J-Pow’s First FOMC

By John Authers        March 21, 2018

Jay Powell has undergone his first ordeal as chair of the Federal Reserve’s Federal Open Market Committee, and he has been rewarded with a counterintuitive sell-off in the dollar. When the FOMC’s announcement came out, and then as he gave his press conference, the dollar fell:

The forex market saw a notably dovish Fed, evidently. Meanwhile, the stock market (which wobbled but ended down very slightly), and the bond market (which ended with the 10-year Treasury yield still just below 2.9 per cent) reacted as though little, if anything, had changed.

Why would this be? The best argument in favour of reading this as a dovish Fed comes, I think, from this chart in the FOMC’s package of projections and materials.

This represents the Fed’s best guess on where the PCE, its favoured measure of inflation, is heading. Basically, it appears to have no concern whatever. As it is “symmetrical” in its approach to its 2 per cent target, equally happy to be above as below it, it would appear that not a single Fed governor seriously fears that inflation is going to take off. After several months in which the fear of resurgent inflation for the first time in a generation has dominated chatter on markets, this does seem strikingly relaxed.

The other critical point in favour of reading the Fed as doves is that the median projection for interest rates this year remained unchanged. We should brace for two more rate rises of 25bp after this one. The crucial numbers appear in the bottom two lines:

If people are really putting this much weight on the “dot plot” in which Fed governors give their best guesses for future rates, it marks a radical departure. For years after the crisis, the Fed has published dot plots projecting imminent rate rises, the market has flatly refused to believe them, and the market has been proved right. Now the dot plot appears to be taken as a key reason to believe in dovishness.

If this is so, I believe it is wrong. The unchanged median looks to me like a statistical quirk. In the following chart, you see December’s dots for 2018 and 2020 ringed in black, and the latest dots for those years ringed in red:

The median may remain unchanged, but the FOMC members, as a whole, have unmistakably grown much more hawkish since their last meeting. The tax cut legislation, and the rise in bond yields since then might explain this. Otherwise, inflation has remained supine, while unemployment has continued with its well established trends.
Why then has the market responded in the way that it has. In my own attempt at an Instant Insight for the Financial Times, I offered two explanations for why the Fed might be as confident on inflation as it appears to be:

There are two potential explanations. One is that the Fed collectively believes that the “Phillips Curve” trade-off between inflation and unemployment is over. Employment can rise without pushing up inflation.

The other is that it has confidence that it can contain inflation by raising interest rates.
Markets appear to be placing their bets on the first explanation.

There are, however, two other intriguing takes on why the market has behaved the way it has. One is that in fact the Fed has signalled a far more dovish approach, by signalling a willingness to allow inflation to go above 2 per cent. This is the explanation of Steven Englander, once head of FX analysis for Citi and now at Rafiki Capital:

there was a huge element of dovishness in the projections that has been missed in the commentary — if you are a central bank that expects to overshoot its target with six hikes over the next two years, you can always go to seven or eight or ten if that’s what it takes to land smack on 2.0% in expected value terms. So if you see a couple of 2.1%’s on inflation and decide you can deal with it slowly over a couple of years well beyond your forecast horizon, you are implicitly endorsing an overshoot. Compare and contrast with the ECB that always has just under 2% at the end of the forecast, because that is what they see as their job.

It is not magic to say that if you really want to land at 2%, just tighten faster. The Fed has the UR well below the NAIRU so the employment and inflation above its target, so it there is nothing to stop them from tightening a bit faster, except if implicitly they see above 2% inflation as catch-up …

You can talk all you want about these being long-term projections but that is not the point. If the central tendency is above 2% for two years it means that the typical FOMC participant is not worried about a temporary overshoot. That tells you something about their reaction function in 2018 as well as 2020.

This is very dovish and asset markets have not yet reacted fully to the dovishness, although the FX market has caught on to some degree.

The key question here is whether it is really that dovish to regard 2.1 per cent for a year or two as an “overshoot”. I may be wrong here, but I thought 2 per cent was a central target and that the Fed was symmetrical in its approach to it; an overshoot would be no worse than an undershoot, and a 2.1 per cent rate would suggest that it had done a better job than a 1.5 per cent rate had done. It did not strike me that Mr Powell was giving that much away by calmly projecting 2.1 per cent inflation for two years — it almost implies confidence about the strength of the economy.

Against this, 1) Steven Englander knows vastly more about the FOMC and the FX market than I do and 2) his theory does have the virtue of explaining what has happened.
A second explanation was offered to my colleague Alex Scaggs by Robert Tipp of Prudential:

The fear is of the Fed breaking the system and creating a risk correction. If the Fed is espousing a very bullish view, and you’re getting a decline in real yields and a weakening of the dollar, and weaker equity prices, you have to ask yourself, is that really a ringing endorsement?”

When you look at the statement, they acknowledge the data slowed down. But in their projections they boost their rate trajectory and they boost their inflation outcome,” he said. “This environment probably does not require aggressive monetary policy.”
Ultimately it’s difficult to read too much into one set of market reactions, but the confident tone of the Fed and the confident set of projections has the market on edge and could backfire.

One of the most vivid times we saw this was in 1987 — and the Fed was hiking interest rates and markets were very buoyant and eventually the deficit was very large, so it was very highly reliant on foreigners underwriting the deficit, the dollar was weakening, and you had a correction in the stock market due to technical factors, but ultimately the genesis for that was fear of a weaker dollar and reliance on foreign capital.
You have an uncomfortable trade situation, the Fed hiking rates, the dollar falling from an elevated level, and today in the flight to quality, you’re seeing a rise not just in the yen, but the euro more than the yen.

On this analysis, Jay Powell is not guilty of dovishness so much as hubris. The market thinks the Fed is being wildly overconfident (some others are also criticising the Fed projections for not taking possible tariffs into account). The markets think that the newbie is overconfident, not up to his new job, and riding for a fall.

Certainly the growth and employment projections look very rosy. It would also make sense for FX to be the market that is most worried, as foreigners are prone to perceive overconfidence in Americans.

But again, I am not sure that I buy this. The dot plot ultimately implies a significantly more hawkish Fed, which expects to double rates from where they are now, and which expects to have to work to douse down the effects of the fiscal stimulus that has just been administered. The strong projections add to the likelihood that it will follow through with rate rises.

One final possibility, laid out by JPMorgan’s Marko Kolanovic, blames the weather. It is snowing and horrible in New York today. I am writing this in my bedroom, trying to fight off children who are spending the day at home because schools are closed. Many Wall Street traders are putting up with the same conditions. This is Marko’s take:

Fears of the Fed delivering a hawkish message did not materialize. 2018 dots were not revised higher, and the importance of the 2019/2020 dots was downplayed by Powell (realistically, no one can have visibility 2 years out). Bond yields went lower, USD weakened, and the yield curve steepened — all of which are positive (dovish) signals for US equities. Furthermore, there was no significant change in inflation expectations and the growth outlook, alleviating recent equity markets concerns. This outcome is a positive and indicates that equity investors could expect a near term goldilocks environment. In contrast to the Fed, price action of the S&P 500 was not coherent — first we saw a strong rally and reversal, then another (smaller) rally and reversal, with the market ending slightly down. We note that this happened on very low volumes (particularly in light of the importance and anticipation of the catalyst). This was likely the result of a severe snowstorm affecting the US northeast and incomplete market participation (e.g. it was one of the lowest futures contract volumes on any Fed announcement days). Market direction was further confused by the initial reaction of bonds and rotation out of tech and momentum stocks, inflows into small cap, value and high volatility stocks, and covering of high short interest stocks.

So my best guess remains that Mr Powell tried to send a more hawkish message than the market received. Higher stock and bond prices keep the economy chuntering along nicely for now, as does a weaker dollar, but there are dangers for the future.

Fair trade
The issue of trade, on which it appears we may well know far more by the end of the week, has the potential to throw the spanner into a lot of works. On the face of it, aggressive tariffs could raise inflation while reducing growth over the next few years. That said, as the area is still utterly fraught with uncertainty, it seems to be totally responsible for Mr Powell and his colleagues to have decided not to incorporate any assumptions on trade into their forecasts.

This take from Jim O’Sullivan of High Frequency Economics is worth reading:

In the short term
The stock market sell-off at the end of the day robbed Mr Powell of what was setting up to be the best stock market debut for a Fed chairman since William “Punch Bowl” Martin started the job in 1951. Generally, as this chart shows, the stock market is disconcerted when a new chairman presides over the FOMC for the first time. And Mr Powell may be relieved to be no different.

Also note that since Martin, the only positive stock market welcome went to Paul Volcker, who would soon after force the stock and bond markets into historic bear market bottoms. So there is no need to take short-term stock market judgments too seriously:


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Master Plan for the World Ocean Corporation

Master Plan for the

World Ocean Corporation

to Co-ordinate and Implement Science-based Action Programs on the World’s Oceans with Commercial Corporations, Governments, NGO’s, Institutes and Individuals                             

Implementing projects to clean-up ocean pollution including toxic chemicals/industrial/municipal garbage and plastics; protect ocean waters, fish, mammals, coral and plankton; replenish decimated fish stocks.

Working together with 200 global commercial corporations, 1,600 oceanographic institutes, 200 governments/multilateral agencies, 35,000 oceanographic scientists/researchers, and millions of interested citizens.

By Robert S. Stewart, Co-founding Chairman, Explorer and Entrepreneur

Laren, Netherlands and Monte Carlo, Monaco (covering the Mediterranean Sea, North Sea, and all three Canadian Ocean Waters)

and Edited by Reginald L. Olson –  Co-Founder, Big Island, Hawaii (Pacific Ocean)

Also in Vancouver, BC, Canada (Pacific, Atlantic and Arctic Oceans); United Kingdom (Atlantic, North Sea, Arctic Oceans); and Kampala, Uganda for East/Southern Africa (Indian Ocean, Antarctic Ocean, Lake Victoria and Nile River System).

March 2018 ©


WORLD OCEAN CORPORATION)                                                                        Page

Executive Summary                                                                                       

Action Plan for Creating a World Headquarters                                             


Branches of Oceanography                                                                                      

Ocean Currents and Heat Content                                                                            


International Hydrographic Organization: Monte Carlo, Monaco                                                               

Woods Hole Oceanographic Institution:Woods Hole Mass, USA                                                                 

UNESCO – the Intergovernmental Oceanographic Commission: Paris                             

UN Sustainability Development Process: NYC USA, Geneva CH and Paris                                                              

Global Science Report: UNESCO, Paris                                                                                           

The United Nations Convention on the Law of the Sea: UN, NYC                                            

Global Maritime Boundaries Database                                                                     

Monaco Blue Initiative                                                                                              

Monaco Explorations 2017-2020                                                                              

The Oceanographic Institute of Monaco

The Oceanographic Museum of Monaco                                                                  

The Scientific Centre of Monaco                                                                              

The International University of Monaco                                                                   

The Yacht Club de Monaco                                                                                      

Oceano Scientific Philanthropic Association                                                                              


The Ocean Clean-Up: Delft, Netherlands

Greenpeace: Amsterdam,  Netherlands

The World Ocean Council: Honoloulu, Hawaii and Kinderdijk, Netherlands                                                                                      

Oceana: Washington DC, USA                                                                                                                     

Mission Blue: Napa Valley, California, USA                                                                                                            

Global Fishing Watch with Oceana: Washington DC, USA                                                                                              

World Trade Organization, Geneva, Switzerland.

The Fight to Save Our Wildlife from Ocean Rubbish                                                

Energy Observer (2017-2022), Mouton, France                                                                                   

Dutch Research Vessel Exploration                                                                        

Canadian Arctic Research Vessel Voyage                                                               

International Oceanographic Institutions                                                                 

World Oceanographic Organization in Monaco  –  Contacts                                                

Robert Sandford Stewart                                                                                          

Reginald Olson                                                                                                        

Executive Summary:

The Establishment of the World Ocean Corporation for combining and cross-referencing Scientific Research into Action Plans for Toxic Clean-up, Species Replenishment and Protection in the World’s Oceans

Greater global awareness, protection, and action projects will enhance the largest area of 71% of the Earth’s surface defined as the unclaimed “Seas and Oceans” and all they contain. “Oceanography” started in the 19th Century with his worldwide, seagoing explorations. Having built the Oceanographic Institute, he filled the Museum with his research and findings. Jacques Yves Cousteau later ran the Institute for decades pioneering aquatic inventions including SCUBA diving equipment and bathymetric submarines.

Voyages of discovery and scientific investigations have yielded evidence now known for over a Century of continuous sea spoilage with pollution, overfishing of decimated fish stocks, fatal collisions with mammals by vessels and destruction of the food chain, compounding in the speed with which the oceans are taking an ever-increasing toll leading to destruction of some species and benefits the oceans and their contents have provided in the past. Urgent actions can be taken to stem this tide and reverse the negative effects of mankind’s plunder of the oceans with science-based solutions to restore the ocean’s health.

By combining a number of private corporations operating on the high seas with public oceanographic and research entities run by governments, universities, charities and non-governmental organisations, this new global corporation is tasked with the effort to unite allied parties for the good of the oceans beyond government intervention or charitable contributions. The private sector must take charge of helping the ocean’s, their inhabitants and those who live off them. A permanent professional staff, continued global research, collection of all known information into a digital database, a resulting action plan with ocean experts, resources and budget are being applied.

The WOC will provide employment and on-going analysis of scientific research with action projects to implement the solutions. This is now recognized by governments, corporations engaged with the oceans and private citizens as a major priority. Over 3 billion people will directly benefit from efforts to clean up the oceans, replenish fish stocks, and balance the ecology of oceans with greater protection.

Supporting and sustaining the fisheries, whales and other mammals occupying 71% of the Earth’s surface, gives the WOC a lead proving the validity behind claims that mankind is endangering its existence by ignoring the conditions of the seas. Significant human populations live on, near or earn their survival on products from and transported over the Oceans.

The WOC has created several responsible headquarters and a small professional corporate management, scientific and engineering staff to undertake the work necessary to understand and protect the ocean’s life.  The sea is the foundation of life on this planet, the source of 50% of its oxygen, a major depository for its toxic gases and home to millions of citizens that live within access of and around it.

Polluting it, ignoring it, depleting it, destroying it and leaving it to its own devices to survive and thrive to support human and all life, is not a wise decision by mankind. Action will be taken, responsibility accepted and work maintained to restore the waters, the primary human support system in the world.

This corporation lays out a business plan with a history, background, institutions and conventions that would bring corporate interests together with professional, governmental and NGO’s to work together focusing immediate goals to improve the quality of life for all species living on the world’s oceans. Connecting thousands of species, hundreds of communities and millions of people who live on the oceans will bring a significant expansion of economic growth, scientific leadership, aquatic effort in employment and continued improvement to the oceans.

Oceans represent the largest unclaimed territory in the world. WOC is dedicated to replenishing and protecting the oceans. A plan that connects the work of ports, naval headquarters, mining locations, petroleum projects, fishing fleets, underwater communications cables and territorial waters will provide an interconnected effort to improve ocean health. Water sustains our visible life. Protecting it should be our highest priority. It will soon become the highest valued commodity in the world. Water is the new gold!

The Business Plan focuses on combining the efforts of corporations working on the ocean with allied institutes, scientists and projects worldwide.

  1. Working with worldwide commercial shipping companies, cruise liners, mining, petroleum, insurance companies & banks, shipbuilding & maritime fisheries, governments, national navies, schools, universities, television, radio, internet, cinematography and documentary film companies, aviation, marine and sea-based companies, yacht clubs, and all NGO’s with an interest in ocean preservation to participate in ocean clean-up, protection of species and replenishment of fish stocks, plankton and coral.
  2. A for-profit corporation with earned funds re-invested primarily into action programs will operate in a fashion similar to the private company known as the International Committee of the Red Cross in Geneva. This is not a charity or Think Tank, academic exercise or government ministry. It is a corporation operating on a fixed business schedule, transparent managerial practises, an audited budget and action plans with specified time lines and results-oriented.

Offshore oil/gas rigs       Container and cargo ships       Cruise and passenger ships

  1. WOC is an active, goal-oriented institution, not a public bureaucracy with wasteful, time-consuming procedures. Growing crises in the oceans demand a concerted effort to overcome the challenges with an action plan of clean-up, protection, and rehabilitation.
  2. WOC has access to all Maritime Registries domiciled worldwide for all ocean vessels. Some yacht club and harbour registered boats may assist in volunteer surveillance and protection on the oceans. If willing, a civic navy may solicit vessel owners to conduct oceanographic surveillance and test research, assisting in clean-up and restoration projects worldwide. Civic navies will patrol pollution and report mammal sitings to the corporate database.
  3. A world-class Board of Directors, Management and Project Implementation Teams shall manage the corporation, while a CEO with +30 years of experience in oceanographic activities will run the operations. Senior management will each have 20 years of active ocean expertise, while program staff will exhibit superior degrees in Oceanography and related disciplines.


Naval Protection            Ice Breakers for Research     Work Vessels for Restoration

  1. WOC will work with global oceanographic scientists, biologists, zoologists, engineers and project technical implementation staff to serve the work of the Headquarters. Their prime focus is on analysing all relevant data, creating and managing project implementation activities. Little time will be wasted on raising funding or attending conferences. Data collection and dissemination are a priority in the business plan.

NOC Data Base

Underwater research and operations

Science-based research and operations

  1. WOC operates with an annual budget through corporate investments, private donations and barter arrangements with leading corporate participants expanding with progress. Funds raised will be meticulously and forensically audited towards the highest professional performance achieving the outcomes audited and verified independently.
  2. WOC has an initial Priority Action List including the following pursuits: clean-up of human and natural ocean pollution in the most critical, targeted regions worldwide; replenishment of missing fish stocks; preservation of endangered species.
  3. WOC will deploy a wide range of vessels from yacht basins, bathymetric and other maritime work ships, to work with cargo vessels, super tankers, cruise liners, private motor launches, sailboats, naval military vessels, and work ships to participate in co-ordinated work.

12. WOC is building a digital database. This comprises of storage, analysis and dissemination of relevant information for WOC’s projects. WOC will insure fair dissemination of data with all the professional members, governments, investors and corporations so as to dispel fake science or inappropriate media attention to prove relevant facts through rigorous investigation, proof and successful reclamation projects.

13. To augment the ocean vessels with improved time and aerial efficiency, when available, WOC will make use of the hybrid cargo airship for surveillance and tracking over migrating ocean species, collecting and disseminating data, transporting personnel to offshore operations, managing reclamation projects and supplying logistics to Oceanographic work worldwide. It can fly point-to-point worldwide, land or hover over water.

14. WOC will establish relationships with inter alia the NOAA (Washington DC) , World Ocean Council (Hawaii and Rotterdam), Oceana (in Washington DC), the Woods Hole Institute, The Intergovernmental Ocean Commission (IOC) in Paris at the UNCTAD, the International Hydrographic Organisation (Monaco), Global Maritime Boundaries Database, Greenpeace (Amsterdam), Mission Blue (USA), Global Fishing Watch, World Trade Organization (Geneva), Energy Observer (2017-2022), other oceanographic institutes worldwide and volunteer organisations cleaning up Ocean rubbish, toxic waste, plastics and chemicals. WOC will combine and align objectives, goals and enterprises with a view to complete co-operation on scientific research, analysis, action plans and project implementation. At an appropriate stage, merge all efforts into a global entity with all participants working with series and parallel efforts to improve the ocean’s Health. Include efforts from every continent, especially developing nations.

15. WOC will contract with existing hatcheries in a select locations close to depleted fish stocks that will incubate the eggs of select fish. WOC will disseminate the hatching eggs to predetermined secure zones where annual returning stocks can multiply without hindrance. Continue this practise with salmon, tuna, cod, herring, sea bass, sole, and other stocks of fish depleted from overfishing.

Fish Incubator and Hatchery

Fish Hatchery Layout for multiple fish species

Business Plan, Financing, Budget, Key Management, Timeline, Implementation and Operations:

  • Business Plan: A detailed document outlining a full business plan, the implementation and operations of the World Ocean Corporation is underway. This includes the identification of key resources, funding, sponsors, investors, partners, key management, manpower, budget, timeline, operational functions, office buildings, location of a large data base of computers, consultations with key stakeholders, and final decision to proceed. The corporation will operate from six countries to start (Netherlands, USA, UK, Canada, Monaco and Uganda for East and Southern Africa).
  • Sources of investment funding and key investors have been identified as being corporations engaged already in work on the oceans. Sufficient finance will be confirmed for start-up and operations over the first half of 2018. A detailed budget operated by a small, efficient and lean secretariat of professionals is being created and approved by the investors for this proposal.
  • The new entity WOC has been incorporated in Delaware USA. It is run with a small secretariat in the above locations. Private and commercial corporations, government bodies, non-governmental educational, scientific, and research bodies already in existence are contributing their inputs to a global data base. An operational plan will implement specific, targeted, action projects to meet the ultimate objectives in restoring and maintaining the health of the unclaimed oceans and territorial waters of the Earth. The organization may be called the World Ocean Corporation.
  • The WOC will initiate actionable programs and projects identified by a competent Board of Directors, Management and Jury under International Tender regulations. Each project will be appraised, adjudicated and awarded by approval of the senior management and board. It will carry out clearly-defined projects, independently monitored and approved throughout their duration in a manner befitting the highest competence of international work.
  • The WOC operates as a private Corporation under the supervision of its initiators, appointed Board, management, invited, elected and approved by its membership.
  • The timeline for implementing the establishment and operations of WOOM is a suggested below:

           2018                                                                         2019____

Action                    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Complete BP           *************

Consultations                   *************

Incorporation                        **

Approval of Plan                     ************

Complete Funding                       ***************

Identify Offices/Secretariat           ***************

Appoint Board, Management            ***************

Secure office facilities                               *************

Tender Data Base                                                   ******

Build Data Base                                        ****************

Present to BENS (WashDC) G7 Canada         **

Commence Operations                                      ********************************

1st Annual Meeting                                                 ****

Budget: The initial budget from funded sources will be dedicated towards managing the operations, carrying out specific tasks, approved by the Board, building a computer data base and network operating centre devoted entirely to all aspects of oceanography and connecting with others overseas, cross-referencing and analysing data collected over recent decades scientific investigations, voyages of discovery, identifying key actionable projects.

A small percent of budget will be devoted to a full-time management and administrative secretariat with the balance invested in specific projects identified as “applied science”, engineering works, specific work actions such as ocean clean-up, protection programs. These are targeted for fish stocks, mammals, aviary and coral, replenishment of depleted fish stocks worldwide. Eventually, educational, promotional and documentary films may be created. All projects are carried out by responsible and efficient professional contractors.

This is not a research institute, academic institution, scientific organization, government body or official agency of any national or multilateral body. It is a private sector response from interested parties, a responsible group from civil society who contribute prior professional expertise, substantial resources and manpower to carry out the work. This consists primarily of protecting, cleaning up, replenishing and maintaining the health of the oceans as few or none exist today to conduct these efforts on a global scale. Increased sharing and rationalizing of resources should make every effort productive with serious improvements.

WOC will reduce inefficiency and maintain the highest professional standards, cross-referencing the work of thousands of scientists and researchers. It will not seek to engage in any political or controversial activities worldwide. WOC will attract and support only projects that leave a very powerful, positive and permanent impact and contribution to this process.

WOC is not a public relations or promotional entity designed to further its popularity or profitability. It is dedicated solely to the objectives of protecting, enhancing and respecting the health of the oceans. This is a contribution to the safety, security, longevity, happiness and survival of all who live on, under or alongside the oceans. Most human populations derive some food, oxygen, employment, and resources from the oceans. This effort hopes to create this in a safe, non-polluting, non-destructive manner while having minimal negative impact on the health of all who inhabit the Earth.




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Poor education and obesity are risk factors for dementia Studies find that hearing loss is also associated with the disease

At first sight the global growth in Alzheimer’s disease and other forms of dementia looks terrifying. The World Health Organisation’s latest estimates, released in December, put the total number of people with dementia at 50m today — and that is projected to reach 82m in 2030 and 152m in 2050.

The increase results entirely from demographic changes. By far the largest risk factor for dementia is old age. As deaths from other causes — infections, cancer and cardiovascular disease — decline, the number of dementia-prone people in the population is rising fast.

Yet the frightening overall figures conceal the good news that in many industrialised countries the age-related incidence of dementia is beginning to fall. In the UK and US an 80-year-old today is about 10 per cent less likely to suffer from dementia than one a decade ago, though the fall is mainly among men rather than women.

Many scientists think the decline must be due to changing environmental and lifestyle factors. If we can identify the factors responsible, we might learn from them to come up with a prevention strategy for Alzheimer’s.

An expert commission set up by the Lancet medical journal reported in July that more than a third of dementia cases could be prevented by tackling non-genetic factors ranging from poor education, stress and obesity to hearing loss, head injury and pollution.

“There is a lot of research showing that a generally healthy lifestyle can have a marked effect on your risks of developing dementia,” says David Reynolds, Alzheimer’s Research UK chief scientist.

The decline in age-related incidence could be due to improved cardio-vascular health or more education and physical activity, showing that “dementia does not have to be an inevitable part of ageing”, says James Pickett, head of research at the London-based Alzheimer’s Society.


Evidence that education protects against Alzheimer’s is also growing. “Many studies have shown that the more years spent in full time education, the lower the risk of Alzheimer’s,” says Hugh Markus of the Department of Clinical Neurosciences at the University of Cambridge.

“But it is difficult to unravel whether this is an effect of education improving brain function, or whether it’s the case that people who are more educated tend to come from more wealthy backgrounds and therefore have a reduction in other risk factors that cause Alzheimer’s disease.”

Prof Markus is leading a study to unpick these factors. Results published in BMJ in December showed that genetic variants predicting educational attainment were strongly associated with Alzheimer’s disease. Other studies have found that up to 19 per cent of Alzheimer’s cases can be attributed to low education.

A favourite idea is that many years of education, followed by a creative career and retirement activities that keep the brain as active as possible, build up a “cognitive reserve”.

However, it is far from clear to what extent this reserve needs to be established during early and mid life, and how much people can build it up further through mind-expanding activities in old age.

Many environmental factors have been linked to an increased risk of dementia, ranging from air pollution to head injury.

The most surprising of the nine significant risk factors identified by the Lancet commission is hearing loss in middle age, which could cut the number of dementia cases by 9 per cent if everyone was treated before deafness set in.

It is important to remember that, while studies may suggest that one-third or more cases of dementia are preventable, these are population-level estimates that do not necessarily take into account individual circumstances.

By having bad luck and the wrong genes, an individual who does all the right things may still develop Alzheimer’s, just as a non-smoker living a healthy life and trying to avoid air pollution may die young of lung cancer.

The hunt is on for a cure for dementia as more drugs flunk final stages Scientists are focusing on new trials that will be an important test of the ‘amyloid plaque’ hypothesis Merck announced it was stopping a trial of its Phase III Alzheimer’s medicine early

The last few years have been miserable for the estimated 50m dementia sufferers worldwide who are waiting for the first treatments that can arrest the devastating brain diseases. Drug after drug has flunked the final stage of testing, even after earlier studies offered hope that the experimental medicines might be able to slow the relentless march of the illness.

Until a pharmaceuticals group develops a “disease-modifying” medicine, patients must make do with a handful of drugs that only slightly ameliorate the ravages of Alzheimer’s disease — which accounts for between 60 and 70 per cent of dementia cases — but do nothing to stop or slow it.

The failing streak has continued to dominate the first few weeks of 2018. Last month, Merck announced it was ending a large Phase III trial of its Alzheimer’s medicine early, after a committee monitoring the trial said the medicine was unlikely to benefit patients in the earliest stage of the disease. Merck had already stopped a trial of the medicine, known as a “beta-secretase inhibitor”, last year, after it failed to work on a group of patients whose disease had been classed as mild or moderate by doctors.

In an interview with the FT shortly before announcing the most recent failure, Rob Davis, Merck’s chief financial officer, said the company knew the drug had “activity”, but conceded there remained a question as to “how soon in the disease process you intercede”. It turned out that even targeting patients who have only just started exhibiting symptoms was still too late for this particular medicine.

The next big hope is a drug being developed by Biogen, a biotech company based in Massachusetts. Its medicine, aducanumab, is designed to clear the brain of sticky plaques known as “beta-amyloid”, which accumulate in the brains of people with Alzheimer’s, and which some scientists blame for the disease.

Although Biogen’s drug appears to be able to remove those plaques, it is not yet clear whether doing so will result in a corresponding improvement in a patient’s brainpower. The company’s two trials of aducanumab in mild patients, known as Engage and Emerge, are due to complete enrolement in the summer with a final result expected in 2020. The studies are being seen as an important test of the so-called “amyloid hypothesis”.

But Biogen also kicked off 2018 with some inauspicious news, after it announced that it was enrolling a further 510 patients in the trials. The company decided to add the extra participants after it looked at early data from the trial and noticed what it described as “more variability on the primary endpoint”.

Both trials are blinded, meaning Biogen’s researchers cannot tell which patients are getting the drug and which ones are on a placebo, but concerns have been raised over their decision to enrol more participants. Although such a move does not necessarily indicate the trials will fail, investors become wary when drugmakers move the goalposts in a middle of a study, and shares in Biogen declined by about 7 per cent after the announcement.

“Net-net we view this as a negative, as it highlights the inherent challenges in Alzheimer’s studies,” says Brian Abrahams, a biotech analyst at RBC, an investment bank. If aducanumab does fail, it will provide more evidence for those who say focusing on the plaques themselves might be a red herring. They suggest that by the time the sticky deposits have built up, it could already be too late.

“If you get [researchers] at a table with a few beers they will admit we really don’t know what those plaques are doing,” says Sean Harper, the top scientist at Amgen, the world’s largest biotech company.

“We don’t have any idea whether removing them is the right thing to do, whether it’s even deleterious, or if it’s just neutral,” he adds. “If you see pictures of an Alzheimer’s brain, a lay person can see it is already profoundly affected, perhaps beyond the point of no return.” Dr Harper is among those scientists who believes the best approach is to try to tackle Alzheimer’s before patients have even been diagnosed.

His company has a partnership with Novartis, the Swiss drugmaker, which is testing a drug in people with no outward signs of the disease, but who carry a gene that makes them more predisposed to developing it in the future. This medicine, like Merck’s, tries to inhibit the enzyme known as beta-secretase, which is implicated in the formation of amyloid plaques.

“What we’ve been able to observe is that humans who have a natural resistance to beta-secretase enzyme activity also have an . . . eight-fold lower risk of developing Alzheimer’s,” says Dr Harper. “We continue to believe the target is very good but that you have to go earlier,” he adds. Some scientists tackling Alzheimer’s believe the whole amyloid hypothesis is flawed.

Other companies have focused their efforts on other pathologies thought to be involved with the disease, like brain tangles known as tau. And start-ups like Denali and Alector, both based in San Francisco, are exploring microglial cells that provide the brain with its energy. But many of these efforts are still in the very earliest stages: for now, at least, Alzheimer’s patients must hold out hope that the amyloid hypothesis still has promise. It will be several years until they have anything approaching  a conclusive answer to the scientific question, let alone a drug that is proven to work.

Forget Drugs, Music Works

How to harness music to fight dementia Brain’s ‘musical memory’ can escape the ravages of Alzheimer’s George and Dot Smith, together for more than 60 years.  It is a cold morning in a church hall in Croydon, south London, and Peter Edwards is warming up his singers with some call-and-response exercises. But this is no ordinary choir: the participants are dementia sufferers, enjoying a final session before an appearance at Buckingham Palace.

Mr Edwards leads his group through rousing renditions of “She’ll Be Coming Round the Mountain”, “The Music Man” and “Oh, What a Beautiful Mornin’” before turning up the excitement by handing out maracas and tambourines. Singing for the Brain, as the session is called, is organised by the Alzheimer’s Society, a UK dementia support and research charity.

It is one of many initiatives harnessing music to help not only those with living with dementia, but their carers too. The Commission on Dementia and Music, a UK project backed by the Utley Foundation, a family charitable trust, aims to turn a “cottage industry” of programmes into a national policy of musical interventions for all dementia sufferers by 2020.

This is a difficult task given the commission’s estimate that less than 5 per cent of care homes in the UK currently provide “good quality arts and music activity for residents”. Singing for the Brain: Peter Edwards is warming up his singers with some call-and-response exercises.

The commission published its recommendations, calling for more music-based interventions in dementia care, in January. The advice is bolstered by neurological studies that have shown “musical memory” is handled by a part of the brain that remains relatively unscathed by diseases such as Alzheimer’s.

Sally Bowell, research fellow at International Longevity Centre UK and one of the report’s authors, says: “Music can help alleviate some of the behavioural and psychological symptoms of dementia such as agitation and wandering, and has been shown to help reduce reliance on anti-psychotic drugs.

She says music can have wider benefits too. “It can help tackle anxiety and depression and improve wellbeing, not just for the person with dementia but also for their carer.”

The organisation has developed an app that can build “life soundtracks” of songs that provide that “flashback feeling” for a person with dementia. Powered by Spotify, the music streaming service, the app helps identify music from an earlier time in an individual’s life — typically between the ages of 10 and 30. Singing for the Brain: research has shown that singing and listening to music from their youth can improve dementia sufferers’ memory’ Sarah Metcalfe, Playlist for Life’s chief executive, says the idea has been so successful that at least one GP has started prescribing playlists to wean patients off sedation.

“Music is neurologically special and that’s why these different interventions are emerging,” she says. Chris Rowlands works as a playlist co-ordinator, using Playlist for Life’s system, at Nightingale Hammerson, a care home in London. “I call it the ‘pixie-dust effect’,” she says. “Get the right piece of music and someone will just come alive. It’s a joy to behold.” Singing for the Brain: an innovative project to help those living with dementia Singing for the Brain: participants go through some call-and-response exercises.

Neil Utley — who also has his own record label — has been funding musical projects through the Utley Foundation since 2014. He says the foundation conducted a research project on people with dementia in conjunction with the Priory, a leading provider of behavioural care in the UK. “People who hadn’t moved a finger, within 40 minutes of having a live guitarist in front of them, were tapping their hands, some standing.

It was quite moving and emotional,” Mr Utley says Ms Metcalfe is optimistic the campaign can succeed. “What the ILC and the Utley Foundation are doing is taking this very simple thing and making a transformational difference to the way we approach this really frightening disease,” she says. “It needn’t be frightening. Music can help. It can help make life easier and happier.”

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Africa eats up lion’s share of Chinese lending: Beijing has invested $34.8bn in continent’s energy infrastructure since 2000

11 March 2018

London, Kampala, Addis Abeba, Dakar, Nairobi, Juba, Dar es Salaam and Johannesburg.

Construction of the Karuma hydroelectric project in Uganda, one of the African countries where China is investment billions in infrastructure

Africa attracted more Chinese state lending for energy infrastructure than any other region last year, highlighting Beijing’s view of the continent’s growing economic and strategic importance.

A study by Boston University academics shows that nearly one-third, or $6.8bn, of the $25.6bn that China’s state-owned development banks lent last year to energy projects worldwide went to African countries. This was ahead of south Asia, with $5.84bn.

The loans bring total Chinese energy finance in Africa since 2000 to $34.8bn. While this is well behind the $69bn lent in Europe and Central Asia, the $62bn in Latin America and the $60bn in Asia over the same period, the 2017 data illustrate Africa’s growing importance.

“China is trying to replicate its model of development in Africa to show the world that the Chinese economic model really works,” said Yu Jie of LSE Ideas, a think-tank based at London School of Economics.

The strong lending follows a 2015 promise by Xi Jinping, China’s leader, for a total of $60bn in Chinese investments to Africa by the end of this year to demonstrate what he called a “common future”. Statistics on how close Beijing is to realising the overall $60bn target are not yet available, analysts said.

Some soundings, though, suggest a growing affinity. An 2016 Afrobarometer survey of 36 African countries found that 63 per cent of Africans found China’s influence “somewhat” or “very” positive. Asked which countries provided the best development model for Africa, China placed second only to the US with 24 per cent and 30 per cent respectively.

Financing energy projects is one of the main strands in China’s push to win market share and diplomatic friends in developing counties by building much-needed infrastructure.

Power generation and transmission were the largest lending segment, accounting for $22.3bn of the total, with the remainder being going to oil and gas exploration and extraction, according to data from Boston University’s Global Development Policy Centre. All the $6.8bn in 2017 lending to Africa was for power projects.

Geographically, the lending has been concentrated into six countries, with Angola, Nigeria, Zambia, Uganda, South Africa and Sudan getting $23.8bn of the total $34.8bn since 2000. The Boston University data tracks loans from the China Development Bank and Export-Import Bank of China, the world’s two largest development banks.

The door to Chinese lenders has been left open by a comparative lack of action from the western-backed multilateral lenders. “Traditional multilateral development banks have not been forthcoming in big energy and China has been more than willing to fill the void,” said Kevin Gallagher, professor of global development policy at Boston University.

In addition, Prof Gallagher said, Africa’s demographic explosion, which is likely to lead to an additional 1.3bn people on the continent by 2050, underscored the demand for power generation and transmission for decades to come.

Beijing’s testing ground:  The country’s politicians, lenders and businesses eye opportunities for growth and greater geopolitical influence.

On Pate Island, off the coast of northern Kenya, there are light-skinned Africans with Chinese features, fragments of ancient Chinese porcelain, and even a place named “New Shanga”.

All lend weight to a local story that shipwrecked sailors from the fleet of Zheng He, the 15th-century Chinese explorer, settled on the island many years before Columbus set foot in the US.

Whether or not there are descendants of the great Chinese helmsman’s crew in Kenya, records show that huge ships reached the east African coast more than 500 years ago, swapping Chinese treasures for exotica such as ivory, ostriches and zebras.

Indeed, there is a long if tentative history of contact between China and Africa, cemented under Mao Zedong in the 1960s with anti-colonial solidarity and the construction of engineering works, notably the 1,860km Tanzam railway linking Zambia with the Tanzanian coast.

In the past 15 years, however, the level of engagement by Chinese state-owned enterprises, political leaders, diplomats and entrepreneurs has put centuries of previous contact in the shade.

The China-Africa relationship — partly spontaneous and partly the fruit of an orchestrated push from Beijing — is shifting the commercial and geopolitical axis of an entire continent that many western governments had all but given up on. While Europeans and Americans view Africa as a troubling source of instability, migration and terrorism — and, of course, precious minerals — China sees opportunity. Africa has oil, copper, cobalt and iron ore.

It has markets for Chinese manufacturers and construction companies. And, perhaps least understood, it is a promising vehicle for Chinese geopolitical influence.

“To have 54 African [nations as] friends is very important for China,” says Jing Gu, director of the Centre for Rising Powers and Global Development in East Sussex, who contrasts Beijing’s mostly good ties with African governments with the tense relationship it has with neighbours from Tokyo to Hanoi.

Kenyan President commissions the new Nairobi-Mombasa railway built by China Road and Bridge Corporation.

Many, including some Africans, are suspicious of what they see as a neocolonial land grab, in which companies acting as proxies for the Chinese state extract minerals in return for infrastructure and finance that will saddle governments with large debts.

The behaviour of Chinese actors in Africa, in common with those from the west, has often fallen short of the exemplary. There have been legitimate complaints about Chinese companies employing few locals, mistreating those it has and paying scant regard to the environment.

Nevertheless, there is a begrudging recognition that China has mostly benefited Africa and that the country’s participants on the continent have learnt lessons.

Beijing’s engagement with Africa is more multi-layered than is often recognised. China, Ms Jing says, has used Africa almost as a testing ground for its growing international ambitions, whether through peacekeeping missions or construction of the roads, ports and railways intended to bind much of the developing world, via a new Silk Road, to the Middle Kingdom.

Howard French, whose book China’s Second Continent charts the experience of about 1m Chinese entrepreneurs who have settled in Africa, agrees. “Africa has been a field where China can try various things in a very low-risk environment,” he says. “Africa has been a workshop of ideas that now have a much bigger scale and strategic significance.”

A few numbers illustrate the shift. In 2000, China-Africa trade was a mere $10bn. By 2014, that had risen more than 20-fold to $220bn according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies in Washington, though it has fallen back because of lower commodity prices.

Over that period, China’s foreign direct investment stocks have risen from just 2 per cent of US levels to 55 per cent, with billions of dollars of new investments being made each year.

China contributes about one-sixth of all lending to Africa, according to a study by the John L Thornton China Center at the Brookings Institution. Certainly, China has been attracted by Africa’s abundant resources: oil from Angola, Nigeria and Sudan, copper from Zambia and the Democratic Republic of Congo, and uranium from Namibia.

Chinese President Xi Jinping with Ethiopian prime minister Hailemariam Desalegn at the Belt and Road Forum in Beijing last month. In recent months, Chinese companies appear to have made an effort to corner the market for cobalt, crucial for the production of electric car batteries, with multibillion-dollar purchases of stakes in mines in Congo, the world’s biggest producer.

From Libya and Zambia to Ghana and Mozambique, Chinese businesses have gained a reputation for unbridled extraction, whether of old-forest timber, oil, gold or illegal ivory. Yet the emerging China-Africa relationship goes well beyond commodities.

One of the top destinations for Chinese investment in Africa is Ethiopia, a mostly resource-poor country of 100m people that is pursuing Chinese-style state-led development. Ethiopia has few resources of interest to China other than its strategic location and potentially large market, should its fast growth of the past 15 years prove sustainable.

Since 2000, Ethiopia has been the second-biggest recipient of Chinese loans to Africa, with financing for dams, roads, rail and manufacturing plants worth more than $12.3bn, according to researchers at Johns Hopkins.

hat is more than twice the amount loaned to oil-soaked Sudan and mineral-rich Congo. In fact, a far larger portion of US direct investment — 66 per cent vs 28 per cent for China — goes into mining.

China-Africa ties have proliferated in other areas. Beijing has 52 diplomatic missions in African capitals against Washington’s 49. Of the UN Security Council’s five members, China has the most peacekeepers on the continent, with deployments of more than 2,000 troops in Congo, Liberia, Mali, Sudan and South Sudan. From Africa’s perspective, although China presents risk it brings tangible benefits in finance and engineers.

More importantly, it brings choice. That is welcome for African governments that have, for decades, been locked in often unproductive relationships with foreign donors who have brought billions of dollars in aid, but also, in the 1980s and 1990s, brought what many view as the ruinously prescriptive Washington consensus of market-based development and reform.

“The narrative of donor and recipient has changed considerably with China,” says Dambisa Moyo, a Zambian economist whose 2009 book Dead Aid questioned the aid-based ties of Africa to Europe and the US. “African countries need trade and they need investment. To the extent that China, or anybody else — India, Turkey Russia or Brazil — bring new trading and investment opportunities to Africa, that’s good news.”

A Senegalese worker helps raise the Chinese flag before the visit of the Chinese vice-president in May.

Jeffrey Sachs, director of the Earth Institute at Columbia University, calls China’s newfound enthusiasm “the most important single development for Africa in this generation”. Beijing, he says, can help transform the continent. “They know how to build big projects,” he says, referring to the dams, ports, airports, railways, telecommunications networks and roads that Chinese groups are building in even the most obscure corners of the continent. “They know how to get them done.”

Throughout Africa, people on the streets and in power echo these sentiments. Beijing’s official policy of non-interference makes it an attractive partner to African leaders in countries from Angola to Zimbabwe fed up with lectures from former colonial powers about human rights or democracy.

A 2016 Afrobarometer survey of 36 African countries found that 63 per cent of Africans found China’s influence “somewhat” or “very” positive. Asked which countries provided the best development model for Africa, 30 per cent said the US and 24 per cent China, placing them number one and two. Yet there is disquiet about the rise of Chinese influence.

“I think the Chinese know what they want. It is the Africans who don’t know what they want,” says PLO Lumumba, director of the Kenya School of Law. “China wants to control. China wants to be a world power,” he says, adding that African governments are taking on so much Chinese debt that they will be in economic and political hock to Beijing.

Godfrey Mwampembwa, a cartoonist better known as “Gado” whose political satire is syndicated all over Africa, says something similar. “It’s the same old story: now you have the Chinese conquering Africa, but what is Africa getting out of it?”

In one of his cartoons, Lilliputian African leaders shake the hand of a towering Chinese figure. The caption reads: “We are equal partners.” In an interview with the Financial Times last month, Uhuru Kenyatta, the Kenyan president who has used Chinese billions and engineering know-how to mount a huge infrastructure push, expressed concern at the fact that Africa has moved into trade deficit with China.

Beijing he says, is “beginning to appreciate that, if their win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must also open up to Africa”.

Chinese peacekeepers in South Sudan.

Mr French says Africans’ view of China “is still positive, but not as exuberant as it was”. People welcome the infrastructure, he says. But they insist their governments should not be taken for a ride, either by overpaying, accepting shoddy work or allowing Chinese companies to use all their labour and materials.

Africans resent it, he says, when corrupt governments inflate the price of projects — as has been alleged with the $4bn Mombasa-Nairobi railway, inaugurated this month — to make space for kickbacks. Still, he adds, Chinese companies have become more attuned to such issues than critics suggest.

A decade ago, they thought that dealing with the government was enough. Now they realise, they also need to engage civil society and international non-governmental organisations on issues from local skills to the environment. Chinese and local staff for Kenya Railways at the Nairobi terminus of the new railway.

Chinese companies like to be seen to be transferring skills. Huawei, which earns 15 per cent of its global revenue in Africa, trains 12,000 students in telecoms a year at centres in Angola, Congo, Egypt, Kenya, Morocco, Nigeria and South Africa. According to Johns Hopkins researchers, 80 per cent of workers on Chinese projects are African, even if many are in low-skilled jobs such as trench-digging.

“I give the Chinese a fair amount of credit,” says Mr French. “They have been mounting quite a steep learning curve from almost no knowledge to becoming very sophisticated players.” Ms Jing of the Centre for Rising Powers says China wants the relationship to be seen as mutually beneficial.

“China is actively pursuing an African industrialisation strategy,” she adds. “It is hoping to transfer low-wage production to Africa in the next 10 years.” The crucial thing for African governments, says Ms Jing, is to take control of their relationships, whether with the west or China.

That means setting priorities, ensuring skills are transferred and negotiating with foreign partners on their own terms. “It is up to the Africans. They need to be clear about who can play what role,” she says. “It is not for outsiders to decide.”

Push into Africa seen as a scramble for state funds The evolving China-Africa relationship is not monolithic, but conducted by multiple players with different agendas.

On the one hand, there are 54 African countries and, on the other, various Chinese banks, state-owned enterprises, provincial governments, private companies and individuals. “When you look at what China is doing in totality you see chaos, not coherence,” says Minxin Pei, a Chinese scholar, who rejects the idea of a grand Chinese strategy for Africa.

Uwe Wissenbach, an expert on Chinese projects in Africa, also cautions against the idea of a Beijing “master plan”. The construction of the $4bn railway from Mombasa to Nairobi was Kenya’s idea rather than China’s, he says. Even though the railway may be extended to Uganda and possibly Rwanda, it is not a Beijing strategy to link east Africa.

Rather, it was an opportunistic bid by state-owned China Road and Bridge Corporation for a lucrative contract, he says. The absence of a sweeping strategy does not mean there is no state influence. Chinese leaders have been active in courting African governments.

In 2015, Xi Jinping, China’s president, pledged $60bn for African projects over three years despite the downturn in commodity prices. Beijing has consistently encouraged Chinese companies, many with huge surplus capacity at home, to win contracts in Africa. “When the government says: ‘This is the new frontier; it’s lucrative and people should go there,’ then people do go there,” says Mr Wissenbach.

Policy directives from Beijing come with cheap finance and an implicit state guarantee should African governments default on loans. Rather than Beijing carving up the world, he suggests, what has emerged is a scramble for Chinese state funds. “In that sense, it is strategic but it’s also very opportunistic.”

Tillerson tells Africa that China finance imperils their sovereignty: Chinese investment in Africa: Beijing’s testing ground US abdication in Africa hands political opportunities to China.

Further momentum behind China’s engagement with Africa has come from the Belt and Road Initiative (BRI), a signature programme of Mr Xi to finance and build infrastructure in more than 80 countries in Asia, Africa, the Middle East and Europe.

In Asia and Europe, Beijing has experienced some resistance to the BRI, largely because of the size of debt burdens being incurred by some recipient countries and criticism over a perceived lack of contracts being awarded to local contractors. In Africa, so far, the BRI roll-out has been comparatively smooth, analysts said.

However, Rex Tillerson, the US secretary of state who is on a five-nation tour of Africa, warned on Thursday that the continent should be careful when accepting Chinese investment, saying countries should “not forfeit any elements of your sovereignty as you enter into such arrangements with China”.

Tillerson tells Africa that China finance imperils their sovereignty First senior Trump official to visit continent questions Beijing’s investment drive Rex Tillerson accepts a cup during a traditional Ethiopian coffee ceremony at the US embassy in Addis Ababa.

Rex Tillerson has warned African governments they risk forfeiting their sovereignty when accepting money from China as the US secretary of state began the first visit to the continent by a senior Trump administration official.

Mr Tillerson’s implied criticism comes as the US plays policy catch-up on a continent that hosts five of the world’s top-10 growing economies but where many struggle to secure financing. Some African governments have tended to bristle at Washington’s approach.

Speaking at the African Union headquarters in Addis Ababa, the Ethiopian capital, at the start of a week-long visit, Mr Tillerson said that while the US was “not attempting to keep Chinese investment dollars out of Africa”, governments could lose control of infrastructure and resources if projects went wrong. China is ploughing billions of dollars every year into infrastructure initiatives.

“Oftentimes, the financing models are structured in a way that the country, when it gets into trouble financially, loses control of its own infrastructure or its own resources through default,” Mr Tillerson said. African nations should “not forfeit any elements of your sovereignty as you enter into such arrangements with China”, he warned.

The comments drew a quick response from Sergei Lavrov, Russia’s foreign minister. Speaking during a visit to Zimbabwe, he said it was “not appropriate” for Mr Tillerson “to criticise the relations of his hosts, when he was a guest there”, Reuters reported.

Oftentimes, the financing models are structured in a way that the country, when it gets into trouble financially, loses control of its own infrastructure or its own resources through default .

Rex Tillerson

The five-nation visit by America’s top diplomat has been billed as an apology tour after President Donald Trump reportedly dismissed “shithole countries” in Africa and elsewhere in comments made in January.

Mr Trump’s remarks drew strong criticism, although he said that was “not the language used”. Asking about the comments at a press conference with Mr Tillerson, Moussa Faki, the AU chairperson, said the “incident is of the past” and refused to answer questions on it.

Mr Tillerson twice refused to answer questions on the issue. John Ashbourne, Africa economist at Capital Economics in London, said Mr Tillerson’s remarks on China were partly motivated by a sense in the administration that it was “being left behind or displaced in importance” in Africa. “The Americans are on the back foot on many African issues,” he said.

“Africa hasn’t been a focus for the Trump administration at all. There’s been a total lack of direction.” Recommended Africa’s power shuffle is a renewal, not a revolution Without Gary Cohn, the White House will lack normality and structure Ethiopia’s state of emergency signals struggle to damp discontent Beijing overtook Washington as the largest trade partner with Africa in 2009, although the US remains the biggest aid donor.

China is investing more than $7bn a year in infrastructure projects in Africa, according to Witney Schneidman, a retired diplomat and expert on US-Africa relations. The Trump administration has also been slow to make Africa appointments, going through three potential Africa directors of the National Security Council before picking Cyril Sartor, a former CIA deputy assistant Africa director.

The state department has yet to successfully nominate an assistant secretary for Africa. Peter Pham, Africa director at the Atlantic Council think-tank, said the administration was putting security, governance, trade and investment at the forefront of US-Africa relations.

“It’s an easy trope to claim the administration does not have a policy [on Africa] . . . but there’s a policy theme at the strategic level and you just have to connect the dots to see it,” he said. Mr Tillerson also met senior Ethiopian officials and urged them to lift the state of emergency imposed last month following almost three years of anti-government protests. He will also visit Djibouti, where the US has its largest military base in Africa, as well as Kenya, Chad and Nigeria.

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Diamond discovery proves Earth’s Oceanic crust gets recycled Mineral usually found at depths of 700 km found ensconced within diamond near Earth’s surface for the first time.

Scientists discovered a sample of perovskite, the world’s fourth most abundant mineral, locked in a diamond unearthed from the Cullinan Mine in South Africa. Diamonds from the mine have high scientific value because they offer insights into the deepest parts of Earth’s core.

For the first time, scientists have found Earth’s fourth most abundant mineral—calcium silicate perovskite—at Earth’s surface.

Scientists discovered a sample of perovskite, the world's fourth most abundant mineral, locked in a diamond unearthed from the Cullinan Mine in South Africa. Diamonds from the mine have high scientific value because they offer insights into the deepest parts of Earth’s core. (Photo: Petra Diamonds)

“Nobody has ever managed to keep this mineral stable at the Earth’s surface,” said Graham Pearson, a professor in the University of Alberta’s Department of Earth and Atmospheric Sciences and Canada Excellence Research Chair Laureate. He explained the mineral is found deep inside Earth’s mantle, at 700 kilometres.

“The only possible way of preserving this mineral at the Earth’s surface is when it’s trapped in an unyielding container like a diamond,” he explained. “Based on our findings, there could be as much as zettatonnes (1021) of this perovskite in deep Earth.”

Pearson, working with a team of colleagues from the universities of Padua and Pavia, the University of British Columbia and universities in the U.K. and South Africa, found the calcium silicate perovskite within a diamond mined from less than one kilometre beneath the Earth’s crust, at South Africa’s famous Cullinan Mine, best known as the source of two of the largest diamonds in the British Crown Jewels. Pearson explained that the diamonds from the mine are not only among the most commercially valuable in the world, but are also the most scientifically valuable, providing insight into the deepest parts of Earth’s core.

He said the particular diamond in question would have sustained more than 24 billion pascals of pressure, equivalent to 240,000 atmospheres. The diamond originated roughly 700 kilometres below Earth’s surface, whereas most diamonds are formed at depths of 150 to 200 kilometres.

“Diamonds are really unique ways of seeing what’s in the Earth,” said Pearson. “And the specific composition of the perovskite inclusion in this particular diamond very clearly indicates the recycling of oceanic crust into Earth’s lower mantle. It provides fundamental proof of what happens to the fate of oceanic plates as they descend into the depths of the Earth.”

He said the discovery once again highlights the uniqueness of diamonds being able to preserve things we otherwise would never be able to see.

“And it’s a nice illustration of how science works. That you build on theoretical predictions—in this case, from seismology—and that once in a while you’re able to make a clinching observation that really proves that the theory works,” said Pearson.

One of the best-known diamond researchers in the world, Pearson was also behind the major 2014 discovery of ringwoodite—Earth’s fifth most abundant mineral—in a diamond that pointed to a vast reservoir of water bound to silicate rocks in Earth’s mantle.

Pearson worked with an international team of researchers, including one of the best X-ray crystallographers in the world, Fabrizio Nestola from Padova, Italy, as well as scientists from the Deep Carbon Observatory in Washington, D.C. Pearson also teamed up with colleagues from the University of British Columbia who together lead a program—the Diamond Exploration Research and Training School, part of NSERC’s Collaborative Research and Training Experience—to train the next generation of highly qualified diamond explorers.

The study, “CaSiO3 Perovskite in Diamond Indicates the Recycling of Oceanic Crust Into the Lower Mantle,” was published the March 8 issue of Nature.

CaSiO3 perovskite in diamond indicates the recycling of oceanic crust into the lower mantle

Received: Accepted: lished online: 


Laboratory experiments and seismology data have created a clear theoretical picture of the most abundant minerals that comprise the deeper parts of the Earth’s mantle. Discoveries of some of these minerals in ‘super-deep’ diamonds—formed between two hundred and about one thousand kilometres into the lower mantle—have confirmed part of this picture.

A notable exception is the high-pressure perovskite-structured polymorph of calcium silicate (CaSiO3). This mineral—expected to be the fourth most abundant in the Earth—has not previously been found in nature.

Being the dominant host for calcium and, owing to its accommodating crystal structure, the major sink for heat-producing elements (potassium, uranium and thorium) in the transition zone and lower mantle, it is critical to establish its presence. Here we report the discovery of the perovskite-structured polymorph of CaSiO3 in a diamond from South African Cullinan kimberlite.

The mineral is intergrown with about six per cent calcium titanate (CaTiO3). The titanium-rich composition of this inclusion indicates a bulk composition consistent with derivation from basaltic oceanic crust subducted to pressures equivalent to those present at the depths of the uppermost lower mantle.

The relatively ‘heavy’ carbon isotopic composition of the surrounding diamond, together with the pristine high-pressure CaSiO3 structure, provides evidence for the recycling of oceanic crust and surficial carbon to lower-mantle depths.

The diamond discovered in a mine in South Africa contained perovskite, which meant it originated more than 700 km beneath Earth’s surface.

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Why let criminals deny our sources of energy? Will the demonstrators kindly not shut off my energy supply which maintains my life support system at my hospital!

Calgary, Houston, Dubai, Qatar   9th March 2018

Pipeline chiefs criticise ‘extreme’ tactics of campaigners: Blocking of new infrastructure in US and Canada hits industry recovering from oil price fall

A Motley crew of ill-advised campaigners who complain loudly against the Keystone XL pipeline in front of the White House in 2015. They all drove there in their gas-guzzling, oversized SUV’s from the suburbs after leaving their natural gas-fired air-conditioning systems on for the day. Speaking of fossils, have they ever contributed anything to energy production other than hot air?

Campaigns to keep fossil fuels underground have sparked concern from leading North American pipeline executives, who said tactics to stop their projects had become extreme.

The comments by the chiefs of Energy Transfer Partners, Kinder Morgan and TransCanada underscored how a tactic of addressing climate change by blocking new infrastructure has rattled a midstream energy industry still recovering from the oil price collapse.

Opposition from local residents and environmental campaigners delayed pipelines including ETP’s Dakota Access, which opened last June, and Kinder Morgan’s Trans Mountain Expansion and TransCanada’s Keystone XL, which remain incomplete despite years on the drawing board.

Some campaigners have moved beyond conventional letter-writing, demonstrations and lawsuits. In 2016, a group of activists broke into pipeline flow stations in four states and shut off valves.

“The tactics have changed and they’ve gone to an extreme level,” said Steve Kean, Kinder Morgan’s chief executive, on Wednesday at CERAWeek by IHS Markit, an annual conference of the global energy industry in Houston.

Kelcy Warren, ETP’s chief executive, said: “It’s a changed environment, and it’s going to add to all of our costs, and all of us must build that into our costs when we price our services.”

Keystone XL, a pipeline planned to connect Canada’s oil sands to US refineries, languished as it became a potent symbol of carbon emissions. The Obama administration rejected the project after years of deliberation, only for that decision to be reversed by President Donald Trump.

Russ Girling, TransCanada chief executive, told the conference that some environmental groups had hired lawyers with the expertise to challenge pipeline applications on technical grounds, forcing his company to be more meticulous with paperwork.

Activists charged with trespassing have said in court that “this is totally defensible behaviour because there’s a greater good of trying to save the world,” an argument that has gained traction with some judges, said Mr Girling.

Fossil fuel groups risk wasting $1.6tn on projects
Trump pipeline approval faces environmental backlash
US climate change outlook worsens after further research

Pipelines have become a focus for some climate campaigners as policy measures fall short of global emissions goals. Carbon dioxide emissions from the US energy sector are set to rise 1 per cent this year to 5.2bn tonnes, according to the Energy Information Administration.

The activists who shut off the oil pipelines in 2016 wanted to “state dramatically and unambiguously that normal methods of political action and protest are simply not working with anywhere near the speed that we need them to”, Emily Johnston, one of the activists, wrote in the Guardian newspaper.

Pipeline companies, reliant on volumes to increase revenue, are under pressure to improve returns after the oil slump of 2014-16 caused dividend growth to decelerate. The Alerian MLP index, which tracks energy logistics companies, has declined 19 per cent in the past year.

“Higher interest rates, too much debt, extreme competition from private equity, a hangover from over-investment, and beleaguered public market energy investors have offset what should be a golden age for the group,” said Ethan Bellamy, an analyst at Baird.
Copyright The Financial Times Limited 2018. All rights reserved.
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Robert S. Stewart rss1@interopag.com
just now

What in the world justifies criminal behaviour to shut off energy supplies to the population? Certainly not specious, incomplete and foolhardy arguments that trashes energy production for populations worldwide who need it to survive daily. When all the uneducated, screaming protestors shut off the power, are they thinking about the people dying in hospitals who lose this source. How did they drive to the pumping station, on a bicycle or walk?

Were they riding on an extremely low emission hybrid bus, methanol-fuelled car or clean diesel truck? Where does all this purported foul air go after it has been emitted. Ever think of that? Straight up into the atmosphere and beyond. Half may end up in the oceans and forests which is then cleansed by the osmosis and efficient ocean filtration system which has been around for billions of years.

Did you ever notice that the Earth’s axis may shift from time-to-time, such as billions of years ago when the Sahara was a tropical rain forest or when the weather this past winter was sunny and warm at the existing marker for the North Pole shifted, leaving the area to the SE freezing cold in Europe? The sky did not fall down as these Chickens Little proclaim. Skaters cruised happily around their canals in Netherlands and Ottawa, Canada while the polar bears found more fish in the seas as their severe climate waned to allow many to survive instead of freezing to death.

All this fake alarmist science and incomplete climatic research does is to fill the pockets of academics searching for a paper to publish, governments taxing their hard-working citizens to pay for their salaries. perks and pensions, and does nothing to cause ordinary people to enjoy their lives on Earth.

When all these violent, criminal demonstrators invent new, improved, low cost methods of transport and energy production, we’ll all buy into it. In the meantime, it has served us well to get to our homes, offices, schools, hospitals, stores, sporting events, demostrations and conferences to discuss global warming.

In fifty years time, I doubt that one of those demonstrators will have expended one minute inventing a better system or spent a penny of their own money to come up with an alternative. In the meantime, don’t let the handful of rioters who play into the hands of the media and politicians by grabbing attention like silly children with criminal antics that destroy public energy production spoil your day or shut off your life support systems. Methinks they scream too loudly like little kids who never grew up and without offering anything better.

Posted in Op-Ed's in Major Publications | Comments Off on Why let criminals deny our sources of energy? Will the demonstrators kindly not shut off my energy supply which maintains my life support system at my hospital!

Congo’s Kabila signs new mining code despite CEOs’ intervention: Global Miners complain on Deaf Ears

8 March, 2018 Kinshasa

It is time to change again (after another 20 year failure) the leadership of the DR Congo.

DAKAR, March 9 – Democratic Republic of Congo President Joseph Kabila signed into law on Friday a new mining code that raises royalties and taxes on operators, the presidency said in a statement.

International mining companies that operate in Congo, Africa’s top copper producer, have vigorously opposed the new law, although Kabila pledged this week to work with them while implementing it.

The law, passed by parliament in late January, replaces an earlier code from 2002. It raises royalties on minerals across the board and removes a clause that protected miners from changes to the fiscal and customs regime for 10 years.

Executives from Glencore, Randgold, China Molybdenum and Ivanhoe failed to convince Kabila during a six-hour meeting on Wednesday to re-open negotiations over the code, which they say will deter investment and violate existing agreements.

The two sides agreed, however, to open negotiations next week over measures to implement the code, and Mines Minister Martin Kabwelulu said the companies’ concerns would be considered on a case-by-case basis.

Royalties on cobalt, a vital component in electric car batteries, could increase five-fold to 10 percent if the government designates the metal a “strategic substance”. The law also introduces a windfall profits tax.

The president of the Democratic Republic of Congo signed the controversial new mining code into law, despite a personal intervention by the chief executives of some of the largest international mining companies.

President Joseph Kabila said the miners’ concerns will be taken into account after the law passes, according to a statement issued after a meeting with the heads of Glencore, Randgold, China Molybdenum and Ivanhoe Mines, who had travelled to Kinshasa to lobby against it. “The president of the Republic assured the mining operators that they are economic partners of the Democratic Republic of Congo and their concerns will be taken account of through a constructive dialogue with the government after the promulgation of the new mining law,” said mining minister Martin Kabwelulu in a statement.


The cobalt, copper, zinc, tantalum and coltran mines are all located in the SE corner of DR Congo. The Bechtel Master Plan high-lighted their orderly development through a democratic government, infrastructure construction and operations. That never saw the light of day.

Instead, President’s Kabila I and Kabila II chose to fill their pockets, start a civil war, start an international war with Uganda and Rwanda, then Angola and Zimbabwe joined in, and now you have the mess created when people don’t listen to 1000 investors in Brussels (December 1987), Canadian Master Planners who write intelligent Actions Plans to rebuild destroyed countries (Robert S. Stewart at Bechtel Corp.) and all the  US engineering companies, Canadian and Swiss mining corporations listed below.

The new mining code has already been passed by both chambers of the parliament in the DRC and will be promulgated “shortly,” the statement said. The outcome is a blow to the mining companies that have lobbied publicly against the new mining code, which will substantially hike royalties on copper and cobalt mining. It is also a victory for Mr Kabila as it comes just as demand surges for cobalt, a key ingredient for electric car batteries.

Over half of the world’s cobalt comes from the DRC, mostly mined by Switzerland-based Glencore. Prices for the metal have more than doubled over the past year. The new mining code, which is a revision of a 2002 law, could see royalties rise as high as 10 per cent for minerals deemed “strategic” by the government.

It also applies immediately as it scraps a provision in the previous code that said miners would have 10 years following any change in the law to meet the new conditions. The meeting in Kinshasa was attended by Ivan Glasenberg, the chief executive of Glencore, Mark Bristow, the chief executive of Randgold, Robert Friedland, the chairman of Ivanhoe Mines, and representatives from China’s MMG, Zijin Mining and China Moly.

Kabila defies calls for election clarity as Congo conflict escalates. President under mounting pressure to deliver credible poll and leave office. President Joseph Kabila has refused to say whether he will retire or try to run again. Few of the people waving flags at a pro-government rally in central Kinshasa last week could explain why they supported President Joseph Kabila.

“Er, he’s good for the country. How can I describe it?” Franck Matuaka, a 24-year-old information sciences student, said of the man who has ruled the Democratic Republic of Congo since Laurent Kabila, his father and predecessor as president, was assassinated in 2001 by a bodyguard.

But when pressed about the man who is holding the resource-rich but impoverished country to ransom by refusing to leave office despite his mandate ending in December 2016, Mr Matuaka had no answer.

Mr Kabila failed to organise elections in 2016 but through control of the courts and the security forces he has managed to stay in power. Nationwide protests have been brutally suppressed, leaving scores dead.

Presidential and parliamentary elections are scheduled for December and preparations are on track, according to the electoral commission’s timetable. But the 46-year-old president, who “prefers acting to speaking” according to his spokesman Lambert Mende, has refused to announce whether he will retire, as the constitution stipulates, or try to run again.

The DR Congo is vast. It is the size of western Europe and boasts rich copper reserves and half the world’s cobalt, a crucial component in electric cars. But it also hosts one of Africa’s worst humanitarian crises, which diplomats say the political limbo is exacerbating

While Mr Mende insists the elections will take place on time, many Congolese are suspicious of Mr Kabila’s silence.

A camp for internally displaced Congolese in Bunia. Some 4.5m people have fled their homes. Politicians, analysts, activists and religious leaders fear Mr Kabila is plotting to prolong his time in office. He could achieve this either by engineering further delays to the polls or, as rulers in neighbouring states such as Congo-Brazzaville and Rwanda have done, alter the constitution to allow additional terms. An alternative theory is that Mr Kabila will install a puppet and rule from the senator-for-life post that he will assume.

“It’s crucial that we have a legitimate government through fresh elections,” said Adolphe Muzito, who was Mr Kabila’s prime minister from 2008-2012. “However, I don’t think there will be an election this year.”

One person who knows the president well says the video games and luxury cars enthusiast does not want to leave office because he is “afraid of tomorrow, partly because of what happened to his father”.

“The people who are closest to him are his brother and sister and he doesn’t trust anyone outside his family,” the person said. “He says little and the people who can read his silence and interpret what he doesn’t say have the most influence.”

Nickson Kambale, the director of the Centre for Governance, an independent research organisation in Kinshasa, says: “If he [Mr Kabila] says tomorrow ‘I won’t be a candidate’ the national tension will decrease massively. But it would trigger conflict within the family and the ruling elite because they will all start fighting for supremacy.”

However, pressure is mounting on Mr Kabila, both from abroad and at home, to deliver a credible election and leave office. Last week Botswana issued a surprisingly blunt warning that the failure to hold elections would aggravate Congo’s security crisis.

It was referring to the escalating conflict in Congo’s eastern regions where UN sources say 127 armed groups are active, with 32 having emerged in the last year. Some 4.5m people have fled their homes, 1.9m of whom left last year, according to the UN. The UN has 16,000 soldiers in DRC, its largest peacekeeping operation in the world.

Mr Kabila has also lost important regional allies in South Africa’s Jacob Zuma and Zimbabwe’s Robert Mugabe. Emmerson Mnangagwa, Mr Mugabe’s replacement, delivered a forceful message on the need to hold elections during a visit to Kinshasa last week, according to diplomats in the city. And Moussa Faki, the chairperson of the African Union Commission, has visited Kinshasa recently to maintain pressure.

Hans Hoebeke, a DRC analyst at the International Crisis Group, a Brussels-based think-tank, says the regional pressure is driven more by a desire for stability and to avoid a repeat of the Congo wars of the 1990s and 2000s rather than a championing of democracy.

“They want the building to remain, they just want the concierge to go,” Mr Hoebeke said. “Kabila’s failure is that unlike other leaders in the region he has not been able to ensure an internal transition or change the constitution.”

Mr Kabila is helped by a leadership vacuum in Congolese opposition politics. No one has filled the mantle of Etienne Tshisekedi, the longtime opposition leader who died last year. And Moise Katumbi, the former governor of the resource-rich Katanga region who is way ahead in the opinion polls, is in exile having been convicted of dubious property offences.

But this void is being filled by the influential Roman Catholic Church, which led opposition against dictator Mobutu Sese Seko in the 1990s and the Belgian colonisers in the 1950s. On February 25, for the third time in as many months, priests led after-mass protests at 150 churches to maintain the electoral pressure on the president. All but a handful of protests were crushed by the police, although with fewer fatalities than in December and January.

Father Jean-Claude Tabe, the priest at St Benoit’s Church in Kinshasa, where one demonstrator was shot dead in the protests, said the police tactics spoke volumes about Mr Kabila’s intentions. “He just wants to retain power and he’ll do whatever it takes to do so.”

The Catholic church has led dozens of protests against President

Democratic Republic of Congo President Joseph Kabila will soon sign into law a new mining code that is vigorously opposed by industry, according to the government and mining companies.

The announcement followed a nearly six-hour meeting on Wednesday between Kabila and mining executives in Kinshasa about the new code, which will raise taxes and remove a stability clause in the current law protecting miners from changes to the fiscal and customs regime for 10 years.

“The president of the republic assured the miners … that their concerns will be taken into account through a constructive dialogue with the government after the promulgation of the new mining law,” the statement said.

Participants in Wednesday’s meeting included Glencore CEO Ivan Glasenberg, Randgold CEO Mark Bristow and China Molybdenum executive chairman Steele Li.

Glencore, Randgold, Ivanhoe and China Molybdenum all operate mines in Congo, Africa’s top copper producer, and have said the changes in the code adopted by parliament in January would scare off new investment and violate existing agreements.

Mines Minster Martin Kabwelulu told reporters after the meeting that the companies’ concerns would be treated on a “case-by-case basis”.

“After the promulgation of the code, we are going to wait for the mining companies … to send us their concerns,” Kabwelulu said. “We are going to re-examine those concerns, first with (government) experts … and with the mining companies’ experts.”

Participants in Wednesday’s meeting included Glencore CEO Ivan Glasenberg, Randgold CEO Mark Bristow and China Molybdenum executive chairman Steele Li.

Randgold, which operates the giant Kibali gold mine in northeastern Congo, said last month that it would challenge the new code through international arbitration if it was not referred back to the mines ministry for further consultation with industry.

The government has disputed the companies’ claims that the new code will make them unprofitable and said the revision is needed to boost meager public revenues in a country with an annual budget of only about $5 billion.

Under one provision in the proposed code, royalties on cobalt, a vital component in electric car batteries, could increase fivefold to 10 percent. The law will also introduce a windfall profits tax.

Congo is the world’s biggest source of cobalt. Its output jumped 15.5 percent last year to 73,940 tonnes.

LME rethinks cobalt contract for electric vehicle sector

The exchange is instead looking at offering a cash-settled cobalt metal contract, which will trade alongside its physically deliverable metal contract launched in 2010.

Interest in battery metals such as cobalt, nickel and lithium has soared over the past year on the automotive industry’s ambitious plans to produce electric cars and cut noxious fumes from vehicles powered by fossil fuels.

However, prices of cobalt sulphate, which alongside nickel sulphate and lithium are used to make the rechargeable batteries used to power electric vehicles, are typically based on the metal plus or minus a dollar amount.

“The amount depends on whether the sulphate market is in surplus or deficit; there is no fixed formula,” one cobalt industry source said.

“The LME’s existing cobalt contract isn’t very liquid. A cash-settled contract could have more success, but there’s no reason why we can’t two have contracts.”

The exchange’s new cobalt contract was likely to be for cobalt sulphate.

“We are investigating the possibility of a cash-settled cobalt contract to expand our offering in battery metals,” an LME spokesperson said in response to a request for comment.

“If we were to launch a new cash-settled cobalt contract it would not be until the end of 2018 or early 2019.”

The LME recently asked companies that assess traded cobalt metal prices — Metal Bulletin, Argus Media and CRU Group — to submit proposals to supply prices that can be used as a reference for a cash-settled contract, sources said.

Chemical shift

“Metal is a smaller part of the cobalt market than chemicals, but this is how the industry has developed over the years,” one cobalt producer said.

Consultants CRU Group estimate that cobalt metal accounted for 36.8 percent of nearly 104,000 tonnes of consumption last year, with the remainder going to chemicals for batteries used in mobile devices and electric vehicles.

CRU expects the metal component to fall to 32 percent, or about 46,000 tonnes, in 2021 in a market it estimates will total more than 144,000 tonnes.

Growing dominance of chemicals is mainly due to electric vehicles.

Volkswagen, for example, last November approved a five-year spending plan to further the German group’s goal of transforming itself into a leading force in electric cars.

Volkswagen is planning spend more than 34 billion euros ($41.80 billion) on electric cars, autonomous driving and new mobility services by the end of 2022.

Such ambitious moves by the car sector are why the LME has been consulting with companies in the supply chain — metal producers as well as chemicals, battery and car companies — about what the industry needs and what is feasible.

One source said the LME was still looking at lithium, in which the choice is between carbonate and hydroxide, but that the idea of a nickel sulphate contract had been shelved because, as with cobalt sulphate, pricing is based on the metal rather than the compound. ($1 = 0.8133 euros).


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Is Climate Change real Science? Show me the Facts. Industry and Real Science say No. It is an Academic and Governmental Hoax run by bureaucrats looking for tax dollars to study what is no more than speculation

London, Amsterdam, New York, Houston, Monaco     8 March 2018

Investment consultants questioned over climate change backing.

Failure to support green initiatives puts influential advisers under spotlight

Investment consultants argue not signing up to three climate change initiatives does not signal a lack of commitment to the issue .

Polar Bears are not signing up to cataclysmic climate change. They are taking it in their stride. It means warmer seas, more fish, milder temperatures, less harsh climate to survive. They reckon it has something to do with the tilt in the Earth’s axis and direction facing the sun.

This has occurred over many millennium and nothing to be shocked about.  While the Arctic enjoys better weather, ask the folks in London (snow and freezing temperatures), Netherlands (more ice skating on outdoor rinks – just like the good old days), Monaco (snow in February?) and Gstaad (tons of beautiful powder snow for the holidays to fill hotels and restaurants)?

Ask them all if it didn’t snow this winter, bringing sub -20 temperatures in places. Fake Science – move over. We are not fooled. Ask the scientists how they got to work this morning – walking or snow shoes? Or cars you say? How did you fly to your conference to talk about global warming – on an aircraft using jet aviation fuel? Shame!

How did you heat your home, ride your bus, make use of your computers, speak on your cell phones, and a thousand other activities wherein without a fossil fuel or two, you wouldn’t survive past tomorrow. ‘Try another 50 years. Use your brains, not your emotive skills at scaring people with fake science. In the meantime, write all the airy-fairy academic treatises you want on Climate Change, then tell us how you wrote it. We all want to read that bit too.

Investment consultants advising on trillions of dollars of assets are failing to back high-profile initiatives calling for more to be done in combating climate change and for companies to disclose how they are dealing with global warming.

Eight out of the world’s top 10 investment consultants or asset managers offering investment advice, including Aon Hewitt and Russell Investments, have not backed a series of recent major climate change initiatives, according to campaign group Preventable Surprises and research group Sustainix, despite the growing importance of the subject to investors.

The poor scorecard shines a light on the role of investment consultancies who generally fly under the radar but exercise huge influence over how pension funds, insurers and charities allocate their funds.

“Investment consultants are so influential — able to substantially sway the opinions of managers and asset owners alike. They must get behind changes to market structures and industry norms,” said David Murray, chief executive of Preventable Surprises. “Without this we won’t address climate change in time and for advisers to long-term investors this should be a matter of big concern.”

The research examined the signatories of three initiatives — Climate Action 100+, which calls on companies to cut greenhouse gas emissions and improve disclosure and oversight of climate-related risks; the Ceres G20 letter, in which large investors urge politicians to uphold the 2015 Paris climate accord; and the task force on climate-related financial disclosures (TCFD), which is backed by the Financial Stability Board, a body that makes recommendations to the G20 group of nations.

Leading policymakers and asset managers have warned that understanding and addressing climate change risk is of critical importance to investors.

Of the 10 only Willis Towers Watson signed the TCFD. Preventable Surprises has sent an open letter to the remaining nine, eight of which are headquartered in the US, calling for them to publicly endorse the TCFD recommendations which ask that companies set out the risks and opportunities linked to climate change and how boards are dealing with these issues.

“Not to sign sends signals to fund managers and others, and we therefore hope you will take immediate corrective action,” the letters state.

However, investment consultants said they were taking climate change risk seriously when providing advice to clients and argued not signing up to those three initiatives in particular did not signal a lack of commitment to the issue.

“The three initiatives highlighted are all really worthy but there are other initiatives out there,” said Tim Manuel, head of responsible investment in the UK at Aon Hewitt, pointing to its endorsement of other programmes including the UN-backed principles for responsible investment.

Russell Investments, also a signatory of UNPRI and a member of the Institutional Investors Group on Climate Change, an organisation in Europe, said it was an “advocate for best practices in ESG investing”.

Mercer, which supported the Ceres G20 letter, said it “continue[s] to review other related initiatives that constructively advance ideas and solutions to this critical issue”.

Amin Rajan, chief executive of asset management consultancy Create Research, expressed surprise that more consultancies had not signed on to recent proposals but added there had been many similar-sounding proposals in recent years.

“There have been so many initiatives in this area. [They may argue] judge me by what I do rather than what I say,” he said.

The other six sent letters by Preventable Surprises are Cambridge Associates, Callan Associates, Nomura Securities, RVK, Wiltshire Associates and Pension Consulting Alliance.

Fossil fuel groups risk wasting $1.6tn on projects

Study highlights uneconomic hydrocarbon schemes if Paris agreement implemented

High-cost Canadian oil sands, such as these in Alberta, are among the most exposed assets, according to Carboon Tracker’s survey

They will become uneconomic if the world steps up efforts to tackle climate change, according to an analysis of projected capital expenditure in the energy sector.

The figure represents the difference between the estimated $4.8tn of investment needed to meet global fossil fuel demand between 2018 and 2025 under current climate policies and the $3.3tn that would be required if the Paris agreement on reducing carbon emissions was fully implemented.

High-cost Canadian oil sands, such as these in Alberta, are among the most exposed assets, according to Carboon Tracker’s survey

The study, by Carbon Tracker, a climate think-tank, illuminates one of the most difficult questions facing the energy industry: how much more capital should be committed to hydrocarbons in an era of increasing competition from renewable power.

Institutional investors are also beginning to focus on the issue at the urging of regulators, led by Mark Carney, Bank of England governor and chairman of the G20’s Financial Stability Board, who has warned of “potentially huge” losses from fossil fuels which could become “literally unburnable”.

Andrew Grant, author of the Carbon Tracker report, said current government policies fell “a long way short” of the commitment made at the Paris climate summit in 2015 to limit the average rise in global temperatures to well below 2 degrees Celsius above pre-industrial levels. This meant that fossil fuel investments made on an assumption of current policies continuing risked creating “stranded assets” if emissions reduction efforts were intensified to meet the Paris goal.

“Companies that misread the signals and overinvest in marginal oil, gas and coal projects based on a false sense of security could destroy shareholder value worth billions of dollars,” said Mr Grant. It’s only going to be the highest-margin barrels which will be competitive, and the lowest-margin barrels will drop out Andrew Brown, Shell’s director of exploration and production Carbon Tracker’s estimate for $4.8tn of investment under current policies would be consistent with a path towards 2.7 degrees Celsius of warming above pre-industrial levels, while the lower $3.3tn figure was consistent with a 1.75 degree rise.

The greatest risk is in the oil sector, where $1.3tn of investment would become uneconomic if governments introduced measures such as carbon taxes and more stringent emissions regulation to bring policy into line with Paris. High-cost Canadian oil sands and Arctic resources are among the most exposed assets, with $545bn at risk in the US and $110bn in Canada.

Low-cost oil in the Middle East was least exposed. Almost $230bn of gas projects and more than $60bn of coal investment were also threatened, according to Carbon Tracker. No new coal mines would be viable anywhere in the world except India if the Paris agreement was fulfilled.

“Energy companies must be transparent about their thinking surrounding low-carbon outcomes, and convince shareholders that they are taking these risks seriously,” said Mr Grant. ExxonMobil, which has been criticised by activists for not taking climate change seriously enough, bowed to pressure in December to start publishing reports on the possible impact of climate policies on its business.

Royal Dutch Shell set a new target last November to reduce the net carbon footprint of its energy products by about half by 2050. The Anglo-Dutch group has committed to spend up to $2bn a year on renewables and other cleaner sources of energy and other European oil and gas groups are making similar moves.

Andrew Brown, Shell’s director of exploration and production, told a conference in London last month that the industry must become more choosy about which oil to develop. “It’s only going to be the highest-margin barrels which will be competitive, and the lowest-margin barrels will drop out,” he said.

And now for some good news on Climate Change. We did it!

The Arctic is enveloped in warmth as Europe shivers

Scientists say temperature inversion may be down to man-made climate change

Snow guard: Trooper of the Household Cavalry in London

London March 1, 2018

The extreme weather that has brought snow and bitter cold to much of Europe in recent days is part of a remarkable temperature inversion that has also enveloped the Arctic with unprecedented warmth. This is the second time this winter that such unusual weather has hit the northern hemisphere.

In January, the eastern US and Canada suffered a record-breaking “polar vortex” that brought plunging temperatures and led Niagara Falls to freeze. Now, as Europe experiences its most intense period of cold for eight years, temperatures at the North Pole have risen above freezing point for several days — up to 30 degrees Celsius higher than normal for this time of year.

Both events may be a consequence of man-made climate change, scientists say, as rapid warming of the far north weakens the band of strong westerly winds that normally circulate around the Arctic. This makes it easier for very cold air to plunge thousands of miles south, while warm winds infiltrate polar regions.

Scientists working for Nasa, the US space agency, say that heat and moisture are moving into the Arctic on two fronts this year — not only through the North Atlantic between Greenland and Europe as in the three previous winters but also from the Pacific through the Bering Strait.

“We have seen winter warming events before but they are becoming more frequent and more intense,” said Alek Petty, a research associate at Nasa’s Goddard Space Flight Centre in Maryland. Levels of Arctic sea ice are already at or near record low levels. This winter’s exceptional polar warmth is opening up the ice cover north of Greenland, releasing heat from the water to the atmosphere.

“This is a region where we have the thickest multiyear sea ice and expect it not to be mobile, to be resilient,” Mr Petty said. “But now this ice is moving pretty quickly, pushed by strong southerly winds and probably affected by the warm temperatures, too.”

A map from the University of Maine shows the extraordinary temperature pattern over the northern hemisphere this week, with parts of Europe up to 20C colder than average and in parts of the Arctic up to 30C warmer © Climate Reanalyzer.org

An international study published in February in the Bulletin of the American Meteorological Society showed how Arctic warming has the paradoxical effect of producing more intense winter cold further south in Eurasia and North America.

“In winter, the freezing Arctic air is normally ‘locked’ by strong circumpolar winds several tens of kilometres high in the atmosphere, known as the stratospheric polar vortex, so that the cold air is confined near the pole,” said Marlene Kretschmer of Potsdam Institute for Climate Impact Research, lead author of the study.

When polar ice melts, more warmth escapes from the ocean into the air — which can affect the atmosphere up to 30km high, weakening the polar vortex. “This allows frigid air to break out of the Arctic and threaten Russia and Europe with cold extremes,” said Ms Kretschmer.

Here we go again. The Polar bear tests the strength of weakening Arctic ice and says: “Everyone in for a swim! Dr. Chicken P. Little at some Oceanographic Research Station on loan from the World Bank and the State of Oregon has just said the seas are getting warmer. More fish for dinner!”

The short-term outlook for north-west Europe, the region most affected by this week’s extreme cold, is that the so-called Beast from the East will soon return to its lair as spring sunshine warms the Eurasian land mass. But predicting the long-term meteorological course of Eurasian and North American winters over coming years and decades is fraught with uncertainty.

If the Arctic continues to heat up faster than latitudes closer to the equator, the north-south temperature differences that help to drive atmospheric circulation in the northern hemisphere will reduce. “If you have a weaker circulation, it may be easier to disturb,” said Laura Wilcox, a climate scientist at the University of Reading. That would allow more extreme weather events to take place as the world warms.

“Our projections show that cold winters in general will become much less common,” she said. But growing climate instability would permit short outbreaks of intense cold to take place like this week’s Beast from the East threatens UK gas supplies

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Old News of Natural Gas is back in Vogue Again with New Faces Making all the Fast Profits

London, Calgary, Dubai, Houston, and Gstaad

4th March, 2018

The risk-taking trading firms eye riches in the global gas markets by taking over from the gas producers. Traders such as Trafigura and Vitol are benefiting as the LNG market moves away from long-term contracts that once built the petroleum giants Exxon Mobil (US), Royal Dutch Shell (Dutch/British), Chevron (USA), Gazprom (Russia) and Ocelot International (Canada).

The world’s biggest independent commodity traders have carved out reputations and built their billion-dollar balance sheets on a willingness to take calculated risks in oil and metals markets that more staid and established rivals shunned. Some of it is dumb luck. Some of it is being in the right place at the right time. But most of it is about creating and taking advantage of market niches when the people who invented or once developed it are too inflexible about understanding how to profit from their own wise investments and future market advantages.

Shell LNG Plant at Kitimat BC Canada replacing Ocelot’s world class  Methanol Plant

Take for instance the Canadian arm of Royal Dutch Shell, Shell Canada in Calgary, that once controlled the world’s largest supply of natural gas , some of which was discovered in shallow wells across Western Canada. Vern Lyons, Shell’s Chief Geologist, discovered this lucarative shale gas in small pockets just beneath the Earth’s surface in the Jurassic fields of Saskatchewan (his home province) and in Alberta (his corporate headquarters).

By tapping into the shallow wells with directional drilling (a new technology developed which improved costs for cheaper gas discoveries and lowered the high costs of straight down drills than often found empty wells), all he needed was $10mm to get started. He would build some wellheads to tap, cap and flow the gas out of the ground, and then build a pipeline running thousands of kilometres across Western Canada. A newly-built,  isolated port city was also constructed in British Columbia called Kitimat, home of the Haida Indians (ancient First Nations aboriginal tribe). It would take another billion dollars or two to set up the entire project.

Royal Dutch Shell headquarters in London and Amsterdam refused to budge giving its Calgary subsidiary the budget to proceed. They didn’t think shale gas was economically extractible, nor did they want to sell more gas than oil (their main commodity which needed to be amortized after decades of investment), and they couldn’t see the markets staring them in the face and demanding a cleaner, cheaper fuel that was also a healthier fuel for those who breathed in its fumes.

Large cities in North America like Los Angeles (above) and in Asia were choking on oil-based fuels spewing carbon into the atmosphere and holding it close to the Earth under days of high atmospheric pressure. This was rapidly lowering life expectancy when inhaled and giving lung cancer a new source name: Pollution.

The diesel and gasoline exhaust emissions from city buses, trucks and private cars formed microscopic smog particles that lay in heavy, dark fogs over these giant, new, metropolitan cities across the state of California like Los Angeles (with +8 million people) and San Francisco (with +0.9 million and growing). The Japanese cities of Kyoto, a humid, tropical city, once the largest and Imperial capital of Japan (at +1.5 million) and Tokyo (+38 million) were even worse.

People in those cities of Tokyo (above) wore white handkerchiefs like gas masks or breathed in the pitch black air making tobacco a distant lung cancer threat compared to hydrocabon poison. The world’s academia and media seethed in rage against Shell’s gasoline made from pollutant oil by-products creating carbon-laced petroleum fuels.

Environmental lobbies rose up to kill the heavier carbon fuels singing in a chorus of anti-Big Oil demonstrations, demonizing these energy producers all over the world. One such movement was started by the CEO of Canada’s biggest future natural gas distributor PETRO CANADA (Maurice Strong, the first UN Secretary General of the UN Environment Program in Nairobi).

It’s upstream natural gas supplier was Ocelot International, whose CEO once wrote the UN Convention for the Law of the Sea. His global production arm created, financed, designed, built and operated offshore gas wells, underwater and underground pipelines from Songo Songo Island to Dar es Salaam producing gas-to-electricty operations in Tanzania. This lit up the lives of its 30 million inhabitants when hydro power went dry and the forest wood supplies disappeared. Later, natural gas reserves in Gabon were developed along with 1 TCF (trillion cubic feet) of gas reserves in neighbouring Cameroon would prove beneficial to both of those countries. Electrical power to 90% of these populations was either non-existant or a flickering effort at unsustainable energy.

Methanol produced from low-cost natural gas is a liquid petroleum first used in the internal combustion engine when cars were invented and developed 125 years ago. It was cheap and burned cleanly with minimal pollutants – just water drops and a trickle of carbon gas which disipated into thin air. There was more gas in the world than oil at the time the first cars were being built, so natural gas was pumped out of the wells in Canada and the US.

They used fractionation (or fracking/fracing) to pump natural gas up and fill the empty space left behind with mud, sand, water or a combination of any solid or liquid to stop cave-in’s or artificial earthquakes. Cooling it down into a concentrated liquid form is called LNG or liquified natural gas which is easier to transport, store and use in petrol engines.

Only Formula 1 cars, municipal buses, taxis, trucks and government fleets of vehicles  use LNG or methanol today. It burns cheaply, cleanly, with miniscule emissions of carbon, CO2, CO or NOX, the worst of pollutants found 100 times more in dirty oil. Cities like LA and SF, Kyoto and Tokyo got their supply from Kitimat’s plant built and owned by Ocelot Chemicals, then it traded to Germany’s Metallgesselshaft and finally it was owned by Methanex and listed on the Toronto and Vancouver Stock Exchanges. It eventually provided these cities with cures for their smog-filled air. It is a pity that thousands of other cities didn’t learn these lessons. These cities transformed the air quality swiftly for their 51 million citizens as the photos below show clealy.

After decades of providing solutions for cleaner air by these petroleum and natural gas giants, now trading houses, including Trafigura (Dutch), Vitol (Dutch), Glencore (Swiss) and Gunvor (Swiss), are focusing on a new arena they see as rich with potential profit: cooling the gas down into liquefied natural gas and shipping it around the world in giant tanker ships. This was once a once-sleepy corner of the energy industry that is rapidly transforming into the next major commodity for swashbuckling trading houses.

For decades this super-cooled fuel market was dominated by state-owned producers, international energy companies such as Royal Dutch Shell (British/Dutch gas producers), BP (British gas producers) and rigid long-term contracts that restricted freewheeling trading activity. However, the growing LNG supply now comes from:

  • Qatar, 77.2, 29.9%
  • Australia, 44.3, 17.2%
  • Malaysia, 25, 9.7%
  • Nigeria, 18.6, 7.2%
  • Indonesia, 16.6, 6.4%
  • Algeria, 11.5, 4.5%
  • Russia, 10.8, 4.2%
  • Trinidad, 10.6, 4.1%

They are starting to make the market truly global, handing more power to buyers of the fuel and creating the opportunity for independent trading firms to provide short-term deals. Other producers include:

  • Oman, 8.1, 3.2%
  • PNG, 7.4, 2.9%
  • Brunei, 6.3, 2.4%
  • UAE, 5.6, 2.2%
  • Norway, 4.3, 1.7%
  • Peru, 4, 1.6%
  • Eq. Guinea, 3.4, 1.3%
  • US, 2.9, 1.1%
  • Angola, 0.8, 0.3%
  • Egypt, 0.5, 0.2%

“The old model of LNG trading has broken down,” says David Fyfe, chief economist at Gunvor. “The market is no longer only confined to long-term bilateral trades between producers and consumers.” Traders now dominate the market as the producers go in search of more supplies. The world petroleum market has shifted in the past 30 years thanks to the efforts of those early Canadian suppliers like Ocelot to transform the dirty air produced by oil-based fuels into the clean air from natural gas.

The four commodities houses traded about 27m tonnes in 2017, representing 10 per cent of the market and a jump of two-thirds from 2016, according to estimates from energy consultants Wood Mackenzie.

The explosive growth in their activity comes as they extend credit lines to new buyers in developing countries and help build infrastructure such as LNG import terminals and storage facilities.

“With the commodity traders this is bread and butter,” says Frank Harris, head of global LNG consulting at Wood Mackenzie. “This is what they do in oil.”

Traders have long had a prominent role in the fuel procurement for developing countries often regarded as too risky for large established sellers or banks. Now LNG buyers such as Egypt, Bangladesh, Argentina and Pakistan are turning to commodity traders for help.

Trafigura has a minority stake in Pakistan’s LNG floating storage and regasification import terminal which was launched in November last year, and is helping develop the country’s second import terminal.

Such developments, analysts say, means commodity traders are expected to capture more of the market by competing with established players such as Qatar’s state energy company and global oil companies like Shell that have trading arms of their own.

Vitol has historically been regarded as the key trader committed to LNG, having set up a unit more than a decade ago. Others followed, with Trafigura rapidly building its operations after setting up its LNG unit in 2013.

The changing nature of the market and growing presence of the traders has forced companies such as Shell and BP, that have traditionally provided importers — typically a utility company selling gas and electricity — with fixed volumes under multi-decade contracts, to become more flexible.

“The spot market is a great way for us to optimise our portfolio,” says Maarten Wetselaar, Integrated Gas & New Energies Director at Shell, who adds that the company is increasingly engaging with buyers on shorter time horizons.

Growing LNG supply from the US, Australia and African countries such as Nigeria and Angola has increased the negotiating power of the buyers in Asia and elsewhere. While long-term deals — typically for 25 years and with constraints on where the cargo ends up — still account for about two-thirds of the LNG that is traded, many of the traditional buyers signing new agreements are turning to shorter contracts without destination restrictions.

Indeed, IHS Markit says spot and short-term deals of under three years accounted for about a quarter of all LNG cargoes traded last year, up from 22 per cent in 2016.

Those who are able to buy and sell in a timely manner will be the beneficiaries of such a shift, says John England, US energy and resources leader at Deloitte. “Trading capability is going to become more important in this new world,” he says.

For example, last year Vitol loaded a cargo in France and the ship was on its way to Egypt when prices in the French market jumped.

“We turned the ship around, we discharged the cargo we had loaded in France and we brought a Middle Eastern cargo to Egypt,” says Pablo Galante Escobar, a former oil trader who runs the LNG unit at the world’s largest independent energy trader Vitol.

“Those are trades that perhaps oil companies in the past would not have done because they [only] wanted to go from point A to point B,” he told the International Petroleum Week conference last week. “Our role as traders is to help make the market more efficient.”

The rise in overall flexible supplies means more trading opportunities, as volumes which are not contracted to an end user need a home. In 2017, the number of LNG spot cargoes sold reached 1,100 for the first time, equivalent to three cargoes delivered every day, according to Shell.

But Nigel Kuzemko, chief executive of Canadian developer Steelhead LNG, says traders are also getting involved in longer-term deals and helping to overcome the mismatch between sellers, which need lasting agreements so bankers feel confident to extend financing, and buyers which now want shorter, flexible deals.

“The question has been who can step in the middle and bridge the gap,” says Mr Kuzemko. “Traders could come in and offer some kind of product to us. They would buy long-term and sell short-term,” he says.

Trafigura’s 15-year deal with US LNG group Cheniere Energy to buy 1m tonnes a year of the super-cooled fuel, announced earlier this year, is such an agreement and one that analysts say signals the commitment of traders to the LNG industry.

Gunvor’s Mr Fyfe says while traders have expanded their role in a well supplied and liquid market, even when production is expected to tighten from 2023 he still sees their presence growing.

“You can’t put the genie back in the bottle,” he says. “Buyers like the flexibility that traders provide.”

The UK:

The UK’s cold snap this week may have blown in from Siberia, but now Russia’s far north is set to provide some relief to Britain: a cargo of liquefied natural gas to replenish the country’s stretched energy supplies.

However, the LNG cargo coming from Russia’s Yamal energy project in Siberia will not arrive in the UK without controversy, partly because it will highlight the fragile state of British energy security amid declining gas production. UK gas prices have soared this week as the extreme weather dubbed the “Beast from the East” generated huge demand for energy. Wholesale “same-day” prices more than quadrupled at one point to reach their highest level in at least 12 years.

National Grid, which operates the UK’s gas transmission system, said on Thursday that it was facing a supply deficit as demand soared — the first such warning for eight years. The shortage warning was withdrawn on Friday after some companies were paid to reduce their consumption of gas, but National Grid said demand remained high and it was “continuing to monitor developments closely”.

The Yamal energy project was the target of US sanctions during development owing to Russia’s involvement in the Ukraine crisis, and its start-up late last year was hailed as a victory for president Vladimir Putin, who personally oversaw the commencement of operations.

While Russian LNG shipments are not subject to sanctions, the British government has taken a tough line on Moscow in recent months, with Theresa May accusing the Kremlin of attempting to “weaponise information” to undermine the west, among other things.

The LNG cargo is being brought to the UK by Royal Dutch Shell, according to two people familiar with the shipment. Shell is expected to collect the cargo this weekend from a Russian LNG icebreaker with its own chartered vessel, executing a ship-to-ship transfer of the super-cooled fuel off the coast of western France.

The market is facing a strong test of how well it can operate without being able to rely on Rough for additional storage volumes. Shell is then due to deliver the cargo on March 6 to an LNG terminal at Milford Haven, which will regasify the shipment and pump it into the UK network.

Shell and Novatek, the Yamal operator, both declined to comment. This week’s cold snap has highlighted Britain’s growing dependence on imported gas as domestic North Sea reserves decline. Gas is critical to UK energy security as the source of 40 per cent of electricity generation and heating in most homes and businesses.

Critics accuse the government of increasing market vulnerability by authorising the closure of the UK’s largest gas storage facility in the North Sea. The site, known as Rough, was able to hold a tenth of daily peak gas demand until it was closed last year by Centrica, owner of British Gas. “The market is facing a strong test of how well it can operate without being able to rely on Rough for additional storage volumes,” said Oliver Burdett, commercial director of EnAppSys, an energy market analysis company.

The government has argued that plentiful piped gas from Norway and continental Europe — coupled with LNG shipped from further afield — are adequate to keep supplies flowing in any conditions. Recommended Five tough choices for UK to keep the lights on UK energy ‘challengers’ face tough times Utilities advised to look offshore in face of Labour threat The Department for Business, Energy and Industrial Strategy said on Friday that less than 1 per cent of UK supplies come from Russia, adding: “Great Britain benefits from highly diverse and flexible sources of gas supply.” But critics note that this import dependency exposes consumers to price spikes when supplies are tight because the UK is forced to compete with the rest of Europe for piped gas and with the rest of the world — especially large Asian economies — for LNG.

Yamal’s first ever LNG shipment was meant to come to the UK in late December after a shutdown of the Forties pipeline system delivering oil and gas from the North Sea caused prices to jump. But by the time it was delivered to the Isle of Grain in Kent UK gas prices had eased, leading traders to reload it on to another vessel that eventually sailed to Boston in the US.

Meanwhile, as the UK remained in the grip of low temperatures on Friday, the country’s energy regulator, Ofgem, was among organisations facing disruption. The heating at its London headquarters failed on Friday morning because of frozen pipes, causing some chilly employees to go home. A spokesman said the problem was later fixed.


It looks like most of Canada’s existing abundent natural gas reserves will sit in the ground for yet another decade as environmental groups, aboriginal tribes and small city mayors ignorant of the cleaner burning fuels will postpone plans to build pipelines and natural gas ports to supply the world with these new fuels.

Shell had plans to turn Kitimat (see above) into a global supply port for LNG, but small minded-city mayors along the route from Fort. St. John to Vancouver are blocking their Prime Minister’s (Justin Trudeau) environmental approval to build the pipeline and port.

The fraudulent (read – fake news) charge is that the new port, pipeline or loading facilities might leak this clean fuel into the waters offshore Canada and poison the people, tuna and salmon of the British Columbia coastline. Hysterical academics and those without scientific facts still smother the truth with visions of dirty oil producing smog-infested cancers into their lungs. This is clean-burning natural gas. Times have changed.

That is akin to suggesting that knives can either be used slice bread or as weapons of mass murder. Or that nuclear power plants are the equivalent of nuclear bombs. Left in the hands of the unknowing politicians, unthinking voters, hysteria-inducing and speculating media, or unproving academic scientists, that is precisely what would happen to them.

But for most peaceful citizens seeking safe, clean, low-cost, efficient and environmentally-friendly energy to fuel their daily land commute, sea travel or air transport, warm or cool their houses and offices, liquified natural gas has been around for a long time curing some of the planet’s neediest airspace over the many crowded cities of the past, present and future.

LNG Supply

Shell warns of future LNG supply crunch Renewed investment needed to meet surging demand from China and developing countries. Tens of billions of dollars of new investment is needed in liquefied natural gas projects to avoid a supply crunch in the 2020s, Royal Dutch Shell has warned. The global market is still absorbing supplies from a wave of LNG megaprojects built in Australia over recent years, as well as the emergence of the US as a net gas exporter for the first time in more than half a century.

But Shell, one of the world’s largest suppliers of LNG, said renewed investment was needed to meet surging demand from China and other developing countries. Steve Hill, head of Shell’s gas trading and marketing business, said the LNG market was absorbing “quite comfortably” an unprecedented increase in supplies from new projects such Chevron’s Gorgon and Wheatstone developments in Australia.

Shell, Chevron and other big LNG producers such as Total and ExxonMobil have put the brake on further investment because of concern that the Australian projects, together with rising US gas exports, would lead to a supply glut. LNG prices have fallen sharply since 2014 in parallel with oil but both markets have staged a partial recovery over the past year and Mr Hill indicated that Shell was beginning to refocus on the case for renewed expansion.

While 50m tonnes per annum of LNG supply has come on stream in the past two years stemming from investment decisions made years earlier, only 7m tonnes of additional capacity has been approved for development during the same period, Mr Hill noted. “We’ve had a hiatus in the past two years,” he said. “Something needs to happen to avoid a supply crunch in the next decade.”

Maarten Wetselaar, director of Shell’s integrated gas business, said an extra 200m tonnes per annum of LNG capacity was needed by 2030 — equivalent to about 20 large projects, each of which has typically cost about $10bn to develop in the past. These liquefaction facilities condense gas into a supercooled liquid form which can be transported long distances by ship.

Shell has proposed LNG plants awaiting investment decisions in the US and Canada as well as projects at an earlier stage of planning in Indonesia, Tanzania and Australia. Mr Wetselaar acknowledged that Shell had capacity to embark on new projects as it neared the end of its existing development programme with the planned start of production from the Prelude LNG facility in Australia later this year.

However, he said Shell was still working to reduce the cost of future projects before approving them. Recommended LNG: a US success story that tests the laws of economics Inside Business: Russia’s LNG ambitions no longer a pipe dream Lex on LNG: vessels valued Global gas demand will grow at an average 2 per cent per year between 2017 and 2035, double the rate of overall energy demand, according to Shell’s latest outlook for the LNG market issued on Monday.

In Asia, gas demand will grow at an average 3 per cent over the period. Gas demand from China increased 15 per cent last year alone and LNG imports rose 50 per cent, reflecting the push by Beijing to tackle air pollution by replacing coal with cleaner sources of energy. Shell and other big LNG investors are counting on demand for gas outlasting other fossil fuels because it emits less carbon dioxide and pollutants than coal or oil when used to generate electricity or to fuel trucks and ships.

Mr Wetselaar acknowledged that the LNG market was becoming more competitive with proliferating sources of supply, including low-cost US shale gas, and technological disruption from renewable power. This was causing a shift to shorter-term supply contracts and spot pricing which gave LNG developers less certainty than they have had when making investment decisions in the past.

But Mr Wetselaar said the demand outlook was strong enough to support new projects. “We are confident that the industry will solve this and that the money will be there. People need to get use to the risk-reward profile.”

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Trade Wars: Not Good

March 2, 2018
Before trading began today, we were treated to what will probably be one of the more memorable presidential tweets:

“The USA is losing  billions of dollars every day in almost every country we trade with.  The only way for us to win is to fght trade wars and win”. D. Trump


After a day of messy trading, the S&P 500 ended up slightly for the day, so the stock market did not hand Donald Trump a fresh rebuke for his decision to levy tariffs on aluminium and steel imports, but the damage to sentiment is already clear.

For those keeping score, the S&P is now very slightly positive for the year so far, and back within its trading channel of the past two years. At least part of the sharpness of the selling this week came because the rebound after the correction at the beginning of last month had come with indecent haste. Technical analysts would probably predict that we need to test the levels of the 200-day moving average, and the bottom of the trading channel (which remain very close to each other) once more before the incident can be declared closed.

As for those tariffs, opinion is running heavily against the president, at least among those who broadcast their views on markets. The only strongly dissenting voice I have heard on this issue so far belongs to Stephen Jen, the highly respected foreign exchange analyst who now runs Eurizon Capital in London. Here are some extracts from his latest notes on the situation:

We do not share this prevailing opinion, and have these thoughts. 

1) The US is the least protectionist large economy in the world, while China is the most protectionist. In our note on this subject a couple of weeks ago, we pointed out that the US, based on data from the WTO, is by far the least protectionist nation in the world (with the exception of a tariff-free city state like Hong Kong) — far more open than Europe, Japan, and especially China. And it seems a bit hypocritical to us that more protectionist nations are complaining about the actions of the least protectionist nation.

2) Excess capacity in China.  China has half of the world’s steel production capacity, much of which is excessive and unnecessary, even Beijing would admit. The 2008-09 RMB4 trillion stimulus in China further boosted China’s industrial capacity, including in steel and other sunset industries. This has led to a situation where Chinese steel production had to be exported to the rest of the world at very low prices. Some in the US, not surprisingly, consider this ‘dumping’. Further, both the US and the EU share the verdict that China is still not a ‘market-based’ economy, because of the large and persistent explicit and implicit government subsidies, and other forms of support from the public sector, that make Chinese products unfairly competitive. 

3) Why is Europe not held to the same standard as the US? Europe is complaining about the US’s latest policy. Investors should know that Europe has already imposed two dozen anti-dumping measures against Chinese steel exports. What then is the substantive difference between the anti-dumping measures imposed by the EU and what the Trump Administration is doing? Is Europe less protectionist than the US? If Europe were so open, what is all the fuss about Brexit and the inability of the UK to access the European market?

That gives us his defence of the morality and practicality of the president’s actions. In a later passage, he also gives his reasons why he suspects that trade will end up being a non-issue:

Our expectation is that this struggle on trade will ultimately end up in a less protectionist China and the EU, rather than a more protectionist US.  It may look and feel messy for a while.  But ultimately the global trade arrangements will be more fair than it is now, and at least as free as it is now. 

Already, China has been a good global citizen.  In the steel industry, China has been curtailing its exports, which now account for 9.1% of total steel production in 2017, down from 13.8% in 2016.  Since 2011, China has cut its exports to the US by 31%.  It will also soon announce several reform measures that will address some of the non-tariff issues mentioned above. 

Bottom line.  In our opinion, the debate on trade policies is far from a lop-sided discussion between an irrationally myopic Trump Administration on the one hand, and a liberal and learned rest of the world shocked by such foolish policies, on the other hand. There is a great deal of hypocrisy, gaming, and politicking.  But in the end, we are optimist on how the world will look: free and more fair trade.  Between here and there, however, it may look and feel messy. 

Nobody can disagree that this move has muddied the waters, and that it will probably contribute to volatility for a while. But if there is no direct retaliation, there is a decent chance that the incident will peter out with nobody worse off.

While there is a chance of this, however, most think the chance of such an outcome is rather low. The greatest cause for hope is that the countries that stand to be most negatively affected, because they export the most steel to the US, are the EU and Canada, strong allies who would prefer not to let the incident intensify:

Citi Private Bank go into interesting detail on the risks of retaliation, particularly from China for whom many political issues complicate their likely response. That is what matters most now: who does what next?

Canada and the European Union have already said they would take still-to-be-disclosed countervailing steps in response to the US steel and aluminum tariffs. This is in addition to taking complaints to the World Trade Organization. Yet as we understand it, the reason for the US actions on steel and aluminum stem from China’s high level of industry capacity and influence on global metals markets.

Importantly, the move comes after both houses of the US Congress passed steps that could be interpreted by China as threatening to the “one China policy” on which trade and diplomatic relations between the two countries is based. Earlier this week, the US Senate passed a bill to encourage visits between US and Taiwan “at all levels”, especially “cabinet-level national security officials”. This follows earlier passage in the US House, and awaits President Trump’s signature. Notably, in the past year, the administration has moved to clarify that its view to the “one China policy” had not changed.

US protectionist trade policies have so far elicited little response from China and we see significant scope for cooperation. However, in our view, a perceived challenge to sovereignty could substantially reduce China’s willingness to cooperate on all matters. In the view of the US, the Congressional bill could merely be seen as a signal of friendship and support to the Taiwanese. It is unclear if this is seen the same way by Chinese officials.

Turning to China’s economy, the silver lining is that its macro environment is less vulnerable than 2014-15. China’s FX reserves have risen for a year by $160bn. Its economy is moderating from the 4Q pace, but remains in solid expansion. Past domestic policy tightening and the US dollar’s weakness have created some room for Chinese policy to accommodate potential setbacks in trade. Tariffs on steel could even help to push progress in the reduction of overcapacity and pollution.
There remain many uncertainties as to how either side takes the issues from now. The coming weeks could be crucial to gauge how far the US is going with protectionism and how much reaction comes from China and other trading partners. Still, diplomatic and trade confrontation with the US would be a net negative on China’s growth and on its currency, as well as market sentiment. If left to fester, this could present a key challenge to our generally positive world view. 

That sounds a little unduly positive to me. Ben Inker of GMO published a brilliant essay taking apart the ideas and motivations behind the tariffs. Making clear that “trade wars are bad” and that nobody wins from them, he shows that steel and aluminium production figures for the US suggest that the country has very little to win from its tariffs:

With production close to or above recent averages, there is no evidence that the US has any new sources of production that can be swiftly switched back on in response to fresh demand driven by the tariffs. However, Ben is less concerned than Citi, largely because GMO was far more negative towards the US and its assets in the first place:

Despite everything I have written above, we have not made, nor are we planning, any material changes to our asset allocation portfolios. The proposed tariffs and the likely limited responses by our trade partners would probably constitute a net negative for U.S. stocks relative to the rest of the world, but we already are positioned for that given valuations. The tariffs do increase expected inflation at the margin, but we have already tried to position ourselves recognizing inflation as a threat. In benchmark-aware strategies, we are generally at (or are close to) our maximum bet against the U.S. equity market. In our benchmark-free strategies, we recently restructured our last material net U.S. equity exposure — our Quality strategy — as a long/short position against the S&P 500. In our multi-asset strategies generally, we have lower than normal weights in risky assets, less than normal duration, and own significant amounts of TIPS, which provide at least some inflation protection. While we by no means welcome these tariffs, we are comfortable with our current positioning given them. Contrary to what Donald Trump appears to think, I believe that the U.S. imposing unilateral tariffs is more negative for U.S. companies than it is for the rest of the world. A full-blown global trade war would be a different matter, and we would expect emerging companies as the suppliers to the developed world to be particularly vulnerable. We have known this to be a risk for our emerging positions, and we do not currently see any reason to change it. We hope, and at this point expect, that cooler heads will prevail and a global trade war will be averted. But let’s be clear — no one would win a trade war, and investors should realize that they would lose along with everyone else.

That about covers it. For the time being, the announced tariffs somewhat complicate the economic outlook, and slightly worsen the likely performance of the US compared to the rest of the world. We cannot go much further than that until we know how others respond.

Pricing power

One intriguing price movement today came from McDonald’s. It has been heavily advertising its discounted meals in a fight for market share, but is finding it tough. Today, an analyst for RBC cut sales forecasts for the restaurant chain, and it was greeted with its worst day’s performance since the thick of the crisis in 2008.

McDonald’s performance over the past decade has been impressive, but the market is now scared that it lacks pricing power. And if hamburgers and fast food are mired in deflation, why exactly are we worried about inflation?

A further illustration is the performance of the consumer branded goods colossus, Procter & Gamble. Their performance over the past decade has been terrible, and again it is plain to see that the market does not have faith in its pricing power:

Scheherazade Daneshkhu had a fascinating Big Read this week on the trouble for fast moving consumer goods (FMCG), which is well worth reading. This is bad news for shareholders in large incumbent FMCG companies like P&G, or also for people with stock in restaurant chains.

For those worried by inflation, however, it seems rather healthy. These market concerns suggest that they are very worried about pricing power, which is alarming for companies and their profits, but rather positive for consumers.

Ice hockey

There is an interesting new research paper from financial heavyweights Cliff Asness and Aaron Brown on the subject of ice hockey. (Or just hockey for North Americans). You can read it here.

They look at the odds and the strategy behind taking off a goalie at the end of a game. Hockey teams are allowed six players on the ice at any one time, one of whom can be the goalie and is allowed to handle the puck. He is generally very heavily armoured. When a team is a goal down, it often pulls its goalie with a minute to go, so that it can outnumber its opponents six to five in the open ice. This increases its chances of scoring but also increases the chances of conceding a goal into an empty net. At that point, it is a risk worth taking. And according to Cliff and Aaron, after crunching the probabilities, it is in fact a risk worth taking far earlier, and even when two goals down.

Why do two hedge fund managers bother with this? They may in part be motivated by the fact that hockey is an extremely exciting sport to watch. But they do come up with a financial lesson as well:

A chief-investment officer (CIO) who runs a tight ship, putting his money with low-fee index funds and moderate fee active managers who beat their benchmarks, is perceived as an excellent manager (more so these days than in earlier times when perhaps the opposite, a CIO investing only in high fee ex post successful stock pickers, was conventional wisdom). Although he is indeed likely to be excellent as those are good things, they are nonetheless sometimes not good enough, in which case a CIO should look into alternative choices and new types of risk. For example, accepting some leverage risk for the benefit of additional portfolio diversification, or taking some liquidity risk in exchange for higher expected return. But if these things don’t work out, the CIO can lose his reputation for competence; and if they do work out, well, everyone knows it was luck because all those things were risky. As John Maynard Keynes pointed out, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” This applies to both coaching sports and portfolio management. We can also apply this lesson to security selection. Cheap stocks (using simple ratios like price-to-book or price-to-sales) tend to outperform expensive stocks. But they also tend to be “worse” companies — companies with less exciting prospects and more problems. Portfolio managers who own the expensive subset of stocks can be perceived as prudent while those who own the cheap ones seem rash. Nope, the data say otherwise.

There is even another angle. Buying is difficult, but selling is far harder. That is where the worst mistakes are made. And there is an analogy between hockey and investing:

Investors have been shown to be reluctant to sell their losers (part of the so-called “disposition effect”) presumably as selling is psychologically “locking in” a loss. Might the extreme reluctance towards pulling the goalie, when say down two with more than ten minutes left, be the result of a similar cause? Pulling the goalie earlier may be the best action in terms of expected points but runs a very high probability of going down three goals, and thereby almost “locking in” the loss.

So it is worth the time of some hedge fund managers to go into depth on hockey strategy. Honest, it is.

And what cannot be denied is that the closing minutes of a hockey game can be very exciting. This is how a youthful Bobby Orr famously clinched the Stanley Cup in over-time for the Boston Bruins in 1970, and then immediately seemed to take flight. Enjoy the goal and enjoy the weekend:

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