA asked the Justice Department to investigate well-known offshore gambling sites, which it said are openly violating federal and state laws and brazenly paying for advertising that targets U.S. gamblers.
    Then on June 29, more than two dozen members of Congress also sent a letter calling on the Justice Department to investigate and prosecute illegal offshore sportsbooks.
    The Justice Department has not yet responded to the AGA’s letter or to CNBC’s request for comment.
    The challenge for the gaming industry has escalated as online searches for offshore sportsbooks last year rose faster than searches for the regulated operators, according to the AGA. More than half of gamblers say they still wager using offshore sites like Bovada, MyBookie and BetOnline, according to a survey by the association.

    “There are hundreds of illegal or unregulated operators who are taking sports bets every single day. We estimate there’s potentially $15 billion going through some of these offshore operators,” FanDuel CEO Amy Howe told CNBC.
    Legal operators including FanDuel, owned by Flutter, DraftKings, Caesars and BetMGM, co-owned by MGM Resorts and Entain, spend billions of dollars on licensing, marketing and lobbying for the legalization of sports betting in new states.
    The companies say offshore operators compete for customers without having to invest in licensing or lobbying or paying state and local taxes.
    “It gives them an unfair competitive advantage. They can offer better odds to the consumer,” Howe said. She added that many players don’t even know when they’re using illegal betting sites. 
    Some gamblers used offshore bookies for years before the Supreme Court overturned the Professional and Amateur Sports Protection Act in 2018 and cleared the way for states to legalize sports betting.

    Professional gambler Justin Werlander says many high rollers use offshore gambling sites because they allow bigger transactions and accept credit.
    Courtesy: Justin Werlander

    New Jersey gambler Justin Wunderler said he used to bet on sports through offshore sites, starting in high school, when that was the only option for sports wagering. Since then, he’s been burned a number of times when he couldn’t withdraw money from the offshore bookies.
    “I got kind of screwed,” he said. “They ran away with my winnings, and that’s it. Sometimes bookies don’t pay out when you win.”
    Howe said unregulated sites frequently ignore the responsible gambling safeguards U.S. operators have in place to maintain their licenses. She said 25% of FanDuel’s customers who switch from illegal operators do so because they weren’t paid their winnings.
    Yet some experienced gamblers continue to use unregulated sites, drawn by more advantageous odds or promotions or because the sites let high rollers bet on credit. Plus, some frequent gamblers might find their bet limits restricted at legal sportsbooks in the U.S.
    Wunderler said the offshore sites allow far higher limits, including for the “sharks,” who are experienced, savvy gamblers. “Some of them could go up to $50,000, while some of these legal sites you can only bet $120,” he said.
    In states that have legalized sports betting, online searches for offshore betting sites have declined, according to the gaming association. But the offshore site Bovada still accounts for half of sports-betting-related searches nationwide, the AGA told CNBC.
    Miller of the AGA said the gaming industry is looking to partner with Google and other internet search engines to stop turning up results with illegal sites.

    The casino industry is also asking law enforcement to crackdown on unlicensed gambling machines, often placed in taverns, mini-marts and gas stations.
    Courtesy: American Gaming Association

    The casino industry is also asking law enforcement to crackdown on unlicensed gambling machines, often found in taverns, mini-marts and gas stations. They look, sound and play like slot machines, but the manufacturers label them “skills-based” games to avoid gambling regulations.
    “Why that matters is they’re not tested. There’s no quality assurance around odds,” said Miller. And if the machines don’t pay out, he said there’s rarely accountability from the host location.
    Aristocrat manufactures the popular Buffalo slot machines, as well as many others, that are licensed in 300 U.S. jurisdictions. Its CEO, Hector Fernandez, said unregulated manufacturers have stolen designs and other intellectual property from the company.
    Fernandez said he’s also concerned about the lack of consumer protections with unregulated games.
    The industry is working to educate players about unregulated operators, although it says that it can be difficult to tell the difference between legal and illegal operators.
    “Educating the public that is generally unaware of whether they’re betting on illegal sites or illegal sites is a job for all of us,” Miller said.
    Disclosure: CNBC parent Comcast and NBC Sports are investors in FanDuel.

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    Gasoline futures are dropping, which could mean more relief at the pump

    Prices at the pump have retreated from June’s never-before-seen levels, but remain stubbornly high.
    Some relief could be in sight with gasoline futures down more than 10% this week.
    Patrick De Haan, head of petroleum analysis at GasBuddy, said the national average could drop to between $4 and $4.25 by mid-August.

    Brie Olootu pumps gas at an Exxon Mobil gas station on June 09, 2022 in Houston, Texas. Gas prices are breaching record highs as demand increases and supply fails to keep up.
    Brandon Bell | Getty Images

    Prices at the pump have retreated from June’s never-before-seen levels, but remain stubbornly high.
    Some relief could be in sight. U.S. gasoline futures have dropped more than 11% this week, following a decline in oil prices as recession fears spark concerns around a drop-off in demand.

    The national average for a gallon of gas stood at $4.75 Thursday, according to AAA. That’s down from the record $5.016 hit on June 14. But prices are still $1.62 higher than this time last year.
    California has the highest state average at $6.185. The state’s Mono county is currently averaging $7.224 per gallon. South Carolina’s average of $4.257 is the lowest in the U.S.
    Patrick De Haan, head of petroleum analysis at GasBuddy, said the national average could drop to between $4 and $4.25 by mid-August, barring a price spike in oil.
    West Texas Intermediate crude, the U.S. oil benchmark, slid below $100 per barrel on Tuesday for the first time since mid-May. Oil makes up more than half the cost of gasoline, with refining expenses and taxes, among other things, also influencing prices.
    On Thursday WTI traded around $99.51 per barrel, while gasoline futures stood 1.2% higher at $3.27 per gallon.

    Prices at the pump tend to rise faster than they fall, as stations look to lock in profits in an ultra-competitive business.
    “When [oil] prices trend up, stations are usually 2-5 days behind price increases until the upward trend stops,” noted De Haan. “That means for weeks they can be behind on raising prices. When prices do finally fall, they lower prices slowly to recapture margins from when prices rose. The longer and steeper upward trend, the slower stations likely lower prices when there’s finally relief,” he added.
    But there were some positive signs of easing. De Haan counted 2,535 gas stations with prices below $3.99 on Thursday. Even though that’s a small fraction of 145,000 gas stations in the country, De Haan expects the number could double or triple in the next week or so.
    Record prices have been a major contributor to rampant inflation, and a headache for the Biden administration ahead of November’s midterm elections.
    President Joe Biden called on Congress in June to temporarily suspend the federal gas tax, but such a move has garnered little support from lawmakers.
    Looking forward, some Wall Street firms believe oil prices will regain prior highs, which would mean only temporary relief at the pump. Goldman Sachs is calling for Brent crude, the international oil benchmark, to hit $140 this summer. It traded at $101.81 Thursday. Meantime Citi has been an oil bear for some time, and on Tuesday said Brent could hit $65 by the end of the year should the economy tip into recession.
    Other factors that could send gas prices higher again include a hurricane or any refining-related issues, with refineries already running near peak capacity.
    Andy Lipow, president of Lipow Oil Associates, forecasts the national average will drop to $4.50. Without any major disruptions, prices could fall even further.
    “If we can get through the next six weeks without a major hurricane, we are looking at $4.40,” he said.

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    Stocks making the biggest moves premarket: GameStop, Seagen, Virgin Galactic and more

    Check out the companies making headlines before the bell:
    GameStop (GME) – GameStop rallied 7.8% in the premarket after the videogame retailer declared a 4-for-1 stock split. Trading on a split-adjusted basis will begin on July 22.

    Seagen (SGEN) – Seagen gained 4.5% in premarket trading after the Wall Street Journal reported that Merck (MRK) is in advanced talks to acquire the biotech company for more than $200 per share, or about $40 billion.
    Virgin Galactic (SPCE) – The space tourism company’s stock rallied 3.7% in premarket action, after announcing a partnership with a Boeing (BA) subsidiary to build motherships that carry Virgin rocket ships aloft.
    Meridian Bioscience (VIVO) – The maker of diagnostic test kits agreed to be acquired by a consortium consisting of Korean diagnostics company SD Biosensor and Korean private equity firm SJL Partners for $34 per share in cash, or about $1.5 billion.
    Bed Bath & Beyond (BBBY) – Bed Bath & Beyond jumped 6% in the premarket following the disclosure of several insider purchases. Interim CEO Sue Gove bought 50,000 shares of the housewares retailer’s stock, while board members Harriet Edelman and Jeff Kirwan each bought 10,000 shares.
    Boston Beer (SAM) – Boston Beer was downgraded to “sector perform” from “outperform” at RBC Capital Markets, which expects the brewer of Sam Adams beer and Truly hard seltzer to cut its volume guidance once again.

    Helen of Troy (HELE) – The health care and beauty products company reported an adjusted quarterly profit of $2.41 per share, beating the $2.16 consensus estimate, with revenue also topping analyst forecasts. However, the company noted a slowdown in demand in some of its categories, as consumers shift spending patterns to deal with inflation, and cut its full-year outlook. The stock slid 6.7% in the premarket.
    China EV Makers – Shares of China-based electric vehicle makers rose after government officials said they would consider extending a tax break for EV buyers. Li Auto (LI) rose 1% in the premarket, with Nio (NIO) up by 1.5% and Xpeng (XPEV) jumping 3.3%.

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    What a tycoon’s trial says about the rot in China’s financial system

    Insiders have been waiting for half a decade for official word on the whereabouts of Xiao Jianhua, an erstwhile billionaire financier. So far they have heard nothing, not even as his trial kicked off in a Shanghai courtroom on July 4th. All details of the charges he faces have been kept secret. The only official recognition of the trial itself has been from Canada’s foreign ministry (Mr Xiao is a Canadian citizen), which says its diplomats have been denied entry to the proceedings.For leaders in Beijing, the secrecy is necessary because the case presents an uncomfortable picture of the Chinese political and financial system. Not long ago Mr Xiao counted some of China’s most powerful families as clients. His dealings have been linked to many elite families including, according to the New York Times, that of Xi Jinping, the president. This alone makes his trial extremely sensitive.Mr Xiao was abducted by Chinese agents from his suite in the Four Seasons hotel in Hong Kong in early 2017, in violation of local law. He has been held for five years at an undisclosed location in Shanghai as he helps financial authorities untangle his business empire. Mere recognition that he is in China is a prickly fact officials would prefer to sidestep. Many of the details of Mr Xiao’s case may never be revealed to the public. But his tribulations have already laid bare some of the hidden risks lurking within China’s financial system. His conglomerate, Tomorrow Group, once controlled a vast array of assets from mining and property to banking and insurance. Over the years his network built up huge debts, which quickly turned into financial losses after he was abducted. The Chinese state was forced to take over his bank, Baoshang Bank, in 2019 in order to prevent spillovers to the wider system. Several other institutions were also eventually bailed out or seized in what posed one of the biggest threats to China’s financial system in years. Once-hidden risks such as these are now popping up in other corners. Poor oversight of smaller lenders has led to an accumulation of bad debt. In many cases tycoons such as Mr Xiao have been allowed to control banks and use them to lend to their own ventures, or to friends.Central auditors recently discovered that a handful of small banks had understated their bad debts by a total of more than 170bn yuan ($25bn). The central bank has said there are more than 300 high-risk institutions in the country. All this is starting to test public trust in the thousands of small lenders. Bank runs are occurring more frequently. In May depositors at several rural banks in Henan province discovered they could no longer withdraw billions of dollars in funds, leading to protests in the provincial capital of Zhengzhou. The banks are linked to a property tycoon. Covid-19 is making the problems worse. Lockdowns are expected to create a new wave of troubled loans worth 1.1trn yuan this year alone. Adam Liu of the National University of Singapore recently noted that a “systematic central bail-out is increasingly foreseeable”. Political intrigue can be contained in a closed court. But the financial spillovers are harder to keep secret. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

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    Are central banks in emerging markets now less of a slave to the Fed?

    In america and Europe, central banks turned only recently from encouraging economic recovery to battling stubborn inflation. In some emerging markets this shift began much earlier. Brazil’s central bank raised interest rates by three-quarters of a percentage point back in March 2021, 15 months before the Federal Reserve did the same. It foresaw that fiscal stimulus in the rich world raised the risk of inflation, which would upset financial markets and complicate life for emerging economies. The governor of Russia’s central bank, Elvira Nabiullina, warned over a year ago that the prospect of sustained inflation was likelier “than perceived at first glance”. The pandemic had changed spending patterns, she pointed out. No one knew if the shift would last. But that very uncertainty was discouraging firms from investing to meet demand.These kinds of comments look prudent and prescient in hindsight. Indeed, with some notable exceptions, central banks in emerging markets have won increased respect in recent years. Their monetary-policy frameworks have improved, according to a new index (based on 225 criteria) developed by the imf. Their frameworks are more coherent (their targets serve sensible objectives), transparent (they say what they are doing) and consistent (they do what they say). According to calculations by the World Bank, expectations of inflation in emerging markets in 2005-18 were about as well-anchored as they had been in rich countries in 1990-2004. Inflation also became less sensitive to falls in the exchange rate. Your columnist remembers a sign outside a café in the Malaysian state of Penang in 2015. “Don’t worry!” it said. “As our ringgit falls, coffee price remains the same.”More people expected emerging markets to succeed in their fight against inflation, which in turn made success more likely. This enhanced credibility raised enticing possibilities. Perhaps their central banks, like those in the rich world, would not need to worry about each depreciation and every inflation spike. If so, perhaps they could pay less slavish attention to two forces that had bedevilled them in the past: namely, the global price of capital, which is dictated by the Fed, and that of commodities.When the Fed tightens monetary policy, trouble has often followed for emerging markets. In 2013, for example, Ben Bernanke’s talk about reducing (or tapering) the pace of the Fed’s bond-buying sparked the “taper tantrum”, a big sell-off in Brazil, India, Indonesia, South Africa and Turkey. Things are different in the rich world. When the Fed tightens, central banks in Britain, the euro area and Japan do not feel obliged to raise interest rates. Their currencies may fall. But unless these depreciations look likely to raise inflation persistently above their targets, they are ignored. Likewise, when the price of oil goes up, so does the cost of living. Yet consumer prices need not go on rising, unless people demand higher wages in response, putting further upward pressure on prices in a self-reinforcing spiral. In both cases, central banks can ignore a one-time increase in prices. The more securely inflation expectations are anchored, the more leeway central banks enjoy. The past year has subjected emerging-market anchors to one severe test after another. Global interest rates have risen in anticipation of a faster pace of tightening in America, as the Fed wrestles with a credibility test of its own. And emerging markets have suffered remorseless increases in the prices of food and fuel, which make up more of their consumers’ shopping bills than they do in the rich world. According to the World Bank, food and energy account for over 60% of South Asia’s consumer-price index.Some central banks have been able to “look through” the rise in food and fuel prices. One example is Thailand’s central bank, which has done nothing even as inflation has surged. It insists that “medium-term inflation expectations remain anchored,” and it wants to make sure the economic recovery gains traction. But other emerging markets, including Mexico and Brazil, felt compelled to raise interest rates forcefully long before their economies fully recovered. They were quicker to respond than their counterparts in mature economies, point out Lucila Bonilla and Gabriel Sterne of Oxford Economics. But “that’s partly because they had to be.” Much of their tightening had to keep up with a worrying rise in inflation expectations. They have stayed ahead of the curve. But the curve has been brutally steep. The Fed has been a “somewhat less dominant” force in this emerging-market tightening cycle than in the past, note Andrew Tilton and his colleagues at Goldman Sachs. Fears of a second taper tantrum have not been realised. One reason may be that a lot of footloose foreign capital had already left during the pandemic. Moreover, some of the countries that might otherwise be vulnerable to Fed tightening, especially those in Latin America, are also big commodity exporters that have benefited from higher prices for their wares, point out Ms Bonilla and Mr Sterne. Following the leader The Fed, however, is far from finished. And inflation, already rising in emerging markets, may become more sensitive to any falls in domestic currencies. “It’s like adding combustible material to a fire,” says David Lubin of Citigroup, a bank. A depreciation may not be enough to ignite inflation. But once it is already burning, a weaker exchange rate could make it hotter. A Malaysian café that is already revising its prices to keep up with costlier commodities may be more likely to factor in a weaker ringgit. Much therefore depends on how far the Fed has to go to restore its anti-inflation credentials and contain price pressures in America. The harder the Fed must work to meet the test of its own credibility, the more trouble emerging markets will face. Their hawkish pivot began much earlier than in America, but it probably cannot end much sooner. This year has reminded emerging markets that for all their progress, they are not yet blessed with fully credible central banks. It has taught America the same lesson. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

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    Do cheaper commodities herald a recession?

    The war in Ukraine throttled a flow of raw materials that was already being restricted by logistical logjams, bad weather and other disruptions. The result was soaring prices. In March a barrel of Brent crude oil hit $128, and European gas prices were three times higher than they had been just two months earlier. Copper, a trendsetter for all industrial metals, hit a record price of $10,845 per tonne. Wheat, corn and soyabean prices rose by double-digit percentages. The surge turbocharged consumer-price inflation, which, by challenging central banks’ credibility, has given them another reason to raise interest rates. Yet in recent weeks the wind has changed. Oil is trading at around $100 a barrel. Copper has dropped below $8,000 a tonne for the first time in 18 months; metals in general have fallen by 10-40% since May. Agricultural-commodity prices are back at pre-war levels. (Europe’s gas prices, which have continued to rise as Russia has cut supply, are bucking the trend.) The slide may fuel hopes that inflation will soon be defeated. But the victory might prove hollow—if there is one at all. One explanation for tanking commodity prices is that worries about a recession are taking hold. In this view, rising interest rates are cooling the market for new homes, dampening demand for building materials such as copper and wood, and lowering spending on things like clothing, appliances and cars, which in turn hurts everything from aluminium to zinc. Moreover, some of the supply constraints that contributed to price rises earlier in the year have eased—the weather in grain-growing regions has improved, for instance. Meanwhile, the un is trying to end a blockade on Ukraine’s shipments of wheat. For central banks, this is mixed news. It suggests that inflation may be beaten even though they have only just begun tightening monetary policy. True, this might be accompanied by a recession, but, because inflation would be tamed without interest rates having to rise too much, the downturn would, perhaps, at least be shallow. Worries about the economy are not the only force pushing down prices. Much of the money that has fled commodities, say industry experts, belongs not to physical traders but to financial punters. In the week to July 1st about $16bn flowed out of commodity-futures markets, bringing the total for the year so far to a record $145bn, according to JPMorgan Chase, a bank. In part that reflects rising interest rates. In May America’s long-dated real rates turned positive for the first time since 2020. That made commodities, which do not offer a yield, less attractive to speculators. This suggests that commodity-price inflation may not have been slayed. Movements driven by real-rate swings are usually short-lived, says Tom Price of Liberum, an investment bank. The last time one happened, in 2013, prices stabilised within weeks. Prices are also still sensitive to further supply disruptions. Commodity stocks remain 19% below historical average at a time of tight production, meaning there is less of a buffer against shocks. Even as some supply problems have eased, triggers for others abound. Energy prices are still vulnerable to Vladimir Putin’s whims. Pricey energy, in turn, would cause metals producers to trim output further, making production tighter still. And the return of La Niña, a harsh climate pattern, for the third consecutive year could disrupt grain harvests worldwide. Prices, in other words, might stay high even if recession hits. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

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    Shell to build Europe's 'largest' renewable hydrogen plant to help power Dutch refinery

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    Shell says it wants to “become a net-zero emissions energy business” by the year 2050, but the company remains a major producer of oil and gas.
    Its aims for a renewable hydrogen plant in the Netherlands represent the latest attempt by multinational firms to lay down a marker in the sector.
    Shell’s Anna Mascolo says renewable hydrogen “will play a pivotal role in the energy system of the future.”

    On Wednesday, Shell said the Holland Hydrogen I facility would be “Europe’s largest renewable hydrogen plant” when operations start in 2025. Shell is one of several big firms looking to lay down a marker in the sector.
    Ina Fassbender | AFP | Getty Images

    Plans to build a major hydrogen plant in the Netherlands will go ahead following a final investment decision by subsidiaries of oil and gas giant Shell.
    In an announcement Wednesday, Shell said the Holland Hydrogen I facility would be “Europe’s largest renewable hydrogen plant” when operations start in 2025.

    According to Shell, the 200 megawatt electrolyzer will be located in the Port of Rotterdam, Europe’s largest seaport, generating as much as 60,000 kilograms of renewable hydrogen every day.
    Hydrogen has a diverse range of applications and can be deployed in a wide range of industries. It can be produced in a number of ways. One method includes using electrolysis, with an electric current splitting water into oxygen and hydrogen.

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    If the electricity used in this process comes from a renewable source such as wind or solar then some call it “green” or “renewable” hydrogen.
    Shell said the electrolyzer in the Netherlands would use renewable power from the Hollandse Kust (noord) offshore wind farm, a 759 MW project set to be operational in 2023. Shell is a part-owner of the wind farm.
    The hydrogen generated by the plant will be funneled to the Shell Energy and Chemicals Park Rotterdam using a new hydrogen pipeline called HyTransPort.

    The idea is that this renewable hydrogen “will replace some of the grey hydrogen” — which is produced using fossil fuels — used at the site. “This will partially decarbonise the facility’s production of energy products like petrol and diesel and jet fuel,” Shell said.
    In a statement, Anna Mascolo, who is executive vice president for emerging energy solutions at Shell, said renewable hydrogen would, “play a pivotal role in the energy system of the future and this project is an important step in helping hydrogen fulfil that potential.”

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