ENERGY UPDATE: EIA

July 25, 2008 at 9:09 am | Posted in Economics, Globalization, Oil & Gas, Research, World-system | Leave a comment

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THIS WEEK AT EIA July 18 – July 24, 2008

wmaster@eia.doe.gov

Thu 7/24/08

THIS WEEK AT EIA (Volume 10, Issue 30)
(July 18 – July 24, 2008)

THIS WEEK AT EIA is a list summarizing and providing URLs for every Energy Information Administration (EIA) product released during this week.

PRESENTATIONS

To see the latest speeches, testimonials and presentations by the EIA Administrator, Deputy Administrator and EIA staff.
http://www.eia.doe.gov/neic/speeches/speech1.html

COAL

Coal Production for Week Ended July 19, 2008 (07/24)
Contains an overview of U.S. weekly coal production.
http://www.eia.doe.gov/cneaf/coal/weekly/weekly_html/wcppage.html

The Coal News and Markets Report for week ended July 18, 2008 (07/21)
Contains information for the week, spot prices:
http://www.eia.doe.gov/cneaf/coal/page/coalnews/coalmar.html

ENERGY OVERVIEW

Monthly Energy Review (07/24)
EIA’s primary report of recent energy statistics: total energy production,
consumption, and trade; energy prices; overviews of petroleum, natural gas,
coal, electricity, nuclear energy, renewable energy, and international
petroleum; and data unit conversions. See What’s New in the “Monthly Energy
Review” for a record of changes. Over the first half of 2008, the average
number of rotary rigs in operation in the United States (onshore and
offshore) was up 4 percent compared with the first half of 2007 and up
15 percent compared with the first half of 2006; the total number of wells
drilled was up 7 percent and 20 percent, respectively; and the total footage
drilled was down 3 percent and up 20 percent, respectively.
http://www.eia.doe.gov/emeu/mer/contents.html

NATURAL GAS

Weekly Natural Gas Storage Report (07/24)
Contains weekly estimates of natural gas in underground storage
for the United States and three regions of the United States.
http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html

Natural Gas Weekly Update (07/24)
Contains weekly updates of natural gas market prices, latest
storage level estimates, recent lower 48 NOAA weather data,
and other market activity or events.
http://tonto.eia.doe.gov/oog/info/ngw/ngupdate.asp

NUCLEAR

Status of Potential New Commercial Reactors in the United States (07/22)
This feature was updated to reflect five new Combined License applicants
(added to the four previously reported), and provides new information on
anticipated applications. The reactor designs, capacity, and application
status are discussed.
http://www.eia.doe.gov/cneaf/nuclear/page/nuc_reactors/reactorcom.html

PETROLEUM

This Week in Petroleum (07/23)
TWIP is a weekly Web product that provides analysis, data, and
charts of the latest weekly petroleum supply and price data.
http://tonto.eia.doe.gov/oog/info/twip/twip.asp

Weekly Petroleum Status Report,
Data for Week Ending Ending July 18, 2008 (07/23)
Contains timely information on supply and selected prices of
crude oil and principal petroleum products in the context
of historical data and forecasts.
http://www.eia.doe.gov/oil_gas/fwd/wpsr.html

Weekly Highway Diesel Prices (07/21)
This report contains a 53-week history of weekly retail
on-highway diesel fuel prices for the U.S., 8 regions,
and the State of California.
http://tonto.eia.doe.gov/oog/info/wohdp/diesel.asp

Weekly Retail Gasoline Prices (07/21)
This report presents average retail gasoline prices at the
national and regional levels, and for selected cities and
States, based on an EIA survey conducted each Monday of
approximately 900 retail outlets.
http://www.eia.doe.gov/oil_gas/fwd/wrgp.html

CONFERENCES-NORTH AMERICA and REST OF WORLD
http://www.eia.doe.gov/calendar/meetings.htm

NOTE: At times some of the URL’s in this e-mail message may be quite long and may get broken by line breaks when displayed by your e-mail software. You therefore may have to cut and paste the entire URL into your Web browser rather than just clicking on the URL from your e-mail software.

THIS WEEK AT EIA July 18 – July 24, 2008

wmaster@eia.doe.gov

Thu 7/24/08

PLATINUM AND PALLADIUM

July 25, 2008 at 1:20 am | Posted in Economics, Financial, Research | Leave a comment

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GFMS Quarterly

THREE YEAR FORECAST FOR PLATINUM AND Palladium

Charles de Meester (charles.demeester@gfms.co.uk)

Elena Patimova (Elena.Patimova@gfms.co.uk)

Thu 7/24/08

Dear Sir/ Madam,

“How badly will a slump in US car sales undermine PGM demand & prices?”

“What is the likely response of platinum jewellery to record high prices? Is palladium the alternative?”

“Are surpluses or deficits likely to characterise the market into the future?”

“Is South African mine production going to regain its vigour?”


GFMS’s latest report – The Platinum and Palladium 3-Year Forecasting Quarterly

will be released on 5th August 2008.

Background

Published 4 times a year, the report will give GFMS’s independent insight into the latest developments and trends and offers a 3 year forecast on supply, demand and the price for platinum and palladium.

Table of Contents
1/ Executive Summary
2/ Macroeconomic Outlook
3/ Investment and Above Ground Stocks
4/ Mine Production
5/ Scrap
6/ Hedging
7/ Autocatalysts
8/ Jewellery
9/ Other fabrication

Independent – Informed – International

The GFMS Group:

CARBON FINANCE: FORESTS

July 24, 2008 at 9:15 pm | Posted in Earth, Economics, Financial, Globalization, World-system | Leave a comment

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BioCarbon Fund: REDD Methodology‏

biocarbonfund@worldbank.org

Forest Policy Info

forests-l@lists.iisd.ca

Thu 7/24/08

Dear Colleagues,

The BioCarbon Fund is pleased to announce that a methodology for estimating reductions of GHG (greenhouse gas) emissions from mosaic deforestation has been developed.

The methodology can be downloaded from the BioCarbon Fund website: www.carbonfinance.org/biocarbon

We welcome comments to the methodology. Please address these to: biocarbonfund@worldbank.org

Yours sincerely,

Ellysar Baroudy

The BioCarbon Fund

BioCarbon Fund: REDD Methodology‏

biocarbonfund@worldbank.org

Forest Policy Info

forests-l@lists.iisd.ca

http://www.climate-l.org – A knowledgebase of International Climate Change Activities, provided by IISD in cooperation with the UN Chief Executives Board for Coordination (CEB) Secretariat
IISD Reporting Services for environment and sustainable development policy professionals at
http://www.iisd.ca/email/subscribe.htm

Thu 7/24/08

RISING OIL AND FOOD PRICES IN THE MIDDLE EAST

July 24, 2008 at 2:14 pm | Posted in Economics, Financial, Globalization, Middle East, Research | Leave a comment

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The Effects of Rising Oil and Food Prices on the

Middle East

Dayan Center, TEL AVIV NOTES –

“The Effects of Rising Oil and Food Prices on the

Middle East”

dayancenter (dayancen@POST.TAU.AC.IL)

TEL AVIV NOTES is published with the support of the V. Sorell Foundation

Thu 7/24/08

PAUL RIVLIN

Over the last 12 months, the international price of oil doubled, while in the twelve month period ending on March 1, 2008, the price of food, measured by the UN Food and Agriculture Organization’s composite index, rose by 50%. These developments have had major and differential effects on the economies of the Middle East, including changes in economic growth rates and a serious acceleration of inflation.

Oil prices and revenues
Middle East oil and gas exporters are expected to earn $830 billion in 2008, an increase of over $300 billion (or almost 60%) on 2007
. This is due to the rise in the price of oil rather than increases in production. As a result, the six member states of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates  – are awash with funds. In contrast to the situation after the price rises of 1973 and 1979-80, they have been using the huge surpluses more carefully, and as their own banking systems have become more mature, a larger share of funds has been retained in the region. Despite this, they have also become major players on the international scene, acquiring foreign assets and partly helping to finance the enormous US balance of payments deficit. At the end of 2006, according to the Institute for International Finance, the GCC states possessed identified foreign reserves of $434 billion and unidentified reserves of $283 billion, a total of $717 billion. The estimates for 2007 and forecasts for 2008 suggest that Middle East oil producers will have balance of payments current account surpluses of almost $300 billion and $420 billion, respectively. The GCC states alone had a surplus of $227 billion in 2007 and is forecast to have a surplus of $332 billion in 2008. This implies that by the end of 2008 GCC total foreign reserves could reach $1.3 trillion.


Food Prices
The rise in oil prices has affected the balance of payments of oil-importing countries, of which there are a number in the region.  In addition, the indirect effect of higher oil prices has been to push up the cost of transport, irrigation and fertilizers.  As a result the price of food has risen. The very sharp increases in the prices of many basic foodstuffs on international markets are also the result of rising demand, problems in supply and the diversion of food crops to the production of bio-fuels. The IMF has estimated that diversion to bio-fuels was the cause of half of the rise in food prices in 2006-2007. Other estimates suggest that the effect was even stronger.  This was, therefore, another consequence of rising oil prices.  In addition there had been speculation in commodity markets, which were used as partial alternatives for investors when the real estate bubble burst in mid-2007. The fall in the exchange rate of the dollar is both a cause and consequence of these developments. There were poor harvests in major producing countries partly due to extreme weather events. In addition, the imposition of export restrictions in some countries led to hoarding and panic buying, pushing prices up further. The Middle East, which is the most arid region in the world, imports half of its food. Net food imports account for between 5% and 10% of total imports; the most important product being wheat.  The region is therefore very exposed to the current global food crisis.

The rising cost of food has had drastic effects on the poor and even on sections of the middle class. For the over thirty million Egyptians who live on less than $2 a day, the rise in the cost of food  –  almost 25% in the year to January 2008 –  has generated a major crisis that has already resulted in riots. The government responded by increasing subsidies and even by ordering the army to bake bread for the population as a whole.  Morocco also experienced riots as a result of rising food costs.  The volume of Moroccan wheat imports rose because of a bad harvest in 2007 that, coupled with the rise in prices, has magnified the crisis. Although the 2008 grain harvest is expected be more than double that of 2007, it is still smaller than the average of the past ten years.
The impact of rising food prices has even been felt in the oil-rich Gulf states.  The inflation rate in Saudi Arabia was estimated at 2% a year in April 2007, but a year later it had reached 10%. In Qatar, the acceleration was less dramatic but the rates were higher: 14% and 15%, respectively. In Iran, a country with a history of rapid inflationary spurts, the rate has accelerated from 16% a year ago to about 24%; the increase in food prices has been much faster. Throughout the region, governments have increased public sector wages in an attempt to compensate for the rise in prices. Given that the public sector is one of the largest employers in the region, this is significant in buying loyalty and preventing economic hardship from being translated into political discontent.

Some countries are both large oil producers and have large populations. The best example is Iran, which has a population of over 70 million and has the third largest oil export revenues in OPEC. The government has used oil revenues to subsidize basic commodities such as wheat, but remains dependent on imports for this strategic product. Iran has a large balance of payments current account surplus that will exceed $35 billion a year in 2007-2008. Iraq is also a major oil producer, despite the problems it has experienced in restoring its oil production. There too, the government uses oil revenues to buy food and supply it – at heavily subsidized prices – to the population. It is forecast to have a balance of payments surplus of $6.5-$7 billion in 2007-2008. The largest oil producer in the world, Saudi Arabia, now has a population of over 20 million, much of which is exposed to higher costs. The Saudi government has increased subsidies to restrain inflation. Like other Gulf states, it has increased the salaries of civil servants to compensate them for rising prices, something that discourages attempts to move nationals from the public to the private sector. Since 2003, Saudi Arabia’s foreign reserves are estimated to have increased by $500 billion.

Developments outside the GCC reveal the serious problems that agriculture faces in much of the region. Not only does the Middle East face chronic water shortages, but in most countries water is misused on a large scale. It is under-priced or supplied without cost to agriculture, thereby encouraging the production of strategically important crops, such as wheat, which are not suited to an arid environment and is therefore both economically and ecologically damaging. Furthermore, increasing consumption of meat in the region has led to more animal feeds being produced, at the expense of food for people. This is also inefficient from a water-use perspective. Overall, agriculture has been neglected in terms of investment in infrastructure, training and marketing.

The economic situation in the Middle East is ironic: oil-rich countries are now experiencing huge increases in income. These now exceed the high levels of the mid-1970s and early 1980s in real terms and in 2008 may even exceed them in per capita terms. At the same time, non-oil producers and small oil producers in the region are facing soaring import costs for oil as well as food, with serious macro-economic and distributional consequences. The sensitivity of these economies to the rise in food prices reflects the failures of their development strategies over many years.

TEL AVIV NOTES is published with the support of the V. Sorell Foundation

Previous editions of  TEL AVIV NOTES can be accessed at www.dayan.org, under “Commentary”.

The Effects of Rising Oil and Food Prices on the Middle East

Dayan Center, TEL AVIV NOTES –

“The Effects of Rising Oil and Food Prices on the Middle East”

dayancenter (dayancen@POST.TAU.AC.IL)

Thu 7/24/08

BANK FOR INTERNATIONAL SETTLEMENTS BIS REVIEW NO. 93: SUSTAINABLE GROWTH

July 24, 2008 at 1:52 pm | Posted in Economics, Financial, Globalization, Research | Leave a comment

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BIS Review

Bank for International Settlements

BIS Review No 93 available‏

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Thu 7/24/08

Please find BIS Review No 93 attached as an Adobe Acrobat (PDF) file. Alternatively, you can access this BIS Review on the Bank for International Settlements’ website by clicking on http://www.bis.org/review/index.htm.

What’s included?

BIS Review No 93 (24 July 2008)

George Provopoulos: International financial turmoil and its impact on the Greek economy

Stanley Fischer: Challenges for Israel’s banking system

Amando M Tetangco, Jr: Turning challenges into opportunities – the key to sustainable growth

L Wilson Kamit: Financial sector improvements in Papua New Guinea

Nigel Jenkinson: Financial innovation – what have we learnt?

________________________________

please e-mail press.service@bis.org.

BIS Review

Bank for International Settlements

BIS Review No 93 available‏

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Thu 7/24/08

WORLD BANK: “ENVIRONMENTAL SUSTAINABILITY”

July 24, 2008 at 2:39 am | Posted in Earth, Economics, Financial, Globalization, Research, Third World | Leave a comment

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Environmental Sustainability:

An Evaluation of World Bank Group Support‏

World Bank Independent Evaluation Group (ieg@worldbankorg.ccsend.com)

on behalf of World Bank Independent Evaluation Group (ieg@worldbank.org)

ieg@worldbank.org

The World Bank | Independent Evaluation Group | 1818 H Street, NW | Washington | DC | 20433

Wed 7/23/08

Dear Colleague,

Environmental problems, such as climate change, pollution, desertification, water scarcity and loss of biodiversity, are among the most serious challenges affecting people’s well-being around the globe.  While all nations are affected, the poorest countries often bear the greatest burden and have the fewest resources to adapt to changing situations.  Addressing environmental degradation and ensuring environmental sustainability are inextricably linked to the World Bank Group’s (WBG) mandate to reduce poverty and improve people’s lives.

The World Bank’s Independent Evaluation Group (IEG) is releasing the report “Environment Sustainability: An evaluation of World Bank Support,” which looks at the WBG’s support for public and private sector clients with regard to environmental sustainability during the past decade and a half.  It addresses these important questions:

  • How effective has the World Bank Group’s advocacy and operational support for the environment been at country and global levels?

  • What constraints stand in the way of improving the effectiveness of these actions on the ground?

  • What needs to happen to elevate environment sustainability as a country and a World Bank Group priority going forward?

Sincerely

Vinod Thomas
Director-General, Evaluation

Visit the web site | Download Summary and/or Full Report | Request Hard Copy

Other IEG Highlights

Taking the Measure of the World Bank-IFC Doing Business Indicators

Water Management in Agriculture: Ten Years of World Bank Assistance, 1991-2004

New Renewable Energy: a Review of World Bank Assistance

About The Independent Evaluation Group

The Independent Evaluation Group (IEG) is an independent unit within the World Bank Group; it reports directly to the World Bank Group’s Board of Executive Directors. IEG assesses what works, and what does not; how a client plans to run and maintain a project; and the lasting contribution of the World Bank Group to a country’s overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the World Bank Group’s work, and to provide accountability in the achievement of its objectives. It also improves World Bank Group’s work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings.

http://www.worldbank.org/ieg

Environmental Sustainability:

An Evaluation of World Bank Group Support‏

World Bank Independent Evaluation Group (ieg@worldbankorg.ccsend.com)

on behalf of World Bank Independent Evaluation Group (ieg@worldbank.org)

ieg@worldbank.org

The World Bank | Independent Evaluation Group | 1818 H Street, NW | Washington | DC | 20433

Wed 7/23/08

BANKING STATISTICS: BIS

July 23, 2008 at 9:45 am | Posted in Economics, Financial, Globalization, Research | Leave a comment

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Preliminary release of banking statistics for the first

quarter of 2008‏

Bank for International Settlements

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Wed 7/23/08

The Bank for International Settlements has today released preliminary locational and consolidated banking statistics for the first quarter of 2008.

These statistics, with a commentary pointing out some highlights of the data, are now available on the BIS website.

Regards,

Press & Communications

Bank for International Settlements

Preliminary release of banking statistics for the first quarter of 2008‏

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Wed 7/23/08

FREIGHT RATES AS ECONOMIC INDICATORS

July 22, 2008 at 8:22 pm | Posted in Economics, Financial, Globalization, Research | Leave a comment

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Freight Investor Services

FIS Supra & Handysize Report 22nd July 2008 and

The Baltic Spot Indices‏

Alan Cumming (AlanC@freightinvestor.com)

Tue 7/22/08

Dear All,

Please find attached the FIS Supra & Handysize Report 22nd July

2008 and The Baltic Spot Indices.

Regards,

Alan Cumming

Freight Investor Services

Tel: +44 207 090 1120

Mob: +44 79 2148 7872

Baltic Dry Index (BDI)

The Baltic Dry Index is a daily average of prices to ship raw materials. It represents the cost paid by an end user to have a shipping company transport raw materials across seas on the Baltic Exchange, the global marketplace for brokering shipping contracts. The Baltic Exchange is similar to the New York Merc in that it is a medium for buyers and sellers of contracts and forward agreements (futures) for delivery of dry bulk cargo. The Baltic is owned and operated by the member buyers and sellers. The exchange maintains prices on several routes for different cargoes and then publishes its own index, the BDI, as a summary of the entire dry bulk shipping market. This index can be used as an overall economic indicator as it shows where end prices are heading for items that use the raw materials that are shipped in dry bulk.

Dry Bulk Shipping Stocks

When an investor buys a dry bulk shipping stock, they are effectively buying into the Baltic Dry Index. The amount of exposure depends on the individual stock. Some companies, such as DryShips (DRYS), have most of their ships contracted out at the spot Time Charter Equivalent. This means that the contracts are directly correlated to the daily price of the BDI. Thus, their revenues are directly tied to the index. In times of increasing prices, this set up will yield greater profits for the shipper. Other companies, such as Diana Shipping (DSX), have contracts set at the period Time Charter Equivalent. This means that they enter into a contract, usually 2-5 years in length, which pays a fixed daily rate. This set up provides less volatility, hedges risk against falling BDI rates, and guarantees cash flows.

List of U.S. Listed Dry Bulk Shippers

Market Cap in $Millions (6/17/08)

DryShips (DRYS)

3,430

Diana Shipping (DSX)

2,410

Genco Shipping (GNK)

1,800

Excel Maritime Carriers (EXM)

1,690

Eagle Bulk Shipping (EGLE)

1,360

TBS International (TBSI)

1,120

Navios Maritime Holdings (NM)

1,030

Safe Bulkers (SB)

996

Star Bulk Carriers Corp. (SBLK)

598

Paragon Shipping (PRGN)

490

Euroseas (ESEA)

417

OceanFreight (OCNF)

362

Navios Maritime Partners (NMM)

151

FreeSeas (FREE)

134

Composition of the Index

The index is maintained by the Baltic Exchange. The cargoes being moved are raw material commodities such as coal, steel, cement, and iron ore. The prices are determined by the buyers and sellers, and then the exchange takes 26 different routes throughout the world for various materials and averages them into one index. The index does not concern itself with finished goods or container ships, only raw materials and dry bulk specific ships are factored into the calculation.[1] It also factors in all four sizes of oceangoing dry bulk transport vessels:

Ship Classification

Dead Weight Tons

% of World Fleet

% of Dry Bulk Traffic [2]

Capemax

100,000+

10%

62%

Panamax

60,000-80,000

19%

20%

Supramax

45,000-59,000

37%

18% w/ Handysize

Handysize

15,000-35,000

34%

18% w/ Supramax[3

BDI Analytics and Comparisons to Other Economic Factors/Inputs/Indices[6]

What The Index Means To Investors

Economic Implications

This index is one of the purest leading indicators of economic activity. It measures the demand to move raw materials and precursors to production. Consumer spending and other economic indicators are backward looking, meaning they examine what has already occurred. The BDI offers a real time glimpse at global raw material and infrastructure demand. This could also be gleaned from looking at commodity prices, but there are substitution effects and futures contracts that make it difficult to interpret the impact of commodity price fluctuations. Additionally, nearly all commodities are seeing severe increases in prices in 2008 regardless of supply situations as investors seek to hedge their inflation exposure with hard assets.

Unlike stock and commodities markets, the Baltic Dry Index is totally devoid of speculative players. The trading is limited only to the member companies, and the only relevant parties securing contracts are those who have actual cargo to move and those who have the ships to move it. [7] The BDI will show how much a company or country is willing to pay to import raw materials immediately. For example, if a Chinese company has contracted out coal prices for the next year from Rio Tinto (RTP), then the spot price of coal increasing after a mine accident will not impact that established contract. However, when this company is willing to pay more per ton to ship the coal then to actually purchase it, an investor can see that price growth is accelerating.

Price Increases Passed To Businesses/Consumers

As the BDI increases, so effectively does the cost of raw materials. This cost associated with procuring the materials must be passed along the value chain by producers and refiners. In the end, consumers will see higher dry bulk rates in the higher prices they pay for goods derived from these raw materials. For example, when Folgers pays an extra $10/ton to import coffee beans, they will pass along this increased procurement cost to consumers to maintain margins.

Additionally, imported goods may often carry a BDI factor in the prices. An example of this would be the average Chinese imported good. As China transformed from coal exporter to importer, they began buying coal from nations such as Russia, Brazil, and Australia. The coal from the latter two must be shipped using dry bulk carriers. As the rates for the BDI went up in 07, so did the cost of coal to China. Since coal is used for 70-80% of China’s energy generation, [8] overhead costs for factories increased with the price of coal. As the overhead costs increase, so must the price of the end good to maintain the margin of profit. As this end price increased, an American paid more for a t-shirt or toy at Wal-Mart.

Key Trends and Forces

  • Commodity Demand – This is determined mainly by industrial production and energy demand. If commodity demand is strong, BDI rates will increase regardless of spot rates for those commodities. Companies that have contracted out spot rates will show increased demand through paying more for shipping of the materials. As more coal and steel are being demanded by China, so will the rates for dry bulk shipping increase.

  • Fleet Supply – This is determined by the amount of available ships, their capacity, and the utilization rates. Additionally, the average age of the fleets will determine where they are in the life cycle. The average ship lasts 25 years. If the average is closer to that number, supply will be decreasing in the short term. Also, supply is greatly determined by delivery of new vessels. Currently, there is significant back logged demand for new vessels. No new orders are being taken for delivery before late 2009. With this backed up supply, BDI prices soared in 2007. With rates for the largest dry bulkers fetching nearly 10x that of a comparable VLCC Oil Tanker, many companies converted tankers into dry bulk carriers.[9] As conversions and ships contracted to be built at the beginning of the price run up in 2006 come on line, the upward pricing pressure of a fleet in which 41% of its ships are over 20 years old will be held it bay.[10]

  • Seasonal Pressures – Weather has a major impact on both demand and logistics. For demand, cold weather may increase the demand for coal and other energy creating raw materials. For logistics, cold weather may cause ice to block ports and low rivers to prevent travel. Both of these cause increases in the BDI. Conversely, a mild winter or early ice breakup in cold water parts will cause decreased in the BDI.

  • Bunker Prices – Bunker oil is the name for the oil a ship uses for fuel. Bunker fuel accounts for between a quarter and a third of vessel operating costs. These higher oil prices will be reflected in higher BDI prices. So just as higher oil prices will put a damper on Airline company margins, they will squeeze margins for dry bulk operators.

  • Choke Points Nearly half of the world’s oil passes through a few narrow shipping lanes. This includes the straights of Hormuz and Malacca, the Bosporus and the Suez and Panama canals. These choke points cause natural caps in ship supply; i.e.- only a certain amount of ships can pass through them each day. If something disrupts this flow, the BDI will increase.

  • Market Sentiment – Because of the time lag in forecasting demand for raw materials, market opinion can greatly affect the freight exchange. [11] The recent halving of the index’s value can be attributed to many companies forecasting lower global growth and cutting their production/demand targets.

  • Port Congestion -This acts as another great buffer against supply increases lowering index prices. The actual infrastructure of these ports prevents more ships entering the market. The ports simply cannot handle more traffic. Until major changes occur at these vital terminals, there will be upward pressure on dry bulk prices. Shipping industry analysts [1] are actually developing an index to standardize and make available this incredibly vital data.[12]

Example of Global Ports Congestion Index Report

Other Indices

Shipping industry publication “Lloyd’s List” publishes a comprehensive list of input and route specific indices. These can be used to gauge demand on certain inputs. Economic activity can also be extrapolated by examining where rates are rising/falling on specific routes.

Lloyd’s List Indices and Route/Cargo Info[13]

Winners/Losers

When the BDI increases, dry bulk shippers win. The increase in the index directly increases their margins and revenues.

When the BDI decreases, every other consumer/producer in the global value chain wins. Since the BDI measures procurement costs, when these costs go down, producers benefit from increased margins, and consumers benefit from lower prices for finished products.

Notes

  1. http://www.balticexchange.com

  2. This is measured in terms of the tonnage of cargo carried multiplied by the distance traveled

  3. Lamb, Thomas. Ship Design and Construction. Jersey City: Society of Naval Architects and Marine Engineers. ISBN 0939773406 and CIA World Factbook 2005. Data slightly dated as their has been increased construction in the Capemax size the past three years

  4. http://www.irstockcharts.com/portals/shipping/i_stockChart_big.php?&c=1&date_r=5yr&ticker=BDI

  5. http://www.bloomberg.com

  6. http://www.investmenttools.com

  7. http://www.slate.com/id/2090303/

  8. http://www.energygrind.com/?cat=26

  9. http://www.livemint.com/2007/11/06011451/Crude-carrier-to-get-new-lease.html

  10. http://en.wikipedia.org/wiki/Bulk_carrier

  11. http://www.balticexchange.co.uk/default.asp?action=article&ID=3

  12. http://www.g-ports.com/gp_Congestion.aspx

  13. http://www.lloydslist.com

FIS Supra & Handysize Report 22nd July 2008 and The

Baltic Spot Indices‏

Freight Investor Services

Alan Cumming (AlanC@freightinvestor.com)

Tue 7/22/08

BANK FOR INTERNATIONAL SETTLEMENTS BIS REVIEW NO. 92: MODERN CENTRAL BANKING

July 22, 2008 at 3:58 pm | Posted in Economics, Financial, Globalization, Research | Leave a comment

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BIS Review

BIS Review No 92 available‏

Bank for International Settlements

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Tue 7/22/08

Please find BIS Review No 92 attached as an Adobe Acrobat (PDF) file.

Alternatively, you can access this BIS Review on the Bank for International Settlements’ website by clicking on http://www.bis.org/review/index.htm.

What’s included?

BIS Review No 92 (22 July 2008)

Mario Draghi: Monetary policy, expectations and financial markets

Mark Carney: Summary of the latest Monetary Policy Report

Jean-Claude Trichet: Interview with Le Figaro, Frankfurter Allgemeine Zeitung, Irish Times and Jornal de Negócios

José De Gregorio: Transparency and communications in modern central banking

Randall S Kroszner: Federal Reserve’s initiatives to support minority-owned institutions and expand consumer protection

________________________________

please e-mail press.service@bis.org.

BIS Review

BIS Review No 92 available‏

Bank for International Settlements

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Tue 7/22/08

BASEL COMMITTEE BANKING SUPERVISION

July 22, 2008 at 12:35 pm | Posted in Economics, Financial, Globalization, Research | Leave a comment

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Press release

Press enquiries: +41 61 280 8188

press.service@bis.org

www.bis.org

Ref no: 21/2008E

22 July 200

Basel Committee on Banking Supervision issues consultative documents on Computing Capital for Incremental Risk in the Trading Book and Revisions to the Basel II Market Risk Framework

The Basel Committee on Banking Supervision today issued for public comment Guidelines for Computing Capital for Incremental Risk in the Trading Book as well as Proposed Revisions to the Basel II Market Risk Framework.

Major banking organisations have experienced significant losses over the last year, most of which were sustained in banks’ trading books” stated Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank. “Against this backdrop, the Basel Committee’s incremental risk proposal will better align regulatory capital requirements with the risk exposure of banks’ trading book positions.” The guidelines support one of the key recommendations for strengthening prudential oversight set out in the Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, which was presented to G7 Finance Ministers and Central Bank Governors in April 2008.

These proposals were developed jointly by the Basel Committee and the International Organization of Securities Commissions (IOSCO). Mr Christopher Cox, chairman of IOSCO’s Technical Committee and Chairman of the US Securities and Exchange Commission, noted that the proposed requirements will also apply to investment firms. He added: “The market turmoil has had a severe impact on many commercial and investment banks. The incremental risk guidelines and related changes to the Basel II Framework will contribute to a safer and sounder financial system.”

In October 2007, the Basel Committee consulted on proposed guidelines for computing capital for incremental default risk, or the risk that is incremental to the default risk already reflected in a bank’s value-at-risk (VaR) model. The application of such an incremental default risk charge, however, would not have captured recent losses in CDOs of ABS and other resecuritisations held in the trading book. The losses that materialised during the market turmoil have not arisen from actual defaults but rather from credit migrations combined with widening of credit spreads and the loss of liquidity. Given this and other observations from the market turmoil, as well as comments received through the consultative process, the Committee decided to expand the scope of the capital charge. The proposed incremental risk charge (IRC) would capture price changes due to defaults as well as other sources of price risk, such as those reflecting credit migrations and significant moves of credit spreads and equity prices.

The Basel Committee also proposes improvements to the Basel II Framework concerning internal VaR models. It has further aligned the language with respect to prudent valuation for positions subject to market risk with existing accounting guidance. In addition, it has clarified that regulators will retain the ability to require adjustments to current value beyond those required by financial reporting standards, in particular where there is uncertainty around the current realisable value of a position due to illiquidity.

Once the Basel Committee has finalised the revised requirements, it expects firms to comply with them by 1 January 2010. However, firms will be allowed an additional year to incorporate into their IRC models all risks covered by the proposed IRC beyond default and migration risks for positions subject to credit risk. Until the IRC is implemented in 2010 and to ensure that firms hold adequate capital for resecuritisations, an interim treatment will apply. This interim treatment will be specified in a separate proposal that will be issued by the Basel Committee later in 2008. Over a longer term horizon, the Committee also intends to review the VaR approach for the trading book including the specific risk capital charges under the standardised approach.

In conjunction with this proposal, the Basel Committee will conduct a two-stage quantitative impact study of the IRC on firms’ capital requirements. In the first stage, the Committee plans to rely largely on data collected in connection with the 2007 incremental default risk proposal to examine the impact of incorporating default and migration risk into the IRC. In stage two, additional data will be collected to examine the impact of incorporating other risks.

The Committee, through its Trading Book Group, will continue to work closely with industry groups and individual firms during and after the comment period to refine the proposed principles and the supporting supervisory guidance for implementing the new capital requirement.

Comments are invited by 15 October 2008 and may be sent via e-mail to baselcommittee@bis.org.

Alternatively, comments may be addressed to:

Basel Committee on Banking Supervision
Bank for International Settlements
Centralbahnplatz 2
CH-4002 Basel
Switzerland

The Basel Committee on Banking Supervision has today issued for public comment Guidelines for Computing Capital for Incremental Risk in the Trading Book as well as Proposed Revisions to the Basel II Market Risk Framework.

See the attached press release for details.

Regards,

Press & Communications

Bank for International Settlements

Disclaimer

This e-mail message shall not be construed as legally binding on the Bank for International Settlements (BIS). As internet communications are not secure, the BIS does not accept responsibility for the content of this message.

Thank you for your cooperation.

New consultative documents from the Basel Committee on

Banking Supervision

Press, Service (Press.Service@bis.org)

Publications, Service (Publications@bis.org)

Tue 7/22/08

Centralbahnplatz 2 · CH-4002 Basel · Switzerland · Tel: +41 61 280 8080 · Fax: +41 61 280 9100 · email@bis.org

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