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King Coal: The global battle to control resources

December 26, 2010

Riversdale Mining Ltd. has 13 billion metric tonnes of known coking and thermal coal reserves in its Benga and Zambeze projects in Mozambique. A global battle is now hotting up for the acquisition of Riversdale and the potential bidders clearly have no doubts about the continued use of coal and are not greatly impressed by the passing fad of Global Warming alarmism.

King Coal: image pitt.edu

Bloomberg reports:

International Coal Ventures Ltd., an Indian state-run joint venture, is studying an offer for Riversdale Mining Ltd. to counter a A$3.9 billion ($3.9 billion) bid from Rio Tinto Group.

ICVL appointed Citigroup Inc. to examine a possible takeover offer for the Sydney-based coal company with mines in Mozambique, the venture’s chairman C.S. Verma said yesterday. London-based Rio yesterday bid A$16 a share for Riversdale, securing 14.9 percent of the company in pre-bid agreements.

Indian companies are seeking coal mines overseas to ensure raw material supplies for producing steel and electricity. Brazil’s Vale SA or Eurasian Natural Resources Corp. may make bids, according to Sanford C. Bernstein & Co., as Tata Steel Ltd., Riversdale’s biggest holder, said it will study Rio’s offer “in the context of other alternatives” available to Tata. “The A$16 cash offer is unlikely to secure acceptance from all of Riversdale’s shareholders,” analysts led by Hayden Bairstow at CLSA Asia-Pacific Markets, said yesterday in a report, raising his price target for Riversdale by 3 percent to A$18. Riversdale’s “Benga and Zambeze coal projects are world class and we believe other suitors may show an interest in Riversdale now a formal bid has been tabled,” he said.

Tata Steel holds 24 per cent stake in Riversdale and is its largest shareholder. Sources say there have been talks between ICVL and Tata Steel for a joint bid or at the very least support from Tata Steel for ICVL’s bid. However, ICVL did not confirm that any talks took place between the consortium and Tata Steel reports The Hindu Business Line.

But more bidders are appearing and it is likely that the shareholders of Riversdale can expect a much higher price than what is on the table now. The Guardian reports that:

The global battle for control of the world’s natural resources flared again when it emerged that Anglo American could gatecrash Rio Tinto’s plans to buy Riversdale Mining, the Australian coking coal group, for £2.5bn.

Headed by chief executive Cynthia Carroll and chairman Sir John Parker, Anglo has joined a list of possible counter-bidders for Riversdale, whose African business produces coal for the fast-growing Asian steel industry.

Evidence of the importance of coking coal to China surfaced recently when Riversdale signed an agreement with Wuhan Iron and Steel to jointly develop Riversdale’s huge Zambeze coal reserves in Mozambique.

Anglo, which is believed to have appointed Morgan Stanley to advise on its options, will face stiff competition, with the Wall Street Journal reporting that Tata Steel of India, which controls 24% of Riversdale, is considering an offer.

Another potential bidder is ICVL, an Indian consortium that has appointed Citigroup as a financial adviser and mandated the bank to report back on the viability of a bid that would top Rio’s promise of A$16 a share.

Tata Steel has just received shareholder approval “for raising of additional long-term resources through issue of securities, including equity shares with differential rights as to voting and dividend, up to Rs 7,000 crore ($1,550 million)”. A company press release said “Tata Steel notes the takeover bid for Riversdale Mining announced by Rio Tinto. Tata Steel will evaluate the takeover bid in the context of other alternatives available to Tata Steel.” Riversdale is important for the long-term coking coal security for Corus. Tata Steel is already entrenched in its Mozambique coal mining project with a strategic stake and long-term supply contract. With Tata Steel’s share of Riversdale valued at almost $1 billion by the Rio Tinto bid it is likely that the final selling price will be significantly higher than Rio Tinto’s bid.

An educated guess would suggest a final selling price of over $5 billion or over A$20 per share.


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Posted in Australia, Economics, Energy, India, UK | Comments Off on King Coal: The global battle to control resources

The Cancun hype begins – but it is all about money not climate

November 22, 2010

With one week left before the Cancun circus begins (UN/ IPCC Climate Conference from 29th November to 10th December), the mainstream media hype has begun.

Global CO2 expected to rise to record levels screams the Daily Telegraph. Carbon dioxide (CO2) emissions are expected to reach record levels this year, according to a new study, despite the recession and global efforts to reduce greenhouse gases – but what that has to do with climate is uncertain. No doubt it has a great deal to do with pricing of the Carbon Trading market. As The Telegraph points out (inadvertently perhaps) this is just hype timed to come just before the UN jamboree.

The results of the study by the Global Carbon Project will be used to put pressure on environment ministers meeting in Cancun, Mexico this month for the latest UN meeting to come to a global agreement on cutting emissions.

The Cancun meeting itself is all about money and Carbon Trading. The collapse of the Chicago exchange and the growing realisation in Europe that Carbon Trading is just a scam is leading all those with a vested interest in carbon pricing to raise the spectres of carbon dioxide again.  Hopefully these efforts will be as useless as at Copenhagen but some “trading” being introduced through the back door is always a possibility.

The two main “money flows” that Cancun is concerned with is the carbon trading fraud and the diversion of funds to “developing” countries to reduce their emissions of carbon dioxide. Just as with the Nagoya biodiversity conference a key objective is the redistribution of wealth. In fact biodiversity and climate are merely convenient scare stories which can act as vehicles for arranging for the flow of funds. A UN IPCC official admitted as much when talking about climate policy:

OTTMAR EDENHOFER, UN IPCC OFFICIAL: “That will change immediately if global emission rights are distributed. If this happens, on a per capita basis, then Africa will be the big winner, and huge amounts of money will flow there. This will have enormous implications for development policy. And it will raise the question if these countries can deal responsibly with so much money at all”.

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Posted in Air pollution, Alarmism, Climate, Development, Economics, Fraud, UN | 1 Comment »

Misguided solar subsidies favoured the wealthy

November 11, 2010

Further confirmation that subsidies in general are counter productive and in the case of solar panels in Australia were misguided:

From ABC News:

A new report has found the Federal Government’s billion-dollar subsidies for solar energy favoured the wealthy and barely reduced Australia’s greenhouse gas emissions. Over the past decade, successive federal governments have provided generous subsidies to households installing solar roof-top panels.

But the cost effectiveness and fairness of the solar voltaic rebate program is being questioned. Andrew Macintosh, the associate director of the Australian National University’s Centre for Climate Law and Policy, has reviewed the program. He says it has barely reduced Australia’s greenhouse gas emissions, and it has favoured the rich. “What we found was that the cost of the program was very high,” he said. “It cost the government about $1.1 billion. For that we got about a six-fold increase in solar generation, but still solar constituted only 0.1 per cent of total generation, so a relatively small technology in the overall grid,” he said.

“We’ve been handing out a lot of subsidies for solar systems, but the most people who pick up these subsidies tend to be from wealthier households … and as a result we’re basically providing middle and upper class welfare.”

In June last year the Federal Government cancelled the program at short notice.

 

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Posted in Alarmism, Economics, Energy, Renewable Energy, Subsidies | Comments Off on Misguided solar subsidies favoured the wealthy

“Renewable energy keeps oil price high”- Saudi Oil Minister

November 5, 2010

It would seem that the current oil price is determined by the level at which renewable energy costs are politically acceptable. The conclusion then must be that if the “renewables” go out of fashion and become less politically correct then the oil price could be significantly lower than it is!

The Financial Times carries the story:

Ali Naimi, the oil minister of Saudi Arabia, was in mischievous mood on Monday night, positing an oil price of $70 to $90 for the foreseeable future, and suggesting that oil consumers should be happy with such a settlement – because a price of more than $70 was needed to justify investments in renewable energy.

His remarks, which came in response to questions from the Financial Times at a dinner hosted by the Singapore International Energy Week, did not go down well with all sections of the audience – some were unhappy that the world’s biggest oil producer should suggest they be content with an oil price they felt was unnecessarily high.

Mr Naimi justified his $70 to $90 prediction, which he called a “comfortable zone” that should be welcomed by oil producers and consumers alike, by reference to renewable energy, which he suggested gave oil an “anchor” price. If the oil price were to fall below $70, then renewable energy would not be competitive, he said.

In other words, he seemed to be implying, governments and companies that have invested in renewable energy are at least partly responsible for setting a de facto minimum price for oil of $70 per barrel.

Nothing to do with those oil-producing countries wanting a price more than $70 and “less than $90”, and tailoring their production accordingly, then.

In fact, Mr Naimi said, the world’s oil market was already “a little bit oversupplied”, which he suggested proved that it was renewable energy that was keeping prices up.

By the way, that $90 – an upper limit of the range that he carefully dropped into the conversation – was $10 a barrel more than Mr Naimi had previously suggested was the range of the “comfort zone”. Oil markets took note, and prices nudged up: Nymex December West Texas Intermediate, a US benchmark, rose $1.88 to $83.31 a barrel just after the remarks.

Posted in Economics, Energy, Environment, Oil price, Renewable Energy | Comments Off on “Renewable energy keeps oil price high”- Saudi Oil Minister

Indian stock market and cricket performance

October 13, 2010

 

The Little Master: image rediff.com

 

Today Indian won the 2nd cricket test against Australia in Bangalore by a handsome 7 wickets. Sachin Tendulkar scored a second innings fifty after his double- century in the first innings which was his 49th Test century.

The Bombay Stock Exchange (Sensex) surged 484 points to 20,688 today.

This was immediately taken as corroboration of the street wisdom that the two are closely tied. The Indian Express is euphoric. Sensex wins on day of India’s triumph.

A superb ending for the stock markets happened in tandem with Team India’s victory against Australia in Bangalore. Coincidence? The 484-point surge in BSE benchmark Sensex today coincided with the triumph of Indian cricket team against Australia –thus corroborating claims of a correlation between trends in stock markets and cricket field.

A recent paper by Monash University economists did find a link between Cricket performance and the BSE Sensex.

Mishra, Vinod & Smyth, Russell, 2010. “An examination of the impact of India’s performance in one-day cricket internationals on the Indian stock market,” Pacific-Basin Finance Journal, Elsevier, vol. 18(3), pages 319-334, June 2010.

This study examines the impact of the Indian cricket team’s performance in one day international cricket matches on returns on the Indian stock market. The main conclusion of the study is that there exists an asymmetric relationship between the performance of the Indian cricket team and stock returns on the Indian stock market. While a win by the Indian cricket team has no statistically significant upward impact on stock market returns, a loss generates a significant downward movement in the stock market. When Sachin Tendulker, India’s most popular cricketer, plays the size of the downward movement in returns is larger.

So in fact the stock market surge today is not quite in line with the paper’s conclusions.

But, for once, a masterly performance by Tendulkar the “Master Blaster” has coincided with an India win!!

So the correlation is permitted some poetic licence.

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Posted in Cricket, Economics | Comments Off on Indian stock market and cricket performance

Currency war of words continues – time to be in Yuan?

October 13, 2010

For the layman currency investor these are dangerous times. Countries are intervening in currency markets to hold the value of their currencies down as a way of helping their own exports. The currency market is not that “free”. The only certainty for the long term is that the Chinese Yuan is undervalued. Even Gold where the price may keep rising in Dollars may not keep pace – in the long term – with the Yuan. The Korean Won is also undervalued  but whether this will hold in the long term is uncertain. In the Eurozone the Euro will not rise till the lowish values now can get the economies of Spain and Ireland and Greece and Portugal moving again. But the current values can help the export engines in Germany and the UK  to keep going.

The G20 finance ministers will meet in South Korea from October 22 and its leaders are to gather in Seoul next month to try to reach a consensus on the global currency system to prevent competitive devaluation from damaging growth. A weekend International Monetary Fund meeting failed to defuse tensions reports Reuters.

“As chair of the G20, South Korea’s role will be seriously questioned,” Japanese Finance Minister Yoshihiko Noda told a parliamentary panel when asked about South Korea’s currency intervention and its place in G20. Japan intervened in the currency market last month for the first time in more than six years to try to stem a rise in the yen that is putting a fragile economic recovery at risk. Noda declined to say whether Japan would step in again as the Japanese currency hovers near a 15-year high against the dollar. He drew a distinction, however, between Japan’s intervention, which appears so far to have been a one-off move, and more frequent intervention by South Korea and China. “In South Korea, intervention happens regularly, and in China, the pace of yuan reform has been slow.

“Our message is that we have confirmed at the Group of Seven that emerging market countries with current account surpluses should allow their currencies to be more flexible.”

Analysts say Tokyo is worried about Japanese exporters’ waning competitiveness against South Korean rivals, given that the yen has risen about 13 percent against the dollar so far this year, while the won has gained only about 4 percent.

Hopes for a G20 currency consensus look slim. “It’ll be impossible for the G20 to reach a consensus on currencies. Many emerging economies feel that they are being forced to intervene because of a weak dollar,” said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp.

Japanese Prime Minister Naoto Kan urged Seoul and Beijing to act responsibly but acknowledged Tokyo’s delicate position. “I want South Korea and China to take responsible actions within common rules, though how to say this is difficult because Japan has also intervened,” he told the same parliamentary panel.

Japan sold 2.1 trillion yen ($25.65 billion) last month in its first currency intervention in more than six years to curtail the yen’s strength against the dollar. South Korea has intervened to the tune of about $13 billion since late September to try to cap the won’s rise, but analysts said its intervention had been more aggressive in relative terms.

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Posted in Currency, Economics, Economy | Comments Off on Currency war of words continues – time to be in Yuan?

Indian Minister: Indian IT companies have created 250,000 jobs in US

September 15, 2010
DAVOS/SWITZERLAND, 27JAN10 - Anand Sharma, Min...

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While it is clearly political positioning just before bilateral trade talks between the US and India to be held next week in India, the “global outsourcing” alarmism is not as one-sided as it is made out by opportunistic politicians.

In my own experience transfer of technology across countries within the same company is more likely to lead to an increase in jobs – but not the same jobs – in the country exporting technology.

The Times of India reports that:

Indian IT companies created 7,000 jobs in the US last month and 2.5 lakh (250,000) jobs over the last three years, commerce minister Anand Sharma has said, indicating that recent protectionist measures taken by the US such as hiking professional visa fees and clamping down on outsourcing could hamper such economic activities.

“In times of crisis, countries tend to look inwards but protection can be counter productive. This is the time to encourage global trade flows,” the minister said on Tuesday. The bilateral trade policy forum meeting scheduled next week to be chaired by Mr Sharma and US trade representative Ron Kirk will focus on both issues.

The minister is optimistic that the issues could be sorted out through discussions. “We remain optimistic about the whole scenario but responses need to be calibrated,” he said.

Read more: Indian IT cos created 7,000 jobs in US in Aug – The Times of India http://timesofindia.indiatimes.com/business/india-business/Indian-IT-cos-created-7000-jobs-in-US-in-Aug/articleshow/6557684.cms#ixzz0zaEmNB00

Of course it was not so very long ago when US and EU trade officials were berating India, China and other developing countries about the sins of protectionism and closed markets. With the growth in India and China now leading the way out of recession it would be wiser to keep global trade flows open rather than to wave the protectionist flag.

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Posted in Business, Economics, Technology | Comments Off on Indian Minister: Indian IT companies have created 250,000 jobs in US

Reality Check:Since 2008 US constructing 17.9 GW of coal power

September 14, 2010
Hunter Power Plant, a coal-fired power plant j...

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An Associated Press examination of U.S. Department of Energy records and information provided by utilities and trade groups shows that more than 30 traditional coal plants have been built since 2008 or are under construction.

“Building a coal-fired power plant today is betting that we are not going to put a serious financial cost on emitting carbon dioxide,” said Severin Borenstein, director of the Energy Institute at the University of California-Berkeley.

Sixteen large plants have fired up since 2008 and 16 more are under construction. Combined, they will produce an estimated 17,900 megawatts of electricity.

Carbon-neutralizing technologies for coal plants remain at least 15 to 20 years away.

Once the carbon dioxide hysteria dies away – as it surely will – the misguided and wasted effort on carbon sequestration can be redirected to real issues connected with power generation. These are the mundane but practical though unfashionable fields of development – such as energy storage, small scale distributed use of wind power sources (since they cannot ever provide base-load), increase of efficiency for conventional coal and gas plants, integration of solar- thermal contributions into fossil plant to get continuous sustainable generation, mini-hydro (run of the river) power and distributed micro-hydro plants. Subsidies wasted on renewables can also be redirected to more fruitful areas.

Anthracite coal, a high value rock from easter...

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Coal has not gone away.

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Posted in Economics, Energy, Engineering, Environment | Comments Off on Reality Check:Since 2008 US constructing 17.9 GW of coal power

Strong GDP growth in India but danger signals persist

September 1, 2010

India and China continue to grow and should be able to weather the storm of the coming second dip of the double-dip recession which is looking ever more likely in Europe and the US – notwithstanding the recent growth in Germany and the UK.

In India the sharp growth in the manufacturing and service sectors could overcome the demand side weakness that is also apparent. The April – June quarter has had the highest growth for 10 quarters. Bringing inflation down from the current 9+% becomes crucial. The good monsoon so far should help. The hotels and tourism sector should get a further boost in the 3rd quarter when the Commonwealth Games is held in Delhi – though the Games themselves seem to be mired in corruption scandals and the late completion of all the venues.

From the Hindu Business Line. http://www.thehindubusinessline.com/2010/09/01/stories/2010090152010100.htm

Powered by a manufacturing rebound, the Indian economy has recorded an 8.8 per cent growth during the first quarter of the current fiscal (April – June 2010)

The 8.8 per cent year-on-year increase in the real gross domestic product (GDP) compared with 6 per cent in the same quarter of 2009-10 has been largely due to robust industrial (especially manufacturing) growth from a low base.

The industry, as a whole, grew 11.4 per cent against 4.6 per cent in the corresponding period of the previous fiscal, when factories were struggling to emerge from the slowdown triggered by the global financial crisis of late 2008.

Within industry, manufacturing registered a 12.4 per cent year-on-year jump, against 3.8 per cent during April-June of last fiscal. But, it is not only industry that has done better relative to last year. Even the farm sector and services have notched up higher growth rates for the first quarter. While agriculture has benefitted from a decent rabi harvest that followed a drought-impacted kharif crop, in services, the impetus has come mainly from commerce (trade, hotels, transport and communication) and construction.

But as The Times of India points out, danger signals on the demand side still persist and could threaten future growth.

However, a closer look at the data, say economists and bankers, reveals that the upward trend may not continue for long. StanChart in a report, said that despite strong growth in Q1, slow growth in domestic demand and global slowdown raise doubts about growth in the next few quarters. A research report by Nomura also pointed out that the biggest surprise in India’s growth figures is the substantial divergence between the real GDP (gross domestic product) growth estimated at 8.8% (year-on-year basis) and the real GDP growth at market prices, estimated at 3.7%.

The report explained that the difference between the two is indirect taxes and subsidies offered by the government. Government’s latest figure suggests that taxes are falling while subsidy payments have risen substantially.

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Posted in Economics, India | 1 Comment »

Wind Power Sector struggles

August 21, 2010

Wind Power is still a long way from being commercial and is  still critically dependent upon subsidies. Austerity packages resulting from the financial crisis have sharply reduced subsidy programs and there have been a spate of cancelled and delayed projects. There is also some disillusionment evident as wind turbines demonstrated their weaknesses during the last cold winter when many had to be shut down in Europe for fear of ice on the turbine blades. The requirement for back-up power and the instability they add to the grid has not helped either. The Spanish support for renewables has dried up as the financial crisis has hit hard.

An injection of realism and common sense to the the use of renewable energy is long overdue. Wind and Solar and tidal and geothermal energies all have their place but they will not – and cannot – provide the base load power generation that coal, nuclear and hydro power have provided.

The FT reports that shares in Vestas Wind Systems lost more than a fifth of their value on Wednesday after the world’s largest wind turbine manufacturer slumped to its second consecutive quarterly loss and cut its profit guidance for the year.

image: http://www.pcdistrict.com/modules/productcatalog/product_images/132027-Windmill-3D-Screensaver.jpg

image. http://37signals.com/svn/images/dutch_windmill.jpg

Vestas warned that some expected orders from Europe and the US had been delayed as banks take longer to approve financing and deficit-laden governments review their support for wind power. Analysts highlighted regulatory uncertainty in Spain, which recently cut subsidies for renewable energy as part of its fiscal austerity programme, and the US, where legislation to promote clean energy has stalled on Capitol Hill. Low natural gas prices, caused in part by the surge in supplies from newly exploited US shale gas reserves, was another factor deterring investment in more costly renewable energy, analysts said.

New wind power installation in the US declined by more than two-thirds in the first half and fell below new coal power capacity for the first time in five years.

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Posted in Business, Economics, Energy, Technology | Comments Off on Wind Power Sector struggles

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