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Great Barrier Reef Faces ‘Irreversible’ Damage: Report

Great Barrier Reef Faces ‘Irreversible’ Damage: Report.

The Huffington Post  | by  Sara Gates
Posted: 03/06/2014 12:26 pm EST Updated: 03/06/2014 12:59 pm EST

Main Entry Image

The Great Barrier Reef may be in serious trouble.

Unless immediate action is taken, the famous coral reef system will be unable to recover from the “irreversible” damage that climate change will wreak on it by 2030, a new report out of Australia warns.

Published by the World Wildlife Fund-Australia, the University of Queensland reportpaints a bleak picture for the future of the ecosystem.

“If we don’t increase our commitment to solve the burgeoning stress from local and global sources, the reef will disappear,” the report, prepared for Earth Hour’s upcoming annual event, states. “This is not a hunch or alarmist rhetoric by green activists. It is the conclusion of the world’s most qualified coral reef experts.”

The reef has already experienced extensive damage in the past few decades from tropical storms and other harmful events, which can lead to coral bleaching, a condition that occurs when stress from changes causes coral to weaken and turn white. A 2012 report indicated that 50 percent of the Great Barrier Reef has disappeared since 1985.

great barrier reef bleaching

Bleached coral, as seen here at the Great Barrier Reef in Queensland, occurs when extreme temperatures, increased UV rays, disease, chemicals, salinity and exposure to air and rain at extreme low tides occur.

This decline is set to increase in the next 16 years, based on current estimates of carbon dioxide emissions, warn coral reef biologists Dr. Selina Ward and Ove Hoegh-Guldberg.

If things do not drastically change, the condition of the reef in 2030 will be “getting close to what we understand to be some of the limits in terms of rapidly calcifying reefs,” Hoegh-Guldberg, who serves as the director of the university’s Global Change Institute, told The Sydney Morning Herald.

In order to grow and thrive, coral reefs undergo calcification. But with warming waters and increased carbon pollution, the Great Barrier Reef is becoming weaker and less likely to reproduce.

“If we continue as we are, we’ll get more degradation and more bleaching events,” Ward told The Guardian. “If we want to save the Great Barrier Reef we need to act immediately and make dramatic reductions in carbon pollution. We need to move away from fossil fuels.”

Great Barrier Reef Faces 'Irreversible' Damage: Report

Great Barrier Reef Faces ‘Irreversible’ Damage: Report.

The Huffington Post  | by  Sara Gates
Posted: 03/06/2014 12:26 pm EST Updated: 03/06/2014 12:59 pm EST

Main Entry Image

The Great Barrier Reef may be in serious trouble.

Unless immediate action is taken, the famous coral reef system will be unable to recover from the “irreversible” damage that climate change will wreak on it by 2030, a new report out of Australia warns.

Published by the World Wildlife Fund-Australia, the University of Queensland reportpaints a bleak picture for the future of the ecosystem.

“If we don’t increase our commitment to solve the burgeoning stress from local and global sources, the reef will disappear,” the report, prepared for Earth Hour’s upcoming annual event, states. “This is not a hunch or alarmist rhetoric by green activists. It is the conclusion of the world’s most qualified coral reef experts.”

The reef has already experienced extensive damage in the past few decades from tropical storms and other harmful events, which can lead to coral bleaching, a condition that occurs when stress from changes causes coral to weaken and turn white. A 2012 report indicated that 50 percent of the Great Barrier Reef has disappeared since 1985.

great barrier reef bleaching

Bleached coral, as seen here at the Great Barrier Reef in Queensland, occurs when extreme temperatures, increased UV rays, disease, chemicals, salinity and exposure to air and rain at extreme low tides occur.

This decline is set to increase in the next 16 years, based on current estimates of carbon dioxide emissions, warn coral reef biologists Dr. Selina Ward and Ove Hoegh-Guldberg.

If things do not drastically change, the condition of the reef in 2030 will be “getting close to what we understand to be some of the limits in terms of rapidly calcifying reefs,” Hoegh-Guldberg, who serves as the director of the university’s Global Change Institute, told The Sydney Morning Herald.

In order to grow and thrive, coral reefs undergo calcification. But with warming waters and increased carbon pollution, the Great Barrier Reef is becoming weaker and less likely to reproduce.

“If we continue as we are, we’ll get more degradation and more bleaching events,” Ward told The Guardian. “If we want to save the Great Barrier Reef we need to act immediately and make dramatic reductions in carbon pollution. We need to move away from fossil fuels.”

Coal Fire Turns Australian Mine Into Mordor’s Mount Doom

Coal Fire Turns Australian Mine Into Mordor’s Mount Doom.


fire at the the Hazelwood open-cut coal mine has turned a large swathe of Morwell, Australia into something out of J.R.R. Tolkien’s Mordor.

australia coal mine fire 1

australia coal mine fire 2

The fire at the mine has been blazing for three weeks and is believed to be the result of a bushfire started by an arsonist. The town of Morwell and its 14,000 inhabitants has been blanketed in smoke and authorities fear it could take months to completely extinguish the blaze. The town is about 150 km east of Melbourne.

There is speculation that the government of the province of Victoria may soon order a total evacuationTens of thousands of gas masks have been distributed, according to Vice.

australia coal mine fire 3

australia coal mine fire 5

The blaze poses a difficult challenge for firefighters because even when flames are extinguished the coal continues to smoulder. The fire can reignite at any moment and rages underground. Firefighters are concerned about the danger posed by landslides caused by the huge quantity of water being used on the flames.

australia coal mine fire 7

australia coal mine fire 6

Let’s hope they get things under control soon.

The great Australian electricity rip off – Solar Business Services

The great Australian electricity rip off – Solar Business Services.

The great Australian electricity rip off

20 Feb, 2014


Right, now I’m really, really annoyed.

Although I’ve spent more than two decades in the solar and energy field, in the last two years as solar has grown and we have become an intrinsic and material part of  Australia’s energy mix I have come to realize something fundamental.

The Australian public is being duped and constantly lied to on a monumental scale when it come to electricity.

Now I am a fundamentally trusting person; it’s the way I was brought up. I’m not a conspiracy theorist. I always give people, Governments and corporations the benefit of the doubt.

However, the more I read, research and understand about the way our electricity system operates the more alarmed I become. I admit, I am not an expert in the complex and ever changing world of electricity regulation, but a lot of what is happening in the industry is not rocket science. Events of the last few weeks have simply brought it all home for me.

Lets look at a few examples.


The facts on what the RET does and doesn’t cost are absolutely, 100% clear, ironically thanks to a Government body, The Australian Energy Market Commission. It’s the single smallest component of electricity bills  (bar one) and is already declining in proportional terms.

And yet, from the Prime Minister all the way down to the subtle messages passed on to their very close friends in  media who helped them gain power, time and time again the RET (and the Carbon Price) are made out to be the root of all evil.

This is despite the data, the facts and the truth from their own departments. I am boggled and stunned by the willingness of our leaders to tell blatantly astounding mistruths about this issue and to conveniently overlook the real source of price rises. Even Joe Hockey (who seems like a nice bloke) jumped on the band wagon yesterday suggesting that the RET had something to do with Alcoa’s decision to exit Australia, despite the fact that the company had received hundreds of Millions of dollars in exemptions and grants. The only ones not blaming the RET and the Carbon Price, were Alcoa.

The real source of price rises

When you look at the data, it shows you some staggering facts about what is really going on. Take for example, one of Australia’s largest network owners, NSW Government owned Ausgrid.

Ausgrid has the single largest share of customers in the entire National Electricity Market (around 18%) making them the canary in the coal mine. In their 2013 report, the Australian Energy Regulator had this to say: “There have been many large changes in the relative and overall magnitude of the charging parameters within the period. Of particular note is the 471.14 per cent increase in the fixed charge in 2012–13, 18 per cent decreases in energy charges in 2006–07 and over 200 per cent increases in energy charges in 2009–10.”

Did you get that ? Ausgrid, a Government owned network operator increased fixed charges by 471.14 % to business customers.

If you look at it over the period 2004 to 2013 it is a total increase of 1125%. Peak energy costs increased 600%, shoulder by 649%, Off peak by 1111% and peak capacity by 869%.

And yet, the RET is the problem apparently.

So despite all the bleating about wanting to reduce peak demand, they have in fact increased fixed charges which consumers can have NO IMPACT on, no matter how hard they try.  These  ”price signals”  are counter intuitive to reducing peak demand and in fact utterly dis-empower consumers in a most profound way, a fact that was outlined in a report in 2013 by the Centre for Policy Research. And they are completely Government sanctioned.

If that’s not enough, the same report actually shows that in 44 out of 46 cases across 8 network companies between 2005 and 2011, revenues (that are regulated) were ABOVE expectation. That means they mademore profit and we all paid for it. And guess what; when you look at the AEMC’s data here’s what it shows is going to happen as a proportion of the average National electricity bill between 2014 and 2016:

  • Distribution network charges will RISE by 8.2%
  • Generation costs will RISE by 5.7%
  • Retail Margins will RISE by 6.3%
  • Transmission costs will RISE by 6.7%
  • The RET (Small and Large scale) will REDUCE by 55.6%

Of course, these changes could be somewhat masked by State price settinghours a day.  regimes and the assumed removal of the Carbon Price. How terribly, terribly convenient.

But of course, there are rewards for electricity consumers in some cases. years ago, many tariff structures were revised so that their was an incentive to use less energy and to reward energy efficiency. But the AEMC document demonstrates the inexorable shift away from this and back to rewarding higher consumption. Use more and pay less. This works beautifully if your profit comes from meeting this demand or expanding your network to cope but the impact on the rest of society is that prices rise to fund it all.

Highlighting the case, I spoke to an installer recently who was facing challenges because of this issue. He had stumbled across several large agricultural facilities that were obsessed with ensuring their demand was constantly high enough to get them to the next (lower) tariff rate. The solution? Install a 200kW water pump, suck water out of a dam and pump it back in again. Constantly. 24 hours a day.

Wonderfully efficient.

But lets not forget the retailers because after all “they just pass on the regulated network costs from the distributors” (like Ausgrid). Poor guys. They are scrambling to scrap the RET at a rabid pace, have erroneously called it  middle class welfare and are laying the blame for the countries woes squarely at our mutual, solar panel installing feet. All the while they have Government sanctioned approval to make proportionally MORE profit from you and me and every single Australian business owner (and Alcoa of course, had they stayed).

Meanwhile, the regulators and the Government just keep saying “Don’t worry. its ok, you can just switch providers and save a FORTUNE because switching is really, really easy and the market is in a state of healthy market based competition”. Bullshit.

Firstly, the vast majority of the Australian electricity industry is still Government owned. Not  really renowned for innovation or their creative market based behaviour, the Government.

Secondly, consumers are lazy and switching is a pain in the backside. Most of us are too busy dealing with life to worry about trying to save a few percent here or there. Where’s the reward for loyalty gone in this world, for goodness sake? And you know what? Switching and “customer churn” is on the increase and the poor utilities are facing increased costs because of it which is exactly the reason they are allowed to charge us more. Because we are all switching. Because that’s how we’ll save money. But it puts costs up. So it will cost us money. But we should switch because we’ll save money.

You’re getting this, right?

But hey, if we swallow the assumption (and advice from Government) that we will save money by switching then that’s awesome. You’ll knock 10 0r 15% off my bill? Yes? Awesome, because my last bill was a shocker. Terms and conditions? Yep, read all 279, 621 tiny little words of your terms and conditions after following ten links on your website (lie). Didn’t understand a word of (true). Yes, I’ll sign your contract because I’m Australian, you’re Australian and a deal is a deal. I’d spit and shake on it if you weren’t in Bangalore.

Now as it turns out, the totally awesome discount you just got is actually pretty “fluid”.  Turns out current laws allow the retailers to increase the price they charge you for electricity at any time during a contract.  But I hate switching, it’s a pain, so I’ll just lump it in 6 or 12 months when you hit me with a price rise caused by factors completely outside your control.

Wow, that wasn’t such a good deal after all.

The rules

Then there are the rules. My god, the rules.  Simply trying to understand the rules and regulations that govern the industry, how they translate to your bill and what they can and cant do is like trying to understand what your Optus phone is actually costing you. You have absolutely no hope.

Take business customers for example. I recently analysed 5 business bills, which were from different locations in Australia but all similar costs and by co-incidence, all from the same retailer.

Firstly, there was a a complete lack of consistency which made understanding and comparing them virtually impossible. Different terms for the same thing, slight changes in wording,some charges on energy, some on demand and an utter lack of consistency. In some cases customers paid for simply awesome things like “VIP Metering” and “Consumer advocacy”. Unreal. If I was a business owner, I would be so impressed to know that my retailer is charging me to be an advocate. For me. And then charging me. Now that’s service!

Then there is the complete and total transparency which allows me to compare commercial offerings. Yep, you can go to a web site, look at every offer in the market upload your consumption data and work out which offer is best.  And its easy (switching, remember?). Bullshit.

There is a chasm greater than the Western Australia’s Big Pit here.

First, if you want to know your demand profile, they’ll take weeks and probably charge you. For knowing. Your consumption.

Secondly, if you ask for an offer, they’ll pretty quickly slot you into a demand “band”. No one actually knows what these bands are or what they mean and they vary by region, by offer, by your size and the color of your neighbors hair (god help you if they are a blood-nut). It’s like a mystery flight; just shut up, sit down and hang on. If you don’t know your demand yet, don’t worry because they have a secret formula so they can tell you how much it will cost and what your profile will look like. Without knowing anything about your demand. At all.

But hey, I’m probably being unfairly critical because its complicated; I couldn’t possibly hope to understand. Go right ahead.

Then of course, you might have a relationship going back many, many years with your retailer. You watch the news, you’ve seen the drought, you listened to the issues about peak demand and the greatest moral issue of our time and you decided; Screw it. I’ll stump up hundreds of thousands of dollars of my own money and whack some solar up.

Your retailers reaction? Well at least one I know of said “Awesome!” “We’ll just renegotiate the contract you broke, your energy rate will dramatically reduce from 25c kWh to 5c. Your standing charges (don’t worry about them) will increase form 25c a day to $2  day”. For those unfamiliar, that’s called “the big switcheroo”, formerly the domain of dudes in weird waistcoats with cups and balls, but now a wholly owned subsidiary of electricity retailers.

Oh and because the rules have changed to protect consumers (enter the National Energy Customer Framework) , if you want solar, we will need to come and do a horrendously expensive study because  well, the fact that you have been on our network for thirty years and we approved everything counts for nothing. Because we have to protect you. In one actual case from a network operator one of the reason the gave for delaying a solar installation was, and I quote “The LV OH supply from the Council access track North of premises is quite sneaky visually and very hazardous to the unsuspecting. “

Damn it, sneaky wires. That’s a damn good reason to stop progress and infuriate a 30 year customer who’s (sneaky) installation was approved by you.You’re right. We are busted for excessive sneakiness.

I was also fascinated to see the variation in loss factors that are applied to bills, as  a separate and definable item. They varied between 0.1% and a staggering 15.19%. and are applied as a multiplier to the energy you consume. So in one case, the business bill I looked at was 15.9% higher than their actual consumption because the network is so grossly inefficient at delivering energy to their premises.   That’s akin to a mechanic saying “Sorry mate, I spilled 15.9% of the oil when I was doing your service because my pipe has a leak, but the law says I can charge you for it”. 

Not only are they allowed to do this by law, but they will charge you a huge proportion of your bill for building owning operating and maintaining that same network, then charge you (again) if they happen to do a lousy job of it where you happen to have your business. Really.

Then we can also consider the regulations around the pass through of the costs of RET. In NSW for example, Retailers were allowed (by the State regulator) to pass through the “full cost” of certificates at $40 and recover these costs from consumers and business. The catch here is the real price of certificates has moved from $16-$36 over the last few years and of course, if those same retailers create their own certificates (by selling you a solar system and capturing the STC’s) then they could get prices way down. So we know and it has been ackowledged by IPART that the Retailers stood to gain, potentially substantial sums from this quirk.

So in reality, the RET and the SRES in particular, has contributed to the profits of the Retailers.

I could go on with a myriad of other examples but I suspect you get my point.

The Government owns, regulates and controls the vast majority of the electricity industry in Australia all the way back to the coal reserves in some cases. The make a phenomenal amount of money from it, as do the non Government retailers and they don’t want it to change. The US based Edison Electric Institute (an electricity industry think tank) summed up the substantial concerns of their industry to disruptive challenges in blunt terms in a document released lat year, warning that industry had to adapt or perish. Through their vast media connections they will say what is politically convenient even if it is complete and utter rubbish and we wont even get a return phone call from the same reporters.

It seems to me that they have all got themselves into a corner so dark, they just have to keep rolling out the same rubbish and hope no one notices.

Guess what? We noticed.

Seen On An ATM In Western Australia | Zero Hedge

Seen On An ATM In Western Australia | Zero Hedge.

With iron-ore stockpiles at record highs in China amid the escalating cash-for-steel financing debacles, one can only imagine the squeeze that is about to occur on the banks of a nation that is almost entirely economically dependent on said iron-ore mining production… which made us think when we saw this sign “justifying” holding low cash amounts in an Aussie bank ATM



So no need for a withdrawal halt per se when you simply make it impossible for customers to get their money out…

Why Australia’s economic debate doesn’t rate | Business Spectator

Why Australia’s economic debate doesn’t rate | Business Spectator.

10 Feb, 7:09 AM 24

Douglas Adams’ brilliant comic farce The Hitchhiker’s Guide to the Galaxy describes Earth as residing in sector ZZ9 Plural Z Alpha, one of “the uncharted backwaters of the unfashionable end of the Western Spiral Arm of the Galaxy” and being inhabited by “ape-descended life forms” who “are so amazingly primitive that they still think digital watches are a pretty neat idea”.

Sometimes when I return to Australia, I feel that I’ve arrived in the planet’s sector ZZ9 Plural Z Alpha. Here the economic debate is so primitive that people still think the economy can be controlled by tinkering with the rate of interest.

Is inflation rising? Then put the rate of interest up one and a half times as fast as inflation is increasing. Is output falling below trend? Then drop the rate of interest by half as much as output has fallen. Then adjourn for drinks.

This formula, known as the Taylor Rule, was all the rage in Central Banks from the early 1990s until the mid-2000s. Economists were so confident that they had economic management nailed that they invented the phrase “The Great Moderation” to describe the Goldilocks state of the economy, and took credit for bringing it about:

The sources of the Great Moderation remain somewhat controversial, but as I have argued elsewhere, there is evidence for the view that improved control of inflation has contributed in important measure to this welcome change in the economy (Bernanke 2004, emphasis added).

Then in late 2007 the world went to hell in a handbasket when the global financial crisis began. Mainstream economists were forced to abandon the belief that getting the rate of interest right was all that was necessary to keep the economy on an even keel. Instead, the rate was dropped to near-zero to in an attempt to stop the economy sinking below the waves.

The USA? A cash rate of 0.13 per cent. Japan? 0.1 per cent. Europe? 0.25 per cent. The UK? 0.5 per cent. No-one asks what the central bank will do to interest rates at its next meeting at one of those more fashionable sectors of this planet, because the conceit that the central bank can fine-tune the economy by varying its interest rate is long dead.

Figure 1: Cash rates around the world.
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But not in Australia. Here, what the Reserve Bank will do to the interest rate at its monthly meeting is big news. And because it’s big news, every month Sky News asks about 20 economists three (and lately four) questions about the RBA rates meeting on the first Tuesday of the month:

1) Do you expect the RBA to move on Tuesday? And if so, in which direction and by how much?

2) Where will the official cash rate likely sit by the end of the calendar year?

3) One thing you’re looking for in the RBA statement?

4) What do you THINK the RBA should do on Tuesday? (we’re asking for your opinion)

The first question I’ve likened to betting on which cockroach will get outside a circle first inChangi prison; it’s just gambling. On the second, I’ve consistently called for rates to be lowered, because in my opinion the main impact of our high cash rate – compared to the USA, Europe, UK and Japan in Figure 1 – has been an overvalued dollar that has decimated Australian manufacturing.

On the third and fourth, since March of last year, I’ve added a call that the RBA to introduce loan to valuation ratio controls to stop a property bubble forming. (Strictly, APRA would make such a call, but if the RBA said jump, APRA would do it.)

My answer to Sky News’ poll in March 2013 was:

1) I think the RBA will hold, but if there is any move it will be down;

2) 2 per cent

3) Realisation that (a) the cash rate is the main factor keeping the Australian dollar overvalued and (b) it has to do something to stop a housing bubble forming if it lowers rates–for example, reintroduce a maximum level for LVRs of say 90%.

But that’s all so yesterday. For last week’s poll, I changed my answers in a rather radical way:

  1. Zero
  2. 3.5 percent [1 per cent higher than today]
  3. Realisation that they are stuck with 4 competing goals: declining employment, rising inflation, a housing bubble and an overvalued dollar, and whatever they do with rates will stuff up at least 3 of those 4 things
  4. Introduce loan to valuation controls like those in NZ (via APRA), persuade the government to introduce limits on non-resident buying of properties, raise rates by half a percent to help burst the property bubble they’ve allowed to develop.

The answers were partly in exasperation, since the whole idea that all the Reserve Bank can and should do to control the economy is vary the interest rate is nonsense. I felt rather likeFord Prefect, livid at the inability of the Golgafrinchans to design the wheel:

‘And the wheel,’ said the captain . ‘What about this wheel thingy? It sounds a terribly interesting project.’ ‘Ah,’ said the marketing girl, ‘well, we’re having a little difficulty there.’ ‘Difficulty?’ exclaimed Ford. ‘Difficulty? What do you mean, difficulty? It’s the single simplest machine in the entire Universe!’ The marketing girl soured him with a look. ‘All right, Mr Wiseguy,’ she said, ‘you’re so clever, you tell us what colour it should be.’

So I answered that the colour should be “square”. And, by analogy, the interest rate decision is about as useful as a square wheel in controlling the economy. There are at least four factors the RBA should care about, and they’re giving conflicting signs:

  1. The economy: this has been heading down for some time, and is still generally heading down—which indicates that rates should be cut. So tick the ‘down’ box.
  2. Housing: We now have a housing bubble because of the RBA rate cuts since 2012—rate cuts that it didn’t expect to make since against its expectations, the economy has been going down (check Figure 1 again: the RBA was alone in raising rates from 2010 since it falsely thought that the economic crisis was over and inflation was about to rise once more). Since the RBA has been and remains too gutless to introduce prudential controls on mortgage lending—unlike the New Zealanders, who did so in August 2013—then it should put interest rates up to prick the housing bubble. So tick the ‘up‘ box.
  3. The currency: this has been overvalued for the last four years, thanks to our high interest rates, and though it’s fallen it is still above the RBA’s comfort level, let alone where the actual economy needs it to be (around 70 cents in my opinion). So tick the ‘down’ box.
  4. Inflation: though this has been consistently lower than the RBA has expected, it is now potentially moving up because the currency has fallen. So tick the ‘up‘ box.

That gives us two “up” signals and two “down” signals. So what to do? Sit on our hands, or stay in a bath for 5 years, like the captain of the Golgafrinchans.

Bugger that, I thought. The one thing the RBA has done courtesy of its primitive belief that interest rates alone can control the economy is allow a housing bubble to form once more. So let’s prick that – hence my call for a 3.5 per cent rate by June 30 (this month’s question asked for the rate by the end of this financial year).

Of course, if the RBA did that – which it won’t – then the currency would fly back over a dollar for sure. There’s no way I actually thought that would be the rate. But please, let’s stop being digital watch fans, and join the rest of the world in realising that there’s more to managing the economy than tinkering with the rate of interest.

Now I think I’ll go have a drink with Marvin

Steve Keen is author of Debunking Economics and the blog Debtwatch and developer of theMinsky software program.

Chinese Iron Ore Stockpiles Rise To Record As End Demand Plummets | Zero Hedge

Chinese Iron Ore Stockpiles Rise To Record As End Demand Plummets | Zero Hedge.

It may not be one of the core three (somewhat) realistic and accurate econometric indicators of China’s economy (which as a reminder according to premier Li Keqiang are electricity consumption, rail cargo volume and bank lending), but when it comes to getting a sense of capacity bottlenecks in China’s fixed investment pipeline – be it in ghost cities or the latest skyscraper building spree – nothing is quite as handy as commodity, and particularly iron ore (if not copper, which as we have explained before has a far more “monetary/letter of credit” function in China’s markets), stockpiles at China’s major ports. The logic is simple: no stockpiles means end demand by steelmakers is brisk and there is no inventory build up which in turns keep Australia, Brazil and other emerging markets happy. Alternatively, large stockpiles indicates something is very wrong with final demand, and hence, the overall economy.

One look at the chart below, which shows how much iron ore has been stockpiled at China’s 34 major ports (spoiler alert: it just hit an all time high), should explain at which of these two extremes China currently finds itself.

Here is what happened as explained by Market News:

Weak demand from steelmakers saw iron ore stockpiles at major ports hitting record highs, according to data from industry website umetal.com. Iron ore inventory at China’s 34 major ports jumped 4.56 million tons last week to 100.86 million tons as of February 14, the 2nd time it has surpassed the 100 million-ton level and matching the record of 2012. Iron ore imports were also at a record high in January, at 86.83 million tons, as steel traders boosted imports to bet on rising steel prices this year. But data from the China Iron and Steel Association showed crude steel output falling around 2% m/m in January. Average steel prices fell 0.79% last week, according to data compiled by mysteel.com.

There is another, more finely spun, explanation: monetary financing, or in other words, when it comes to China’s peculiar “generally accepted collateral”, iron is the new copper. Bloomberg explains:

Iron ore stockpiles in China, the world’s biggest buyer, climbed to a record as traders increased imports to use the steel-making raw material as collateral for credit and domestic demand remained weak.

“Imports kept piling up at ports as more cargoes are being hauled in for trade-financing deals,” Gao Bo, chief iron ore analyst at Mysteel.com, a researcher in Shanghai, said by phone from Beijing today.

While this may suggest end demand has not completely imploded, it does bring up a different set of complications: steel mill funding difficulties – perhaps the most sore topic in China nowadays.

Steel mills and trading firms in China are contending with increasing difficulty in getting funding, said Mysteel’s Gao.

“The funding situation in the steel industry was getting worse last month,” he said.

The weighted average lending rate in China was 7.2 percent in December, up from 6.22 percent a year earlier, central bank data released earlier this month show. In December, 63.4 percent of loans had interest rates above benchmarks, up from 59.7 percent a year earlier, according to the central bank.

However one spins it though, there is no denying that in addition to its on again, off again infautation with tapering and deleveraging, which usually continues right until the moment yet another shadow bank has to be bailed out, construction in China has slammed on the brakes:

Stockpiles of steel products also rose as construction activity remained weak after the Lunar New Year holidays, Gao said. Traders’ stockpiles of rebar, a building material, jumped by 65 percent this year to 8.55 million tons last week, according to Shanghai Steelhome.

One thing is certain – the biggest loser, as iron prices are set to tumble, will be Australia

Iron ore may drop more than previously forecast to $118 a ton this year as China will be unable to absorb record supply from Australia as growth slows, Judy Zhu, an analyst at Standard Chartered Plc, said last week.

Prices may average $119 a ton this quarter, $110 in second quarter and drop to $100 in the final period of this year, Goldman Sachs analysts led by Christian Lelong said in the Feb. 11 report.

Mine supply of iron ore reached a record over the fourth quarter of 2013, “with the natural destination being China,” Macquarie Group Ltd. said in a Feb. 13 report. “With inventory build being evidenced on the back of higher imports, this will act as a buffer to buyers in the coming months,” it said.

China’s shipments from Australia’s Port Hedland, the largest ore-export terminal, rose 27 percent to 23.3 million tons last month. Increased supply from Australia, the top ore shipper, may push the global seaborne surplus to 94.2 million tons this year from 9.1 million tons in 2013, UBS AG estimates.

Rio Tinto Group (RIO), the world’s second-biggest exporter, said last month that output rose 7 percent to 55.5 million tons last quarter from 52 million tons a year earlier. Fortescue Metals Group Ltd. is boosting capacity to 155 million tons by the end of March.

And speaking of Australian iron miners, it was in late summer of 2012 when Chinese iron ore stockpiles were once again in the 100 million ton range, when iron prices crashed so bad, that Fortescue was on insolvency watch. Should the current episode of collapsing Chinese end demand persist and construction freeze persist, it may be time to short to FMGAU bonds once again.

Unless of course, China once again unleashes the ghost cities building spree. Which it inevitably will: after all it has become all too clear that not one nation – neither Developing nor Emerging – will dare deviate from the current status quo course of unsustainable, superglued house of cards “muddle-through” until external, and internal, instability finally forces events into a world where everyone now has their head in the proverbial sand.

Australian Unemployment Jumps to 10-Year High; Aussie Drops – Bloomberg

Australian Unemployment Jumps to 10-Year High; Aussie Drops – Bloomberg.

By Michael Heath  Feb 12, 2014 11:04 PM ET
Photographer: Brendon Thorne/Bloomberg

Commuters ascend a flight of stairs at Martin Place in the central business district of Sydney.


Australia’s unemployment rate climbed to the highest level in more than 10 years in January, spurring traders to pare bets on an interest-rate increase and sending the Aussie to its biggest drop in almost three weeks.

The jobless rate rose to 6 percent from 5.8 percent, the statistics bureau said in Sydney. The median estimate was an increase to 5.9 percent in a Bloomberg News survey of economists. The number of people employed fell by 3,700.

The softer-than-expected jobs report damped expectations the Reserve Bank of Australia will switch to tighter policy amid surging property prices, rising building approvals and a forecast acceleration in growth and inflation. Toyota Motor Corp., General Motors Co. and Ford Motor Co. have said they’re closing plants and shedding jobs in Australia as high production costs and a strong currency render them uncompetitive.

“While some may argue that employment is a lagging indicator, we would also suggest this print will be a negative for household income, sentiment and thus spending,” said Justin Smirk, a senior economist in Sydney at Westpac Banking Corp., which forecast the 6 percent unemployment rate. “In the details there is no silver lining.”

The Australian dollar fell to 89.43 U.S. cents at 3 p.m. in Sydney from 90.27 cents before the data’s release. Bets on how much the RBA will add to its cash rate in the next 12 months fell to 11 basis points, from 18 basis points yesterday, a Credit Suisse Group AG index based on swaps data showed.

Full-Time Fall

The number of full-time jobs declined by 7,100 in January, and part-time employment rose by 3,400, today’s report showed. Australia’s participation rate, a measure of the labor force in proportion to the population, was unchanged at 64.5 percent in January from a revised figure a month earlier, it showed.

The RBA cut the overnight cash-rate target by 2.25 percentage points between late 2011 and August to a record-low 2.5 percent to help offset the currency and spur industries outside mining, where an investment boom is waning.

Unemployment jumped to 5.1 percent in the resource-rich state of Western Australia, from 4.6 percent a month earlier. It jumped to 6.1 percent from 5.9 percent in Queensland. In the manufacturing hub of Victoria, joblessness climbed to 6.4 percent from 6.2 percent in December.

About 50,000 jobs in Australia’s auto and parts industry are in jeopardy after Toyota on Feb. 10 followed Ford and GM in announcing plans to quit manufacturing in the country.

Abbott’s Challenge

The decisions pose a challenge for Prime Minister Tony Abbott, who won an election last September pledging to restore confidence in the economy. The country’s main car plants are sited in districts where the jobless rate is already on par with the euro zone’s, and a waning mining boom is unlikely to soak up the additional labor.

“Over 60,000 full-time jobs have been lost since the Abbott government was elected,” opposition leader Bill Shorten told reporters in Canberra today. “What is the jobs plan of the Abbott government? What are they doing to stop the tens of thousands of jobs that are either going overseas or just disappearing?”

Consumer confidence fell 3 percent this month to the lowest level since July, a private report showed yesterday.

Unemployment in Melbourne’s Brimbank-Sunshine region adjacent to Toyota’s Altona plant and in the city’s Broadmeadows district that houses Ford’s main production lines was about 12 percent in September, according to government data. In the Adelaide suburb of Elizabeth where GM’s Holden has its main plant, it was 22 percent.

Commodity Currency

Manufacturing in Australia has been hurt by a commodities boom that helped drive the value of the local currency to $1.11 in July 2011, the highest level in the 30 years since exchange controls were dropped. While the Australian currency has since depreciated to about 90 U.S. cents, it’s still higher than at any point in the 18 years running up to 2007.

GM estimates it costs about A$3,750 more to produce a car in Australia than elsewhere. Ford said last May that its costs in the country were double those in Europe and four times those of its Asian divisions. The two carmakers will close their local plants in 2017 and 2016 respectively.

Even so, the RBA last week raised its inflation and growth forecasts, reflecting the currency’s decline from its peak last year, and reiterated its shift to a neutral policy stance. Low interest rates have driven up home prices and spurred a pickup in approvals for residential construction.

Home Prices

Sydney home prices jumped 13.8 percent in the fourth quarter from a year earlier, followed by Perth’s 8.7 percent, government data showed this week.

“For the RBA, these numbers are probably not a surprise,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “What it does suggest is that a market that’s starting to think about the possibility that the next move is up, and we may get a lift in cash rates later this year, these numbers argue strongly against that.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

The Golden Age of Gas… Possibly: An Interview With The IEA | Zero Hedge

The Golden Age of Gas… Possibly: An Interview With The IEA | Zero Hedge.

Submitted by James Stafford via OilPrice.com,

The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA)—the “global energy authority”–believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.

In an exclusive interview with Oilprice.com, IEA Executive Director Maria van der Hoeven, discusses:

  • The potential for a golden age of gas
  • What will the “age” means for renewables
  • What it means for humanity
  • The challenges of renewable investment and technology
  • How the US shale boom is reshaping the global economy
  • Nuclear’s contribution to energy security
  • What is holding back Europe’s energy markets
  • The next big shale venues beyond 2020
  • The reality behind “fire ice”
  • Condensate and the crude export ban
  • The most critical energy issue facing the world today

Interview by. James Stafford of Oilprice.com

Oilprice.com: In 2011, the IEA predicted what it called “the golden age of gas,” with gas production rising 50% over the next 25 years. What does this “golden age” mean for coal, oil and nuclear energy—and for renewables? What does it mean for humanity in terms of carbon emissions? Is the natural gas boom lessening the sense of urgency to work towards renewable energy solutions?

IEA: We didn’t predict a golden age of gas in 2011, we merely asked a pertinent question: namely, are we entering a golden age of gas? And we found that the potential for such a golden age certainly exists, especially given the scale of unconventional gas resources and the advances in technology that allow their extraction. But the potential for a golden age of gas hinges on a big “if,” and we elaborated on this in 2012 in a report called “Golden Rules for a Golden Age of Gas”. Exploiting the world’s vast resources of unconventional natural gas holds the key to golden age of gas, we said, but for that to happen, governments, industry and other stakeholders must work together to address legitimate public concerns about the associated environmental and social impacts. Fortunately, we believe that unconventional gas can be produced in an environmentally acceptable way.

Under the central scenario of the World Energy Outlook-2013, natural gas production rises to 4.98 trillion cubic metres (tcm) in 2035, up nearly 50 percent from 3.38 tcm in 2011. But we have always said that a golden age of gas does not necessarily imply a golden age for humanity, or for our climate. An expansion of gas use alone is no panacea for climate change. While natural gas is the cleanest fossil fuel, it is still a fossil fuel. As we have seen in the United States, the drastic increase in shale gas production has caused coal’s share of electricity generation to slide. Of course, there is also the possibility that increased use of gas could muscle out low-carbon fuels, such as renewables and nuclear, from the energy mix.

OP: When will we see “the golden age of renewables”?

IEA: Although we have not yet predicted a “golden age” of renewables, the current, rapid growth of renewable power is a bright spot in an otherwise bleak picture of global progress towards a cleaner and more diversified energy mix. Still, the investment case for capital-intensive, low carbon power technologies carries challenges. We need to distinguish between two situations:

•    In emerging economies, renewable power often provides a cost-competitive alternative to new fossil based generation and are perceived as part of the solution to questions of energy supply, diversification, and economic development. In China, for example, efforts to reduce local pollution are stimulating major investments in cleaner energy.

•    By contrast, in stable systems with sluggish demand, no technology is competitive with marginal electricity prices, due to overcapacity. Governments are nervous about increasing investment in low-carbon options which impact on consumer prices, and this is causing policy uncertainty. But long term energy security and environmental goals need to be kept in mind.

The overall outlook for renewable electricity remains positive, even as the outlook can vary strongly by market and region. However, the electricity sector comprises less than 20% of total final energy consumption. The growth of renewables in other sectors such as transport and heat has been more sluggish. For a golden age of renewables to materialise, greater progress is needed in these areas, for example, with the development of advanced biofuels and more policy frameworks for renewable heat.

OP: How is the shale boom reshaping the global financial and economic system? Who are the winners and losers in this emerging scenario?

IEA: One of the key messages of our World Energy Outlook-2013 is that lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden.

Natural gas prices have fallen sharply in the United States – mainly as a result of the shale gas boom –  and today they are about three times lower than in Europe and five times lower than in Japan. Electricity price differentials are also large, with Japanese and European industrial consumers paying on average more than twice as much for electricity as their counterparts in the United States, and even Chinese industry paying  almost double the US level.

Looking to the future, the WEO found that the United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline – a combined loss of around one-third of their current share.

OP: The IEA has noted that the US is no longer so dependent on Canadian oil and gas. What could this mean for pending approval of TransCanada’s Keystone XL pipeline? How important is Keystone XL to the US as opposed to its importance for Canada?

IEA: The decision on the Keystone matter is one that must be taken by the United States Government. I am afraid it is not for the IEA to comment.

OP: With the nuclear issue taking center stage in Japan’s election atmosphere, is Japan ready to pull the plug entirely on nuclear, or is it too soon for that?

IEA: This year’s World Energy Outlook, which we will release in November 2014, will carry a special focus on nuclear energy, so please stay tuned. While I won’t discuss what Japan should do, I will say that every country has a sovereign right to decide on the role of nuclear power in its energy mix. Nevertheless, nuclear is one of the world’s largest sources of low-carbon energy, and as such, it has made and should continue to make an important contribution to energy security and sustainability.

A country’s decision to cut the share of nuclear in its energy mix could open up new opportunities for renewables, particularly as some phase-out plans envision the replacement of nuclear capacity largely with renewable energy sources. However, such a decision would also likely lead to higher demand for gas and coal, higher electricity prices, increased import dependency on fossil fuels and electricity, and a more difficult path towards decarbonisation. Such a scenario would therefore make it much more difficult for the world to meet the 2°C climate stabilisation goal, and have potentially negative impacts on energy security.

OP: What is the key factor holding back European energy markets?

IEA: Europe has quite a few advantages but also many hurdles to overcome. If I had to pick one key factor that is holding back European energy markets, I would say it is the lack of cross-border interconnections. Let me explain what I mean. As we showed in WEO 2013, Europe’s competitiveness is under pressure, as energy price differences grow between Europe and its major trading partners – the US, China and Russia. High oil and gas import prices combined with low gas and electricity demand, following the recession, are impacting European economies.

Europe should accelerate the use of its indigenous potential and reap the social and economic benefits from energy efficiency, renewable energies and unconventional oil and gas. In open economies, there are significant advantages to be gained from free trade and a large energy market. One example: Today, we cannot make use of competitive electricity prices across the EU, as physical trade barriers exist and markets remain national. Europe is failing to achieve its potential. The electricity grid and system integration is very low, which also serves as a barrier to the full and efficient exploitation of renewable energy potentials. This is why addressing the issue of cross-border interconnections is so important.

OP: Where do you foresee the next “shale boom”?

IEA: According to WEO projections, there will be little non-North American shale development before 2020 due to the much earlier stage of exploration and the time needed to build up the oil field service value chain. Beyond 2020, we project large-scale shale gas production in China, Argentina, Australia as well as significant light tight oil production in Russia. The current reform proposals in Mexico have the potential to put Mexico on the top of that list as well, but they need to be properly implemented.

OP: What is the realistic future of methane hydrates, or “fire ice”?

IEA: Methane hydrates may offer a means of further increasing the supply of natural gas. However, producing gas from methane hydrates poses huge technological challenges, and the relevant extraction technology is in its infancy. Both in Canada and Japan the first test drillings have taken place, and the Japanese government is aiming to achieve commercial production in 10 to 15 years.

One thing I always mention when I am asked about methane hydrates is this: It may seem far off and uncertain, but keep in mind that shale gas was in the same position 10 to 15 years ago. So we cannot rule out that new energy revolutions may take place through technological developments and price incentives.

OP: Have we hit the “crude wall” in the US, the point at which oil production growth may end up slowing due to infrastructure and regulatory constraints?

IEA: In January 2013, the IEA’s Oil Market Report examined the possibility that as surging production continues to move the US closer to becoming a net oil exporter, there may come a time when various regulations, particularly the US ban on exports of crude oil to countries other than Canada, could have an adverse impact on continued investment in LTO – and thus continued growth in production. We called this point the “crude wall”.

A year later, in our January 2014 Oil Market Report, we noted that with US crude oil production exceeding even the boldest of expectations in 2013 by a wide margin, the crude wall now seems to be looming larger than ever. Having said that, challenges to US production growth are not imminent. Potential US growth in 2014 seems a given, even against the backdrop of resurgent non-OPEC supply growth outside North America.

OP: How is this shaping the crude export debate and where do you foresee this debate leading by the end of this year?

IEA: You are better off asking my friends and colleagues in Washington! This is obviously a sensitive topic. Different people feel differently about it, often very strongly. Oil policy always is the product of multiple, sometimes-competing considerations.

OP: What would lifting the ban on crude exports mean for US refiners, and for the US economy?

IEA: Many refiners and other major oil consumers have said they support keeping the ban amid worries that allowing exports would result in higher feedstock costs and erode their competitive advantage, or shift value-added industry abroad. On the other hand, oil producers have in general come out in favour of lifting the ban, arguing that the “crude wall” may become so large that it cannot be overcome; they see the possibility of a glut causing prices to slump and thereby choking off production. We have not produced any detailed analysis on the economic impact of lifting the ban, so I cannot comment on that part of your question.

OP: Are there any other ways around the “crude wall” aside from lifting the export ban?

IEA: As we wrote in our January 2014 Oil Market Report, much of the LTO is produced in the form of lease condensate, which is most optimally processed in a condensate splitter. There is currently only one such facility in the United States, although at least five others are in various stages of planning and construction.

I mention this issue because one could imagine a scenario under which lease condensate is excluded from the crude export restriction. The US Department of Commerce, which enforces the export ban, includes lease condensates in the definition of crude oil. However, this definition could be changed, or the Commerce Department could simply issue lease condensate export licenses at the behest of the President.

OP: How will the six-month agreement to ease sanctions on Iran affect Iranian oil production? And if international sanctions are indeed lifted after this “trial period”, how long will it take Iran to affect a real increase in production?

IEA: The deal between P5+1 and Iran doesn’t change the oil sanctions themselves. The oil sanctions remain fully in place though the P5+1 agreed not to tighten them further. Relaxing insurance sanctions doesn’t mean more oil in the market.

As for the second part of your question, I am afraid I can’t answer hypotheticals and what-ifs.

OP: What is the single most critical energy issue in the US this year?

IEA: I think that if you take the view that the energy-policy decisions you make now have ramifications for many decades to come, and if you believe what scientists tell us about the climate consequences of our energy consumption, then the single most critical energy issue in the US is the same issue for every country: what are you going to do with your energy policy to mitigate the risk of climate change? Energy is responsible for two-thirds of greenhouse-gas emissions, and right now these emissions are on track to cause global temperatures to rise between 3.6 degrees C and 5.3 degrees C. If we stay on our present emissions pathway, we are not going to come close to achieving the globally agreed target of limiting the rise in temperatures to 2 degrees C; we are instead going to have a catastrophe. So energy clearly has to be part of the climate solution – both in the short- and long-term.

OP: What is the IEA’s role in shaping critical energy issues globally and how can its influence be described, politically and intellectually?

IEA: Founded in response to the 1973/4 oil crisis, the IEA was initially meant to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets.

While this continues to be a key aspect of our work, the IEA has evolved and expanded over the last 40 years. I like to think of the IEA today as the global energy authority. We are at the heart of global dialogue on energy, providing authoritative statistics, analysis and recommendations. This applies both to our member countries as well as to the key emerging economies that are driving most of the growth in energy demand – and with whom we cooperate on an increasingly active basis.

Australia to suffer biggest property collapse since Great Depression – Yahoo!7

Australia to suffer biggest property collapse since Great Depression – Yahoo!7.

7NEWSFebruary 7, 2014, 5:57 pm

The expert who predicted the global financial crisis has a dire warning for Australia’s property markets.

Melbourne, Sydney, Brisbane and Perth are on the verge of the most violent property collapse since the great depression, economist guru Harry Dent has said.

Speaking exclusively with 7News, the author, economist and property guru says as an entire country, Australia is the most over-valued real estate in the developed world.

“I think it’s probably going to go down at least 30 percent to kind of take off the bubble, [and] I think 50 percent down the road is even more likely,” Mr Dent said.

After London, Melbourne and Sydney are the most expensive cities in the world when housing prices are compared to earnings.

On average, Australians are shelling out more than ten times their annual income on a home.

“[Over] the next three to six years, we’re going to have a bigger GFC, we’re going to have the next Great Depression,” Mr Dent said.

“I think the most dangerous years are 2014 and 2015,” he said.

The American, who begins his Secure the Future speaking tour this week, was lambasted when he predicted the collapse of the Japanese economy when most economists said it would overtake the US as the biggest economy in the world.

He also accurately predicted the timing and severity of the 2008 Global Financial Crisis.

“An everyday person with a million dollar mortgage is going to go underwater,” Mr Dent said.

A lot of people are going to have a house worth less than their mortgage, and they apparently will not be able to refinance.

Leading analyst from Residex John Edwards disagrees with Harry Dent, and says if anything, our market is getting stronger.

Dent says his predictions are based on long-terms statistics on how Australians live and spend, and data from governments worldwide.

He says the key is to look to China, where almost a quarter of all new properties are sitting empty, and that cities like Shanghai could lose 85 per cent of their value.

“All it takes is something to burst the bubble,” he said.

“If China blows it’s going to have a much bigger impact than the 2008 GFC.”

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