Europe’s gas shortage could make the whole world pay more to get warm this winter

Published

3 years ago

September 15, 2021

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A liquefied natural gas (LNG) tanker arrives at a gas storage station.

STR | AFP | Getty Images

Natural gas prices have surged more than 35% in the past month, as worries grow there is not enough gas stored up for the winter should temperatures be especially cold in the northern hemisphere.

The usually quiet market for the commodity has become hot in the last couple of weeks, as investors focus on the growth in demand around the world and supplies remain below normal. The biggest problem area is Europe, where supply is at a record low for this time of year.

Even in the U.S., the amount of gas in storage is 7.6% below the five-year average, according to recent data from the U.S. Energy Information Administration. Natural gas is an important heating fuel and is responsible for about 35% of power generation in the U.S., the federal agency found.

“People are starting to throw the ‘crisis’ word around” when it comes to Europe, said John Kilduff, partner with Again Capital. He said natural gas in storage in Europe is 16% below the five-year average, and the level in storage is a record low for September.

“Europe is squarely behind the eight ball going into the winter season. It’s going to put the focus on this commodity that’s been overlooked for the last several years,” said Kilduff.

The tipping point could come in several months when it becomes clear what type of winter is ahead for Europe, and also the U.S. Some analysts say in an extreme scenario, U.S. prices could double if there is an extended cold spell, particularly in Europe where shortages could get severe.

“If the winter is mildly cold, it’s going to be problematic for sure,” said Francisco Blanch, head of commodities and derivatives strategy at Bank of America.

Rising prices for natural gas

Natural gas futures for October jumped nearly 5.3% Monday, to about $5.20 per one million British thermal units, or mmBtus. Natural gas is up 106% year-to-date and is the highest in more than seven years. But the equivalent gas in Europe and Asian markets is upwards of $20 per mmBtus.

“The U.S. is supposed to be an island, but in the last three or four years, there’s an increasing link between the U.S. and global market,” Blanch said. “We’ve gone from 50% correlation to 95% correlation. The U.S. market is being dragged around by this.”

The U.S. has been exporting natural gas, in the form of liquified natural gas shipments. The shipments have grown to about 10% of U.S. production, analysts said. South Korea is the largest customer, followed by China and Japan, according to U.S. government data. But buyers also include Brazil India, Poland, Spain, France and Portugal.

“If it’s a cold winter, gas will not just be tight. It will be very tight,” said Daniel Yergin, vice chairman of IHS Markit. If that’s the case, prices could go sharply higher. “It will either be physical shortages, or it will be reflected in price.”

Strategists say for now the world’s gas supply is stretched, but prices could fall if the autumn and early winter are mild, and more gas is put in storage.

“We lean toward a lot of risks for price spikes, rather than higher and higher sustained prices,” said Christopher Louney, commodities strategist at RBC.

Weather patterns and gas demand

Brian Lovern, chief meteorologist at Bespoke Weather, said the U.S. is in a La Niña state, which could mean a warmer than normal October and November in the northern U.S.

Fewer days that require heating could mean more gas will go into inventories before the coldest winter weather.

“I think in a few weeks, the weather is going to give us some bearish headwinds [for natural gas] as we get into the October, November period. That does not mean we won’t see a colder winter,” he said.

Europe’s winter will depend on a weather pattern that sets up over Greenland. “The early indications do not indicate a big cold winter over there,” Lovern said.

The market is anxious about a repeat of last year, when a cold winter in Europe resulted in a larger-than-normal drawdown of gas.

Supplies were not built back up enough in Europe, and analysts said lately Russia had cut back on some exports into Europe. But the new Nord Stream 2 pipeline, bringing natural gas from Russia to Europe, could resolve some of the supply problems for the continent in the next couple of months.

Russia’s Gazprom last week announced completion of the pipeline, which had once been opposed by the U.S. The pipeline would allow Russia to double gas exports to Europe. Germany’s energy regulator Monday said it has four months to complete certification of Nord Stream 2.

Global impact

The situation in Europe has caught the attention of U.S. officials. Amos Hochstein, the U.S. State Department’s senior advisor for energy security, told reporters Friday that he was concerned about supply, and potential shortages if the winter is very cold.

Hochstein said U.S. deliveries of liquified natural gas, known in the industry as LNG, can be increased and Russia is coming off the period of low supply.

“There’s different explanations for what’s going on, why Russian supplies are constrained,” said Yergin. “Russian and German regulators are in a debate as to whether new regulations apply that were put in place after the pipeline was given its final investment decisions.”

Yergin said Asian demand has also been a factor in the short supplies. Chinese liquified natural gas demand was 20% higher than what was anticipated, he said.

TortoiseEcofin’s senior portfolio manager Rob Thummel said Europe also did not get sufficient liquified natural gas cargoes to rebuild its inventories. “What happened was Brazil hydroelectric power didn’t come to fruition,” he said.

“There was drought, so Latin America and Brazil needed natural gas,” Thummel added. During Europe’s summer, “a lot of LNG… ended up in Brazil in particular.”

Supplies in Europe were not replenished, and there was a jump in demand. “Asia and China in particular got nervous. They started buying LNG,” he said.

Thummel said he does not expect a serious problem for the U.S. this winter, and prices could come back down. He said there has been an increase in rig count in the Haynesville shale. “You’re likely to see higher volumes,” he said.

One issue for the U.S. has been lower volumes of shale oil production. A byproduct of that production is natural gas.

“I would say the volatility in U.S. price will not be the same as it has been, and likely will be in Europe,” said Thummel. The amount of gas going into winter is about 8% below the five-year storage average, but “it’s not the end of the world,” Thummel said.

As natural gas prices have jumped, so have the stocks of gas producers, like the largest EQT, Range Resources, and Antero Resources. Investors have also jumped into the United States Natural Fund ETF, which bets on the commodity.

Environment

Tesla jumped the gun, Nissan drivers will have to wait a bit for Supercharger access

Published

4 hours ago

November 22, 2024

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Tesla jumped the gun, Nissan drivers will have to wait a bit for Supercharger access

It sounds like Tesla jumped the gun when announcing that Nissan drivers now have access to the Supercharger network in North America.

They will have to wait a bit.

Yesterday, we reported that Tesla added Nissan to the list of automakers with EVs capable of using the Supercharger network in North America.

However, Tesla has since removed Nissan from its list of automakers with access and switched the Japanese automaker back to the “coming soon” list.

Nissan confirmed to Electrek that access is not currently available, but it will be available by the end of the year.

It sounds like a miscommunication on Tesla’s side. We hear that it should be coming soon.

Elon Musk fired Tesla’s entire charging team – seemingly to make an example of its then-head of charging, Rebecca Tinucci, who reportedly disagreed with Musk about making further layoffs following another layoff wave.

Instead of just firing her, Musk decided to fire the entire team and then sent an email to other Tesla managers using the charging team situation as a warning.

Tesla has since had to rehire several former members of its charging team to rebuild the department.

This is believed to have slowed down the opening of the Supercharger network to other automakers in North America. We were told that communications with Tesla’s charging team were difficult to non-existent for those automakers for weeks earlier this year.

As we have previously reported, the situation has definitely slowed down Tesla’s own deployment of Supercharger stations.

Nonetheless, the Supercharger network recently hit the milestone of 60,000 chargers worldwide.

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Northvolt files for bankruptcy, CEO quits

Published

4 hours ago

November 22, 2024

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Northvolt files for bankruptcy, CEO quits

Europe’s “green dream” Northvolt has filed for bankruptcy protection in the US after a rescue package failed to go through, leaving the battery maker with just one week’s worth of cash in the account. Cofounder and CEO Peter Carlsson, who spearheaded a costly expansion, has also quit.

The Swedish-owned battery maker filed for Chapter 11 in the Southern District of Texas, reports Bloomberg, with $5.8 billion debt. CEO Peter Carlsson, Telsa’s former chief products officer, stepped down from his role as CEO after the filing, but will remain onboard as advisor and director.

According to a statement, Northvolt said that its main factory will maintain business as usual during the reorganization, as the company now has a buffer from creditors, giving it time to restructure the balance sheet. However, the company said that this will not impact its business in Germany, and through the court process, Northvolt now has access to about $145 million in cash collateral. An additional $100 million in debtor-in-possession financing will be added to the pot via one of its customers, the report said.

In recent weeks, Northvolt has been in intense negotiations in the hope of securing a $300 million rescue package to give the company a bit more time to seek longer-term funding. But when that deal fell through, the battery maker was forced to seek protection from creditors via the Chapter 11 filing.

The company still has a $7 billion project in place in Quebec – a new campus that is set to include a cell production plant, battery recycling, and cathode active-material production facilities – and the bankruptcy won’t affect those plans, the company said on its website. “Northvolt Germany and Northvolt North America, subsidiaries of Northvolt AB with projects in Germany and Canada, are financed separately and will continue to operate as usual outside of the Chapter 11 process as key parts of Northvolt’s strategic positioning.”

The plant is expected to have capacity to produce 30 GWh of battery cell every year, with an expansion set to double that output, making it enough to power 1 million EVs. The Canadian government is putting $1.334 billion CND toward the project, with Quebec chipping in another $1.37 billion CND.

Northvolt has hit hard times in recent months, once thought of as Europe’s best shot to homegrown EVs and the makers of “the world’s greenest battery.” Enthusiasm mounted as the company opened the doors to its first plant in Sweden, in the small town of Skelleftea near the Arctic Circle, in 2021. Billions of dollars have been invested into the company, and Volvo, VW, and BMW rushed to place future orders.

All of this enthusiasm has been fueled by a vision to cut dependency on China by creating greener EV batteries using 100 percent recycled nickel, manganese, and cobalt. Plans were put in place to build factories in Gothenburg, in southern Sweden, and Poland, Germany, and Canada, all backed by huge government subsidies. Back in January, the company raised an additional $5 billion, firmly locking in its position as one of Europe’s best-funded startups and recipient of the largest-ever green loan in the EU.

But then things started going south, with Northvolt’s production problems and massive delays forcing BMW to cancel its €2 billion battery cell order with the company. This past May, Northvolt also announced that it pushing back its plans for an IPO until next year. The interim report that followed revealed the dire state of its finances and how far its production had fallen short of goals, with Carlsson admitting he had been “too aggressive” with the company’s expansion plan.

Since Northvolt has put in place a series of changes to reset the company’s course, including bringing onboard a new CFO, leaving the former CFO to focus solely on expansion plans. Plus the company started making cuts, including closing down its research center, Cuberg, in San Francisco and deprioritizing secondary businesses. At the end of September, Northvolt announced that it would cut 1,600 staff from three Swedish sites and about 20 percent of its international workforce.

Last month, Volvo started proceedings to take over their joint venture with Northvolt, while Volkswagen Group’s representative to Northvolt’s board stepped down this month. Sweden, for its part, is ruling out taking a stake to save its homegrown enterprise, Bloomberg reports. Carlsson had said last month that the company needs more than $900 million to permanently shore up its finances.

Photo credit: Northvolt

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YMX Logistics deploys 20 new Orange EV electric yard trucks

Published

14 hours ago

November 22, 2024

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YMX Logistics deploys 20 new Orange EV electric yard trucks

YMX Logistics and Orange EV Join Forces to Deliver Zero Emission Transportation Solutions to Yard Operations Across North America

Leading yard operation 3PL YMX Logistics has announced plans to deploy fully twenty (20) of Orange EV’s fully electric Class 8 terminal trucks at a number of distribution and manufacturing sites across North America.

As the shipping and logistics industries increasingly move to embrace electrification, yard operations have proven to be an almost ideal use case for EVs, enabling companies like Orange EV, which specialize in yard hostlers or terminal tractors, to drive real, impactful change. To that end, companies like YMX are partnering with Orange EV.

“This relationship between YMX and Orange EV is a significant step forward in transforming yard operations across North America,” said Matt Yearling, CEO of YMX Logistics. “Besides the initial benefits of reduction in emissions and carbon footprint, our customers are also seeing improvements in the overall operational efficiency and seeking to expand. Our team members have also been sharing positive feedback about their new equipment and highlighting the positive impact on their health and day-to-day activities.”

This Orange looks good in blue

YMX Logistics electric yard trucks; by Orange EV.

One of the most interesting aspects of this story – beyond the Orange EV HUSK-e XP’s almost unbelievable 180,000 lb. GCWR spec. – is that this isn’t a story about California’s ports, which mandate EVs. Instead, YMX is truly deploying these trucks throughout the country, with at least four currently in Chicago (and more on the way).

“Our collaboration with YMX Logistics represents a powerful stride in delivering sustainable yard solutions at scale for enterprise customers,” explains Wayne Mathisen, CEO of Orange EV. “With rising demand for electric yard trucks, our joint efforts ensure that more companies can access the environmental, financial, and operational benefits of electrification … this is a win for the planet, the workforce, and the bottom line of these organizations.”

We interviewed Orange EV founder Kurt Neutgens on The Heavy Equipment Podcast a few months back, but if you’re not familiar with these purpose-built trucks, it’s worth a listen.