Finance

A paramedic prepares doses of AstraZeneca vaccine for patients at a walk-in COVID-19 clinic inside a Buddhist temple in the Smithfield suburb of Sydney on August 4, 2021.
Saeed Khan | AFP | Getty Images

Check out the companies making headlines in early trading.
AstraZeneca — Shares of the British pharmaceutical company gained more than 2.7% in premarket trading after the company reported positive results for its drug Dato-DXd in a trial for treating a common type of breast cancer.

Wayfair — Shares gained more than 2% after Bernstein upgraded home merchandiser to market perform from underperform. The firm cited improving revenue growth and margin commentary.
Chinese e-commerce stocks  —  U.S. listed shares of Alibaba and PDD Holdings added nearly 4% in premarket trading, while JD.com rose 3.3%. Bloomberg reported that China is considering easing rules that cap foreign investment in domestic publicly traded companies.  
Seagen — Shares of the biotech firm rose nearly 4% in premarket trading after the company reported positive topline results from a clinical trial of treatment for patients with previously untreated bladder cancer. The results showed the treatment improved both overall survival and progression-free survival, compared with chemotherapy.
Deere — The tractor manufacturer fell around 1% after Canaccord Genuity downgraded shares to hold from buy, citing slowing growth for large agricultural equipment and normalizing dealer inventories.  
Arm Holdings — Shares of the chip designer added 1.3% during premarket trading. The stock jumped nearly 25% during its public trading debut but is now trading just above its $51 IPO price. Susquehanna initiated a neutral rating on the company in a Friday note.

Charter Communications – Shares gained about 2% after Wells Fargo upgraded Charter Communications to an overweight rating, saying that its mobile roll-to-pay offering and rural growth should contribute to accelerating EBITDA and free cash flows.
Ralph Lauren — The clothing brand’s shares ticked up nearly 1% after Raymond James initiated an overweight rating in a note Thursday evening. Analyst Rick Patel forecasts 20% upside potential from where shares closed on Thursday. 
Yeti — Shares fell about 0.4% premarket. Jefferies on Friday called Yeti a “best-in-class” favorite in drinkware, even as the market expands to new entrants.
— CNBC’s Pia Singh, Sarah Min, Samantha Subin, Tanaya Macheel, Brian Evans and Michelle Fox contributed reporting More

People flocked to a flagship Apple store in downtown Beijing on Friday morning to pick up the iPhone 15.
As of 10 a.m. Beijing time on Friday, iPhone 15 sales via JD’s Dada one-hour delivery app surged by 253% versus that of the iPhone 14 last year, Dada said.
Counterpoint Research’s most optimistic outlook for Apple in China predicts a 4% year-on-year decline in Apple shipments in the fourth quarter.

Hundreds of people lined up at a flagship Apple store in Beijing to pick up the new iPhone 15 when deliveries began on Friday.
CNBC | Evelyn Cheng

BEIJING — People flocked to a flagship Apple store in downtown Beijing on Friday morning to pick up the latest iPhone, despite market worries that nationalistic fervor would dampen the U.S. company’s sales in China.
Many also ordered the phone for delivery. As of 10 a.m. Beijing time on Friday, iPhone 15 sales via JD’s Dada one-hour delivery app surged by 253% versus that of the iPhone 14 last year, Dada said.

In the first 10 minutes after deliveries began at 8 a.m., the company said 25,000 phones were on their way to customers. Dada said this year it is working with 4,600 authorized Apple retailers in China — up from 500 in 2020.

Apple started delivering the iPhone 15 on Friday after pre-orders began on Sept. 15. This year’s release comes as the smartphone giant faces economic and political headwinds in its third-largest market.
About two weeks prior to Apple’s launch event this month, Chinese telecommunications giant Huawei quietly released its Mate 60 Pro in China with a reportedly 5G-capable chip from SMIC. That’s despite U.S. sanctions since 2019 which have almost wiped out Huawei’s smartphone business.

However, for people waiting in line at the Apple store, there was a general ambivalence about the phone brand.
One man, surnamed Zhao, said he’d wanted to buy Huawei’s new phone, but it sold out the moment he tried to buy it online. “Since I couldn’t get the Mate 60 I decided to get the new iPhone instead,” he said in Mandarin, translated by CNBC. “I don’t think there’s too much of a difference.”

I don’t feel it’s patriotic to get one brand or another. Don’t Huawei and Apple both pay taxes to China?

iPhone buyer in China

Zhao declined to share his first name due to the sensitivity of the matter. He was 10th in line at the Apple store in Sanlitun, Beijing, and said he arrived at 6:30 a.m. The first person in line, who also requested anonymity, said he’d arrived at 1 a.m.
Huawei’s phone might slow down in about two to three years, while Apple’s system might last a bit longer — maybe four to five years, according to Zhao. “But I’m going to change to a new phone in two to three years anyway, so it’s about the same to me.”
“I don’t feel it’s patriotic to get one brand or another. Don’t Huawei and Apple both pay taxes to China? Apple probably pays more,” he said. Zhao said he was planning to upgrade from his Huawei device to buy the iPhone 15 Pro Max, which has a list price of 9,999 yuan ($1,370).

Stock chart icon

Share slide

In early September, The Wall Street Journal reported, citing sources familiar with the matter, that central government employees were ordered not to bring iPhones to the office or use them for work. It was not clear how new or wide-reaching any such order was. Bloomberg, citing sources familiar with the situation, also reported a ban on iPhones at work could spread to other state-affiliated agencies.
China’s Ministry of Foreign Affairs said the country hadn’t issued bans on the purchase or use of Apple iPhones.

Based on the current pre-ordering results, we do see that Apple will still be resilient in its sales, though it faces challenges…

senior researcher at IDC

Apple did not immediately respond to a CNBC request for comment on the reports or its iPhone 15 sales in China.
Shares of Apple, the largest U.S. stock by market capitalization, are down by about 7% so far this month.

Strong iPhone 15 pre-sales

Apples’ iPhone 15 pre-sales in China pointed to robust demand. Earlier this week, CNBC checks of online shopping sites JD.com and Alibaba’s Tmall showed the more expensive iPhone 15 Pro and Pro Max were essentially sold out, with delivery wait times of about a month or more.
“Based on the current pre-ordering results, we do see that Apple will still be resilient in its sales, though it faces challenges like Huawei’s new products and the absence of the usual buzz on China’s social media,” said Will Wong, senior researcher at IDC, a market research firm.
“We are expecting a 5%-6% YoY growth for Apple’s overall shipments” in China in the second half of this year, he said. However, he noted pre-order results don’t necessarily represent the final sales number and that last year, China was still dealing with Covid-19.

Consumers living outside big cities such as Beijing, Shanghai and Hangzhou also wanted to buy the new iPhone. Orders from less developed cities surged by six times versus last year, according to Dada.

Apple’s China headwinds

China accounts for nearly 20% of Apple’s revenue. The company’s Greater China net sales rose by nearly 8% year-on-year to $15.76 billion in the second quarter, versus a 5.6% decline in the Americas market to $35.38 billion.
That’s despite economic data that’s pointed to a broader slowdown. China’s retail sales rose by 4.6% in August from a year ago, following 2.5% growth in July.
On top of slowing growth in China, the market is highly competitive.
Huawei is set to hold a product launch on Monday. Foldables, a category Apple has yet to enter, have also grown popular in China.

Read more about China from CNBC Pro

Counterpoint Research’s most optimistic outlook for Apple in China predicts a 4% year-on-year decline in Apple iPhone shipments in the fourth quarter.
The firm’s worst-case scenario predicts a 15% year-on-year decline.
“We must acknowledge the existence of initial supply constraints, particularly for the Pro series. This has manifested in longer delivery times for pre-orders over the past two days,” Tarun Pathak, research director at Counterpoint Technology Market Research, said in an email Wednesday.
“If these supply issues persist without a prompt resolution, it would necessitate us leaning towards the bearish case.”

Pathak noted that Huawei’s decline allowed the iPhone to “attract a massive number of consumers” in the $600-plus price category, and said iPhone 11 and iPhone 12 users would likely want to upgrade to the iPhone 15.
The firm said iPhone 15 pre-sales on JD.com exceeded 3 million units.
JD.com did not immediately respond to a CNBC request for comment.
However, Shanghai-based CINNO Research had a more pessimistic outlook as of Wednesday: A 22% drop in overall iPhone 15 unit sales versus that of the iPhone 14 in China.
That’s still about 10 million iPhone 15s, for an expected total of 45.5 million iPhones sold in China this year, a 2% decline from a year ago, CINNO Research said.
CINNO blamed this on the “economic downturn” and impact of Huawei’s new Mate 60 Pro. Indeed, there has been a lot of focus on Huawei’s latest device. At its height, the Chinese technology giant was Apple’s closest competitor in China’s high-end smartphone market. Any kind of serious bid from Huawei to regain a foothold in China could add pressure on China.
“There’s no doubt that the new Mate 60 series will be a challenge to the iPhone this year,” Counterpoint Research’s Pathak said.
— CNBC’s Eunice Yoon contributed to this report. More

Singapore-headquartered Silent Eight wants to be “IPO ready” by the end of 2025 with a view to listing on the tech-heavy Nasdaq in the U.S, its CEO Martin Markiewicz told CNBC.
Silent Eight uses artificial intelligence (AI) to help financial institutions fight money laundering and other financial crimes.
Markiewicz told CNBC that he forecasts revenue to grow more than three-and-a-half times in 2023 versus last year.

The co-founders of Silent Eight, from left to right: Michael Wilkowski, Julia Markiewicz and Martin Markiewicz.
Silent Eight

WARSAW — When it comes to financial crime, banks can often be “one decision away from a huge mess,” Martin Markiewicz, CEO of Silent Eight told CNBC.
That’s because the risk of fines and reputational damage is high if financial firms don’t do enough to stamp out crimes like money laundering and terrorist financing. But it takes huge amount of time and resources to investigate and prevent such activities.

Markiewicz’s company uses artificial intelligence (AI) to help financial institutions fight these issues in a bid to cut the amount of resources it takes to tackle crime, keeping banks in the good books of regulators.
“So our grand idea for a product … (is that) AI should be doing this job, not necessarily humans,” Markiewicz said in an interview on Thursday at a conference hosted by OTB Ventures. “So you should have a capacity of a million people and do millions of these investigations … without having this limitation of just like how big my team is.”
With Silent Eight’s revenue set to see threefold growth this year and hit profitability for the first time, Markiewicz wants to get his company in position to go public in the U.S.

How AI can catch criminals

Silent Eight’s software is based on generative AI, the same technology that underpins the viral ChatGPT chatbot. But it is not trained in the same way.
ChatGPT is trained on a so-called large language model, or LLM. This is a single set of huge amounts of data, allowing prompt ChatGPT and receive a response.

Silent Eight’s model is trained on several smaller models that are specific to a task. For example, one AI model looks at how names are translated across different languages. This could flag a person who is potentially opening accounts with different spellings of names across the world.
These smaller models combine to form Silent Eight’s software that some of the largest banks in the world, from Standard Chartered to HSBC, are using to fight financial crime.
Markiewicz said Silent Eight’s AI models were actually trained on the processes that human investigators were carrying out within financial institutions. In 2017, Standard Chartered became the first bank to start using the company’s software. But Silent Eight’s software required buy-in from Standard Chartered so the start-up could get access to the risk management data in the bank to build up its AI.
“That’s why our strategy was so risky,” Markiewicz said.
“So we just knew that we will have to start with some big financial institutions first, for the other ones to know that there is no risk and follow.”
As Silent Eight has onboarded more banks as customers, its AI has been able to get more advanced.
Markiewicz added that for financial institutions buying the software, it is “orders of magnitude” cheaper than paying all the humans that would be required to do the same process.
Silent Eight’s headquarters is in Singapore with offices in New York, London, and Warsaw, Poland.

IPO ahead

Markiewicz told CNBC that he forecasts revenue to grow more than three-and-a-half times in 2023 versus last year, but declined to disclose a figure. He added that Silent Eight will be profitable this year with more and more financial institutions coming on board.
HSBC, Standard Chartered and First Abu Dhabi Bank are among Silent Eight’s dozen or so customers.
The CEO also said the company is not planning to raise money following a $40 million funding round last year, that was led by TYH Ventures and welcomed HSBC Ventures, as well as existing investors which include OTB Ventures and Standard Chartered’s investment arm.
But he said Silent Eight is getting “IPO ready” by the end of 2025 with a view to listing on the tech-heavy Nasdaq in the U.S. However, this doesn’t mean Silent Eight will go public in 2025. Markiewicz said he wants the company to be in a good position to go public, which means reporting finances like a public company, for example.
“It’s an option that I want to have, not that there’s some obligation or some investor agreement that I have,” Markiewicz said. More

A sign is posted in front of a Broadcom office in San Jose, California, on June 3, 2021.
Justin Sullivan | Getty Images News | Getty Images

Check out the companies making headlines in midday trading.
Cisco Systems, Splunk — Shares of Cisco fell 3.9% Thursday after the company said it is acquiring cybersecurity software company Splunk for $157 per share in a cash deal worth about $28 billion. Splunk’s stock price popped 19.1% on news of the deal.

KB Home — The homebuilder stock slid 4.3% after saying it expected its gross housing margin to shrink in the current quarter. KB Home posted its fiscal third-quarter report Wednesday evening, reporting earnings of $1.80 per share on revenue of $1.59 billion. Analysts polled by LSEG, formerly known as Refinitiv, called for earnings of $1.43 per share and revenue of $1.48 billion.
Fox Corporation, News Corp — Shares of Fox Corporation and News Corp gained 3.2% and 1.3%, respectively, on news Thursday that Rupert Murdoch is stepping down as chairman of both companies. 
Broadcom — Shares of Broadcom moved lower by almost 2.7%. The action follows a report by The Information that Google is holding internal discussions about dropping the artificial intelligence chip supplier in favor of its own internally developed chips as soon as 2027. A Google spokesperson later told CNBC that the company is “productively engaged” with Broadcom and other suppliers for the “long term.” “Our work to meet our internal and external Cloud needs benefit from our collaboration with Broadcom; they have been an excellent partner and we see no change in our engagement,” the spokesperson said
Eli Lilly — Shares were down 3.4% after the company earlier this week sued several clinics and pharmacies across the U.S. for allegedly selling cheaper, unauthorized versions of the company’s diabetes drug Mounjaro.
Klaviyo — The marketing automation company stock closed Thursday roughly 2.9% higher. Shares of Klaviyo opened Wednesday at $36.75 on the New York Stock Exchange, which was greater than the company’s offering price of $30 per share.

PulteGroup, Zillow Group, D.R. Horton — Shares of companies in the housing industry fell Thursday after data showed U.S. existing home sales fell in August as tight supply raised prices. PulteGroup was down 3.3%, while both D.R. Horton and Zillow lost 3.7%.
FedEx — Shares gained 4.4% a day after the company reported mixed fiscal first-quarter earnings. FedEx reported adjusted earnings of $4.55 per share, greater than the $3.73 forecast by analysts polled by LSEG. Its revenue of $21.68 billion came in below expectations of $21.81 billion.
Paramount, Netflix, Disney — Shares of streaming companies moved higher as writers and producers neared a potential end to the Writers Guild of America strike, people close to the negotiations told CNBC’s David Faber on Wednesday. Paramount was about 0.5% higher, while Netflix lost 0.6% and Disney added 0.2%, taking back earlier gains.
— CNBC’s Alex Harring, Tanaya Macheel and Samantha Subin contributed reporting. More

The Bank had been hiking rates consistently since December 2021 in a bid to rein in inflation, taking its main policy rate from 0.1% to a 15-year high of 5.25% in August.
The Monetary Policy Committee voted 5-4 in favour of maintaining this rate at its September meeting, with the four members preferring another 25 basis point hike to 5.5%.

A passageway near the Bank of England (BOE) in the City of London, U.K., on Thursday, March 18, 2021.
Hollie Adams | Bloomberg | Getty Images

LONDON — The Bank of England on Thursday ended a run of 14 straight interest rate hikes after new data showed inflation is now running below expectations.
The Bank had been hiking rates consistently since December 2021 in a bid to rein in inflation, taking its main policy rate from 0.1% to a 15-year high of 5.25% in August.

The British pound dropped 0.7% against the U.S. dollar shortly after the decision.
The Monetary Policy Committee voted 5-4 in favour of maintaining this rate at its September meeting, with the four members preferring another 25 basis point hike to 5.5%.
“There are increasing signs of some impact of tighter monetary policy on the labour market and on momentum in the real economy more generally,” the Bank said in a statement.
“The MPC will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation.”
The MPC also unanimously votes to cut its stock of U.K. government bond purchases by £100 billion ($122.6 billion) over the next 12 months, to a total of £658 billion.

Investors on Wednesday ramped up bets that the Bank would pause its interest rate hiking cycle after U.K. inflation came in significantly below expectations for August.
The annual rise in the headline consumer price index dipped to 6.7% from the 6.8% of July, defying a consensus forecast that it would rise to 7%, as easing food and accommodation prices offset a hike in prices at the pump. Notably, core CPI — which excludes volatile food, energy, alcohol and tobacco prices — dropped to 6.2% from July’s 6.9%.
Early Thursday morning, money markets were split roughly 50-50 on whether the Bank would pause or opt for another 25 basis point hike, according to LSEG data, before swinging back to 60-40 in favor of a hike in the hour before the decision.
“Inflation is falling and we expect it to fall further this year. That is welcome news,” Bank of England Governor Andrew Bailey said in a video statement.
“Our previous increases in interest rates are working, but let me be clear that inflation is still not where it needs to be, and there is absolutely no room for complacency. We’ll be watching closely to see if further increases are needed, and we will need to keep interest rates high enough for long enough to ensure that we get the job done.”
Job ‘nearly done for now’
The Bank of England has been treading a narrow path between bringing inflation back to Earth and tipping the so far surprisingly robust economy into recession. U.K. GDP shrank by 0.5% in July, while a number of British companies issued profit warnings on Tuesday.
“While it may return to raising rates later in the year or into next year, the Bank of England has been bold and is signalling that its job is nearly done for now,” said Marcus Brookes, chief investment officer at Quilter Investors.
“Inflation surprised to the downside yesterday and with economic data rolling over, the BoE clearly feels it now has enough cover to hit the pause button and assess things as we go.”
The U.S. Federal Reserve on Wednesday also held its interest rates steady, but indicated that it still expects one more hike before the end of the year, along with fewer cuts in 2024 than previously anticipated.
Brookes suggested the MPC will have one eye on the U.S., where sentiment remains hawkish, but where the economy is in a stronger position to absorb a further rate rise.
Thomas Verbraken, executive director of risk management research at MSCI, said the burning question is whether the Bank of England’s Thursday decision signals the peak of the interest rate cycle.
“The rationale is that a steady rate can squeeze the economy more gently, averting heightened risks to financial stability and corporate defaults, while more effectively transmitting higher rates into fixed mortgage rates,” he said in an email.
Hussain Mehdi, macro and investment strategist at HSBC Asset Management, said there is now a “good chance” that the Bank of England’s main policy rate has peaked, along with those of the Fed and the European Central Bank.
“Although the latest U.K. pay growth numbers are a cause for concern, labour market data is lagging. Forward looking indicators suggest the U.K. economy is already flirting with recession, a backdrop consistent with cooling wage growth and a policy pivot,” Mehdi said.
“We believe ongoing restrictive policy settings indicate there is a strong likelihood of developed markets entering recession in 2024.” More

When economists pass judgment on exchange-rate regimes, they like to invoke the monetary-policy “trilemma”. A country might want a stable currency, free capital flows and an independent monetary policy, which can respond to the needs of the domestic economy, regardless of what central banks elsewhere are doing. There are, however, intrinsic tensions between these objectives. And so, sad to say, a country can choose only two of the three.The trilemma is a canonical bit of theory. In practice, however, the choice is not so stark. No country can have all three blessings in full. But some countries, such as China, like a little of each.image: The EconomistThis year, for example, China has tried to go its own way in monetary policy. A property slump, low consumer morale and falling exports have marred the economy’s reopening from covid-19, contributing to dangerously low inflation. In response, China’s central bank has eased its monetary stance, even as interest rates have risen dramatically in America and elsewhere. It lowered reserve requirements for banks on September 15th for the second time this year. It has also twice cut interest rates.China’s slowdown and its monetary response have, predictably, weighed on the yuan. From mid-January, when euphoria about China’s reopening peaked, to September 8th, the yuan fell by 9% against the dollar. On the face of it, this is a good thing. A weaker currency should boost exports and ward off deflation. According to Goldman Sachs, a bank, a sustained 10% drop in the yuan against China’s trade partners could add 0.75 percentage points to China’s growth, which is struggling to reach 5% this year. It could also increase consumer-price inflation, which is near zero, by one percentage points in the long term.China, however, would also like a little currency stability to go with its monetary independence. It fears that sharp declines in the yuan can lead investors to expect further falls. It still bears the scars of 2015, when a devaluation triggered heavy capital outflows. The central bank thus feels inhibited in its exercise of monetary autonomy. Its rate cuts have been small—only 0.1 percentage points each time for the short-term rate. They have also been discreet. In June it cut this seven-day rate two days earlier than such moves are normally made, notes Becky Liu of Standard Chartered, another bank, perhaps to avoid too conspicuous a clash with the monetary-policy meeting of America’s Federal Reserve.China’s central bank has also tried to prop up the yuan. Officials have told speculators not to take one-sided bets. They have cut foreign-exchange reserve requirements for banks, releasing dollars into the system. The central bank has tightened yuan liquidity offshore, making it harder for speculators to borrow yuan in order to sell it. The central bank’s own foreign-exchange reserves fell by $44bn in August, not all of which can be easily accounted for by changes in the valuation of assets it holds. This raises the possibility that the bank intervened modestly itself.China’s distinctive exchange-rate system also gives the central bank a chance to intervene in another way. The yuan is not allowed to float by more than 2% above or below a “fix”, which the bank calculates each morning. The fix is supposed to reflect the previous day’s market forces. But the bank sometimes introduces what it calls a “countercyclical factor” (ie, a fudge factor) into its calculations. This has allowed it to set the fix at a rate that is stronger than the previous day’s close. Indeed, in recent days there has been more fudge in the fix than ever before.These interventions have enjoyed some success. The yuan has stopped falling against the trade-weighted basket of currencies that the authorities use as a benchmark for managing its value. The currency is also a little stronger against the dollar than it was early in the month.All this intervention comes at a cost. It tightens financial conditions, undoing some of the monetary easing the central bank is pursuing. Although a slightly more stable yuan can be engineered, it produces a somewhat less powerful monetary stimulus. China can have a little of everything. But not too much of anything. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

It matters when electricity is produced. A barrel of oil may be a barrel of oil whether it is pumped at midday or midnight, but a megawatt hour (mwh) of electricity is worth a great deal less when you are sleeping than during the middle of the day or, indeed, during moments when everyone decides to boil the kettle. The difficulty of bottling electricity makes its economics unusual: it is a question not just of “how much” but also “when”.At the same time, if there is one thing that everyone knows about renewable energy, it is that it is getting cheaper. Each year, or so the story goes, the costs of wind and solar power fall as the world improves its ability to harness natural resources. In 2014 the levelised cost of offshore wind, a measure for comparing different methods of generating electricity, was around $200 per mwh, according to America’s Energy Information Administration (eia), an official agency; by 2023 it had fallen to $127, excluding subsidies. Yet the industry is struggling. Six state governors recently begged Joe Biden to intervene to keep producers alive, according to Bloomberg, a news service. In Britain the latest annual offshore wind auction attracted no bids whatsoever.To understand what is going on, consider the levelised cost of energy in more detail. Do away with sun and wind, too, and return to a world where the choice is gas, coal or nuclear energy. These differ in terms of both their fixed and variable costs. The costs of a nuclear plant are mostly fixed: once built it is inexpensive to produce another unit of electricity. Natural-gas plants are the opposite: most of the costs are the fuel, and are thus variable.A levelised cost means taking these fixed and variable costs over the lifetime of the plant and weighting them by the expected number of watt-hours the plant will produce. This gives a comparable measure. According to the eia, the levelised cost of nuclear power is $91 per mwh. Natural gas comes to $43. Compare that with expectations for the price of electricity and you should have a good idea of whether or not a new plant is worthwhile.Yet these costs vary depending on how often a source is producing energy. A nuclear plant will be cheapest if it is running constantly, as the high upfront costs will have produced greater output. Gas, with low fixed costs and high variable costs, has lower economies of scale. Coal sits somewhere between the two. Considered purely on the financial merits, the optimal power mix is to have nuclear cover the “baseload”, or minimal level of demand, coal for the “mid-load” and, finally, natural gas for the “peak load”, when demand is highest. Add a carbon price and the coal will be displaced by natural gas, which is less dirty, as has happened in Europe over the past few decades.Unfortunately, this dynamic is upset by renewables, which provide power according to the weather and often require the rest of the energy system to accommodate them. Gas, with its low fixed but high variable costs, can do so easily. Nuclear, with high fixed and low variable costs, becomes much more expensive. It is costly to build a nuclear power plant to cover only the windless hours.As such, solar panels and wind turbines are themselves less beneficial than they might seem. If they cannot reliably produce electricity when it is needed, then their generating capacity is not as valuable as that of a regular power plant. To truly compare the two requires a measure of not just how much each megawatt hour costs to produce, but the value of that particular hour.In an idealised market, with prices updating moment-to-moment and geographically from node-to-node on the grid, the relative benefit of any energy source would be easy to calculate: it would depend on the “capture rate”. This is the difference between the market price that a source receives and the average price for electricity over a period. Prices should be higher when people most want electricity, boosting the capture rate of sources that produce at that time. Fortunately for renewables, this is usually during daylight hours, making solar useful, or during the cold windy months. But as more renewables join the grid the capture rate will fall, since an abundance of solar panels means that when it is sunny electricity prices are very low, or even negative.Consider these costs, as measured by the eia in America, and most renewables look less competitive: solar’s cost of $23 per mwh falls below an average capture rate of $20 for the electricity generated. That is still sufficiently good to beat everything other than onshore wind, geothermal energy and adding more battery storage to the grid. Offshore wind, by contrast, looks downright uncompetitive: the capture rate of its electricity is around $30 compared with a cost of $100 per mwh—only nuclear and coal have lower ratios. Add in rising costs, due to higher interest rates and disrupted supply chains, and it is no wonder many offshore-wind providers are struggling.Scottish powerMost electricity markets are not ideal. Prices do not reflect the true value of time and place, meaning they are not a perfect guide to how much society wants each mwh of electricity. Look at Britain. Wholesale electricity prices are settled for half-hour blocks, which should mean pricing will give a decent idea if renewables are producing at the wrong times of day. But there is only one price for the whole country. Most onshore wind is in Scotland, since England until recently had a de facto ban on building such wind farms, though more of the demand for electricity is in the south of England. A lack of capacity on the grid to move the electricity south means that the grid manager pays to turn off Scotland’s wind turbines while gas power plants in England are turned on.Eventually, increasing the grid’s capacity to shift and store electricity will solve such problems. But for the moment, comparing costs with the capture rate would not give an accurate idea of the relative benefits of building more Scottish wind power. The true costs of renewable energy are greater than they appear. ■Read more from Free exchange, our column on economics:Does China face a lost decade? (Sep 10th)Argentina needs to default, not dollarise (Sep 7th)How will politicians escape enormous public debts? (Aug 31st)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

When russia invaded Ukraine, panic gripped Europe’s nuclear experts—the civilian variety, that is. Ukraine, where 15 reactors relied on Russia for their uranium, rushed to sign an unusually long 12-year deal with Canada. European utilities, also reliant on Russia, drew the maximum they could under other contracts. Most exposed were operators in Finland and eastern Europe that owned Russian-made reactors, which only Russian firms knew how to feed. Finding an American rival that could bundle uranium rods into the hexagonal blocks such plants demand took a year. Now they are searching for the metal needed to restart the atomic Tetris.Such last-minute procurement of uranium is very rare, notes Per Jander of wmc, a trader. Utilities usually take deliveries two to three years after signing a contract. The scramble is just one illustration of the fallout of the war on a once-sedate market already squeezed by rising demand, supply shocks and speculation. In the week to September 18th uranium’s spot price hit $65 a pound, its highest since 2011, reports uxc, a data firm. At the industry’s yearly shindig in London, which drew a record 700 delegates this month, some warned it could reach $100. The two largest producers are sold out until 2027; some utilities are thought to be short for 2024.image: The EconomistJust 85,000 tonnes of uranium are used each year. This compares with 170,000 for niche metals like cobalt and many millions for industrial ones like copper. Unlike coal or gas plants, nuclear reactors cost a lot to build but little to run, so utilities mostly opt to keep them going regardless of, say, the economic cycle, making demand for fuel predictable. It also means that utilities cannot afford to run out, which is why they buy the stuff via long-term contracts.Most supply comes directly from mines. Canada and Kazakhstan, two reliable exporters, account for 60% of such “primary” supply. A quarter of total global supply arrives from “secondary” sources. Exhausted fuel blocks, replaced every three-to-four years, are re-enriched and re-used. Fuel is also made by diluting weapons-grade uranium, which contains more than 90% fissile elements, to concentrations of just 3-4%. In the two decades following the cold war the dilution of just 30 tonnes a year displaced 10,000 tonnes of annual mine output. More supply is regularly released from stockpiles. America, China, France and Japan hold a combined stash worth years of global use, which can be drawn from when prices are high.This tranquil trade is now being rocked by two forces. One is resurgent demand. For years after the Fukushima disaster in 2011 the closure of plants in Japan, Germany and elsewhere pushed the market into surplus. But the search for steady sources of low-carbon power, and Russia’s war in Ukraine, have led governments back to nuclear energy, which emits about the same as wind power and can operate even if pipelines are shut. Some 60 new reactors are under construction, which should add an additional 15% to the world’s nuclear-power-generation capacity over the next decade, reckons Liberum, a bank. Small “modular” reactors—cheap and easy to build—could turbocharge demand for fuel. The World Nuclear Association, an industry body, forecasts that they could make up half of France’s nuclear capacity by 2040.Uranium’s glowing prospects are not lost on financiers. In recent years several listed funds have launched. Sprott Physical Uranium Trust and Yellow Cake, the two biggest, have bought 22,000 tonnes in the past two years, equivalent to over a quarter of annual demand. Both are set up for the long run, with no fixed date or target price at which they will liquidate their holdings.Meanwhile, supply is looking precarious—the second reason why prices are soaring. Early panic aside, Russian ores can still be obtained. But a coup in Niger in July has put 4% of mined supply in jeopardy. Last week Orano, France’s state-owned giant, said it had halted its ore processing there owing to a lack of critical chemicals. Logistical headaches are causing Kazatomprom, the leading Kazakh supplier, to ship less uranium than expected (it typically passes through Russia). Cameco, Canada’s champion, recently cut its production forecast by 9% after hiccups at two mines.All this will probably keep the market in deficit next year, as it has been since 2018. Outright shortages remain unlikely, however. Major utilities retain stocks. And the fuel blocks inserted into operating reactors have another one-to-three years of life left, with a year’s extension possible at limited costs. Most also have the next block ready to go. Thus the risk of running out lies more than four years ahead.That leaves time for supply to respond. Cameco and Kazatomprom, which have lots of unused capacity after trimming output during the dreary 2010s, will not like to see higher-cost producers nab market share. Tom Price of Liberum estimates that they could add another 15-20% to global supply in as little as 12-18 months. If that fails to tame the market, then a sustained rise in price will incentivise the opening of new mines. Jonathan Hinze of uxc reckons a spot price of $70-80 would be enough to get many projects started. Supply snags are also unlikely to last too long. Niger’s junta has a beef with France, but not with China, which runs other mines in the country. If all else fails, Kazatomprom can always decide to export uranium by plane.So the most likely outcome is high prices for a few years, with a surplus returning by the middle of the decade. No one anticipates a repeat of 2007, when buying by the first uranium fund and floods at big mines combined to push the spot price beyond $135 a pound. Utilities have ample room for absorbing price shocks anyway. Because uranium is heavily processed, raw materials are worth less than half as much as finished fuel, which itself accounts for just 10% of a plant’s operating costs (against 70% for natural gas). The rally matters more to speculators than to the cost of what comes out of your socket. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More