The Urethane Blog
September 9, 2022
“Wide Rescue Umbrella”: Germany Plans To Support Companies As Energy Crisis Worsens
by Tyler DurdenFriday, Sep 09, 2022 – 05:45 AM
Natural gas and electricity prices have become so expensive in Germany that the economic engine of Europe is shutting down and at risk of a ‘Lehman-style’ collapse. To mitigate energy cost burdens, the German government unveiled a new proposal to increase a pandemic-era rescue fund to save small and medium size companies that could face a wave of bankruptcies amid the worsening energy crisis.
On Thursday, Bloomberg quoted German Economy Minister Robert Habeck as saying new financial aid for businesses to cover energy costs could soon be made possible.
“We will open a wide rescue umbrella,” Habeck told lawmakers in Berlin. “We will open it widely so that small and medium enterprises can come under it,” he said.
Habeck’s comments come after German Chancellor Olaf Scholz’s coalition agreed on a 65 billion euro program to support millions of struggling households with soaring power bills.
A participant at a parliamentary committee late Wednesday said Habeck was willing to use an existing pandemic-era aid program to support companies — about 20% of the 5 billion euros has already been spent.
Habeck said at the closed-door meeting that drawing funds from the Covid program could spark constitutional debt limit issues, according to the participant, who asked not to be named.
In his speech to lawmakers, Habeck said the energy crisis could persist well beyond this winter, adding financial support for businesses will be temporary as Germany and the EU work to reform energy supply chains away from Russia.
“We are looking at the electricity market design,” said Habeck. “If this doesn’t work immediately and solidly, then we also consider the option of a windfall levy and give this back to the citizens.”
Besides Germany, UK Prime Minister Liz Truss also laid out a plan to support households and businesses amid energy hyperinflation as Russia’s energy giant shuttered the Nord Stream 1 pipeline to Europe last week.
European politicians are maneuvering ahead of a pivot meeting Friday, where they will discuss plans to reduce energy costs, consumption, possible price caps on energy products, and even suspension of power derivatives trading — as the bloc races against time to thwart what could be a ‘Minsky’ moment as we reported European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5 trillion.
September 9, 2022
“Wide Rescue Umbrella”: Germany Plans To Support Companies As Energy Crisis Worsens
by Tyler DurdenFriday, Sep 09, 2022 – 05:45 AM
Natural gas and electricity prices have become so expensive in Germany that the economic engine of Europe is shutting down and at risk of a ‘Lehman-style’ collapse. To mitigate energy cost burdens, the German government unveiled a new proposal to increase a pandemic-era rescue fund to save small and medium size companies that could face a wave of bankruptcies amid the worsening energy crisis.
On Thursday, Bloomberg quoted German Economy Minister Robert Habeck as saying new financial aid for businesses to cover energy costs could soon be made possible.
“We will open a wide rescue umbrella,” Habeck told lawmakers in Berlin. “We will open it widely so that small and medium enterprises can come under it,” he said.
Habeck’s comments come after German Chancellor Olaf Scholz’s coalition agreed on a 65 billion euro program to support millions of struggling households with soaring power bills.
A participant at a parliamentary committee late Wednesday said Habeck was willing to use an existing pandemic-era aid program to support companies — about 20% of the 5 billion euros has already been spent.
Habeck said at the closed-door meeting that drawing funds from the Covid program could spark constitutional debt limit issues, according to the participant, who asked not to be named.
In his speech to lawmakers, Habeck said the energy crisis could persist well beyond this winter, adding financial support for businesses will be temporary as Germany and the EU work to reform energy supply chains away from Russia.
“We are looking at the electricity market design,” said Habeck. “If this doesn’t work immediately and solidly, then we also consider the option of a windfall levy and give this back to the citizens.”
Besides Germany, UK Prime Minister Liz Truss also laid out a plan to support households and businesses amid energy hyperinflation as Russia’s energy giant shuttered the Nord Stream 1 pipeline to Europe last week.
European politicians are maneuvering ahead of a pivot meeting Friday, where they will discuss plans to reduce energy costs, consumption, possible price caps on energy products, and even suspension of power derivatives trading — as the bloc races against time to thwart what could be a ‘Minsky’ moment as we reported European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5 trillion.
September 8, 2022
Positive News from the Inflation Reduction Act
| On August 16, President Biden signed the Inflation Reduction Act of 2022 into law. Section 13301 of this bill, addressing Energy Efficient Home Improvement Credit, delivers an immediate, pleasant surprise for SPF contractors and their homeowner customers installing energy efficient home upgrades in their primary residence. It reinstates the 25C tax credit for insulation and air sealing through the remainder of 2022, which previously expired at the end of 2021. Until December 31, 2022, homeowners may be eligible for a federal tax credit up to $500 or 10% of their purchase of insulation, whichever is lower. Beginning January 1, 2023, the legislation substantially increases the 25C tax credit through December 31, 2032. Taxpaying homeowners can receive a federal tax credit up to 30% of their purchase, up to a maximum of $1200. This extension of 25C also replaces the $500 lifetime limit with a $1,200 annual tax credit limit for homeowners. Unlike a tax deduction, a tax credit directly reduces tax owed. In addition to homeowner tax credits, tax credits will be available to builders and developers of energy efficient and Zero Energy Ready Homes homes under the revised 45L tax code. SPFA and the Spray Foam Coalition will be providing more information for homeowners, builder/developers and contractors about these programs within the next few months. Click here to review the final bill. |
https://www.naylornetwork.com/spf-nwl/newsletter-v2.asp?issueID=82905
September 8, 2022
Positive News from the Inflation Reduction Act
| On August 16, President Biden signed the Inflation Reduction Act of 2022 into law. Section 13301 of this bill, addressing Energy Efficient Home Improvement Credit, delivers an immediate, pleasant surprise for SPF contractors and their homeowner customers installing energy efficient home upgrades in their primary residence. It reinstates the 25C tax credit for insulation and air sealing through the remainder of 2022, which previously expired at the end of 2021. Until December 31, 2022, homeowners may be eligible for a federal tax credit up to $500 or 10% of their purchase of insulation, whichever is lower. Beginning January 1, 2023, the legislation substantially increases the 25C tax credit through December 31, 2032. Taxpaying homeowners can receive a federal tax credit up to 30% of their purchase, up to a maximum of $1200. This extension of 25C also replaces the $500 lifetime limit with a $1,200 annual tax credit limit for homeowners. Unlike a tax deduction, a tax credit directly reduces tax owed. In addition to homeowner tax credits, tax credits will be available to builders and developers of energy efficient and Zero Energy Ready Homes homes under the revised 45L tax code. SPFA and the Spray Foam Coalition will be providing more information for homeowners, builder/developers and contractors about these programs within the next few months. Click here to review the final bill. |
https://www.naylornetwork.com/spf-nwl/newsletter-v2.asp?issueID=82905
September 7, 2022
How will the European energy crisis affect freight markets?
A slowing eurozone may pull ocean container rates down further
John Paul HampsteadWednesday, September 7, 2022 4 minutes read
Listen to this article 0:00 / 5:35 BeyondWords
Volatility in European power markets stemming from EU and U.K. sanctions against Russian energy — imposed in retaliation for Russia’s invasion of Ukraine in February — may soon cool off, but only after carving a slice out of the continent’s economy.
On Monday, U.K. Prime Minister Liz Truss announced plans to cap household energy bills at the equivalent of $2,300 annually. Meanwhile, German Chancellor Olaf Scholz unveiled a 65 billion euro relief package to ease the pain of energy prices that have quadrupled in his country.
These crisis measures are meant to reduce the economic damage caused by a continentwide natural gas supply crunch following the cancellation of Nord Stream 2 and Russia’s shutdown of Nord Stream 1. Historically high energy prices could sap consumers’ ability to spend money on other goods and services, dragging down economic growth.
But last week, Goldman Sachs analyst Alberto Gandolfi wrote that his team did not think that the scope of the price caps being contemplated would be nearly enough to avert a 1970s-style energy crisis.
“We see scope for the introduction of price caps in power generation, which we estimate could save Europe c.€650 bn pa,” Gandolfi wrote in a client note on Saturday. “Yet, price caps would not fully solve the affordability issue: the increase in energy bills would still be of +€1.3 tn, or c.10% of GDP, we estimate.”
Europe’s economy was relatively healthy until the energy crisis, growing GDP by 3.9% year over year (y/y) or 0.6% quarter on quarter in the second quarter of 2022. But now the eurozone manufacturing PMI has slipped to 49.6, and the S&P Global Germany Composite PMI for August was revised lower to 46.9.
Slowing economic growth in the EU has been exacerbated by high inflation, which hit 9.7% y/y in August. That has put a jumbo interest rate hike of 75 bps on the table as European Central Bank President Christine Lagarde meets with her colleagues in Jackson Hole, Wyoming, this week.
Ocean container rates from Asia to Europe have already fallen dramatically this year — and have dropped especially sharply since the beginning of August.
The Freightos Baltic Daily spot rate from China to North Europe, displayed in white in the chart above, has fallen 24% since July 3, from $10,397.55 per forty-foot equivalent unit to $7,869.10. Drewry’s spot rate from Shanghai to Rotterdam, Netherlands, displayed in green, dropped 18% over the same period, from $9,280 per FEU to $7,583.
Those recent ocean container rate cuts came after the market had already been softening for months; container rates on the Asia-Europe trade peaked last October. The sudden, violent step-down in spot rates may indicate that the incremental goods spending is way off in Europe, and ocean carriers are starting to optimize for asset utilization rather than EBIT per shipment.
If the steamship lines follow their well-established playbook, their response to soft demand could be to trim capacity, switching out vessels on the main services with smaller ships and deploying those assets elsewhere. The problem is that they might not have anywhere to go: Trans-Pacific ocean container spot rates are also way down on softening demand.
Upstream ocean container bookings data from FreightWaves Container Atlas reveals that European exports are set to slow markedly as well. Ocean container bookings outbound from Rotterdam to all global ports have experienced downward pressure since July:
The Ocean Booking Volume Index from Rotterdam to all global ports is down by 25.4% since July 5, a sharp downward trend, albeit the index is still at an elevated level compared to pre-pandemic freight flows. Lead times out of Rotterdam run a little over 10 days, so the trend lines above reflect booking activity approximately 1.5 weeks ahead of the freight physically moving on a vessel.
The widely cited European Road Freight Rates Benchmark is at all-time highs but appears to be inclusive of fuel costs (diesel in the EU is up 69% since January). The Russian invasion of Ukraine has restricted the supply of truck drivers in Germany, where migrants make up 24% of the driver workforce, as Ukrainian men returned home to fight. European road freight analysts are betting that weakening economic growth will keep rates from rising higher.
“The effect of rising costs in 2022 is now very evident with road freight rates across the European continent reaching new all-time highs,” wrote Transportation Intelligence economic analyst Nathaniel Donaldson. “Initial fuel price rises following the invasion of Ukraine have held and produced a much more costly environment for European road carriers whilst industrial action and a worsening driver shortage keep capacity tight. A range of indicators are pointing towards a drastic slowdown in consumption and production, which will ease further increases while high costs keep rates elevated.”
The EU energy crisis has already taken a bite out of Europe’s consumption and production, weakening demand for transportation capacity in, through and out of the region. Recently announced fiscal relief measures will likely not be large enough to avert an acute economic slowdown, with knock-on effects for global transportation markets like ocean container freight.
Everchem Updates Archive 
Sign Up for Email Updates