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I.H.T. Special Report: Oil & Money: China Leads the Way as Demand for Coal Surges Worldwide

November 12, 2012 by Leave a Comment

But another problem stood out. India relies on coal for 55 percent of its electrical power and struggles to keep enough on hand.

Coal remains a critical component of the world’s energy supply, despite its bad image. In China, demand for coal in 2010 resulted in a traffic jam 120 kilometers, or 75 miles, long caused by more than 10,000 trucks carrying supplies from Inner Mongolia. India is increasing coal imports.

So is Europe, as it takes advantage of lower coal prices in the United States. Higher-priced natural gas on the Continent is creating demand for more coal imports from the United States, where coal is taking a drubbing from less costly natural gas.

Dirty, fickle and dangerous, coal may seem an odd contender in a world where promising renewable energy sources like solar, wind and hydroelectric power are attracting attention. Anathema to environmentalists because it creates so much pollution, coal still has the undeniable advantages of being widely available and easy to ship and burn.

The biggest attraction, however, is low cost. By many estimates, including that of Li Junfeng, longtime director general of the National Development and Reform Commission of China, burning coal still costs about one-third as much as using renewable energy like wind or solar.

Coal is not subject to the vagaries of windless or sunless days and can easily meet base-load demands of electricity consumers without interruption. So can nuclear power, but the nuclear industry is still reeling from the March 2011 disaster at the Fukushima Daiichi power plant in Japan. Countries like Germany have turned away from nuclear reactors.

Global demand for coal is expected to grow from 7.9 billion tons this year to 8.9 billion tons by 2016, with the bulk of new demand — about 700 million tons — coming from China, according to a Peabody Energy study. China is expected to add 240 gigawatts, the equivalent of adding about 160 new coal-fired plants to the 620 operating now, within four years. During that period, India will add another 70 gigawatts, via more than 46 plants.

“If you poke your head outside of the U.S., coal-fired plants are being built left and right,” said William Burns, an energy analyst with Johnson Rice in New Orleans. “Coal is still the cheapest fuel source.”

Besides strong demand for thermal coal, which is burned in power plants, use of metallurgical coal or coking coal, used in blast furnaces, is also expected to more than double in China, to about 1.7 billion metric tons by 2016, as the country’s steel mills churn out more steel for automobiles, skyscrapers, and export goods, the Peabody study says.

Coking coal will be increasingly in demand in other steel centers like Brazil and India, pushing coal companies to scrounge for new reserves in places like Botswana, Mongolia and Mozambique.

In all, coal use is expected to increase 50 percent by 2035, said Milton Catelin, executive director of the London-based World Coal Association

“Last year, coal represented 30 percent of world energy and that’s the highest share it has had since 1969,” he said.

Within a year or two, coal will surpass oil as the planet’s primary fuel, Mr. Catelin predicted.

For now, coal seems to be sidestepping a major potential impediment to its use. International accords restricting greenhouse gas emissions to prevent climate change so far have been ineffective.

China plans to put carbon-emission reducing equipment on new plants. But China and other big coal producers still have a long way to go in matters like mine safety. On average, about 2,500 Chinese coal miners die in accidents every year.

On Aug. 29, for instance, a blast at the Xiaojiawan mine in Sichuan province killed more than 40 miners. Officials blamed lax safety and overcrowding in the shafts.

Industry officials insist that as large Chinese coal companies like the Shenhua Group buy out smaller mines, and new technologies develop that can detect dangerous methane gas and automatically shut down mines, safety will improve.

Nowhere are the controversies surrounding coal more pronounced than in the United States. Coal became an important issue in the 2012 U.S. presidential campaign, with the Republican nominee, Mitt Romney, accusing President Barack Obama of being anti-coal.

The American coal industry says Mr. Obama is waging a “war on coal” in response to his proposed regulation of air pollution and surface mining in mountain areas.

This article has been revised to reflect the following correction:

Correction: November 12, 2012

An earlier version of this article included an incorrect middle initial for the author. The initial (which he does not use in his byline) is A, not G.

Article source: http://www.nytimes.com/2012/11/13/business/energy-environment/china-leads-the-way-as-demand-for-coal-surges-worldwide.html?partner=rss&emc=rss

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Common Sense: Looking Back on 2011

December 23, 2011 by Leave a Comment

This week ATT threw in the towel on its doomed effort to buy T-Mobile after promising T-Mobile’s owner, Deutsche Telekom, $3 billion in cash plus valuable wireless spectrum if the merger failed on antitrust grounds, which, predictably, it did. As for ATT’s chief executive, Randall Stephenson, ATT’s lawyers and the ATT board, which ultimately bear responsibility, I’m not holding my breath that any of them will be held accountable for this $4 billion error in judgment.

But let’s save a discussion of crony capitalism for next year. It’s Christmas Eve, and the failure of ATT’s $39 billion bid, the biggest deal of 2011, was just one of many developments on subjects I wrote about this year, from the gathering chill in social networking public offerings to the fall of Italy’s prime minister, Silvio Berlusconi. This week I went back to some of the people and companies who appeared in my columns to find out how they’ve fared.

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“Cars 2” was released in June to a critical drubbing unprecedented for a Pixar film. It also raised the specter that the quirky independence that had spawned such beloved classics as the “Toy Story” franchise, “Ratatouille” and “Up” had been extinguished by the heavy hand of Disney, which bought Pixar in 2006. “Cars 2” was still a hit by Hollywood standards — it generated $552 million in worldwide box-office revenue — but it turned out to be the worst-performing Pixar film ever, adjusted for inflation.

But there are encouraging signs emanating from Pixar’s headquarters in Emeryville, Calif. “This is not an executive-led studio,” John Lasseter, chief creative officer for Pixar and Disney Animation, told Brooks Barnes, a reporter for The New York Times, this summer. Mr. Lasseter stressed that “it’s not true” that “Cars 2” was influenced by Disney ownership and “my deepest desire is to entertain people by making great movies.”

More fundamentally, Pixar’s next big film is “Brave,” set for a June 22, 2012, release. “Brave” is a fairy tale (Pixar’s first) set in 10th-century Scotland with a girl as the protagonist. It’s not a sequel and, unlike “Cars 2,” has no obvious merchandising tie-ins (unless it unleashes a mania for girls’ bow and arrow sets). Also in development are a dinosaur film premised on the idea that they never became extinct, and a story set inside the human mind.

The movie “Brave,” said Doug Creutz, an analyst at Cowen Company, “certainly appears to be a return to creative risk-taking in terms of the subject matter. It’s important to look at Pixar’s output in the context of generally declining trends in animated box office as competition has gotten more intense. Pixar may have to work even harder, particularly on nonsequels, to deliver the kind of returns that had been normal for their films. I think there’s a lot riding on that film, more than normal, given the crosscurrents in the film business in general and the animation business in particular, the issues with ‘Cars 2,’ and the importance of Pixar to Disney.”

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After saying his dealership was “close to death” during the financial crisis, David Kelleher, president of David Dodge Chrysler Jeep in Glen Mills, Pa., told me in July that he was cautiously optimistic about Chrysler under its new leadership from Fiat. When I called this week, he was too busy closing sales to come to the phone.

In October, Chrysler reported third-quarter profit of $212 million on a 24 percent surge in sales, in contrast to a loss of $84 million a year ago, and predicted a full-year profit. Many parts of the economy may be hurting, but the rejuvenated American auto industry is thriving. That is filtering down from Detroit to local economies across the country — an unqualified success for the Bush and Obama administrations’ controversial rescue mission.

This week a buoyant Mr. Kelleher told me that his dealership had its first 100-vehicle sales month in September since 2007, a feat it repeated in October and November. His dealership is on track to do even better this month. “Our Jeep sales have been red-hot,” he reported, and the updated Chrysler 300 “is coming on strong.” He said he just ordered as many 300s as he could get. Chrysler “is producing flat out,” he said, “and they’re selling everything they can make.”

Article source: http://feeds.nytimes.com/click.phdo?i=bdd066aa07a1dc24a2a0b9f93f79eaf1

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Banks Defeated in Senate Vote on Debit Card Fees

June 9, 2011 by Leave a Comment

The debit card rules were a major part of the Dodd-Frank financial regulation law passed last year. The Senate vote was one of the strongest challenges so far to the new law.

Although 54 senators voted in favor of the delay, the measure failed to garner the 60 votes that were required for it to pass under Senate rules. Forty-five senators voted against the measure, which was sponsored by Senator Jon Tester, a Montana Democrat who is facing a tough re-election battle next year, and Senator Bob Corker, a Tennessee Republican.

Even with the defeat, the vote showed the results of a remarkable come-from-behind lobbying campaign by banks to recover from the anti-Wall Street drubbing they took during last year’s debate over financial regulation. The debit card measure, sponsored by Senator Richard J. Durbin, an Illinois Democrat, passed last year by a two-to-one ratio after little debate and no hearings.

The Wednesday vote, which followed a vigorous floor debate, was a victory for retailers, who have complained that banks and the companies that control the largest debit card networks, Visa and MasterCard, have consistently raised the fees on debit card transactions even as the market has grown rapidly and technology costs have declined.

Those fees topped $20 billion last year, according to industry reports.

The Federal Reserve, as guided by the new law, had proposed rules that would cut the average debit card processing fee to 7 to 12 cents per transaction, from 44 cents currently. Though Congress exempted small banks with less than $10 billion in assets from the new limits, banking regulators warned that such a two-tiered fee system among banks would not be competitive. Opponents of the delay said that all but 100 banks and three credit unions would be exempt from the fee restrictions.

The new regulations are scheduled to take effect by July 21, and the Federal Reserve, which received more than 11,000 comments on its proposals, has said that it intends to meet the deadline.

The vote also provided a victory for Senator Durbin, who managed to keep his debit-fee measure intact despite a switch by 12 senators from supporting him last year to now voting to delay the debit fee caps. Nine Democrats and three Republicans changed their votes, including both New York senators, whose constituency includes Wall Street and major banks.

Mr. Durbin said that a delay of the debit rules would have kept fees at current levels and given banks “a windfall of profit that they do not deserve.”

By coming close to victory, banks are likely to be emboldened to fight other regulations being drawn under the Dodd-Frank bill. Those include rules that would subject derivatives to increased margin requirements and force derivative trades through a central exchange.

Bankers and business lobbies are also opposed to the structure of the new Consumer Financial Protection Bureau, which is scheduled to take over regulation of mortgages and other consumer-related areas from other banking regulators.

“This shows the banking industry has mounted a very effective fight,” Bill Allison, editorial director for the Sunlight Foundation in Washington, which monitors lobbying activity, said in an interview.

Both sides sought to portray the fight as pitting big, well-financed interests against small-town retailers or banks. Bank lobbyists said that the rule would most harm small community banks and credit unions, while benefiting giant retailers like Wal-Mart and Home Depot that account for most of the nation’s debit card transactions.

Similarly, a coalition of retailers framed the debate as pitting the giant banks that issue the most debit cards — JPMorgan Chase, Bank of America and Wells Fargo — against mom-and-pop retailers that were trying to scrape by on meager profit margins.

There were elements of truth to both arguments. Home Depot executives, for example, told financial analysts on a conference call this year that a cap on debit fees could save the company $35 million a year.

Banks, in a flurry of ads in subway cars and on television, portrayed the debit fee reduction as a $12 billion gift to retailers. “Bureaucrats want to take away your debit card!” read a print ad that tried to argue that the fee cuts would make debit cards so unprofitable that smaller banks and credit unions would either charge for debit cards or raise fees on checking accounts or other consumer services to make up the loss.

Similarly, independent business owners testified before Congress that debit fees had sharply raised their costs. 

The Federal Reserve had already missed an April deadline to complete the debit card rules, and lobbyists on both sides of the issue said that Fed officials expressed a desire for Congress to take the issue out of their hands.

Though the major card companies said they would work to put a system in place that allowed for two tiers of charges — one for big banks subject to the limits and another for smaller banks that were exempt — the top banking regulators at the Fed and the Federal Deposit Insurance Corporation each expressed doubts that such a system would work, because market forces would guide transactions to the lower-cost option.

“It’s going to affect the revenues of the small issuers,” Ben S. Bernanke, the chairman of the Federal Reserve, told a Senate committee last month, “and it could result in some smaller banks being less profitable or even failing.”

The Sunlight Foundation said in an April report that 24 lobbying firms had been hired last year to influence action on the debit card rules. Eighteen of those firms were registered as representatives of the two major debit card networks, Visa and MasterCard. A large portion of those lobbyists have gone through the revolving door between government and industry:  68 of the 79 people who registered as lobbyists for Visa or MasterCard previously worked in government, according to the Center for Responsive Politics in Washington.

Among the most prominent who worked to influence votes on the debit card measure were Richard A. Gephardt, the former House majority leader and a Democrat, who represented Visa. The retailers had Don Nickles, the former Republican senator from Oklahoma, in their corner.

Article source: http://feeds.nytimes.com/click.phdo?i=8c7f398273f930e786cdbc6f864ab4a5

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Europe Debt Woes Hit Markets and Euro

May 23, 2011 by Leave a Comment

LONDON (AP) — Heightened tensions over Europe’s debt crisis combined with weak economic surveys to send world stock markets sliding on Monday, with the euro dropping below $1.40 for the first time in two months.

Investors fretted that the debt crisis was turning more acute due to mounting speculation Greece will have to restructure its debts, a heavy defeat for Spain’s governing Socialists in regional elections and a warning from a leading credit ratings agency over Italy’s public finances.

The renewed jitters were particularly visible in stock markets, where most leading indexes around the world shed over 1 percent of their value. The euro was also in the firing line, dropping 2 cents on the day to $1.3976, the first time since March it traded below $1.40.

In Europe, the FTSE 100 index of leading British shares was down 1.9 percent at 5,837 while Germany’s DAX fell 2 percent to 7,121. The CAC-40 in France was 2 percent lower at 3,913.

“Once again the eurozone debt concerns about the Greece default, having been ratcheted up over the weekend, are the heart of the problem and a warning over the state of Italy’s credit has hardly helped matters,” said Ben Critchley, a sales trader at IG Index.

“Added to this, a drubbing at the Spanish polls for the governing Socialist party, widely seen as a backlash against austerity measures is all adding to investors’ feelings that the European debt problems are going to be a much longer drawn out process again,” Critchley added.

Late Friday, the Fitch ratings agency downgraded its view on Greece’s debts further below junk status. Over the weekend, the country’s Prime Minister George Papandreou conceded Greece was going to find it difficult to tap bond market investors next year. Doing so was part of last year’s euro110 billion ($154 billion) bailout plan. Greece’s failure to appease the markets has generated talk that a second bailout is only weeks away.

Concerns that Europe’s debt crisis could engulf countries other than Greece, Ireland and Portugal were heightened by the news that Standard Poor’s lowered its outlook on Italy’s debt. If Italy were to succumb to the same pressures that forced Greece and the others to seek financial rescue, then the euro’s very existence would be threatened, analysts say.

Italy, though, is considered to be fairly safe from suffering the same fate for now. Its private debt levels are low and the banking sector stable. Rival ratings agency Moody’s Investor Services confirmed its stable outlook on the country’s finances.

The next potential problem is Spain, which has high borrowing and debt levels and is undergoing a major austerity program. Voters on Sunday showed their discontent at what’s going on in a country that has an unemployment rate of over 20 percent.

In what Spanish media said was the worst performance on record by the Socialist Party in local and regional elections, the numbers reflecting the loss were stunning: the conservative Popular Party won at the municipal level by about two million votes, compared to 150,000 in its win in 2007, and in 13 regional governments that were up for grabs, the Socialists lost in virtually all of them.

Figures showing that the economic recovery in Europe may be losing steam heaped further pressure on stock markets and the euro.

The monthly purchasing managers’ index from financial information company Markit fell to a seven-month low of 55.4 from 57.8 in April, largely because of a slowdown in France and Germany. Though the index is above the 50 mark, which indicates expansion, the news did generate worries that recent buoyant growth rates from Europe’s two leading economies may not last.

“May’s sharp fall…brought the strongest signs yet that the core economies’ recoveries are losing steam and will dent hopes that they can pull the periphery out of the crisis,” said Ben May, European economist at Capital Economics.

Worries over the European economy are expected to weigh heavily on the U.S. open later — Dow futures were 1 percent lower at 12,337 while the broader Standard Poor’s 500 futures fell 1.1 percent to 1,313.

The retreat was evident in Asia earlier, where Japan’s Nikkei 225 slid 1.5 percent to close at 9,460.63 and South Korea’s Kospi tumbled 2.6 percent to 2,055.71. Hong Kong’s Hang Seng shed 2.1 percent to 22,711.02.

Mainland Chinese shares dropped almost 3 percent Monday, the most in more than four months, as news that an international stock trading board may be launched in Shanghai soon added to worries over a possible shortage of funds.

The benchmark Shanghai Composite Index sank 2.9 percent to 2,774.57, while the Shenzhen Composite Index of China’s smaller, second exchange lost 3.6 percent to 1,149.39. Shares in chemicals, textiles and paper processing companies weakened.

In the oil markets, benchmark crude for June delivery was up $1.05 to $99.49 a barrel in electronic trading on the New York Mercantile Exchange.

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Pamela Sampson in Bangkok contributed to this report.

Article source: http://feeds.nytimes.com/click.phdo?i=2389a6163684715aab65221f44a54248

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