Today’s Fed Meeting is like a Super Bowl match-up where most of the country just doesn’t really care. We feel compelled to talk about it, analyze it and even watch it, because it is the “Super Bowl” after all (or in this case, yet another FOMC meeting with a Powell press conference). But does anyone really care?
Maybe we will be surprised and this meeting will turn out to be exciting, but consensus is:
25 bps hike.
Data dependent: more types of data, over a longer period of time will be required to get the Fed to act.
Possible future hikes: that will mostly be picked up by the “sticky” inflation crowd as “hawkish”.
Possible future cuts: They will downplay this, but the recession crowd (“which I still associate with) will cheer this.
I just don’t see today being a major market moving event compared to earnings – which is nice for a change, unless your job claim to fame is “Fed Watcher.”
What Couldn’t AI Help Me Identify a Low Rated Super Bowl Match-up?
More interesting, given the AI story and the earnings that are coming out, is why couldn’t (or wouldn’t) ChatGPT predict which match-ups for the next Super Bowl would likely have low ratings?
It seems like a relatively straightforward question. Identify factors that have contributed to low ratings in the past and make some predictions. It did mention some of those, like regional match-ups, teams without star players, etc., but these were pretty obvious to me. I went through some data on TV viewership, social media connectivity, etc. to come up with the Bus vs Jags (apologies to Bucs and Jags fans).
Some of my “work” pointed me to Bills vs Lions as being potentially low, but since that would be almost a dream match-up for me, I chose to ignore it. Cincinnati vs Cleveland seemed like another one except they are in the same division and I have a soft spot for them as well.
What I found really strange, was ChatGPT’s response to lowest rated Super Bowl. ChatGPT “stated” that as if its last update in September 2021 the 2019 Super Bowl between the Patriots and Rams was the lowest rated. A quick Google Search comes up with the 2022 Rams vs Bengals game as being lower rated since Super Bowl III in 1969. Weird that ChatGPT doesn’t have anything post September 2021 on the subject, but stranger still, is what question did ChatGPT answer?. If Google is correct, then the 2019 wasn’t the lowest rated. So, even for what seems like a “simple” question, I got some unimpressive answers and spent more time than I would have, if I just did my own work from the start.
With that, we look to earnings.
This weekend’s potential Change in Leadership is worth reading and if you have time ahead of the Fed (and who doesn’t unless you enjoy staring at a screen and second and third guessing yourself for hours on end) you might want to watch Academy’s AI Webinar.
Orange Juice Squeezes To New Record High Amid Intensifying Fears Of Global Shortage
On Monday, orange juice futures rocketed to an all-time high due to global supply concerns among agricultural traders. The citrus greening disease continues to affect Florida and is spreading in Brazil — both regions are top producers, and a potential production loss from these areas could significantly tighten global supplies.
A new report from Bloomberg shows Brazil’s Citrosuco, one of the world’s top orange juice producers, has considered declaring a force majeure on supplies to clients after the crop disease and extensive rainfall damaged citrus groves.
In a July 17 letter sent to clients and seen by Bloomberg, the company said it was being “severely affected” by greening disease and rain that flooded farms. It added it won’t be able to ensure supplies at the volumes and prices previously agreed. Citrosuco confirmed the contents of the letter, which it said was sent as a warning to some clients who had contracts for delivery earlier this year. In a statement to Bloomberg on Monday, the company added the communication was part of specific commercial negotiations.
While the letter stated “supply performance is currently prevented by force majeure, until further notice,” the company said it had not taken the actual legal step associated with invoking force majeure, a clause companies usually enforce when an unforeseen event, such as a fire or natural disaster, prevents them from complying with a contract. –Bloomberg
Citrosuco’s warning was enough to send orange juice futures in New York above the $3 handle per pound, a new record high.
Data from the US Department of Agriculture and Citrosuco show Brazil exports 80% of its orange juice. Consumers who purchased OJ at US supermarkets have increasingly noticed labels on bottles that read: “Contains orange juice from US and Brazil.”
This is because Florida supplies are low and exports from Brazil have soared to new highs.
“The proliferation of disease continues to be great in Florida and the chance of a large comeback in production for the new season is limited,” Judy Ganes, president of J. Ganes Consulting, told Bloomberg.
Ganes said, “There are signs that disease is more prevalent in Brazil, too, which is also facing long-term problems with their crops.”
Even though egg prices have crashed, breakfast inflation remains elevated for yet another reason.
Last August, in an amalgamation of “The Green New Deal” meets “Build Back Better,” President Joe Biden’s Inflation Reduction Act gifted the renewables industry with billions of dollars worth of taxpayer-funded subsidies.
What few backing the bill realized was that the largest beneficiary would likely be China due to its expansive grip on the global solar photovoltaic (PV) industry. Worse than that, it might end up misdirecting the world’s clean energy efforts into dirtier than appreciated energy technologies because of the country’s ongoing dependence on coal-fired energy.
Information unearthed by Environmental Progress, a nonprofit research organization, points to a gaping oversight in how the figures influencing government net zero policy and investments in solar worldwide are compiled and collated due to the difficulty of collecting accurate information out of China, especially for the purification processes used to create silicon wafers.
The key to this blind spot is that a small number of data compilers provides the source material for most of the assessments. And many, if not all, of them work in collaboration with the International Energy Agency (IEA). The industry voluntarily submits the data in response to academic surveys. The nature and profile of the respondents are never publicly revealed, so there is the potential for conflicts of interest to develop.
A further puzzle is how that data feeds into an organization called Ecoinvent, a Swiss-based non-profit founded in 1998 that dubs itself “the world’s most consistent and transparent life cycle inventory database.” This data is relied on by institutions worldwide, including the IPCC and IEA itself, to calculate their carbon footprint projections, including the sixth assessment report published as recently as March 2023.
Based on such data, the IPCC claims solar PV is 48 gCO2/kWh. But, as we’ll see below, a new investigation started by Italian researcher Enrico Mariutti suggests that the number is closer to between 170 and 250 gCO2/kWh, depending on the energy mix used to power PV production. If this estimate is accurate, solar would not compare favorably with natural gas, which is around 50 gCO2/kWh with carbon capture and 400 to 500 without.
Over the course of a four-month investigation, Environmental Progress has confirmed that Ecoinvent — perhaps the world’s largest database on the environmental impact of renewables — has no data from China about its photovoltaic industry. Meanwhile, the ultimate source of the IEA’s supposedly public data on PV carbon intensity is confidential, and the data, therefore, is unverifiable.
Much of the cradle-to-grave carbon intensity data that governments depend on to guide photovoltaic arrays are instead based on modeling assumptions that are likely to have grossly under-estimated — if not made up — solar’s carbon emissions because they cannot get insights from Chinese manufacturers.
In its most recent report, the IEA predicts that China will continue to dominate solar energy production, delivering over 50 percent of solar PV projects globally by 2024. This trajectory is especially concerning given that China already commands most solar panel production.
The IEA noted that in 2022 China’s manufacturing capacity for wafers, cells, and modules rose 40-50 percent and almost doubled for silicon. In fact, according to market intelligence firm Bernreuter Research, in 2021, China produced more than 80 percent of global solar-grade polysilicon, a critical input into solar arrays. It doesn’t stop there; China manufactures 97 percent of the global supply of solar wafers, another essential component.
How China amassed that market concentration remains an inconvenient truth, all too readily swept under the rug by those pushing for net zero policies.
What we know for sure is that up until the mid-2000s, the market was dominated by Japanese, US, and German manufacturers, many of whom were in the midst of automating their production lines, when Chinese manufacturers swooped in to take their market share. The disruption happened in under a decade, with China’s global share of PV production surging from 14 percent in 2006 to 60 percent by 2013.
But the majority of experts consulted by Environmental Progress agree that China’s competitive advantage did not lie in an innovative new technological process but rather in the very same factors the country has always used to outcompete the West: cheap coal-fired energy, mass government subsidies for strategic industries, and human labor operating in poor working conditions.
Basic reasoning suggests the manufacturing shift must have added to solar’s carbon intensity. But as Environmental Progress has learned, nobody in the carbon counting world has seen fit to research by how much. The modelers are estimating the carbon emissions of solar production as if the panels are still made mostly in the West, grossly underestimating their carbon intensity, even as governments rush to draft and implement net zero policy based on the very same flawed data.
The China-sized black hole at the heart of the world’s photovoltaic data might, in the context of the industry, seem obvious.
That didn’t make it any easier for Enrico Mariutti, an introspective but compulsive 37-year-old Italian from Rome, to convince others in the field there might be a problem. It was Mariutti who first made substantial efforts to flag the data discrepancies.
Like Greta Thunberg, Mariutti comes to the tale as an environmental obsessive passionate about facilitating the world’s transition from fossil fuels to cleaner forms of energy. Unlike Greta, Mariutti finished school and knows how to crunch through a data set. He holds a degree in geopolitics and global security, which, while unrelated to the field, has equipped him with enough quantitative skills to ensure he can recognize the difference between good and bad data.
Mariutti first noticed something wasn’t quite right with photovoltaic assessments about two years ago. He was preparing for an online renewables debate with Nicola Armaroli, a research director at the Italian Research Council. But being a data junkie, he decided to pour over the source material to try and figure out why. What he discovered unnerved him. The data didn’t reconcile.
“They [the data] showed how much solar photovoltaic systems used in terms of raw materials: silicon, aluminum, copper, glass, steel, and silver. Then I saw the carbon footprint. It just seemed way too small,” he told Environmental Progress.
According to his findings, the carbon intensity of solar panels manufactured in China and installed in European countries like Italy was off by an order of magnitude. An initial back-of-the-envelope calculation put it at between 170 and 250g of carbon dioxide per kilowatt hour (kWh), as opposed to the official estimate from the Intergovernmental Panel on Climate Change (IPCC) of 20-40g per kWh. Way off.
The scale of the IPCC’s undercount shocks once applied to the EU’s “clean” energy plans. Following Mariutti’s math, the esteemed scientific body underestimates the emissions from the EU’s solar installations built in 2022 alone by 5.4 to 7.6 million metric tons, equivalent to adding 3.4 to 4.8 million cars to the road.
By 2020, Mariutti felt compelled to make his findings public. He managed to publish an op-ed in Italy’s premier financial newspaper Il Sole. The piece argued it was wrong to describe an energy transition that depended on mineral-hungry tech, which “could double the exploitation of the earth’s resources within a few decades,” as a green revolution. It was a hit and went viral across Italian social media.
Enthused by what felt like a public mandate for his mission, Mariutti continued his research, firing off dozens of queries to the data compilers. Responses, however, were far from forthcoming. Until one day in November 2022, a leading Dutch renewables expert, Mariska de Wild-Scholten, replied.
Mariutti was delighted to have made an inroad. Wild-Scholten had been one of five key authors who had made significant contributions — she is named some 454 times — to the IEA report Life Cycle Inventories and Life Cycle Assessments of Photovoltaic Systems (2020) — a starting point for much government decision-making on net zero policy.
In two emailed responses, Wild-Scholten said that, when determining the electricity consumption of silicon purification, which is used to make wafers, she rarely read scientific papers “because of low data quality, outdated data and or non-transparent data,” while saying little about her own preferred sources other than that it is based on surveys. Responses to other queries were no more reassuring.
Mariutti asked what she thought about 192 countries deciding their long-term energy strategy based on data that at the time reasonably underestimated the average carbon intensity of photovoltaic energy by one order of magnitude (40 vs. 250 gCO2/kWh). Her reply invited more questions than answers. “My experience is that nobody would like to pay for the data aggregation which is needed to come up with publicly available and free updates,” she said, adding that she was working on updating the public data “but only slowly.” Little to no indication was given for the source of her own data.
But, she said, she was happy to share the data she used to inform the 2020 IEA study — attaching it to the email — because it was now “outdated”. It was based on confidential individual company data, she said but did not specify the regional profile of those companies or any other aspects of their identity. She had kept it private only because she had not managed to get the studies funded.
By February 2023, Mariutti decided to self-publish his findings on his own website in a piece titled, “The dirty secret of the solar industry.” The piece made a bold claim: scientists were disingenuously using European data to model the carbon intensity of Chinese solar manufacturing. Was the goal here, he asked, to measure the carbon footprint of solar energy or merely to convince us that it’s green?
With a little prod from Mariutti, it was picked up in May in a piece by Giovanni Brussato for the Milan-based weekly Panorama. Brussato drew on Mariutti’s claim that one needs only to look at the life cycle analysis of China’s glass industry by the China Development and Reform Commission to see if there is a data reconciliation problem.
According to Chinese sources, it noted, glass manufacturing – another critical input in solar production – bears a carbon footprint of only 0.68 kgCO2e/Kg despite an admitted 70 percent dependence on coal-fired energy. A comparable study by Western researchers into the UK’s glass industry, which is mostly powered by cleaner natural gas energy, based on data from Eurostat and Guardian Europe, assessed the industry as having a carbon footprint of 1.12 KgCO2e/kg. To compare, the IEA scores solar between 0.5 and 1 kgCO2e/kg and Ecoinvent with 1 kgCO2e/kg.
A major issue with solar data, according to Mariutti, is that data compilers have been slow to recognize the displacement of the industry to China. It wasn’t until 2016, long after much PV production had already moved east, that the transition appeared on data collectors’ radars. But even then, they depended on new estimates and models rather than data from the source.
“In 2014, they calculated the carbon intensity of PV energy as if the panels were made in Europe, with low-carbon energy,” Mariutti told Environmental Progress, referring to data compilers. “By 2016, calculations started to appear as if the panels were made in China, i.e., supposedly with carbon-intensive energy.”
However, whatever model was used, the resulting carbon intensity was always around 20 to 40 gCO2/kWh. “Had they done the math right, it would come out at around 80 to 106 gCO2/kWh, and that’s with important factors still left out,” claims Mariutti.
After the publication of the Panorama piece, Mariutti’s claims drew the reaction of Dr. Marco Raugei, a leading researcher of emissions from renewable technologies at Oxford Brookes University, embroiling both in an extended online spat.
“We all used Chinese electricity mixes for c-Si PV. And we still got results nowhere near as high as you imply one would. So something is clearly off in your back-of-the-envelope calculations,” Raugei tweeted in April this year. By way of example, he cited an influential paper from 2021 on the sustainability of PV systems by life-cycle analysts Enrica Leccisi and Vsili Fthenakis.
Mariutti had previously critiqued Leccisi and Fthenakis’ analysis in his self-published piece, noting that while the electrical input of solar was modeled according to a Chinese scenario, thermal input remained European. After Mariutti pointed out to Raugei that he had tried to contact Leccisi for comment on his findings without success, the conversation with Raugei went cold.
In further correspondence with Environmental Progress, Dr. Raugei stressed that in his research, he endeavored to use the closest possible approximations to Chinese data in order to create a realistic scenario.
When scientists, academics, or researchers lack accurate data in the Western world, they usually work hard to fill the data void directly. Major efforts are undertaken, and huge sums are spent on sourcing ever more reliable and better data.
Not so, however, with the China data anomaly. A lack of transparency, language barriers, and a plethora of inaccessible institutions – alongside a general reluctance by researchers to unearth realities that might dispel existing assumptions – have led to an overreliance on models and inputs extrapolated from Western manufacturing processes.
The IPCC’s own estimate that solar’s carbon intensity is four times that of wind and nuclear, but 10 times less than gas and 20 times less than coal is derived from such assumptions.
Unsurprisingly, the authors of the IPCC’s sixth assessment report, casually referred to as AR6, base their life cycle assessments (LCA) of solar energy on studies that do not represent the current state of the industry. Of the four studies cited by the authors, two evaluate only European manufacturing of solar panels. The third model is a state-of-the-art Chinese-manufactured panel, the Upgraded Metallurgical Grade Silicon (UMG-Si), which is no longer in production. The fourth reviews 16 studies, all of which either model solar panels that are no longer in production, model panels that make up only a few percentage points of the global market, or employ Ecoinvent’s 1 or 2 inventories, which also use European electricity mixes.
Ecoinvent, the omnipresent database that is relied upon by policymakers and academics across the planet, as well as manufacturers, big and small, was founded by Dr. Rolf Frischknecht.
For over 20 years, his Swiss non-profit, funded at least in part by the Swiss government and the photovoltaic industry, has collected data on the environmental impact of renewable energies. Whether you’re modeling the low-carbon appeal of recycled plastic packaging, automotive filters, or titanium powder, Ecoinvent is the likely source of the data. A recently agreed collaboration on zero-carbon shipping with major players in that industry showcases the association’s still-growing influence.
Since the early 90s, the reputation of Dr. Frischknecht has grown in step with the renewables industry. Some 20 years ago, he began a collaboration with the IEA through the Photovoltaics Power Systems Programme (PVPS), a joint initiative from the IEA and the global PV industry to conduct research on solar and turn it into a global energy “cornerstone”.
Despite his careful stewardship of Ecoinvent, in 2021, Frischknecht quietly resigned from the body he had founded decades earlier. In his resignation letter he noted “irreconcilably different perceptions regarding materiality, reality, quality and accountability” of their latest data.
“There was a drastic shift from (appropriate) data to methodology,” Frischknecht wrote to Environmental Progress. Faced with a movement away from real-world data collection, discussion of what were the crucial data points, proper referencing, and extensive data quality checks, as he had explained in his resignation letter, Frischknecht felt obliged to move on. “During my career, I tried, and try, to be independent of direct, indirect, and subtle attempts to influence the modeling or the data,” he told Environmental Progress.
He then cast doubt on the quality of the Ecoinvent data, telling Environmental Progress, “The PV data in Ecoinvent is from 2011, and there is no data from Chinese information sources.” In email correspondence with Ecoinvent, Environmental Progress was able to confirm Frischknecht’s allegation.
Frischknecht now runs Treeze, a “young and experienced” life cycle assessment consultancy, which is “involved in large EU projects”. Treeze also receives funding from the Swiss Federal Office of Energy and collects life cycle data for the PVPS “Task 12” report on solar’s sustainability.
The total lack of Chinese input into Ecoinvent’s data, however, has not stopped the IEA from continuing to depend on the potentially outdated work of Frischknecht’s brainchild for their own estimates.
These revelations undermine the foundations of the sustainability industry, which bases a significant portion of its certifications on Ecoinvent’s data and promises businesses and governments that earning their certifications protects the planet.
The sector has ample reason to trust Ecoinvent without checking its data. The sustainability sector makes billions of dollars each year thanks to the scale of carbon reductions they claim to provide, and disclosing that it failed to deliver its most basic pledges threatens its business.
Fast forward to today when, as the WSJ reported, the price of Russia’s most coveted crude finally traded above the western price cap imposed to starve Moscow of funds for the war in Ukraine (but not really, because starving the world of Russian oil has long been viewed as a far more dangerous outcome), resulting in a very distinct “victory” for Moscow in the “fight for influence over global oil markets.”
It is the first time that the price for its flagship Urals grade of oil has breached the $60-a-barrel limit since the U.S. and its allies introduced the novel sanctions policy last December, according to commodities-data firm Argus Media, and – as the WSJ clarifies – it is a sign that the Kremlin has succeeded, at least in part, in adjusting to the restrictions.
As a reminder, in late 2022, companies in the Group of Seven advanced democracies were allowed to transport and insure Russian crude only if the price is below $60 a barrel. There are separate caps for refined products. The idea is that Moscow will sell petroleum at lower prices because it needs Western services to export its oil, thus keeping commodity inflation low.
The cap is part of a Western economic-pressure campaign and targets Russia’s most important revenue source. It is meant to bleed the Kremlin’s war coffers while encouraging Russian producers to keep sending petroleum to market so as not to foment inflation around the world. However, in a world where Russia’s 7 million of barrels of daily oil exports are suddenly pulled from the market, inflation would explode as the price of oil would promptly soar, we learn just how toothless western sanctions have been… and were meant to be.
One sign that the financial squeeze on Moscow might be relenting: The discount for Urals, compared with benchmark Brent, has narrowed to $20 a barrel. The gap is still far wider than before the war, but it has halved since January.
Meanwhile, the higher prices will bolster Russia’s oil-export revenues, which last month dropped to just over half their level from a year ago, according to the International Energy Agency, leading to more money available to fight the war in Ukraine just Zelensky’s counteroffensive is about to collapse. Russia’s Urals crude, named after the mountainous, oil-rich region, has also gotten an extra boost from high demand in Asia, where Russian producers are elbowing aside Saudi oil.
With Urals, Sokol and ESPO trading now above the $60-a-barrel level, we should **assume** that all Russian crude is now flowing into the global market without using Western banking, insurance and shipping. Either that, or “attestations” are getting rather creative | #OOTT
Western sanctions strive – at least on paper – to use Russia’s longstanding dependence on European shipping and insurance as leverage to contain the income Moscow fetches from crude. Climbing prices suggest Russia’s push to assemble an alternative network of tankers to which sanctions don’t apply is eroding Western influence over its prize export, said Sergey Vakulenko, an analyst at the Carnegie Russia Eurasia Center and former oil executive in Russia.
“This was an evolutionary process, and now we just see its results,” said Vakulenko. “Russian oil companies…put quite a lot of effort into staying in business and earning money. They have proven themselves to be capable operators.”
According to the WSJ, traders said Russian producers recently showed little desire to negotiate prices at which Western players could stay in the market. That is a shift since Urals last neared $60, in April.
To be sure, Russian companies are likely to need Western ships and insurance for some time to export some of the more than seven million barrels of petroleum they sell overseas daily. Some analysts say that gives the U.S. and Europe significant—though waning—leverage, and that they could step up the financial pressure on Moscow by lowering the cap. However, the growing influence of the gray fleet if “mystery” middlemen– which has shown remarkable stoicism to Washington’s sanctions threats – is what has given Putin all the leverage he needs. In the end, the $1 billion monthly windfall talks, and Biden’s bullshit walks.
Unable to accept defeat, Washington officials call the price rise a Pyrrhic victory for Moscow and point to the many obstacles that have been thrown in Russia’s way.
“Fundamentally, the price cap is holding down Russia’s revenue significantly, while continuing to create a world in which global markets are being supplied with Russian oil,” Deputy Treasury Secretary Wally Adeyemo said in an interview. “Our goal is to continue to increase the cost for Russia in order to make sure they have less money to fight their illegal war in Ukraine, and that’s happening every day.” Spoiler alert: what is happening is that Russia is not only countering Ukraine’s “counteroffensive” but is now making the most money per barrel sold to foreign buyers in all of 2023.
And now that the western sanctions have shattered, the blame game begins: critics say allies started with the cap too high. Ukraine, backed by close allies including Poland, has lobbied to reduce it. But disagreements inside the European Union and concern about gas prices in Washington stymied them.
Instead, according to the WSJ the U.S. and EU have focused on tightening enforcement. A focus: The laundering of oil through swaps between ships at sea. Fraudulent documentation and side payments have also been used to evade the cap, according to traders.
However, the real goal of the sanctions was to fool the public that the West was doing something to punish Putin when in reality the imperative was to make sure Russia does not pull its oil from the western market and sends the price soaring.
A bigger challenge for the sanctions is the new logistics system that Russia and companies in its orbit began to build, consisting of tankers owned, insured and chartered outside the West.
As reported previously, sales of secondhand tankers have swollen the shadow fleet—industry parlance for tankers that shuttle petroleum from sanctioned nations. In the second quarter, five times as many tankers worked with sanctioned producers than at the end of 2021, according to ship-tracking firm Vortexa. Almost 80% of those ships have plied the Russian market.
The West derived leverage in part from the outsize role played by the shipping industry of Greece, which as an EU member observes the sanctions and price cap. The country’s tanker fleet moves more than half of crude exported from Russia, said Robin Brooks, chief economist at the Institute of International Finance. “The West has true pricing power,” he said, adding that the cap could be lowered to between $20 and $30 a barrel. Of course, at that price Russia would sell zero oil to the west and instead target just India and China, which in turn would lead to a violent explosion in Western oil prices, something the former Goldman FX trader clearly failed to anticipate (not that surprising when one looks at the track record of his FX trading recos during his Goldman tenure).
Meanwhile, as even the WSJ admits, what little leverage the West has is evaporating. The huge sums European tanker companies could earn from renting ships out to move Russian oil have fallen in recent months, suggesting Russia has growing access to tankers owned outside the G-7, said Henry Curra, head of research at shipbroker Braemar.
At Russia’s Asian port of Kozmino, where a flavor of crude called Espo has traded above the cap all along, few tankers insured or owned by companies in the West are now involved in the oil trade.
The Biden administration acknowledges that Russia is developing an independent fleet, but a senior Treasury official said it isn’t a significant driver of oil flows. The cost of creating that alternative export system diverts funds from the war, U.S. officials say. They estimate that Russia’s central bank has deployed $9 billion to replace Western reinsurance schemes.
U.S., European and Japanese insurers covered almost all of Russia’s seaborne exports before the war, including those on Moscow’s state-owned tankers. Known collectively as the International Group of P&I Clubs, these companies insure against claims from third parties, such as coastal industries affected by an oil spill.
By April, half of Russian crude shipments and a third of refined-product shipments were on tankers not insured by members of the International Group, according to Borys Dodonov of the Kyiv School of Economics.
Rolf Thore Roppestad, chief executive of Norwegian insurer Gard, said at least 10 tankers pass through the Danish straits, Suez Canal and Strait of Malacca daily without International Group insurance. That poses dangers, he said, because insurers outside the group mostly lack experience in responding to accidents.
“The concern is that these insurers may not have backing by reinsurers—or, to the extent they do, those reinsurers may not have the resources to meet a major claim,” said Alexander Brandt, a partner at law firm Reed Smith. If there is a spill, he said, “the fear is that there will be no one there to mop it up—literally.”
Shipping lines finally seem to be making some headway in managing vessel capacity in the Asia-U.S. trades.
Spot rates have been on the rise for three straight weeks, rebounding to levels last seen in early 2023 and late 2022, according to several index providers. U.S. import bookings remain above pre-COVID levels, and multiple analysts are now highlighting positive rate effects from reduced vessel capacity.
Liners managing down trans-Pacific capacity
“Typically, higher demand leads to higher capacity availability, but over the past month, liners have focused on tightening service offerings as demand has improved,” Omar Nokta, shipping analyst at investment bank Jefferies, said on Monday.
Platts, an analytics and price-reporting agency, quoted multiple market participants who see effects from capacity constraints, including more limited space availability forcing shippers to book earlier and expectations for continued spot rate gains in August.
One logistics source told Platts that Asia-West Coast capacity is down 15% this month versus June, with Asia-East Coast capacity down 8% to 10%, including the effect of Panama Canal restrictions.
Consultancy Drewry attributed rising trans-Pacific spot rates to “capacity reductions due to an increase in blank [canceled] sailings,” fallout from labor disruptions in British Columbia and “a more optimistic outlook on cargo demand in North America.”
Another analytics company, Linerlytica, highlighted divergent trends in the trans-Pacific and Asia-Europe as a result of capacity issues, with trans-Pacific rates rising and Asia-Europe rates still falling.
Linerlytica said trans-Pacific deployments are down 12.1% to date, while Asia-Europe capacity is up 7.6%, “with further divergence expected in the coming months as even more capacity is added to Europe while capacity is withdrawn from the trans-Pacific market.”
“There is growing optimism for the Aug. 1 rate hike, especially on the trans-Pacific, where utilization has been very strong.” Linerlytica said on Monday.
Drewry: Shanghai-LA rates up 29% since late June
Spot rates are still believed to be at loss-making levels in the trans-Pacific and recent double-digit gains are off a low base. Yet rates are moving closer to breakeven and they’re already above or in the vicinity of pre-COVID levels, according to most spot indexes.
Different indexes use different data sources and different methodologies, so they come up with different rate numbers. However, they’ve all trended in the same upward direction in the past three weeks.
Platts assessed North Asia-West Coast North America spot rates at $1,700 per forty-foot equivalent unit on Monday, up 31% week on week to the highest level since October. Platts put North Asia-East Coast North America rates at $2,600 per FEU, up 13% week on week to the highest level since early February.
Xeneta, a company that tracks both short- and long-term freight rates, put average Far East-West Coast short-term rates at $1,715 per FEU on Monday, the highest level since late November and up 33% from June 29.
Xeneta assessed average Far East-East Coast short-term rates at $2,339 per FEU, the highest since February and up 6% from late June.
According to the Drewry World Container Index (WCI), spot rates on the Shanghai-Los Angeles route averaged $1,965 per FEU during the week ending Thursday, up 29% from the last week of June. Compared to pre-COVID, WCI rates for this route are 20% higher than at this time in 2018 and 24% higher than in 2019.
The WCI Shanghai-New York assessment rose to $2,906 per FEU for the week ending Thursday, up 16% since the last week of June, 9% from the same week in 2018 and 3% from 2019.
The data covers a portion of overall bookings (not loadings) and is based on the date of scheduled departure. The volume of bookings scheduled to depart Monday from all overseas ports was up 25% from the recent low hit on May 8 and up 8% from volumes on the same date in 2019, pre-COVID.
If U.S. import volumes hold steady or increase in August and carriers reduce trans-Pacific via blank sailings, spot rates could continue to trend toward profitability.
According to Nokta, “The latest rise in spot rates likely means guidance revisions this earnings season may be more modest than previously feared or nonexistent.”
Endurance Of Electric Vehicles Falters In Extreme Heat
Electric vehicles are known to perform sub-optimally in cold weather — if that’s a loss of range and power. A new study has found similar adverse effects when EVs are subjected to scorching temperatures.
Auto blog Carscoops first reported that data science company Recurrent tested several EVs to “analyze the relationship between batteries and their range.” Recurrent’s data found that if temperatures rise over 100 degrees Fahrenheit, then the ranges of EVs diminish.
Recurrent did not mention which EVs were most impacted when temperatures climbed but said some vehicles experienced a 31% decline in range when temperatures exceeded 100 degrees Fahrenheit. The data is to be taken lightly as more testing needs to be completed, Carscoops said.
“Note that the range loss at 100 degrees is based on extremely limited data, and we will update it when we have more confidence in the value.”
Recurrent CEO Scott Case told Automotive News that collecting data on EVs is challenging because so many drivers commute during the morning rush hour when temperatures are just creeping up from lows. Trip digits are usually reached in the mid-afternoon.
Greg Less from the University of Michigan Battery Lab explained the triple-digit range depletion of the battery occurs when temperatures are “above [104 degrees Fahrenheit] you start to have a breakdown of the passive emission layer on the anode, and that breakdown will then cause consumption of the liquid electrolyte, which will shorten the lifetime of your battery.”
The worst declines include Chevy Bolt by 32%, Ford Mustang Mach-E Premium AWD by 30%, and VW ID.4 by 30%. And one of the best EVs to survive cold weather was surprising the Jaguar i-Pace, which only lost 3% of range. Also, the Audi e-Tron was -8%.
Regardless of the extreme temperature, EVs experience some degree of range loss and power. The push for EVs by the Biden administration comes as climate warriors say these vehicles are the ‘green’ solution to combat climate change. However, these cars appear not to be holding up well in volatile weather.
Beginning in August, China will levy export controls on two critical minerals: gallium and geranium. These metals are essential to semiconductor technology and restricting access to them marks Beijing’s latest volley in its strategic power competition with Washington and will significantly disrupt U.S. and Taiwanese chip manufacturers.
The global mineral supply chain is already narrow and China has an overwhelming lead with respect to rare earth metal extraction and processing. This market dominance enables Beijing to manipulate access seemingly at-will. Beyond minerals, China’s status as the world’s top manufacturer also makes raw material building blocks like plastics, chemicals, and agriculture products vulnerable to Beijing’s geopolitical ambitions.
For U.S. industry dependent upon reliable supply chains, this vulnerability underscores the need to pursue a pivot. Decoupling is unrealistic, but diversifying supply is a necessary long-term strategy. For American interests pursuing new, secure supply chains, Africa represents a key opportunity.
Gaining attention, the Africa market affords a spectrum of trade, investment, and sourcing opportunities across fifty distinct markets. The continent’s population of more than one billion is the youngest and most rapidly growing in the world, and the International Monetary Fund suggests that eight of the world’s fifteen fastest growing markets are in Africa, including Cote D’Ivoire, the Democratic Republic of the Congo, Rwanda, and Senegal.
For some, Africa’s reputation begins with its humanitarian challenges. But today the continent flexes attractive emerging markets that have leveraged development assistance to facilitate serious economic progress. Africa is unambiguously rich in raw materials, oil and gas, and agriculture potential. Moreover, Africa demonstrates enormous workforce promise, innovation clusters, and a rising middle class, suggesting that beyond supply chain security, U.S. industry can build lasting, mutually beneficial relationships through commerce.
Today, Nigeria, Ghana, and South Africa are reliable investment destinations, plus Morocco which holds a free trade agreement with the United States, and Kenya which is receiving similar attention from the U.S. Trade Representative’s Office. Cote D’Ivoire, Tanzania, and Zambia are adopting fundamental reforms such as advancing the rule of law, firming up rights protection, reducing trade barriers, and promoting fiscal management to attract transatlantic partnerships and foreign direct investment.
America’s peers recognize the importance of trade and investment relationships with Africa. The European Union and China have both made strategic investments, and, albeit by very different approaches, established durable and diverse supply chains across the continent.
Europe, for example, exchanges more than $250 billion with Africa every year, nearly five times more than the American trade relationship. With more than 20 free trade agreements across the continent, the European Commission has made Africa a “Global Gateway” priority and the chief target of the block’s energy investment agenda.
China also has a well-documented presence on the continent, driven primarily by the controversial One Belt One Road initiative. China stands as the largest trading partner for many African states, and its active engagement creates competition, particularly in areas such as mineral rights, port access, and government procurements.
For the American firms also interested in engaging Africa as a supply chain partner, support exists for their first steps.
During the past 20 years, U.S. government efforts have encouraged safer trade and investment conditions, and current initiatives such as Prosper Africa and Power Africa align American industry with tools like risk insurance, business intelligence, and matchmaking. The Africa Growth and Opportunity Act also adds import provisions, and the African Continental Free Trade Area’s further facilitates supply avenues and promotes trade through tariff removal between African states, regional cooperation, common rules, and regulatory reform.
Like any emerging market, Africa is not without risk. Undeniably complex, the varying challenges found in some countries include rapidly changing governance structures, political instability, stubborn trade barriers, and persistent corruption. Capital moves slowly on the continent, and results are less predictable. Flight scarcity, limited shipping routes, language barriers, and time differences also contribute to a difficult risk profile. Major and minor alike, these factors affect the calculus for market exploration.
The appropriate approach begins with recognizing every country presents a unique profile and determines reasonable expectations and timelines. Familiarity with Africa’s nuances is key, as is travel to the continent. Starting small, for example, through pilot projects or limited asset investments, can hedge risk. Adding Africa expertise to corporate teams could create conversations, identify potential obstacles, and preach patience.
Though Africa may not be an outright solution to today’s supply chain challenges, the continent deserves much more serious consideration from forward-thinking entrepreneurs who understand the constraints of a “single basket” approach. The case for Africa as a U.S. industry partner is stronger than ever, and for those bold enough to navigate Africa’s complexities the opportunity for two-way commercial relationships with a market positioned for growth is clear.
Ned Rauch-Mannino is a visiting fellow for the Douglas and Sarah Allison Center for Foreign Policy Studies at The Heritage Foundation and a former senior official with the U.S. Department of Commerce and U.S. Agency for International Development and served as co-chair for the White House’s Prosper Africa initiative.
Dancing COVID Nurses That Supported Draconian Mandates Switch To Climate Change
Perhaps one of the most unsettling narrative relationships during the covid pandemic lockdowns was the assertion by various governments, think-tanks and media pundits that the mandates weren’t just good for “stopping the spread,” they were also good for “saving the environment” from what they claim will be inevitable Apocalyptic climate change. While the covid agenda has all but disappeared thanks to millions of people and half the states in the US rejecting the restrictions, climate hysteria is still alive and well.
One of the most obnoxious trends in covid propaganda was the constant TikTok dance videos. Dancing politicians, dancing talk show hosts and dancing nurses all telling us to comply while frolicking around like maniacs. Well, it’s not over, because the dancing covid nurses are back, and now they’re here to tell us that accepting carbon controls is just as important as the mandates.
Beyond the numerous question on how nurses managed to have time to make so many group TikToks if the hospitals were “overrun” with patients dying of covid as the media asserted for the first year of the pandemic, we must also ask: If they lied about the effectiveness of the mandates, why should we listen to them about climate change?
Not one draconian policy enforced by governments made any difference whatsoever in the transmission of the covid virus. The lockdowns were pointless. The masks were pointless. Social distancing was pointless. And the official median Infection Fatality Rate of covid is a mere 0.23%, which means that 99.8% of people were never under any threat from the disease anyway. These facts were well known by medical professionals by early 2021, yet many of them continued to push the mandates.
Invariably, as the summer heats up so does the hype surrounding climate controls which would do little or nothing to shift the existing state of the Earth’s temps. “Record temps” are often touted, but these records are limited to a short time from of around 140 years of official data (since the 1880s). But what about before then? When we look at the real history of the Earth’s climate, the temps today are incredibly mild. Not only that, but the global warming events of the past all occurred without human involvement.
One has to wonder, if this is the case, why are no carbon control proponents or climate scientists talking about it? Is the situation much like covid, where they tell you to “believe the science” except for the science that contradicts their claims? And let’s not forget, these same people have been telling us the Earth is on the verge of burning for a very long time.
People stopped idolizing nurses after the pandemic scare. Dancing for the climate feels more like a desperate act to regain relevancy, rather than legitimate activism.
Kyiv is almost completely dependent on fuel imports to maintain its war effort…
Ukraine’s tanks are increasingly running on oil that comes from Russia in what German newspaper Handelsblatt describes as a paradox of war.
According to the Ukrainian customs authority, Kyiv is importing more and more diesel from Hungary and Turkey, both countries that process oil from Russia to a large extent in their refineries.
Although the market position of Hungary’s MOL Group and Turkish suppliers in Ukraine was already relatively good in the past, it was only recently that the Ukrainian customs authorities reported a striking increase in imports.
For example, MOL, which is closely linked to the Hungarian state, doubled its sales to Ukraine in the past six months.
Since MOL purchases Russian oil to a large extent, it is now likely to be the main fuel for Ukraine’s war machinery.
At the same time, companies that do not obtain their raw material from Russia are losing market share in Ukraine.
This is because MOL has a competitive advantage over other European oil companies: It has an exemption from the European Union to continue supplying its refineries with Russian crude oil.
While the five original BRICS states have their geopolitical differences, they are finding enormous common ground on the geoeconomic front as trade volumes surge and trade routes multiply…
As the BRICS approach the most important summit in their history on August 22-24 in Johannesburg, South Africa, some fundamentals need to be observed.
The top three BRICS cooperation platforms are politics and security, finance and the economy, and culture. So the notion that a new BRICS gold-backed reserve currency will be announced at the South Africa summit is spurious.
What is in progress, as confirmed by BRICS sherpas, is the R5: a new common payment system. The sherpas are only in the preliminary stages of discussing a new reserve currency which could be gold or commodities-based. The discussions within the Eurasia Economic Union (EAEU), led by Sergey Glazyev, by comparison, are way more advanced.
The order of priorities is to get R5 rolling. All current BRICS currencies start with an “R”: renminbi (yuan), ruble, real, rupee, and rand. R5 will allow current members to increase mutual trade by bypassing the US dollar and reducing their US dollar reserves. This is only the first of many practical steps in the long and winding road of de-dollarization.
An expanded role for the New Development Bank (NDB) – the BRICS bank – is still being discussed. The NDB may, for instance, grant loans denominated in BRICS gold – making it a global unit of account in trade and financial transactions. BRICS exporters will then have to sell their goods against BRICS gold, instead of US dollars, as much as importers from the collective west would have to be willing to pay in BRICS gold.
That’s a long way away, to put it mildly.
Frequent discussions with sherpas from Russia and also independent financial operators in the EU and the Persian Gulf always touch on the key problem: imbalances and weak nodes inside the BRICS, which will tend to serially proliferate with the imminent BRICS+ expansion.
Within BRICS, there’s a wealth of serious unsolved dossiers between China-India, while Brazil is squeezed between a list of imperial dictates and President Luiz Inacio Lula da Silva’s natural drive to fortify the Global South. Argentina has been all but forced by the usual suspects to “postpone” its admission request to join BRICS+.
And then there’s the weak link by definition: South Africa. Squeezed between a rock and a hard place, the organizer of the most important summit in BRICS history opted for a humiliating compromise not exactly worthy of an independent Global South middle-ranked power.
South Africa decided not to receive Russian President Vladimir Putin and opted instead for the presence of Foreign Minister Sergey Lavrov – as Pretoria first suggested to Moscow. The other BRICS members validated the decision.
The compromise means that Russia will be physically represented by Lavrov while Putin will participate in the whole process – and subsequent decisions – via videoconference.
Translation: Putin tested Pretoria and exposed it to the whole Global South as a fragile node of the “jungle” – actually the Global Majority – easily threatened by the western “garden” gang and not a real independent foreign policy practitioner.
St. Petersburg-Shanghai via the Arctic
This South African decision by itself raises serious questions about whether BRICS-led geopolitics is just an illusion.
Geoeconomically though, the group has entered a whole different ball game, illustrated by the multiple BRICS interconnections with the Chinese Belt and Road Initiative (BRI).
Chinese trade with BRI nations increased 9.8 percent in the first half of 2023 – compared to the same period last year. That contrasts sharply with the 4.7 percent overall contraction of trade between China and the collective west: Down with the EU by 4.9 percent, and down with the US by 14.5 percent.
Chinese trade with Russia, meanwhile, alongside exports to South Africa and Singapore, raised exponentially by 78
percent. As an example, late last week, a Chinese cargo set sail from St. Petersburg loaded with fertilizers, chemicals, and paper products. It will cross the Arctic and arrive in Shanghai in early August.
Zhou Liqun, chairman of the Chinese Chamber of Commerce in Russia, went straight to the point – this is just the start of the “routine operation of the Arctic freight shipping route between China and Russia.” It’s all about “the security of logistical channels” inbuilt in the Russia-China strategic partnership.
The Arctic Silk Road, from now on, will be increasingly strategic. The Chinese can keep it open at least from July to October every year. And as a bonus, a warming Arctic allows better access to oil/gas resources. A trademark “win-win” – no wonder since 2017 the development of the Arctic Silk Road is part of BRI.
All of the above shows a sharp shift in the Chinese commercial drive towards the Global South. Trade with China’s BRI partners now amounts to 34.3 percent of China’s total global trade in terms of value – and that number is rising.
From the UAP railway to the Greater Bay Area
On the Russian front, all eyes are on the 7,200 km-long, multimodal International North-South Transportation Corridor (INSTC) – which alarms the collective west as a de facto replacement of the Suez Canal. The INSTC cuts shipping costs by about 50 percent and saves up to 20 days of travel compared to the Suez route.
INSTC trade – via ship, rail, and roads linking Russia, Iran, Azerbaijan, India, and Central Asia – should triple over the next seven years, as Russian Transport Minister Vitaly Saveliev noted at the recent St. Petersburg forum. Russia will invest over $3 billion in the INSTC up to 2030.
Increasing trade between Russia, Iran, and India via the INSTC connects to something that until recently would be regarded as a UFO: the Trans-Afghan Railway.
The Trans-Afghan will emerge as a follow-up to something very important that happened last week, when Pakistan, Uzbekistan, and Afghanistan signed a joint protocol to connect the Uzbek and Pakistani networks via Mazar-i-Sharif and Logar in Afghanistan.
Welcome to the UAP railway – which could be hailed not only as a BRI but also as a Shanghai Cooperation Organization (SCO) project – where Tashkent and Islamabad are full members, and Kabul is an observer. Call it a much-needed trade corridor doubling up as a classic Chinese “people-to-people exchange” platform.
The Uzbeks estimate that the 760 km-long railway will reduce travel time by five days and costs by at least 40 percent. The project could be finished by 2027.
The subsequent 573 km-long Trans-Afghan Railway has already got its road map: it’s bound to connect the intersection of Central and South Asia to ports on the Arabian Sea.
All of the above expands Chinese trade in several directions. Which brings us to a fascinating symbiosis in progress between south China and West Asia – symbolized by the Greater Bay Area.
As Saudi Crown Prince Mohammed bin Salman turbo-charges his immensely ambitious Vision 2030 modernization project, the Greater Bay Area is being hailed by Saudis as no less than “the future of Asia.”
Every investor from Jeddah to Hong Kong knows that Beijing is aiming to turn the Greater Bay Area into a prime global tech center, centered in Shenzhen, with Hong Kong playing the role of privileged global finance hub and Macau as the cultural hub.
The Greater Bay Area, not by accident, is a key BRI plank. As a whole, the nine cities in Guangdong, plus Hong Kong and Macau (more than 80 million people, 10 percent of Chinese GDP), will be configured as an astonishing first-class economic powerhouse by 2035, largely overtaking Tokyo Bay, the New York Metro Area, and the San Francisco Bay Area.
With Saudi Arabia aiming to become a full member of both BRI and SCO, Beijing and Riyadh will turbo-charge their tech cooperation on top of energy and infrastructure.
All eyes on South Africa next month are on how BRICS will work to solve its internal issues while organizing the expansion to BRICS+. Who will get to join the club? Saudi Arabia? UAE? Iran? Kazakhstan? Algeria? The top two BRICS countries, China and Russia keep investing in a geoeconomic roll that has dozens of countries lining up to join.
