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🔋 EU-US Electric Vehicle Tax Credits

EU officials are still pained by the Inflation Reduction Act (IRA) and its potential effect on European EV manufacturing. 

This week, the European Union hinted that the IRA thorn could soon be removed from its side. The unconfirmed deal would make EU-sourced critical minerals eligible for many of the same benefits as those from other US free trade agreement partners. 

As discussed last week, EV manufacturers are drawn to the IRA’s near $400 billion in subsidies. But that’s not their only concern. European energy is often pricier and more unreliable than in the US, making new factory locations a multi-decade concern, not a five-year one. 

The takeaway:

The US has one operational lithium mine with 4% of the world’s estimated total. Argentina and Chile have historically supplied over 90% of US lithium imports, but the balance might shift to include free trade agreement partner Australia to accommodate the IRA. 

Europe doesn’t have robust infrastructure to handle domestic minerals like lithium, and most of its mineral supplies lie untapped in nordic regions like Norway, Sweden, and Finland. Including Europe as a pseudo-FTA partner would add new incentives for the EU to cut its reliance on Chinese processing and bring its raw materials online. 

🏭 China Heats Up Oil Hopes

China’s manufacturing purchasing managers’ index (PMI) rose to 52.6 last month, demonstrating that the country’s post-COVID opening is heating up. 

February’s factory growth was the highest in over ten years, but China’s awakening still has to contend with inflation spurring interest rate hikes in the EU and US. 

Sluggish global demand might have the same effect on China as it has on the US, EU, and other Asian manufacturing and exports. 

Regardless, this week’s announcements out of China boosted Brent and WTI crude futures to their highest level in three weeks. 

Quick Shots:

🌽 EPA Proposes Ethanol-15 in Midwest

The EPA proposed a new rule that would enable higher ethanol/gasoline blends in corn-dominant states of the midwest. 

The new proposal would bump year-round ethanol content from 10% to 15% in Iowa, Nebraska, Illinois, Minnesota, Missouri, Ohio, South Dakota, and Wisconsin. 

Oil and biofuel firms say a patchwork plan in isolated states would require significant infrastructure changes. Both industries are vying for nationwide expansion of the proposal. 

⚛️ France’s Nuclear Down 2.1 Gigawatts On Strike

A strike at France’s nuclear utility firm, EDF, dropped output by 2.1 gigawatts on Friday over the country’s planned pension reforms.

French President Emmanuel Macron says he plans to go ahead with the reforms. 

🪫 Leading Lithium Suppliers Overshoot Demand

China dominates the lithium market with over 60% of the global supply, and the country is growing that figure faster than the demand for EVs in the country can satisfy it. 

China’s spot prices for lithium carbonate hit an all-time high of roughly $86,000/metric ton in November, but a decrease in new EV and hybrid sales in Asia has softened the market by over 33% from the peak.  

While China’s lithium prices are crimped, the selective sourcing requirements for the US Inflation Reduction Act could split the market into eligible and ineligible segments. If EV manufacturers can’t source from China and reap the IRA’s rewards, the pool of lithium supplies shrinks to the select few on the US free trade agreement list.