What’s happening around raw material deals?
We talked in our last post about the Inflation Reduction Act, which tries to get the American electric vehicle market going. These laws and regulations, put in place by the government, will give billions in subsidies and tax credits to provide for clean technology.
Not a bad thing, one would assume. But BusinessEurope, an overarching representative for EU copmanies, is upset about this.
They’re calling the urge to create domestic products and growing the economy a choice of ‘self-interest’ and a decisions that does not streamline with the push to support the US in the fight against China’s rise.
How are European companies reacting to this new future?
One thing to note, is that a lot of European companies that deal with lithium, electric vehicles and chargers, have a lot of business in the United States.
ABB, one of Europe’s leading companies on parts for electric vehicles, originates from Sweden. However, America is its largest market and its response to the new legislations are milder and more positive.
BASF, out of Germany, is involved in manufacturing chemicals and has over 100 working sites in North America. The impact of these deals are unknown to it, but it would seek to get the be st out of it.
What does this mean for the investments in raw materials?
Investing in raw materials can be done on different levels and at different exchanges. This unrest will show differently on different investments.
Raw materials, but also end products and even industrial process companies will be impacted by the legislations, whether they are local or international. There will be different trade taking place and prices will shift.
If we would look into any national investments in the U.S., the legislation will most likely have a positive effect on businesses. The growth the industry will be able to pull through is huge and that is good for the market.
If we look more into the outside market, it is hard to predict the outcome of this backlash from Europe. Businesses that are depending on export and import with the U.S. will perhaps be hit with more difficult trade as prices lower across the pond.
However, this backlash might have a larger impact, as businesses could seek to trade more with China, when prices are way lower. To keep industry moving, companies that are not able to have a benefit from the I.R.A. package will seek alternatives.