The FT’s Javier Blas has been writing about the disruption in the energy markets as a result of the Japan earthquake. Here is the current state of play with energy-related commodity prices:
Natural gas – up 7.7 per cent
Analysts predict the knock to Japan’s nuclear capacity will lead it to import more natural gas, which will drive up overall demand.
Last week I wrote about the spike in Chinese demand for coal, which was driving a boom in coal M&A deals.
The phenomenon has not gone unnoticed by environmental campaigners, many of whom are quoted in a piece today in the New York Times.
The paper reports:
At ports in Canada, Australia, Indonesia, Colombia and South Africa, ships are lining up to load coal for furnaces in China, which has evolved virtually overnight from a coal exporter to one of the world’s leading purchasers.
With just a week to go until the US midterms, the narrative seems to have been set: the Republicans are going to do well because of anger at the Obama administration towards two things in particular: a lack of jobs and the healthcare bill.
But there may be another element at play which is feeding into this heady mix: the cap-and-trade bill.
Yesterday, the Journal published an interesting article about the way in which Democratic Congressman Rick Boucher’s support for the bill is losing him votes in his native Virginia. Apparently locals are angry that Boucher voted for a bill that they regard as anti-coal.
China’s aggressive efforts to secure natural resources around the world have sometimes made it an opponent of other importing nations, most recently South Korea. But a shared hunger for commodities can bring countries closer to together too.
Take Tuesday’s deal between Mitsui, one of Japan’s biggest trading houses, and Shenhua, the Chinese state-owned energy and mining company. The two groups agreed to work together to develop coal deposits in Mongolia, and perhaps in other countries in the future.Most of the coal is likely to be sold to Chinese power plants, but some will also find its way to Japan, according to Mitsui. The Japanese group will take a share of the profits regardless, making its investment a partial bet on further growth in Chinese demand.
As Asia’s major economies bound forward and their hunger for energy surges over the next decade, Indonesia is strategically positioned to take advantage as the world’s largest exporter of coal. It is also neatly placed geographically, on the doorsteps (well, almost) of China and India.
Rudi Vann, a leading coal analyst at Wood Mackenzie, told beyondbrics he expects Indonesian coal production to rise nearly 90 percent to 480m tonnes by 2020. By striking deals to sell it in exchange for infrastructure financing, Indonesia is using the resource to fix its own crumbling roads, ports, bridges – and its power plants too.
As you might expect, the competition to secure Indonesian coal is being led by China and India, as the FT reports on Thursday. Companies from the two countries signed a series of deals in recent months to finance billions of dollars in Indonesian infrastructure projects in exchange for thermal coal.