Top global miner BHP Billiton is bearish on the outlook for commodity prices in the long term, but remains bullish on demand growth based on the rise of Asian economies, its CE said on Thursday. 

"The first thing I would say is we're relatively bearish about the long term projections for prices," CE Andrew Mackenzie said following a speech in Melbourne. 

He said the only way to compete in a world where there was ample capacity to meet the needs of countries like China was to keep cutting costs, as BHP and its rivals are doing, which means prices will keep coming down. 

"That is the spirit of competition that we play in," he said. "But, yes, I am optimistic about the long term growth in demand, because I know the kind of resources it requires to push three, four billion people into the middle classes, particularly in Asia, and the kind of consumption that will come from that.

" While iron ore prices have slumped to decade lows as steel mills in China, the world's biggest producer and user of steel, battle a downturn, Mackenzie questioned forecasts by Chinese steel makers that production would stabilise around 500 or 600 million tonnes a year. 

BHP and the world's other mega-producers of iron ore still expect Chinese steel production to peak around 1 billion tonnes in the next decade. "I think China will be producing a lot more steel than the 600 million tonnes a year that you're talking about, and some for a while," he said in response to a question after his speech at a University of Melbourne function. 

"We shouldn't forget that China is turning out to be a much more effective exporter of its steel products than many people thought." China's steel consumption per head would need to roughly double to get to the typical point where an economy is self-sustaining in steel through recycling. 

"If China really wants to get along a path towards full development, it does have to get on with further construction of a number of things, including machinery and cars, and that will require more steel to be produced," Mackenzie said. He said he would "nudge his bearishness up a bit" if China took a long time to push ahead with that construction.

http://www.miningweekly.com/article/bhp-billiton-ceo-bearish-on-commodities-price-outlook-2015-12-03

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China will cut emissions of major pollutants in the power sector by 60 percent by 2020, the cabinet announced on Wednesday, after world leaders met in Paris to address climate change.

China will also reduce annual carbon dioxide emissions from coal-fired power generation by 180 million tonnes by 2020, according to a statement on the official government website. It did not give comparison figures but said the cuts would be made through efficiency gains. (www.gov.cn)

In Paris, Christiana Figueres, head of the U.N. Climate Change Secretariat, said she had not seen the announcement, but linked it to expectations that China's coal use would peak by the end of the decade.

"I can only assume they are talking about the same thing," she told Reuters.

Researchers at Chinese government-backed think-tanks said last month that coal consumption by power stations in China would probably peak by 2020.

An EU official, speaking on condition of anonymity, said Wednesday's announcement seemed to relate more to air pollutants than greenhouse gas emissions.

China's capital Beijing suffered choking pollution this week, triggering an "orange" alert, the second-highest level, closing highways, halting or suspending construction and prompting a warning to residents to stay indoors.

The smog was caused by "unfavourable" weather, the Ministry of Environmental Protection said. Emissions in northern China soar over winter as urban heating systems are switched on and low wind speeds meant that polluted air does not get dispersed.

The hazardous air, which cleared on Wednesday, underscores the challenge facing the government as it battles pollution caused by the coal-burning power industry and raises questions about its ability to clean up its economy.

Reducing coal use and promoting cleaner forms of energy are set to play a crucial role in China's pledges to bring its greenhouse gas emissions to a peak by around 2030.

Beijing has pledged to reduce the share of coal in total energy consumption to 60 percent by the end of the decade. It has banned the use of low-grade coals.

Premier Li Keqiang has said China would set an efficiency "bottom line" of 310 grams of coal per kilowatt-hour for plants across the country, according to the government website.

The average for the first 10 months of 2015 was 318 grams, according to official data.

"The efficiency target is in line with earlier emissions standards announced in 2014, but it tightens things up for coal-fired plants nationwide, without regional differences," said Yuan Jiahai, a researcher with the North China Electric Power University.

The cabinet also said that it would provide more financial support, including preferential loans, to help firms renovate. China already provides subsidies for firms that have installed the mandatory equipment.

China's delegate at the Paris talks, Su Wei, "noted with concern" what he called a lack of commitment by the rich to make deep cuts in greenhouse gas emissions and help developing nations with new finance to tackle global warming.

China's coal-fired power sector is notoriously inefficient. Utilisation rates have fallen nearly 8 percent this year to reach a record low, but surplus capacity could still be as high as 130 GW, or 14 percent of the total, industry estimates show.

Also, local governments continue to approve new capacity even as the country shuts outdated ones. Around 200 GW of capacity was given the go-ahead in the first half of 2015, while only 4.9 GW of small and ageing plants were shut in 2014.

http://www.reuters.com/article/2015/12/03/climatechange-summit-china-emissions-idUSL3N13R3QI20151203#2IVVKYhCGZV3paMk.97

Russia's defence ministry said on Wednesday it had proof that Turkish President Tayyip Erdogan and his family were benefiting from the illegal smuggling of oil from Islamic State-held territory in Syria and Iraq.

Moscow and Ankara have been locked in a war of words since last week when a Turkish air force jet shot down a Russian warplane near the Syrian-Turkish border, the most serious incident between Russia and a NATO state in half a century.

Erdogan responded by saying no one had the right to "slander" Turkey by accusing it of buying oil from Islamic State, and that he would stand down if such allegations were proven to be true. But speaking during a visit to Qatar, he also said he did not want relations with Moscow to worsen further.

At a briefing in Moscow, defence ministry officials displayed satellite images which they said showed columns of tanker trucks loading with oil at installations controlled by Islamic State in Syria and Iraq, and then crossing the border into neighbouring Turkey.

The officials did not specify what direct evidence they had of the involvement of Erdogan and his family, an allegation that the Turkish president has vehemently denied.

"Turkey is the main consumer of the oil stolen from its rightful owners, Syria and Iraq. According to information we've received, the senior political leadership of the country - President Erdogan and his family - are involved in this criminal business," said Deputy Defence Minister Anatoly Antonov.

"Maybe I'm being too blunt, but one can only entrust control over this thieving business to one's closest associates."

"In the West, no one has asked questions about the fact that the Turkish president's son heads one of the biggest energy companies, or that his son-in-law has been appointed energy minister. What a marvellous family business!"

"The cynicism of the Turkish leadership knows no limits. Look what they're doing. They went into someone else's country, they are robbing it without compunction," Antonov said.

Erdogan last week denied that Turkey procures oil from anything other than legitimate sources.

He has said Ankara is taking active steps to prevent fuel smuggling, and he challenged anyone who accused his government of collaborating with Islamic State to prove their allegations.

On Tuesday, U.S. President Barack Obama said Turkey had made progress in sealing its border with Syria, but Islamic State was still exploiting gaps to bring in foreign fighters and sell oil.

The Russian defence ministry also alleged that the same criminal networks which were smuggling oil into Turkey were also supplying weapons, equipment and training to Islamic State and other Islamist groups.

"According to our reliable intelligence data, Turkey has been carrying out such operations for a long period and on a regular basis. And most importantly, it does not plan to stop them," Sergei Rudskoy, deputy head of the Russian military's General Staff, told reporters.

The defence ministry said its surveillance revealed that hundreds of tanker trucks were gathering in plain sight at Islamic State-controlled sites in Iraq and Syria to load up with oil, and it questioned why the U.S.-led coalition was not launching more air strikes on them.

"It's hard not to notice them," Rudskoy said of the lines of trucks shown on satellite images.

Officials said that the Russian air force's bombing campaign had made a significant dent in Islamic State's ability to produce, refine and sell oil.

Ministry officials described three main routes by which they said oil and oil products were smuggled from Islamic State territory into Turkey.

It said the Western route took oil produced at fields near the Syrian city of Raqqa to the settlement of Azaz on the border with Turkey.

From there the columns of tanker trucks pass through the Turkish town of Reyhanli, the ministry said, citing what it said were satellite pictures of hundreds of such trucks moving through the border crossing without obstruction.

"There is no inspection of the vehicles carried out ... on the Turkish side," said Rudskoy.

Some of the smuggled cargoes go to the Turkish domestic market, while some is exported via the Turkish Mediterranean ports of Iskenderun and Dortyol, the ministry said.

Another main route for smuggled oil, according to the ministry, runs from Deir Ez-zour in Syria to the Syrian border crossing at Al-Qamishli. It said the trucks then took the crude for refining at the Turkish city of Batman.

A third route took oil from eastern Syria and western Iraq into the south-eastern corner of Turkey, the ministry said.

It said its satellite surveillance had captured hundreds of trucks crossing the border in that area back in the summer, and that since then there had been no reduction in the flow.

The defence ministry officials said the information they released on Wednesday was only part of the evidence they have in their possession, and that they would be releasing further intelligence in the next days and weeks.


Read more at Reutershttp://www.reuters.com/article/2015/12/02/mideast-crisis-russia-turkey-idUSL8N13R2KV20151202#XqWB803hVVgfk7pQ.99

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Germany's state intelligence agency says competition for influence inside the Saudi Arabian royal family is destabilising the wider Middle East, according to domestic media reports.

Frankfurter Allgemeine Zeitung (FAZ), one of Germany's premier daily newspapers, carries the warning from the BND intelligence agency.

According to FAZ, the BND identifies a shift toward an "impulsive intervention policy" in Yemen and elsewhere, driven by internal power struggles that pose a risk to the whole region.

Analysts at Royal Bank of Canada have previously referred to the internal discord as Saudi Arabia's version of HBO's "Game of Thrones," since the country's political life bears more resemblance to that of the fictional world of court intrigue than it does to that of most other countries.

Mohammad bin Salman, the country's deputy crown prince, is a major part of that dynastic battle. He is the 30-year old son of the current king, but the complex architecture of the country's stratified royal family means he is not next in line for the top job, even if he wants it. For starters, he's not the King's eldest son, even if he's the favourite.

The appointed successor falls to Crown Prince Muhammad bin Nayef, the king's nephew, who is decades older than Mohammad bin Salman.

Mohammad bin Salman has taken a central place in Saudi political life since his father, King Salman, ascended to the throne at the beginning of the year. He is also the country's defence minister, playing a large part in the violent intervention in Yemen's conflict this year.

The royal family has thousands of members with differing levels of wealth and power, and any sign that the deputy crown prince is attempting to leapfrog the crown prince could provoke resentment, especially if it seems to have the blessing of King Salman.

FAZ says BND analysts suggested a "latent risk" that the king's son tries to succeed his father directly, skipping out the crown prince. Saudi Arabia's growing proxy conflicts with Iran and a declining trust in the support of the US are also marked as destabilising factors.

Though it's not mentioned by the BND, Saudi Arabia's economic climate is also far less stable today than it was a few years ago — the tremendous collapse in oil prices means the country's fiscal position will be tenable for around five years, after which its "fiscal buffers" — largely foreign currency reserves — will be exhausted.

http://uk.businessinsider.com/bnd-report-on-saudi-arabias-power-struggle-2015-12

Insurers, cities and other investors controlling more than $3.4 trillion in assets have pledged to keep some or all of their money out of fossil-fuel companies -- a high-water mark for the divestment movement, according to climate-change advocates.

The number has swelled from the $2.6 trillion announced inSeptember and the $50 billion committed just last year, in a sign of the growing political stigma associated with coal, oil and natural-gas producers, according to a statement from 350.org and Divest-Invest, two groups behind the divestment campaign.

The latest figures were announced on the third day of a United Nations conference in Paris where almost 200 nations are seeking a deal to reduce global-warming pollution. Emissions from fossil fuels are a key target, with governments at the talks pledging to reduce billions of dollars in subsidies for the industry and shift them to renewable energy.

“Investors are reading the writing on the wall and dramatically shifting capital away from fossil fuels,” the two groups said in the statement. Investors “hope that their actions can push governments to follow suit.”

Since the September report, the groups said, divestment pledges have come from investors including Allianz SE, Europe’s biggest insurer; a $9 billion pension fund controlled by the city of Oslo; and Australian cities representing $4 billion in investments. Some are only partial commitments, covering a particular fuel such as coal or oil-sands, the groups said. More than 500 institutions in all have made divestment commitments, according to the statement.

http://www.bloomberg.com/news/articles/2015-12-02/fossil-fuel-divestment-tops-3-4-trillion-mark-activists-say

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Following a relentless barrage of recessionary industrial and manufacturing data, moments ago the Business Roundtable released its latest, fourth quarter 2015 CEO Economic Outlook Survey, and it is an absolute disaster.

According to the report, for the third quarter in a row, CEOs expressed growing caution about the U.S. economy’s near-term prospects and indicated they are moderating their plans for capital investment over the next six months, according to the Business Roundtable fourth quarter 2015 CEO Economic Outlook Survey, released today.

The Business Roundtable CEO Economic Outlook Index – a composite of CEO projections for sales and plans for capital spending and hiring over the next six months – declined 6.6 points, from 74.1 in the third quarter of 2015 to 67.5 in the fourth quarter.

This third consecutive quarterly decline brought the Index to its lowest level in three years. As shown in the chart below CEOs are as unconfident in the recovery as they were in late 2012. In other words, CEO confidence has just dropped to a level last seen when the Fed was about to unveil QE3.

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RWE on Tuesday confirmed plans to put its renewables, grids and retail businesses into a separate entity, about 10 percent of which it aims to place in an initial public offering (IPO) at the end of next year.

Germany's second-largest utility said the IPO, to take place along with a capital increase, could result in the sale of additional stakes in the new subsidiary "at the same or later point in time".


Read more at Reutershttp://www.reuters.com/article/2015/12/01/rwe-breakup-idUSFWN13Q04220151201#6x8tJMxbsLhiJxdq.99

As world leaders gather in Paris to debate how to combat the challenge of the climate change, China's capital city is shrouded in heavy smog. Many of Beijing’s landmarks such as the Forbidden City are not even visible from a short distance. One of the jokes going around Chinese social media is about the Beijing mayor’s promise last year to solve the smog problem, or he will serve his head on a platter. Now many people are asking for his head.

Combating an ever-worsening environmental problem has become one of the top priorities for Chinese policymakers. Even in an authoritarian state, the government cannot ignore citizens’ strong demands for better living conditions forever.

The chief economist of the Chinese central bank, Ma Jun, believes one of the root causes of the country’s worsening smog problem is the structure of the economy. China has a disproportionately large heavy industry sector compared to other major economies, and the heavy industry is nine times more polluting than the services sector.

The industrial sector accounts for 41 per cent of the country’s GDP. By comparison, Australia’s industrial sector comprises only 6.8 per cent of the economy. In China, coal is responsible for two thirds of total energy production, and is ten times more polluting than renewable energy.

Ma argues the key to addressing the structural problem of pollution is through financial innovation. The central bank economist says China needs to develop green finance to channel more money into more environmentally friendly sectors, according to an op-ed piece published on Caixin.

“There has been too much investment in polluting industries, energy and transport projects. There are not enough investments in low emission and renewable energy projects,” he says. Like elsewhere, many of these projects face problems of low returns. Many private sector investors are reluctant to enter the field.

China needs two to four trillion yuan in green investment every year for the foreseeable future. The Chinese government, due to its recent profligacy, can only cough up 300 billion yuan a year. Even adopting the most conservative estimates, the Chinese government can only contribute 15 per cent of the total financing needs of the country. It means the private sector has to contribute another 85 per cent.

How to incentivise private sector investors is one of the key challenges. In September this year, the Chinese government published a policy document on building a better ecological system. Article 45 of the document specifically deals with the issue of developing a green financing system.

For examples, it calls for interest rate subsidies and credit guarantees to encourage more lending for so-called green projects. Beijing also wants to develop a market for green bonds and a stockmarket index for sustainable companies. It also wants listed companies to disclose more environmental-related issues.

All of these measures are designed to incentivise private sector investors to move away from polluting industries and invest in more sustainable sectors.

Ma uses Hebei as an example to talk about the need to develop a green economy. The province is the largest producer of steel, cement and pleat glass in China. All these industries are heavily polluting and contribute to the smog problem in northern China. The province needs to cut 15 million tonnes of steel production, 15 million tonnes of iron production as well as 39 million tonnes of cement. These cuts equate to millions of job losses.

The central bank chief argues that if the government relies on draconian administrative measures to shut up factories and steel mills, it will result in massive unemployment, which will create social problems as well put more pressure on the slowing economy. He says a better way to deal with the issue is through encouraging more private sector investors to put money into more sustainable sectors.

He makes the following suggestions.

He says Beijing needs to support more lending to renewable sectors through interest rate subsidies -- he thinks it should be around about 3 per cent.  For every dollar the government spends, it is likely to bring in another 33 dollars from the private sector.

The government should also establish funds that invest directly in green projects. International experience suggests private sector investors are more willing to get involved if the government kicks in money too. In addition, a green bond market could be used to finance long-term projects such as subways and waste water treatment.  

http://www.businessspectator.com.au/article/2015/12/1/china/financial-solution-chinas-smog-problem?utm_content=SocialFlow&utm_campaign=EditorialSF&utm_source=BusinessSpectator&utm_medium=Twitter

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Manufacturing activity in China hit a three-year low in November, an industry survey showed Tuesday, supporting the case for more accommodative policies as authorities seek to prop up growth in the world's second largest economy.

China's National Bureau of Statistics' official Purchasing Managers' Index (PMI) hit 49.6 in November, its lowest reading since August 2012 and down from the previous month's reading of 49.8. This was below a Reuters poll forecast of 49.8 and marked the fourth straight month of contraction in the sector.

A reading below 50 points suggests a decline in activity on a monthly basis while a reading above signifies an expansion.

"With soft growth momentum and deflation pressures creeping up, we expect the authorities to further ease monetary policy and continue to implement an expansionary fiscal policy in order to prevent further slowdown of the economy in 2016," Li-Gang Liu and Louis Lam, ANZ economists said in a research note released after the data.

Separately, the Caixin/Market China Manufacturing PMI edged up to 48.6 in November, beating market expectations of 48.3, which would have been unchanged from the previous month. The index has shown contraction for nine straight months.

The private sector Caixin survey focuses more on small-to-medium-sized private firms, which are showing more stress from the prolonged economic slowdown and high financing costs, while the official versions look more at larger, state-owned firms.

The official PMI's sub-indexes showed widespread weakness in manufacturing with new orders - a proxy for domestic and foreign demand - down 0.5 points to 49.8 and exports contracting to 46.4 for the 14th straight month. Input prices declined 3.3 points to 41.1.

ANZ economists said this points to persistent deflation in upstream prices, which would add pressure to factory gate prices and industrial profits.

Service sector activity, which has helped offset the wider effects of weakness in manufacturing, improved with the official non-manufacturing PMI up half an index point to 53.6.

"The services sector appears strong and there are some hints that accelerating credit growth and fiscal spending may have continued to support investment growth last month, following a rebound in October," Julian Evans-Pritchard, an economist at Capital Economics, wrote in a research note.

Despite a long series of stimulus measures, including cutting interest rates six times since November last year, muted monthly data for October suggests China's economic momentum continues to slow.

Some analysts expect China's economy will bottom out in the fourth quarter as a burst of stimulus measures rolled out by Beijing gradually takes effect, but many remain wary about the outlook.

China's Premier Li Keqiang said last week that China was on track to reach its economic growth target of about 7 percent this year, and that the economy was going through adjustments to maintain reasonable medium- to long-term growth.

But that would still mark China's weakest economic expansion in a quarter of a century, and some analysts believe real growth levels are much weaker than official data suggest.

https://trove.com/a/China-factory-activity-hits-3-year-low-in-November---official-PMI.vI6Cc?utm_campaign=hosted&utm_medium=twitter&ts=1448950358&utm_source=sns&nocrawl=1

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Linde, the world's biggest industrial gases company by sales, cut its 2017 profit target, citing slower industrial production growth weighing on its industrial gases unit.

Linde now expects adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) to come in between 4.2 billion euros ($4.4 billion) and 4.5 billion in 2017, down from an initial target of 4.5 to 4.7 billion, it said on Monday.

It would also not achieve its 2017 target for return on capital employed (ROCE) of between 11 and 12 percent and now expects 9 to 10 percent.

Linde also said its engineering division would continue to suffer from a weak order book due to the low oil price.

It said last month that only strong growth at its U.S. healthcare gases business helped it eke out a gain in third-quarter adjusted EBITDA.

At the engineering division, which designs and erects large plants for the oil and petrochemical industry, clients have kept holding off on large investments, with crude oil prices down about 40 percent from a year ago.


Read more at Reutershttp://www.reuters.com/article/2015/11/30/linde-outlook-idUSL8N13P57B20151130#YQjAuMGboLbFGiZl.99

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Commodities have been getting creamed in 2015.

And according to Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices, it isn't going to get any better any time soon.

"Unfortunately for commodities, there’s no waking up from this nightmare."

So far, 2015 has not yet been the worst year for any single commodity, Gunzberg noted in a November 30 report, but there are a number of commodities that are on pace for one of their worst years on record.

"Aluminum is having its second worst year in history and gold is having its sixth worst year in history," Gunzberg writes.

The S&P tracked each commodity's performance back to 1970 for its research. No fewer than 17 are having one of the their five worst years out of 45.

Natural gas is down more than 40% this year, according to S&P, and energy is down more than 30% — making 2015 the fifth-worst year for each.

Already, Wall Street is bracing for big fallout. Wall Street banks areexpecting more defaults in the energy sector as they see more loans underperforming.

This is S&P's chart tracking the carnage.



S&P Dow Jones IndicesS&P tracks commodities' plunge in 2015.

http://uk.businessinsider.com/commodity-performance-in-2015-2015-11?r=US&IR=T

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Exactly a year ago, Riyadh decided to embark on an epic quest to send crude prices plunging on the way to, i) bankrupting the US shale complex and ii) achieving “ancillary diplomatic benefits,” like tightening the screws on Moscow’s energy-dependent economy in hopes of forcing Putin to give up Assad.

Long story short, the kingdom’s plan didn’t work.

Thanks to ZIRP, legions of yield-starved investors in the US ensured that capital markets remained open to otherwise insolvent drillers, allowing US producers to stay in business longer than the Saudis anticipated. Meanwhile, not only did Putin not give up Assad, he actually sent the Russian air force to Latakia and to add insult to injury, Moscow’s warplanes are now bombing Saudi-financed Sunni militias in Syria.

Meanwhile, slumping crude prices wreaked havoc on the kingdom’s finances.As we’ve documented extensively, the Saudis are now staring down a deficit on both the fiscal and current accounts with the former amounting to some 20% of GDP and the latter representing the first negative balance in at least 15 years.

So what's a despotic, puritanical Islamic monarchy to do? Well, you can tap the debt markets to offset the FX reserve burn and indeed Riyadh has already gone that route, but as we noted earlier this month, it's not clear how far they'll ultimately want to push that given that projections already have the country's debt-to-GDP ratio climbing from basically zero to more than 33% by 2020

Income from oil and related products contributes more than 80 percent of Saudi government revenue, and crude’s 37 percent plunge over the past year is poised to result in a 10-fold increase in the country’s budget deficit. That’s squeezing liquidity in the banking system, with demand deposits dropping 4.7 percent in October, as those of businesses, individuals and government entities slumped.

"The drop in deposits in October, in absolute amount, is probably the biggest since the 1990s," Murad Ansari, a bank analyst at EFG-Hermes Holding SAE, said by phone from Riyadh on Monday. "There are payment delays from the government to contractors, which is one of the reasons for the decline in private sector deposits, and public sector deposits are shrinking as the government is running a deficit."

Well don't look now, but money markets are tightening dramatically in the kingdom as deposits dry up. The 3-month Saudi Interbank Offered Rate has jumped 13 bps in November to its highest level since early 2009.

In short, the Saudi economy is gradually grinding to a halt, which is what happens when you deliberately tank the commodity that accounts for more than three quarters of government revenue and when government spending is the linchpin for economic growth. While it's not clear how much of this is "priced in" so to speak, you'll note that there's not a lot of breathing for the Saudis in terms of avoiding a recession in the not-so-distant future.

http://www.zerohedge.com/news/2015-11-30/saudi-interbank-rates-soar-deposits-flee-cash-crunch-intensifies

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When a world-renowned banker and a congressman were busted last week as part of the biggest corruption scandal in Brazil’s history, the international spotlight naturally fell on the young tycoon, Andre Esteves.

Yet to long-time Brazil watchers, it was the detention of the legislator -- a ruling party dealmaker named Delcidio Amaral -- that marked a far more worrisome development for a country desperately seeking to contain a deepening financial and political crisis. His arrest not only delayed government efforts to resolve this year’s budget dispute, but it also dispels a long-held belief that sitting lawmakers are all but untouchable because of a quirk in Brazilian law that affords politicians special treatment in criminal investigations.

While that can be seen as a true silver lining in the scandal -- a sign that a legislative branch rife with alleged corruption will no longer be tolerated -- it also injects a wild card into the crisis: Who will fall next and where will it all end? With the heads of both houses being investigated, it raises the possibility that Brazil’s political apparatus could unravel before ever passing the spending cuts and tax increases needed to restore investor confidence and ward off a new round of credit-rating downgrades.

"The idea that the political leaders have a plan to pull the country out of this crisis died because their very own future is at stake," Gabriel Petrus, a political analyst at business consulting firm Barral M Jorge, said from Brasilia. "Never before in history have we had so little certainty about tomorrow."

http://www.bloomberg.com/news/articles/2015-11-30/forget-esteves-it-s-the-other-brazil-bust-that-worries-insiders

A power company in China failed to make an interest payment on a bond on Tuesday marking the first time a state-owned firm has been allowed to default and adding to evidence that Beijing is slowly withdrawing its sovereign guarantee of low-quality bonds.

Baoding Tianwei Group said in a statement that it was unable to make the payment on time.

The default "might destroy the ironclad guarantee reputation of central government-owned issuers", wrote analysts at China Chengxin International Credit Rating Co in a research note before the default.

But they added that the low grade of Tianwei and the other defaulters limits the market impact of any defaults.

The news comes shortly after a full default on both principal and interest by Cloud Live Technologies earlier this month, and a more recent offshore default by Kaisa Group , the first Chinese developer to default on dollar bonds. Investors are now eyeing developer Glorious Property Holdings, whose bond payment comes due on Saturday.

But defaults on bonds sold to foreigners offshore have failed in the past; what the Chinese political system has struggled with is allowing domestic defaults. The first default in 2014 by a small private solar power company ultimately ended in a bailout several months later.

Baoding Tianwei Group is entirely owned by the Beijing-based China South Industries Group Corporation, which advertises itself as a part owner of Changan Automobile Group on its corporate website as well as a major defense equipment maker. It is directly owned by the central government.

Calls to the company were not answered, but investors appeared to have taken the lack of a rescue in stride, with bond markets shrugging off the news.

On April 16, the company had warned investors that it might miss an 85.5 million yuan ($13.8 million) interest payment.

The 5-year, 1.5 billion yuan bond maturing in 2016 has a coupon of 5.7 percent. It was originally rated AA+, but was later downgraded to BB.

Despite its links to the government, there were few signs China South Industries would rush to Baoding Tianwei's rescue.

"This affair has no connection with us," said an employee of China South Industries when contacted, although the employee confirmed that Baoding Tianwei is a subsidiary. He suggested contacting its underwriter, China Construction Bank.

Read more at Reutershttp://www.reuters.com/article/2015/11/30/china-debt-bonds-idUSL4N0XI3BA20151130#le42z6IvKfX3ErAp.99

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China is beginning to "talk the walk."

That is according to Wei Yao, a strategist at Societe Generale, who published a note on Friday on the country's need for capacity consolidation.

Capacity consolidation is another way of saying that China needs to cut back on heavy industry, which sucks up resources and capital.

That sector of the economy has been allowed to continue production despite overcapacity, or a glut of supply, for too long.

"To us, capacity consolidation holds the key to addressing China's most pressing economic issues: capital misallocation, looming growth in non-performing assets and deteriorating productivity," the note said.

Supply-side reform is now the No. 1 catchphrase in Chinese policymaking circles, according to Yao. That marks a key change, as in the past China has focused on three areas of aggregate demand: consumption, investment, and exports.

"It is encouraging that the authorities are no longer beating around the bush, at least rhetoric-wise, on the inevitability of some serious restructuring programmes. To us, this sudden sense of urgency is a clearly response to negative developments this year."

To recap, negative developments this year include: A sharp drop in the mainland's stock market, a sharp drop in exports, a devaluation of the yuan, and a fresh round of stimulus measures.

Yao even goes so far as to set out what a potential restructuring might look like. It is pretty brutal, and involves laying off 1.7 million workers. She said:

Scale: The program could begin with the most distressed sectors. The obvious candidates are coal mining, ferrous metal mining and ferrous metal manufacturing.
Size and time horizon for restructuring: SOEs in the three sectors above together have CNY5trn [$780 billion] in liabilities and employ 8.6 million people. Assuming 20% SOE capacity reduction as the target (that is, over average 10% for the sectors as a whole), potential non-performing debt would be CNY1trn [$156 billion] and 1.7 million workers could be made redundant, equivalent to 2% of bank loans and 0.3% of urban employment.
Size and format of fiscal assistance: The amount of assistance would be determined by the cost of soothing unemployment pains and debt write-down. We estimate that the fiscal support needed would be CNY325bn [$50 billion], thus CNY75bn [$11 billion] per year if implemented over five years.
Further expansion of the program: If the initial program is successful, the authorities could then adapt the restructuring model to other sectors. The total cost of restructuring of the troubled sectors could run up to CNY1trn. The pace would be subject to social stability, fiscal scope and the financial system's ability to absorb non-performing assets.

Clearly, such a plan isn't going to be easy. Chinese policymakers and citizens alike are likely to be especially sensitive to the prospect of increased unemployment. But Yao, who is one of the leading lights on China economic analysis, said any kind of programme to speed up capacity consolidation will be a clear positive for China's outlook.

The note said: "The restructuring programme may still come slowly, but with the authorities shifting their attention to supply from demand, a critical shift in macroeconomic management looks likely."

https://trove.com/a/A-critical-shift-is-taking-place-in-China-%E2%80%95-and-it-could-have-brutal-consequences.We1ov?utm_campaign=hosted&utm_medium=twitter&ts=1448824348&utm_source=sns&nocrawl=1

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Southwestern China’s Sichuan province has sent 103.8 TWh of hydroelectricity to eastern and northwestern China through three UHV DC power transmission lines and one EHV DC transmission line by November 26 since the start of the year, registering a new high, state media reported on November 30.

Three UHV DC power transmission lines—Jinping-Jiangsu line, Xiangjiaba-Shanghai line and Xiluodu-Zhejiang line—were key channels of the state’s “West-to-East” power transmission project, with each outbound electricity at over 30 TWh and combined volume rising 21% on year since this year.

The EHV DC transmission line starting from Deyang in the province to Baoji in Shaanxi sent 7.61 TWh of hydroelectricity during the same period, up 67% from a year ago.

The hydropower equaled the reduction of over 40 million tonnes in raw coal consumption, plus 150 million tonnes and 500,000 tonnes dioxide carbon and dioxide sulpur emissions, respectively, in eastern and northwestern China.

The four DC power transmission lines realized full load operation gradually between June and November this year, with combined capacity at 24.6 GW and daily transmission electricity at 500 GWh.

http://en.sxcoal.com/0/135788/DataShow.html

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China has sentenced 14 former officials at state energy firm Sinopec and the local government to jail for up to five years for their role in a massive oil pipeline explosion in 2013, the official Xinhua news agency said on Monday.

The explosion in the eastern province of Shandong killed 63 people and injured 156, and caused losses worth 751.7 million yuan ($117.53 million), Xinhua said.

It said the Sinopec officials were sentenced for violating safety regulations while the government officials had failed to fully perform their duties in dealing with the blast.

The explosion was one of the biggest to hit infrastructure developments in China, raising questions about safety standards in the world's second largest economy. In August, explosions at port warehouses killed more than 160 people in the northeastern city of Tianjin.

The 2013 oil pipeline explosion occurred at the Dongying-Huangdao II pipeline owned by Sinopec. The government at the time said it was caused by corrosion, irregular work practices and a tangled network of underground pipes.

The blast highlights the risks involved as both energy pipeline networks and China's cities expand rapidly. Urban development has engulfed many existing pipelines, providing an opportunity for thieves but also leaving lines dangerously close to residents, industry and commerce.


Read more at Reutershttp://www.reuters.com/article/2015/11/30/china-energy-blast-idUSL3N13P1K420151130#8UCFO8K0T8o6xQf0.99

Volkswagen has revealed its plans to fix those diesel cars in Europe affected by its cheat emissions tests.

The measures will bring the cars into line with the clean air standards in the region, according to the company.

The car manufacturer stated the plans to fix the EA 189 engines affected with a displacement of 1.6 and 2.0 litres will be based on a software upgrade.

A small tube called “flow transformer” will be installed in 1.6 litre engines to allow more precise measurement of the incoming fresh air flows.

It will also allow to measure fuel more precisely and improve emissions.

The plan has been ratified by the Federal Motor Transport Authority (FMTA).

The final technical solution for the 1.2 litre engine will be presented to FMTA at the end of the month, the company added.

The car manufacturer is setting aside €6.5 billion (£4.7 billion) to cover the costs of fixing the cars to comply with pollution standards.

A total of 11 million cars were affected by the emissions scandal worldwide out of which almost 1.2 million are in the UK.

Volkswagen hasn’t announced any plan to fix the cars sold in the US as vehicles are subject to much more stringent emissions legislation than in other countries but it said it will compensate customers.

However, the company won’t reward European customers, explaining the market circumstances are different.

http://www.energylivenews.com/2015/11/27/vw-unveils-emissions-fix-for-diesel-cars-in-europe/