David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    The Top Miners Are Split on How to Chase the EV Battery Boom

    This article by David Stringer for Bloomberg may be of interest to subscribers. Here is a section:

    “We did a review of all the battery input materials -- nickel, cobalt, lithium,” said Eduard Haegel, asset president at the BHP’s Nickel West unit. “We think that in the medium-to-longer term there will be a margin that will be sticky for nickel -- we think it’s an attractive commodity.”

    BHP, the biggest miner, this year reversed long-term efforts to seek a buyer for the division, opting to retain Nickel West to benefit from forecast growth in lithium-ion batteries and a scarcity of high-quality nickel supply. From the second quarter of 2020, the unit will begin production of bright-turquoise colored nickel sulphate -- a premium raw material for the battery supply chain -- from a nickel refinery south of Perth, with plans to potentially carry out the industry’s largest expansion.

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    Evaluating US Nuclear Competitiveness and its Future as a Carbon-Free Clean Energy Source

    Thanks to a Keith Rabin for this interview of Dr.Robert F.Ichord. Here is a section:

    Both Russia and China are strongly committed to domestic nuclear development, international nuclear power exports, and the development of small modular reactors (SMR) and advanced nuclear reactors. Russia is building seven third–generation VVER–1200 reactors domestically and over twenty internationally. China is building domestically about eleven indigenous units, not including the Russia VVERs, the French EPRs or the recently completed US AP–1000s. They have two reactors of the Hualong One design under construction in Pakistan near Karachi and one planned at Chasma, the site of older, smaller Chinese reactors. They are also pursuing deals in the UK, Romania and Argentina as well as Bulgaria and several other countries. These strong state–financed commitments create the domestic and industrial capabilities needed for future innovation as well as to establish long–term political and economic relationships with countries of strategic interest. US historical influence over international standards and regulatory system development is therefore being challenged as well as US overall foreign policy interests in democracy and open markets. South Korean and Japanese companies are also international competitors but remain long–time US collaborators.

    According to the World Nuclear Association about 30 countries are considering, planning or starting nuclear power programs. These range from sophisticated economies to developing nations. Is nuclear a viable option for emerging and frontier economies and how does installation and utilization differ in these locations from developed economies in terms of safety, non–proliferation as well as political stability, environmental and regulatory standards, supporting infrastructure and other factors?

    I believe there is a major shift occurring in the global nuclear industry from the industrial countries to the non–OECD countries. Most of future global electricity growth will be in these countries and they want to diversify and develop cleaner energy systems. Despite the huge upfront costs, countries are deciding to accept attractive Russian and Chinese financing for these large, multi–billion dollar units. There is the national pride involved from joining the “nuclear club' as well as possible corruption in certain cases. Russia also offers military equipment as well as full fuel and operating services in its strategy to expand influence. Although both Russia and China have significant training efforts to develop local capacities, overall governance and transparency in a number of these countries is weak and the commitment to competent Nuclear Regulatory Commission (NRC)–like regulatory institutions is questionable. Although most of the countries have signed the Non–Proliferation Treaty (NPT) and the International Atomic Energy Agency (IAEA) Additional Protocol, the introduction of current nuclear power technologies in countries and regions – in which there are significant tensions and political conflicts, e.g. Middle East – raises serious concerns for US foreign policy.

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    Email of the day on climate change from Dr. David Brown:

    I am impressed by your bravery in questioning much that appears in the media about 'climate change'. I am sure the climate is changing, as it is still warming from the last ice age, but that is a natural cycle. As a dyed-in-the-wool scientist, trained carefully in my PhD studies in the logic, method and philosophy of science, I have been horrified by the apparent abandonment of scientific method by many in research on our climate. 

    I say this for two reasons. The first is that a basic premise of scientific method is that nothing can ever be proven for certain, that all conclusions are subject to change. Adoption of that approach was a key step in development of the scientific method and abandonment of religious-type certainty, yet it appears to have been abandoned as far as climate research in concerned. Second, you may remember that ex-president Obama opined that no grant money should be given to scientists seeking to disprove theories of climate change, yet the whole scientific method IS to generate experiments to disprove a hypothesis. I recommend subscribers read Karl Popper on this matter, as he explains the scientific method very clearly. 

    I do not know whether human activity is particularly relevant to climate change, but I do know that much that passes as 'scientific research and comment' is just the opposite. I am more concerned about pollution that carbon dioxide, and that focus would have been much wiser than the approach adopted by the EU that ignored common sense, led to subsidy of diesel engines, and caused tens of thousands of premature deaths. (Was anyone ever held to account?). I never switched to diesel.

    Well, despite Obama, there are alternative research views being published and this article refers to one quite contrary to the carbon dioxide hypothesis.

    The original research article can be accessed by links in the article and I strongly suggest subscribers do read it to at least loosen their views a little.

    It suggests that human influence is negligible and that any changes are mostly due to increased cloud cover generated by cycles in cosmic radiation. However, I fully expect the response to an alternative view will be as you stated: "Confirming evidence is accepted at face value but non-confirming evidence is dismissed. This practice is justified by the urgency of the problem and the need for action, but it is exactly when a vital decision needs to be made that cool heads need to prevail." 

    Well done Eoin for stating this. You are impressive in your clear thinking and all subscribers benefit from your wisdom if they learn from you while investing.

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    Email of the day on climate change.

    Regarding the Allen Brooks piece on Climate change. I have to say I find the benign conclusions of the report totally unconvincing. Over the years I have read widely on the subject and have been especially impressed by the publications and books of one of the most eminent climate scientists whose work goes back more than 50 years. I refer to Professor James Lovelock. In a recent BBC interview, he suggested that global warming may be entering an acceleration phase. As I write this reply a news story has just announced that a high-pressure dome is due to affect the Eastern states of the US with predicted city temperatures likely to exceed 40 deg C. The simple fact is that you cannot expect hydrocarbons that have been trapped in the Earth’s crust over many millions of years, to be exploited by man over a few decades with the bye products going into the atmosphere, without grave consequences.to follow. Globally we have just experienced the hottest June ever and significantly Siberia has been 7 deg C above normal for the time of year. I mention this in respect of the melting permafrost which is now releasing methane in significant amounts. A gas thirty times more significant than CO2.as a greenhouse gas Of course this topic is an extremely emotional one, simply because the decisions made now on how we collectively proceed could not be more important. On balance I think I would go with the IPCC and James Lovelock. His books on Gaia theory, by the way, are worth reading

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    Email of the day on the Australian Dollar

    You may have seen this but thought it worth sending as it has potentially big impact for us Aussie’s.

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    Oil Dips as Russian Pipe Flow Is Restored, Earnings Are Mixed

    This article by Alex Longley and Alex Nussbaum for Bloomberg may be of interest to subscribers. Here is a section:

    Russian pipeline operator Transneft PJSC, meanwhile, said it resumed full flows from the country’s largest crude producer, Rosneft PJSC, after imposing restrictions amid concerns about contamination.

    Oil has fallen all week as the specter of a renewed U.S.-China conflict dented the demand outlook, while American fuel stockpiles jumped. That’s overshadowed worries that Iran may shut down the Strait of Hormuz, a key chokepoint for much of the world’s oil shipments.

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    Musings from the Oil Patch July 16th 2019

    Thanks to a subscriber for this report from Allen Brooks which may be of interest. Here is a section on climate models:

    What is most important about the Institute’s climate model was its near perfect replication of the temperature history of 1861-2013.  Projected into the future, the Institute’s model projects an unalarming temperature increase to 2100 of 1.4C (2.52 F).  Note that the Institute’s projection falls below the 1.5C increase environmentalists say is necessary to keep the planet from selfdestruction.  That target can be met without upending our entire economic system and how it is powered.  

     The Institute’s temperature forecast is well below those produced from the climate models utilized by the IPCC, which in some cases are as much as five times greater.  The criticism of climate models is that they are biased to the warm side.  An interesting chart shows the temperatures from climate models attempting to recreate actual temperatures at various elevations of the atmosphere for 1979-2010.  The chart shows that the models always exceed the actual observations when they rely on CO2 as the forcing mechanism.  Without CO2, the models come much closer to replicating temperature history, demonstrating the warming bias of the carbon emissions thesis.  

    Understanding that natural variables are more important in explaining our temperature history is important since such a climate model projects a smaller temperature increase.  This goes against the preconceived basis for founding the IPCC, and weakens the attack on fossil fuels.  The Institute’s climate model results suggest that adaptive steps, more fuel-efficient vehicles, equipment and appliances, as well as increased use of cleaner fossil fuels could be a more palatable and less costly route for the global economy than draconian plans such as the Green New Deal.  

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    Email of the day - on uranium and investing in illiquid shares

    How do you think about liquidity in the context of a narrow theme like Uranium? And how would you measure it in this case? Volumes picking up and an increase in market capitalization of the sector? Or does it all tie back to the Fed and other central banks

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    German Vow to Cancel Permits Sends Carbon to 11-Year High

    This article by Brian Parkin and Mathew Carr for Bloomberg may be of interest to subscribers. Here is a section:

    “We’ve seen an encouraging rise in permit prices, so it’s no surprise that we see it as essential that the instrument continues to work as it should do,” Schulze said. “That’s logical. It makes no sense at all to implement an exit from coal here, only to export pollution licenses into the wider European system.”

    And

    “Scarcity is central to the aims of the European carbon trading market.”

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    Roubini Lives Up to Dr. Doom Alias With Global Recession Call

    This article by Gregor Stuart Hunter for Bloomberg may be of interest to subscribers. Here is a section:

    On the trade front, deglobalization looms as countries around the world have to choose which country to align with -- the U.S. or China -- once the bilateral negotiations collapse, Roubini said. “This divorce is going to get ugly compared to the divorce between the U.S. and the Soviet Union.”

    On top of that, an oil-price shock coming from Iran tensions would raise the prospect of 1970s-style stagflation as a rise in crude prices coincides with slower growth, Roubini said.

    Speaking at a blockchain summit in Taipei, Roubini reiterated his skepticism toward cryptocurrencies such as Bitcoin.

    “There’s massive, massive amounts of price manipulation” in cryptocurrency trading, he said in remarks at the conference. As for blockchain, “it’s the most overhyped technology ever, it’s nothing better than a glorified spreadsheet,” Roubini said. “Nobody’s using it, and nobody’s ever going to use it.”

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