The mammoth opportunity no one is talking about

Wednesday, 12 September 2018
Melbourne, Australia
By Bernd Struben

  • Is this what they call sustainable?
  • Capitalising on the alternative
  • Mailbag

In Monday’s Port Phillip Insider, we looked at why the Paris Climate Agreement is beginning to unravel.

Namely, developed nations are balking at the idea of handing over $140 billion (US$100 billion) a year to developing nations.

The monumental annual wealth transfer is supposed to commence in 2020. Many developing countries don’t want to have to pay the money back either. And they don’t want too much prying from donor nations into how they spend the cash splash.

Putting its shaky future aside, the Agreement aims to keep any rises in global temperature to less than two degrees Celsius by 2100. The world is supposed to achieve this by reducing the amount of CO2 we pump into the air.

The environmental push comes at a sticky time.

Over the coming century billions of people in developing nations are predicted to rise out of poverty and join the ranks of the middle class.

A wealthier global populace is great news. Except there’s the inconvenient fact that with more wealth people want more stuff. Things like air conditioning, cars, frost-free refrigerators, and big juicy steaks…to name a few.

Coal gets a lot of the blame for global warming. As do oil and livestock.

But if CO2 really is to blame for any rise in global temperatures, there’s only one real culprit. And that’s you and me…and our 7.6 billion brothers and sisters.

Alarmingly, according to UN estimates, this number is set to balloon to 11.2 billion by 2100.

That’s 3.6 billion people more than today.

To put that staggering figure in perspective, imagine adding the world’s entire population in 1966 to the planet.

If you’ve got trouble envisioning that, you can break it down to an average of 45 million more people a year, every year, for the next 80 years. That’s like adding almost double the current population of Australia annually…all while reducing emissions.

Now you’ll never hear mainstream politicians talk about stabilising or…gasp…perhaps gradually reducing the world’s population to combat climate change and environmental degradation. To do so is political suicide.

And, unfortunately, God didn’t see fit to enlighten us with a useful cap when he threw out the old, ‘Be fruitful and multiply,’ edict.

These are just some of the issues likely to hobble the Paris Agreement. But perhaps the biggest problem is the issue of compliance.

While South Australia may be rushing headlong into renewable energy sources — at great cost to households and businesses — the global appetite for fossil fuels is only growing.

More, after the markets.

Markets

Over the weekend the Dow Jones Industrial Average closed up 113.99 points, or 0.44%.

The S&P 500 lost 10.76 points, or 0.37%.

In Europe the Euro Stoxx 50 index finished up 2.38 points, or 0.07%. Meanwhile, the FTSE 100 lost 0.08%, and Germany’s DAX closed down 169.75 points, or 1.39%.

In Asian markets, Japan’s Nikkei 225 is down 77.37 points, or 0.34%. China’s CSI 300 is down 0.54%.

In Australia, the S&P/ASX 200 is down 7.57 points, or 0.12%.

On the commodities markets, West Texas Intermediate crude oil is US$69.82 per barrel. Brent crude is US$79.29 per barrel.

Regular readers will know the rising oil price over the past few days has seen crude moving in the opposite direction I’ve been forecasting. But the latest price bump should be short-lived. It’s predominantly driven by fears Hurricane Florence could threaten the US East Coast fuel market.

And those fears may be well grounded.

The category 4 storm — with sustained wind speeds of 210 kilometres per hour — is expected to hit US shores on Friday. Meteorologists predict it will likely strike near the border between North and South Carolina.

Turning to gold, the yellow metal is trading for US$1,195.75 (AU$1,685.58) per troy ounce. Silver is US$14.10 (AU$19.88) per troy ounce.

One bitcoin is worth US$6,266.41.

(For the latest investment advice on bitcoin and the other major cryptocurrencies, go here.)

The Aussie dollar is worth 70.94 US cents.

Is this what they call sustainable?

China is a signatory of the Paris Agreement. But are they really gearing up towards a renewable energy-based economy?

You’ve likely read that the nation of 1.4 billion people has done a lot to combat rampant air pollution in some of its biggest cities under President Xi Jinping. That’s certainly true. But China remains the world’s biggest user of coal.

And as you can see in the chart below, the latest figures show Chinese coal imports holding near four-year highs.



chart image

Source: Bloomberg
Click to enlarge


From Bloomberg:

Coal imports by China held near the highest level in four years, underscoring buoyant demand in the world’s largest user even as lower domestic prices and a weaker currency hurt the appeal of overseas supplies…

Daily thermal coal use by China’s major power generators averaged 769,000 tons in July to August, typically a peak demand season, slightly above the levels last year.’

There’s another staggering figure for you. China’s ‘major power generators’ burned an average of 769,000 tons of coal per day over the past two months.

Let’s put this in some kind of perspective again.

I believe the figure is calculated in US tons, as opposed to metric tonnes. Unless my math is off, that works out to 28 kilograms of coal per day for every man, woman and child in Australia. And the Chinese are burning slightly more than last year.

That may not be good news for the environment. But it’s certainly good news for states like New South Wales, which recently recorded record mining royalties from coal.

And you won’t hear investors in companies like Yancoal Australia Ltd [ASX:YAL] complaining either. The coal producer’s price is up 4.0% in intraday trading, putting it up 18.2% since this time last year.

Of course, not everyone wants to invest in ‘dirty’ energy like coal. But the rise of ethical funds and other obstacles to coal investment in Australia and the West show no signs of hobbling the booming industry.

As The Australian Financial Review reported in July:

A cooling climate for coal investment in Australia has encouraged Yancoal Australia to seek a dual listing in Hong Kong so that it can access the deeper pool of Asian capital that is actively seeking long investment in the carbon fuel cycle.

Well there you have it. One man’s threat is another’s opportunity.

A world with ever more and ever wealthier people is going to demand cheap reliable energy. And for the moment, coal remains an important means to that end.

However, there may be a far better way forward…

Capitalising on the alternative

We know that the sun and wind can power our factories and appliances. And we know batteries can store some of the excess power generated during the day to use at night. Or the power generated on windy days to use on calm ones.

But battery backed solar and wind power aren’t up to the task of providing all of humanity’s energy needs. At least not with today’s technologies.

If they were, these industries wouldn’t need subsidies to compete against fossil fuel-based power generation. And developing countries wouldn’t be holding their hands out for $140 billion a year to make the transition to cleaner energy sources.

But there is an alternative.

While it’s not new, it’s been widely overlooked in recent years. But as Greg Canavan has unearthed in his new report, that looks set to change.

Here’s what he wrote to subscribers of Crisis & Opportunity last week:

What was once a heavily oversupplied market is moving quickly toward undersupply. Major producers are cutting production or closing mines altogether. And as I’ve mentioned previously, London-listed                                    is in the market stockpiling                  to await higher prices.

And higher prices are exactly what is likely to result from all this. When the big price moves might start is anyone’s guess. But history suggests that                   can indeed move very quickly once shortages start to become more widespread.’

Now I’ve blocked out the name of the company and the commodity he’s talking about.

I also can’t tell you the three Australian listed stocks he’s recommending to his readers. Stocks he believes could potentially see gains of up to 1,750% over the next 15 months.

While I doubt you can guess the three stocks Greg is recommending, you may well be able to decipher the commodity.

Either way, Greg reveals everything in his new report. You can read that here.

Tomorrow, we’ll look more closely at what Greg believes is the solution to the current energy conundrum. One few pundits are talking about. And one that could make shareholders in the right stocks some eye-popping gains.

Mailbag

We’re always happy to receive your feedback — good or bad — and any other ideas you may have for us here at Port Phillip Insider.

Please send your correspondence to letters@portphillipinsider.com.au. In the interest of privacy, if we publish your letter, we’ll only use your first name.

 

Now before you sign off, here’s the latest in the slippery slope towards reverse discrimination from The Australian Tribune:

‘Liberal Candidate: “Don’t Mark Me Down for My Gender”’

Prime Minister Scott Morrison supports bringing more women into the Liberal Party. But he says quotas are not the means to do so.

Yet even with quotas officially off the table, the party is under mounting pressure to increase the number of females in its ranks. The risk here is that someone rises to power not based on their merit, but on their gender.

As Liberal powerbrokers in Canberra…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another, then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd