Lighting the Way: Namibia's Role in Powering Africa and the World

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As Africa jostles for position in the global economy, Namibia's true potential is coming to light. This spectacular, vast, arid, and unforgiving land is revealing its treasures. Endowed with abundant natural resources and favorable weather conditions for green energy production, Namibia is poised to play a pivotal role in Africa's ever-evolving energy landscape. This is just the beginning of Namibia's journey, and it is destined to take center stage.

The 6th edition of the Namibia International Energy Conference 2024 takes place from 23 – 25 April 2024 in Windhoek, Namibia. Themed ‘Reimagine Resource-Rich Namibia: Turning Possibilities into Prosperity,‘ this influential event brings together policymakers, energy stakeholders, investors, and international partners to foster industry growth and position Namibia as a prime investment destination.

Convened by RichAfrica Consultancy, the three-day flagship event is held under the patronage of the Ministry of Mines & Energy and in strategic partnership with the African Energy Chamber. S&P Global Commodities Insights in partnership with RichAfrica and the African Energy Chamber will be present at the event delivering insights into Namibia's role in powering Africa and the world.

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Thought Leadership

Hydrogen producers mull renewables sourcing for electrolysis projects amid new US regulations

US-based hydrogen sector developers are considering which renewable procurement strategies will align with both domestic and international standards for electricity sourcing amid proposed Inflation Reduction Act rules by the US government. Producers in the hydrogen sector have highlighted the increasing popularity of integrated projects to facilitate adherence to a stronger global regulatory environment. The drafted guidelines for the IRA 45V Production Tax Credits regulation for hydrogen announced Dec. 22, 2023, by the US Treasury and Internal Revenue Service may add barriers to adopting low-carbon hydrogen, slowing investments in hydrogen production, reducing affordability and stifling market growth, according to an S&P Global Commodity Insights analysis. Developers of electrolysis-based "green" hydrogen and its derivatives are exploring provisional options to secure renewable energy and comply with additionality criteria, despite generous subsidies for low-carbon hydrogen production. Before the introduction of the draft IRA rules, many electrolysis-based projects planned to connect to the grid and meet electricity demand. However, with the current rules designed to ensure that subsidized hydrogen production avoids increasing emissions -- especially from the electric grid -- dedicated renewables are becoming a more common approach. Developers view integrated projects as an option that effectively meets the three pillars approach while reducing the challenges that come with the presence of transmission bottlenecks and grid connections. Large-scale US projects exporting hydrogen to Europe have clarity on the EU delegated Act and additional criteria for renewable hydrogen generation. However, a lack of clarity on production in the US may cause delays in financing and final investment decision for hydrogen developers. Electrolysis projects that plan to use grid power are currently not viable for investment without the final rules, resulting in significant delays in project development. However, integrated projects that utilize dedicated or "islanded" renewable-powered electrolysis can potentially proceed, although they still encounter technical and contractual challenges without subsidies for grid-powered electrolysis, according to Commodity Insight analysts. Producers mull grid-connected option for tax credits A leading electrolysis-based hydrogen developer in the US told Commodity Insights May 30 they would continue forth with their plan of using a blend of electricity from the grid and from a power purchase agreement that sources renewable energy with the environmental attribute attached until directed otherwise by the final IRA rules. The developer intends to achieve a lower carbon intensity score by matching their energy consumptions on a one-on-one basis with renewable energy credits. The developer and other sources are considering an alternative approach by oversizing their wind/solar PPAs and optimizing operations based on grid prices -- per the draft rules, this strategy would only be viable if it were to meet the three pillars. As current policies stipulate additional renewable procurement for green hydrogen production, behind-the-meter projects will be a more established approach for sourcing electricity, a renewables developer told Commodity Insights at the World Hydrogen North America Conference, adding that integrated renewable energy development that are co-located with hydrogen projects is the most common practice he sees in the market. The colocation of renewables and the absence from the grid is intended to avoid basis risk in deliverability of energy in times of low grid capacity, grid connection queues and associated costs, the renewables developer added. Developers are facing the challenge of proceeding with their initial energy sourcing strategy and hoping it aligns with policy when finalized. However, some projects are evaluating the economic viability of constructing dedicated renewable assets on site to meet the additionality criteria. Regulation effects on hydrogen, derivatives The draft rules of the IRA received substantial feedback of approximately 30,000 comments from market participants, and some comments argued that facilitating grid connections and grid-based electricity consumption would expedite hydrogen production in the initial years, resulting in cost reductions. Michael Wheeler, Vice President of Government Affairs at Intersect Power, said in the company's comment on the Treasuries Draft rules that "regulations should promote development of hydrogen facilities that will be able to continue to operate in the long-term after any tax incentives are phased out." Wheeler said after the incentives, hydrogen projects would retire, as they would be too financially dependent on government support for offsetting costs that result from the hourly matching requirement. New Fortress Energy said the 45V draft rules "will significantly limit clean hydrogen adoption in the US, delay the Biden Administration's decarbonization efforts, and eliminate the potential for millions of jobs that the clean hydrogen market could generate." The company currently has a project to produce electrolysis-based hydrogen, which it will supply to OCI's green ammonia plant in Beaumont, Texas. OCI said it plans to take advantage of the program in the US, along with EU production guidelines, which both have CO2 costs built into dashboards, allowing for more international standardization for hydrogen projects, Vice President of Global Sustainability at OCI, Hanh Nguyen, said at the World Hydrogen North America conference.

Thought Leadership

INTERVIEW: Alphamar director sees 17 million mt of Brazilian corn going for ethanol

Ethanol will create new prospects for Brazilian corn in the domestic market, with corn for ethanol use rising sharply to 17 million mt in the next marketing year, Arthur Neto, partner director at Alphamar Shipping Agency, told S&P Global Commodity Insights June 12. Register Now Pointing to the impact on domestic and export markets, Neto said on the sidelines of the IGC Grains Conference in London that increased use of ethanol for corn will push prices up, incentivizing corn production in a situation where "the market is flooded by corn because you don't have much exit for it in the domestic market." "This is going to be a dynamic that's going to make the price on the domestic market go higher, which makes the producers maintain the corn inside, meaning that if you have export demand, you need to pay much more," Neto said of the expectation of 17 million mt of corn for ethanol usage in marketing year 2024-25. For 2023, the figure was 13.26 million mt. Speaking on whether Brazilian corn is trading higher than competitors' in the current season, Neto said, "you have to understand that the market is very heated internally, so it doesn't make sense for the farmer to just sell it at pennies for the international market." "I do believe that there's going to be a lot of market, but not as much as in the previous year, because the market is good for the farmer domestically, and they will hold on to the cargo in the country, even though there are many incentives to export," Neto added. 'We are here to sell' Responding to speculation around China's move to bridge the gap between its domestic supply and consumption and what it means for its biggest supplier, Brazil, Neto said carrying out that plan would take time. "China is growing, not as much as it was, but there's a lot coming out of there," Neto said. Any change in China's domestic supply and demand equation will have a major impact on the global balance sheet, considering China's position as the biggest demand center for corn. "I wish them the best of luck," Neto said. "I hope they make it and reach their goals. Meanwhile, we are here to sell." Big flooding impact on soybeans, less on rice Speaking about flooding in Rio Grande do Sul, a key agricultural province that was expected to produce 70% of the country's rice and about 15% of its soybeans in the current marketing year, Neto said the floods were less likely to have a major impact on rice, but soybean production could take a hit. "Roughly 85% of the rice was already harvested when we had the floods," Neto said. "Now we just have logistics issues. Some delays are expected, but not much." However, he said he thought the floods would leave their mark on soybean production, a big factor considering Rio Grande do Sul's strategic location closer to major ports. "Soybeans were the core produce in the region, shipped to the port close to it," Neto said. "That system itself is going to lose a lot of volume." Neto further pointed to the floods in Rio Grande do Sul causing a terminal outage, which is posing a "big risk to the entire export ecosystem." Lower water levels a concern for shipping Brazil's northern ports saw some of the lowest water levels on record last year because of a severe Amazon drought, forcing cargoes to be diverted to Santos. The Alphamar director compared challenges in the northern ports to those on the Mississippi River in the US in the previous year. "When we talk about the northern ports, we're not talking about any problems with the capability on the ports," Neto said. "The water levels are OK. The problem is the cargo being transferred." He added that at some point, the water level will be so low that convoys will have to be disassembled to pass over shallow areas. "Sometimes a trip that is to be done in two days can take around five, so of course, with the total turnaround of the barges, it's very bad," Neto said, adding that there could be two months of major shipping challenges.

Thought Leadership

MPGC 2024: Navigating Uncertainty in the Energy Market Amidst Global Shifts

The annual Middle East Petroleum and Gas Conference convened in Dubai from May 20 to May 22 at a time of heightened concern about the oil markets, the longevity of OPEC+ cuts, the future of hydrocarbons and the switch to non-fossil fuel sources by the middle of the century. The S&P Global Commodity Insights-run event focused on the outlooks for oil and gas on day one with insights from inhouse experts as well as industry leaders and external analysts. The event opened with a keynote address by Emirates National Oil Company group chief executive Saif Humaid Al Falasi, who heads a leading energy company in the UAE. On day one, Carlos Pascual, senior vice president - global energy & international affairs at S&P Global addressed the deepening polarization in the US, the ongoing China-US standoff and potential spill out, and two ongoing wars – Russia-Ukraine and Israel-Hamas – all of them risks to energy market stability. Pascual also talked about energy poverty in the developing world – where many lack access to electricity and have been left behind by the rapid pace of the energy transition. FGE chairman Fereidun Fesharaki tapped his famous crystal ball for analysis on the oil markets. He noted that with a global surplus capacity of 6 million b/d, the world is unlikely to see dramatic swings in oil prices in the event of major political conflict. The focus also turned towards liquefied natural gas, which is widely seen as a transitional fuel. The global LNG market is heating up with European LNG prices rising to a five-month high amid ongoing geopolitical risk factors and tightness in European supply, according to Commodity Insights. There will be “chaos in the markets for the next few years” as the supply of LNG is set to increase by 50% in the next two years, Fesharaki said in his crystal ball analysis. The conference's much-attended events were the ones focused on oil market vagaries with traders concerned about to navigate the sector rife with so much uncertainty. S&P’s Global's vice president and head of crude oil market and energy and mobility research, Jim Burkhard said in his presentation that the surplus in the market will last as long as the US continues pumping more oil, which could extend for a year or two. Members of OPEC+, who are due to meet virtually on June 2 have to make choices about whether to keep the current cuts in place or increase production later this year, he added. Day two of MPGC focused on several downstream tracks with in-house and external experts discussing outlooks for refineries and petrochemicals as well as plans to scale up hydrogen and strategize for a low-carbon future. MPGC attendees also benefited from a day of training courses on May 20. S&P Global experts taught carbon markets fundamentals, oil markets & commercial strategies as well as refining economics and refineries of the future to those in the energy industry.

Thought Leadership

Insight conversation: Alejandro Wagner, Alacero

Latin America's steel industry produced approximately 58 million mt of crude steel in 2023, representing only 3% of global steel production. The industry in the region is currently challenged by stagnant local demand resulting from high interest rates, limited investments, slow economic growth, declining industrial production and heightened pressure from increased imports. In Brazil, for example, steel imports rose to take up almost 20% of the market in 2023. This prompted the government to implement quotas and tariff systems, which are aimed at helping to stem the influx of steel products into the country. The quota system is valid from June 2024 to May 2025, and any volume exceeding the quota will be subject to a 25% tariff. Alejandro Wagner was the executive director of the Latin American Steel Association (Alacero) from 2021 to May 2024. Before representing the region's steel producers in the association, Wagner worked at Ternium and the Argentinian Agency for Investment and International Trade. In this interview with S&P Global Commodity Insights Editors Mayara Baggio and Jose Guerra, Wagner provided insights into the steel industry in Latin America, focusing on the different consumption and production patterns in Mexico, Brazil and Argentina. He addressed concerns about increased imports, the importance of dynamics in steel-consuming sectors and the challenges related to the energy transition. What warning signs should the Latin American steel sector heed following its performance in 2023? Our projections for this year, developed jointly with the countries involved and shared at World Steel [Association] in April, indicate a stable scenario with a 0.2% growth in steel consumption across the region for 2024. However, we continue to observe a trend of declining production coupled with increasing imports. Of utmost importance is the vitality and expansion of steel-consuming industries such as construction, automotive, agricultural machinery and household appliances, which serve as reliable economic and even social indicators when the economy is thriving. Nevertheless, a concerning aspect arises when the imported steel originates from China, given the distinct regulatory frameworks and operational practices that Chinese companies adhere to, differing from those prevalent in Latin America. What are your thoughts on the current Brazilian safeguards? Are they adequate to deter foreign product entry in the long term? The current Brazilian safeguards, while necessary, are deemed insufficient. At present, they primarily encompass a range of tariff barriers. Specifically focusing on Brazil, it is commendable that the Brazilian government has implemented these measures in response to advocacy from the Brazil Steel Institute. However, these safeguards are not comprehensive and are only applicable for a restricted duration of 12 months. The implementation of quotas and tariffs yields distinct statistical outcomes. For instance, Mexico stands out as an exemplary case study. In either September or October 2023, Mexico raised import tariffs on nearly 200 products to 25%, a contrast to addressing the issue with just 15 products. Consequently, Mexico has emerged as a beacon within Latin America. Previously facing a more significant import challenge than Brazil, Mexico demonstrated a significant shift in the situation. Notably, companies like Ternium in Mexico responded to this measure by announcing investments exceeding $3 million for expanding local production capacity. This development exemplifies a pathway for progressively substituting imports with domestically produced goods starting from 2026. Emulating Mexico's approach would represent a pivotal and historic milestone for Brazil. While the initial step has been taken and acknowledged, further actions are imperative. The recent events in Brazil, which hold historical significance, mark a substantial move forward. Acknowledging the progress made, it is essential to continue negotiations, viewing this as an initial stride toward establishing a more comprehensive framework. How would you characterize the state of the steel industry in Argentina? Does it share similarities with other Latin American steel markets, or does it exhibit distinct features? Argentina presents a unique economic scenario, with both similarities and distinctions from other countries in the region. Amid an anticipated 4% to 5% GDP [gross domestic product] contraction this year, all sectors are expected to be impacted. Given the direct correlation between steel and economic activity, a corresponding decline in steel consumption ranging between 15% and 30% is foreseen, contingent upon the pace of economic recovery, potentially in the latter half of the year or even more prominently in the final quarter. The prevailing theme is one of uncertainty and expectation. The Argentina economic landscape is notably different from that of Brazil and Mexico, especially Mexico, due to recent governmental changes and consequential policy shifts. This transition has led to a rapid GDP decline, subsequently impacting steel consumption, production, and overall economic activity. While the effectiveness of these new policies remains uncertain, there exists a degree of optimism within the private and public sectors regarding potential market recuperation by the end of this year, particularly looking towards the following year. Moreover, the significant initial dip in steel consumption in Argentina's first quarter can be attributed to surplus inventory throughout the supply chain. The shift in government policies led to changes in economic dynamics, prompting stakeholders such as distributors, producers and assemblers to accumulate excess inventory. As a result, production and consumption decreased, driven not only by the economic transformation but also by the pre-existing inventory surplus. Any forthcoming demand uptick toward the year's end is likely to prompt inventory replenishment, underscoring the nuanced nature of the current situation in Argentina. Traditionally, Latin America has served as a supplier of raw materials. However, critical minerals are now gaining prominence. What are your expectations concerning these emerging opportunities, and do you believe the region is prepared to capitalize on this new market? Argentina possesses the world's second-largest lithium reserves after Bolivia, presenting significant potential. Mining always begins with environmental considerations and the necessary regulatory framework. Once these processes are successfully navigated, progress is promising. Chile serves as a leading model in this domain. Success hinges on managing the extraction process with sound environmental practices. Given the soaring demand for electric cars globally, the region holds a strong position to be a growth catalyst. How is the region progressing toward cleaner production methods amid the energy transition? Are there significant shifts toward increased scrap use, investments in electric arc furnaces? Are different strategic paths being pursued? We are progressing in the right direction, focusing on a combination of solutions tailored to each country's regulations and resources, driven by investments. Technologically, the groundwork is laid, but cost remains a concern, especially to scale up and accelerate the transition seen in developed regions like the US and Europe. In Latin America, challenges differ due to varying priorities, with a dilemma between decarbonization and social problems in countries with significant poverty rates. Despite this, the region holds great potential with abundant natural resources for sustainable energy like wind and solar power, already seen in various investment projects across countries like Brazil, Chile, Argentina and Bolivia. Currently, Latin American steel boasts a significantly lower carbon footprint compared to global averages and China. Addressing the issue of steel imports from China -- each sheet brings in 45% more carbon dioxide than locally produced steel -- further emphasizes the region's idle production capacity. The focus must shift toward refining policies, establishing priorities and investing in new technologies and processes with reduced carbon emissions to maintain sustainable growth and prevent unfair trade practices in South America.