NEWS,09.01.2013

Growth in coal demand to slow in 2013

Prices for seaborne thermal coal will stay above production costs for larger mines this year, while demand and supply of the fossil fuel will slow because of weaker economic growth and falling US exports, Deutsche Bank said in a report on Tuesday.Prices for Australian and South African coal benchmarks will be largely unchanged this year as a forecast 3% growth in demand for seaborne coal, driven mainly from China and India, will be met by a corresponding 3% rise in supply, leaving the market short by 19m tonnes, the German bank said.South African coal delivered into Europe (API 4 FOB Richards Bay) will average $93/tonne this year, unchanged from last year's levels, while Australian exports of coal (Newcastle FOB) are likely to fall to $95 from $97 seen in 2012, meaning most larger producers of coal will still be able to break-even or produce at a profit, the German bank said.Deutsche Bank estimated costs of production to be around $89-93, but only smaller producers are likely to be loss-making this year as wages and equipment costs stabilise and demand from fast-growing developing economies is likely to underpin the market, the report added."There is no single explanation for higher demand. In India, it is a perennial shortage of fuel for power generation amidst a slowly improving price tariff environment," Deutsche Bank coal analyst Michael Hsueh told Reuters."In China, [higher demand] is primarily driven by the need to fill in the gap between demand and domestic production to whatever degree it is beneficial. We do believe that we are seeing a recovery in China and that it will strengthen throughout the year," he added.The report said recent economic indicators suggest that China, the world's second-largest economy, could see growth pick up this year at a slightly faster rate compared with 2012, when the pace of expansion slowed and prompted the cancellation of some orders for coal and the build-up of big stockpiles."We can already observe that the year-on-year (y/y) growth in Chinese power demand has picked up in October and November 2012 to 7.1% and 8.0% respectively," it added.Moreover, demand for coal in the US, the world's second biggest consumer, could pick up slightly this year because gas prices are forecast to be higher, Deutsche Bank said.This would mean more production will be consumed domestically by utilities and less exported to Europe, where cheap US coal has prompted utilities to burn more of the fuel in power stations in 2012."As we forecast that US gas prices will average $3.75/mmBtu in 2013, and then carry on rising through 2015 in our forecasts to $4.00/mmBtu and $4.25/mmBtu, we expect that coal demand in the US will recover further in the next year."Despite some shutdowns of older mines in the US and smaller operations in Indonesia, mainly because of rising production costs and a 20% y/y fall in coal prices, global supply rose 7% in 2012 while demand grew 8% in 2012, Deutsche estimated.In a separate report on Tuesday Deutsche said a steady decline in European coal prices that has coincided with a tight gas market means that coal prices would have to rise by almost $80 per tonne in order to restore competitiveness to gas for power generation.

Turkey holds plane en route to Iran

Turkey has been holding for several days a cargo plane en route from the United Arab Emirates (UAE) to Iran after its crew refused to document its load, a customs ministry official told AFP on Wednesday. "The plane owned by a Turkish company had to make an emergency landing at Istanbul's Sabiha Gokcen Airport due to technical reasons," the official said on condition of anonymity. "The company has to document its cargo at our customs until 10:00 [Wednesday], for security purposes otherwise we'll do what's necessary," he added, without elaborating. The official said that Turkish authorities would have the right to check the plane's cargo if the company refused to reveal the items on board. "It is most probably carrying gold," he speculated.An official from the Iranian embassy in Ankara told AFP that they had not been informed by the Turkish foreign ministry of the plane's grounding."Authorities will take necessary steps if there is any irregularity in the conduct of business," another Turkish official said.But officials declined to comment if the cargo of the plane was documented before the given time and if the plane was allowed to resume its journey.The incident comes amid indirect gold trade between Turkey and Iran, with the trade to settle Turkish imports of Iranian natural gas reportedly being done via UAE to bypass US-led sanctions against Tehran.Turkey could have faced recession if it was not for the boom in exports, particularly in gold sales to Iran, Economy Minister Zafer Caglayan said in December."Turkey ships 60% of its gold to Iran and [the] rest to the UAE and other countries. But we are not Iran's only market," the minister added.Turkey sold $6.5bn worth of gold to Iran and another $4.2bn worth to the UAE in the first 11 months of 2012. Ankara is under severe pressure from its Western allies to reduce imports of natural gas from Iran owing to Tehran's disputed nuclear programme. Fearing that Tehran aims to acquire nuclear weapons, the US has led Western powers to impose ever tougher sanctions against Iran which rejects the charge outright, insisting its programme is for peaceful purposes only.Under a law approved last year, Washington threatened to penalise foreign financial institutions over transactions with Iran's central bank, which handles sales of the country's key oil and gas exports.On 30 November, the US Senate unanimously approved new economic sanctions aimed at further crippling Iran's energy, shipping and port sectors.But shortly thereafter, Washington extended exemptions from the sanctions to nine major economic powers, including Turkey, China, Taiwan, India and South Korea.Ankara in return has cut its Iranian oil purchases by 20%. Energy Minister Taner Yildiz said last month Turkey met half of its crude oil needs from Iran in 2011 but was now trying to source more from Libya, Saudi Arabia and Russia.But Turkey expects the latest round of US sanctions against Tehran will not cover natural gas imports.Iran is Turkey's second-biggest natural gas supplier after Russia, and third biggest in oil.Iran's economy is struggling to cope with tightening sanctions imposed by the US and the EU over the past two years.Turkey says it is bound only by UN sanctions against Iran, and Turkish officials insist that Turkey will keep buying natural gas from Iran which supplies up to 20% of the gas it consumes.

Hagel to rein in Israel on Iran strike

Chuck Hagel, the nominee for the next US defence secretary, will seek to rein in Israel over any attempt to carry out a unilateral strike against Iran's nuclear facilities, Israeli observers believe. Hagel's nomination by US President Barack Obama must still be confirmed by the US Senate, but the prospect of the former senator assuming the top Pentagon post has already stirred concern in Israel.Analysts and commentators note that Hagel is known for a non-interventionist approach to foreign policy, and is believed to be strongly opposed to the use of military force to tackle Iran's nuclear programme."The road to Iran stops at Hagel," wrote commentator Bradley Burston in Wednesday's Haaretz newspaper."Obama's message to [Israeli Prime Minister Benjamin] Netanyahu on Iran is succinct enough to be spelled out in 10 letters: Chuck Hagel."The message to Jerusalem is clear: it won't be easy from now on getting a green light from Washington to embark on an adventure in Iran," commentator Orly Azulai wrote a day earlier in the top-selling Yediot Aharonot daily."That is one of the reasons why top figures in Jewish organisations in the US, as well as high-ranking Israeli political officials, have been spending the part number of weeks engaged in a concerted effort to prevent Hagel from being appointed," Azulai added."They argue that he is bad for Israel because he supports dialogue with Hamas and Hezbollah, and he doesn't think that the solution to the Iranian nuclear programme is war."Nadav Eyal, writing in the Maariv daily, agreed that Hagel favoured a non-military solution to the issue of Iran's nuclear programme, which much of the international community believes masks a weapons drive, despite Tehran's denials."Hagel would like for the US to speak directly with Iran, and no, he does not believe that war is the necessary outcome of the nuclear crisis there. He wants to avoid war at almost any price."Haaretz's Burston said that in selecting Hagel, Obama was sending the message that in his second term, he would not "grant the same flexibility" to Netanyahu."In the hole he dug with his ostentatious contempt for Obama, a hole he cannot afford to deepen, Netanyahu may have stumbled into paving the way for Hagel's nomination and confirmation," he wrote referring to the Israeli leader's open backing for Obama's rival in the presidential elections."Thus, the prime minister may ultimately become the factor that blocked a war with Iran."Speculation about a possible unilateral Israeli strike on Iranian nuclear facilities reached fever pitch last year, but ultimately came to nothing, amid reports of strong US opposition to any such move.

Why the Hagel Battle Made More Sense for Obama Than the Rice Battle

 

Why did President Barack Obama choose a big battle with Republicans over Chuck Hagel rather than Susan Rice?Obama himself, of course, has not said. He never said that UN Ambassador Rice was his first choice for secretary of state. He also never said that former Nebraska Senator Hagel, now co-chair of the president's Intelligence Advisory Board and member of the Defense Policy Board, was his top pick for secretary of defense before announcing it on Monday.But the question is important enough for speculation because, at least from a superficial standpoint, it's such a striking contrast. Why go to war on behalf of a white male conservative Republican (on most issues outside geopolitics) rather than the black female Democrat who was a loyal campaign surrogate before joining his government?I don't think it's a matter of qualification. Both Hagel and Rice are qualified for Defense and State. Nor is it really a matter of confounding the notion of political loyalty. While Rice jumped from the Clinton circle, in which she was part of a pack of potential appointees, to the Obama circle, where she was able to enter at the top, Hagel made the existential leap in 2008 from dropping his old friend John McCain to lending a bipartisan veneer to Obama's famous campaign world tour, beginning in Iraq and Afghanistan. Even if Obama had come up short against Hillary Clinton, Rice was still a Democrat, close to the ascending young senator. Whereas Hagel was literally a man without a party.But it's not a matter of owing Hagel more than Rice, which in my view Obama does, either. Instead, I think it came down to a question of which battle made the most sense for Obama. In terms of promoting his agenda and, especially, in terms of minimizing risk of damage to his administration and maximizing the ability to create more problems for the Republican Party.With Rice, the advantage on the latter lay in emphasizing how Republicans were demonizing a black woman for a problem, the Benghazi disaster, she herself had nothing to do with causing. (Mischaracterizing being another matter.)But that point had been made. To continue to push it from an identity politics standpoint would have ignored the real risk of harm to the administration in making the debate about the appointment a debate about Benghazi. Yes, Rice, in her now famed Sunday chat show PR offensive five days after the terrorist attack which claimed the lives of Ambassador Chris Stevens and three other Americans on the anniversary of 9/11, followed talking points asserting that the attack was really the result of a protest gone sour. That there was ample information already available, in classified as well as journalistic form, that was wildly wrong  which it was was a problem for Rice going forward. But she could always try claiming that she was just following a script.The bigger problem for the administration, though not Rice herself, who was clearly doing some political spin work on the shows as she buffed up her own internal candidacy to replace Clinton, is that the talking points were altered as they made their way through the bureaucracy. Why turn Senate confirmation hearings on the secretary of state into an exercise in determining how the talking points changed from accurate to inaccurate? Indeed, why dwell on Benghazi at all? While clearly no Watergate, mistakes were made and a tragedy resulted. Not a very uplifting focus. And clearly no one wants to talk about the CIA's role in all this. CIA had a much bigger presence in Benghazi than State, yet was caught just as unawares as anyone else. Which doesn't make them evil, merely fallible.Some on the left say that Susan Rice was an advocate for the Iraq War and all manner of other military interventions in the Islamic world. (There was also grave concern in environmental circles around her multi-million dollar investments in Canadian fossil fuel stocks, including the Keystone XL pipeline, which the State Department is in charge of sorting out.)Columnist Peter Beinart, a shrewd observer of foreign policy elites and the U.S.-Israel relationship, says the reality is more complex, that the real problem with Rice is that she had no discernible position on the invasion of Iraq for reasons of careerism.Hagel we know supported the invasion of Iraq, then broke dramatically with President Bush, his old compadre John McCain, and the rest of his party, becoming a scourging critic of the Iraq War in particular and of the vastly interventionist neoconservative imperative in general. Even before that he had expressed sympathy for the Palestinians and a desire to avoid war with Iran.So a battle for Rice presented a muddy geopolitical contrast and a likely focus that was very antithecal to Obama's interests. Hagel, on the other hand, presents a very different scenario. With the battle over Hagel,Obama gets to take on what many view as the "Forever War" mindset of the neoconservative faction that seized control of the Republican Party's geopolitics with the election of George W. Bush and Dick Cheney. And he gets to do it in a way that emphasizes his own preferred post-partisan positioning. For the neoconservative tendency, resilient as it is despite the debacle of the Iraq War an amnesiac ADD media culture being a prime enabler runs very contrary to major Republican thinking of the not so distant past. Not counting Republican isolationists of the past, internationalist Republicans like Dwight Eisenhower, who famously warned of the "military industrial complex," and the first President Bush saw limits to interventionism, even as they pursued the Cold War. (Eisenhower forced Britain, France, and Israel to give the Suez Canal back to Egypt following their bombing of Cairo and invasion of Egypt in 1956.) That became especially true after the Cold War.Bush I, for example, in the Gulf War, routed Saddam Hussein from his position occupying Kuwait but did not pursue regime change in Iraq, which he could easily have done. He put Saddam back in his box, and kept him there, where he was a useful counterweight to Iran. And while clearly a friend of Israel, the Bush I administration didn't follow everything on the Israeli government checklist. The neoconservative agenda, ever in lockstep with what is already the most right-wing government in Israel's history, has been very different, taking advantage of 9/11 by diligently pursuing regime change in Iraq on spurious grounds, then taking advantage of the resulting edge for Iran, and Iran's suspicious nuclear program, by pushing for war there. How would that work any better than the Iraq War? They don't say. By promoting Hagel, Obama brings all this to the fore. And he does it in a way which emphasizes that Hagel actually has a great many prominent Republican backers and represents an important tradition in Republican thinking prior to the advent of radical conservatism. General Colin Powell, U.S. secretary of state under Bush II and chairman of the Joint Chiefs of Staff under Bush I, who presided over the success of the Gulf War, on Monday afternoon announced his strong support for Hagel, countering the neoconservatives who bedeviled his tenure during the Bush/Cheney years. As did fellow Vietnam vet former Pennsylvania Governor Tom Ridge, U.S. secretary of homeland security under Bush II and a finalist for vice president with John McCain.Hagel, who should be confirmed after a pointed and at times dramatic and entertaining battle, will be the first former enlisted man to serve as defense secretary. He will also be the first Vietnam War veteran to serve as SecDef.With John Kerry at State, the two will form an unprecedented duo of Vietnam War heroes at the top of America's geopolitical cabinet structure. Which is intriguing in itself, as it comes at a time when decreasing numbers in politics and the media have any military experience of their own. This is especially true among Hagel's eagerly interventionist neoconservative opponents, incidentally, as may be pointed out a time or two.Hagel earned two Purple Hearts in Vietnam for his wounds in combat as an infantry sergeant. A favorite of veterans service organizations, Hagel should relate well to rank and file service members as the military downsizes in the post-Iraq/Afghanistan era.It will be his charge to manage the ending of the Afghan War, as well as execute the big geopolitical pivot to the Asia-Pacific region which I write about on a regular basis. ( You can see an archive of my Pivot-related pieces here.)In what is surely not a coincidence, Afghan President Hamid Karzai is on a four-day visit to Washington this week. It's all about the transition away from the Afghan War for the U.S., and potential agreements about a relatively small residual force, almost certainly less than 10,000 troops.But while Hagel is hated by neoconservatives for breaking with them over the Iraq War, the battle lines over his nomination will play out in large measure over his relationship with Israel and his views of Iran and of radicalized Islamic militant organizations pushing for a Palestinian state.Like many of the geopolitical realists around the first President Bush, Hagel sees clear limits on how far America can follow the lead of the Israeli government and its most vociferous allies in the U.S. He's also backed negotiation with Iran and talks with radical Islamic militants.While Obama is in reality a huge supporter of Israel, as just retired Defense Minister Ehud Barak has noted many times, he is clearly no fan of its current government, the most right-wing in Israel's history. And it's a government that is apt to get more right-wing after the January 22 elections there.Israeli Prime Minister Bibi Netanyahu, a longtime conservative who has become more conservative while incorporating far right religious parties in his Likud coalition, is challenged in this election by his charismatic former chief of staff, Naftali Bennett, head of the new Jewish Home party. Bennett, son of two American emigres from, ironically, '60s San Francisco, has seen his support go up dramatically as he pushes far right-wing policies.Netanyahu, who clearly maneuvered during the U.S. presidential elections to help his old friend and business colleague Mitt Romney, looks to enlarge his appeal to coopt that of Bennett, a fellow former special operator in the elite Sayeret Matkal. (Netanyahu may be a warhawk, but you can't say he's a chicken hawk.)On the other side of the inevitable Bill Kristol  has there ever been a cable noise commentator with a poorer forecasting record?  and company in the Hagel confirmation battle is an array of Hagel supporters, including military brass and the new Bipartisan Group, which includes former Republican National Security Advisor Brent Scowcroft, former Democratic National Security Advisor Zbigniew Brzezinski, former Republican Defense Secretary Frank Carlucci, former Republican Undersecretary of State Thomas Pickering, former Democratic Senator David Boren, former Republican Senator Nancy Kassebaum-Baker, and my old friend and boss, former Senator and Democratic presidential frontrunner Gary Hart.There will be plenty to fight about in the coming debate. Hagel has previously urged talks with Hamas, which the U.S. and Israel have identified as a terrorist group, in order to try to make progress on the Palestinian issue. And he has looked decidedly askance at plans to attack Iran in efforts to derail its nuclear program.But when all is said and done, I expect a new focus to emerge from all the tumult. One in which we see the struggle with jihadism as one calling not for massive interventionism in the Islamic world but for carefully calibrated intelligence and special ops war, police action, and shrewd diplomacy to diminish the well of potential recruits.