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Daily Update: November 22, 2023


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Daily Update: November 22, 2023

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Power of AI – Tech and Commodities

Artificial intelligence, particularly machine learning, is transforming the energy, power, and metals and mining industries. Through AI-enabled systems and automation, mining companies are making gains in processing efficiency and metal recovery. In the energy and power sectors, advances in machine learning and newer, more advanced monitoring devices are enabling the processing of ever-growing amounts of grid data, helping to estimate and match varying supply and demand and leading to the easier integration of renewables. For oil and gas, AI-driven tools are helping optimize production and logistics, among other processes.

Metals and mining: As mines become more digitalized, miners are using more sophisticated technologies. AI is driving productivity gains in mineral processing, helping miners avoid accidents and prolonging equipment life. Human operators in concentrator control rooms are getting better at managing AI tools and both are improving themselves. In grinding equipment, AI-enabled systems can help deliver improvements in energy and water use, and for major companies, this can result in significant cost savings. Metal recovery is also an area where AI-enabled systems are helping deliver increases. However, a lot of data in the sector is proprietary, making training models difficult.

Of Freeport-McMoRan's 10 concentrators, facilities used in the final steps of ore processing, seven have AI-enabled models that help direct input flows and other steps, said Cory Stevens, president of Freeport-McMoRan Mining Services, a division of copper-mining giant Freeport. Freeport is rolling out similar AI-driven systems to heap-leaching operations, and, in a first for the company at an open pit mine, is going fully autonomous at the Bagdad copper operation in the US. 

Power: For the power sector, wider AI adoption is a double-edged sword in that the growing complexity of machine learning models means increased datacenter demand and better tools for estimating and matching supply and demand. The increase in datacenter demand is not specifically all from AI usage; neural networks and deep learning models need more power-intensive hardware and vast amounts of data to train.

Stephen Oliver, vice president of corporate marketing and investor relations at Navitas Semiconductor, told S&P Global Commodity Insights that there's potential for an 80% increase in US datacenter power demand between 2023 and 2030. It's difficult to disentangle datacenter demand from AI-specific power demand, but there are some estimates for AI-specific power demand. For example, Google said AI is responsible for between 10% and 15% of its power use.

Energy: The oil sector has long used machine learning, but until cloud computing, it wasn't as popular as it is today. Oil companies use AI to optimize production and logistics and to mitigate environmental impacts, among other things. But the oil industry also grapples with flawed data, and there are operational hurdles, such as generative AI's inability to discern gaps in understanding, which pose serious risks in safety-critical sectors such as oil and gas. This is part of the reason many in the sector express caution.

Still, AI-powered technologies can improve the oil and gas sectors. Companies such as Project Canary, for example, are helping address the sectors' emissions challenges via continuous monitoring technologies at well sites. According to Co-CEO Will Foiles, AI enables the company to comprehensively examine emissions at a given monitoring site and isolate which emissions diverge from expectations. Project Canary then uses this information to determine the methane intensity of a given operator's gas supply.

The advance and wider use of AI, specifically machine learning, are pushing commodities sectors to new frontiers and ushering in a new era of efficiency and monitoring. However, the widespread use of data-intensive statistical learning methods feeds into datacenter demand and emissions. While narrow AI isn't so costly, the large language models growing in popularity today consume shocking amounts of electricity — whether by running the models with billions of parameters or by cooling datacenters. Still, the energy, power and metals and mining sectors are beginning to realize the potential gains of AI.

Today is Wednesday, November 22, 2023, and here is today’s essential intelligence.

Written by Wyatt Scott.

The next edition of the Daily Update will be published Monday, November 27.


Italian Corporate Outlook 2024: Resilience In Tough Times

Rated Italian companies should be able to withstand current economic weakness and preserve their credit quality. Four-fifths of these companies have a stable outlook, which indicates credit resilience in 2024 ahead of current economic weakness.

—Read the report from S&P Global Ratings

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Capital Markets

An Elevating Effect on Equal Weight?

The trouncing of smaller caps by mega-cap stocks has been one of the hallmark market themes of this year, with the S&P 500 Top 50 outpacing the S&P SmallCap 600 by 30% YTD. As a result of its inherent small-cap bias, the S&P 500 Equal Weight Index (EWI) has suffered accordingly, underperforming the S&P 500 by 11% in the twelve months through October.

—Read the article from S&P Dow Jones Indices

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Global Trade

Middle East Diesel Exports To Europe Slump On Refinery Disruptions, US Supplies

Middle East diesel exports to Europe dropped to an 11-month low in October, as refinery disruptions and more product from the US and India curbed supplies, according to analysts and the latest shipping data. Diesel exports dropped to an average 248,000 b/d in October, the lowest since November 2022 and down from 307,000 b/d in September, S&P Global Commodities at Sea data showed.

—Read the article from S&P Global Commodity Insights

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COP28: UN Carbon Body Agrees Crucial Framework On Article 6.4

In a significant move ahead of the UN climate change conference in Dubai, the body trusted with determining the guidelines for a global carbon market under Article 6.4 of the Paris Agreement has agreed to a framework on project methodologies and carbon removals after two years of talks. The Article 6.4 supervisory body said Nov. 18 that its recommendations will now be presented at COP28 for adoption by CMA of the Paris Agreement. If a text is endorsed by countries in Dubai, then the UN can proceed to register projects under Article 6.4 next year. CMA is the short form for the group of the countries who have signed and ratified the Paris Agreement.

—Read the article from S&P Global Commodity Insights

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Energy & Commodities

Listen: New Underground Mapping May Mean More Oil And Gas, Fewer Cut Trees

The climate impact of fossil fuels is in the spotlight as world leaders prepare to head to the COP28 climate negotiations in the United Arab Emirates. Environmental impacts arise from many steps in the oil and gas production process, including the underground mapping that must be done before companies can drill wells. The seismic survey process requires tree cutting that can fragment forests, as well as equipment that emits greenhouse gases.

—Listen and subscribe to Capitol Crude, a podcast from S&P Global Commodity Insights

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Technology & Media

Zegona's Acquisition Of Vodafone Spain Tops European M&A In October

UK telecommunications company Zegona Communications PLC's acquisition of Vodafone Group PLC's Spanish business topped European M&A activity in October. Zegona entered into a binding agreement Oct. 31 to buy Vodafone Holdings Europe SLU from its parent company. The transaction is valued at €5 billion and is expected to be completed by the first quarter of 2024.

—Read the article from S&P Global Market Intelligence

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