Canada’s CDPQ Invests C$200M in Swedish EV Battery Developer

Canadian pension fund Caisse de dépôt et placement du Québec has invested C$200 million ($150 million) in Swedish electric vehicle battery developer Northvolt AB in the form of convertible debt. Northvolt specializes in manufacturing, recycling and research and the development of sustainable battery systems and cells.

“The battery value chain is of great interest for the CDPQ, because in addition to having a favorable impact on the energy transition, it will, in our opinion, experience strong expansion in the next decade,” Kim Thomassin, CDPQ’s executive vice president and head of its Quebec division, said in a release. “This is a promising sector for the economic development of Quebec and we want it to sustain.”

In late September, Northvolt announced it will build a lithium-ion battery gigafactory in a suburb of Montreal, which it said will have an annual cell production capacity of 60 GWh. Construction of the first 30 GWh phase of the project is expected to begin by the end of the year, and the first batteries are expected to be delivered in 2026.

CDPQ’s investment will go toward completing the construction of the gigafactory. According to Northvolt, the first phase of cathode manufacturing, cells and recycling will require a total investment of $5 billion. The announcement identified the project as the largest private investment in Quebec, and Northvolt stated that it chose the area because Quebec hydroelectricity guarantees cell production from 100% renewable energy.

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“The potential for Northvolt Six is enormous, not only to rapidly develop our capacity to deliver sustainable batteries to the North American market, but also to accelerate the emergence of Quebec as a key player in the global energy transition,” Paolo Cerruti, co-founder of Northvolt, said in a statement. “With its unique access to 100% renewable energy and raw materials, we consider Quebec to be the ideal base of operations for Northvolt’s first gigafactory outside of Europe.”

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Tags: Caisse de dépôt et placement du Québec (CDPQ), CDPQ, electric vehicle batteries, gigafactory, Kim Thomassin, lithium ion, Northvolt, Paolo Cerruti, Sweden

Will “sticky” inflation stop the Federal Reserve from lowering interest rates? Some strategists are worried that inflation will not fall sufficiently for the Fed to start easing in 2024.

Fed policymakers are not expected to alter their benchmark rate at their Tuesday-Wednesday meeting this week. But by December 2024, the futures market anticipates that the fed funds rate will be as much as a full percentage point lower from the current 5.25% to 5.5% level.

That forecast is predicated on a continued deceleration in inflation growth: The Consumer Price Index for November, announced Tuesday, rose 3.1% from the prior year, down two-thirds from its June 2022 peak. The Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, was up 3.0% in October (the most recent month reported).

If reduction in inflation has hit a floor, speculation is rampant that the Fed will be reluctant to ease more. The Fed wants to see the PCE reach 2%. The index, however, has been in a narrow band near 3% since June, and some wonder whether it can drop that last percentage point any time soon.

This week’s CPI data showed a big rise for shelter costs, up 6.5%. More broadly, services (absent the volatile energy sector) rose 5.5%, and 0.5% month-over-month in November. As a Bank of America Securities note put it, “Core services inflation remains sticky at 0.5% m/m while core goods prices fell for a sixth consecutive month.”

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In the bank’s view, the inflation report “keeps the Fed in ‘wait and see’ mode especially with services inflation remaining sticky-high.”

The current trend, with inflation stalling at a seeming floor of 3%, is discouraging to market observers. “Although inflation continues to ease, the Fed will still not declare total victory as the stubborn, so-called ‘sticky’ inflation is untangling at a slower than expected pace,” warned Quincy Krosby, chief global strategist for LPL Financial.

The situation does not appear to be changing in the near term, at least according to Carl Riccadonna, U.S. chief economist at Bloomberg Economics: “We think November’s pace of core inflation is likely to prevail over the next few months, translating to core PCE inflation running closer to 3% annualized.”

Failing to act when inflation began climbing in 2022 weighs on the Fed, as Chairman Jerome Powell has admitted. So, observed Bill Adams, chief economist for Comerica, “the Fed would rather risk keeping rates high for longer than necessary than risk cutting too early and allowing inflation to rebound.”

Tags: Bank of America, Bloomberg Economics, Comerica, Consumer Price Index, energy, Federal Reserve, Inflation, LPL Financial, PCE, services, shelter, sticky inflation