Not even the all-powerful Chinese Communist party can make the wind blow China’s wind farms have long had a cloud hanging over them: not enough of their clean energy is consumed. That seems odd; a combination of rapid urbanisation and thousands of coal-fired power stations makes for severe pollution problems, which the state is desperate to reduce. A change in government regulations should improve matters for hard-pressed renewable generators but it will not solve all their problems.  The National Energy Administration has done its bit for pollution reduction by encouraging renewable energy, mostly wind power, through favourable tariff structures. Last year, wind accounted for about 4 per cent of total generation and is due to more than double by 2020. But the NEA faces two big challenges. One is obvious: not even the all-powerful Chinese Communist party can make the wind blow. The other is that while regional networks are required to accept power produced from wind farms, some regional grids nevertheless refuse. In the north-western provinces of Xinjiang and Gansu, almost half of the wind power offered by generators was rejected (or “curtailed”) in the first three months of this year. Wind power specialists such as China Longyuan Power and Huaneng Renewables, which have borrowed heavily to invest in construction, complained bitterly. Their shares have trailed broader market indices for years.  After repeated warnings, the NEA this week required nine provinces with the highest curtailment rates to use an average of a fifth more wind power than last year. That matters; these areas contain at least 60 per cent of the two companies’ wind capacity. Shares in all the listed wind farms bounced sharply on Wednesday. Reducing curtailments should improve their earnings. And they need the cash flow — net debt levels look scary at more than 5 times earnings before interest, tax, depreciation and amortisation, partly explaining very low valuations.  But remember that the curtailments occur for a reason. Coal-fired generators, too, do not run at full capacity because the economic slowdown has reduced demand for power. And exporting wind power to populous coastal regions, as Xinjiang requires, just means competing with the wind farm projects over there. China’s government cannot simply wave away its wind industry’s problems. Email the Lex team at lex@ft.com Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link

Fewer lower prices houses are being sold in Australia with the residential property market seeing more the number of $1 million plus home sales soaring. Over the 12 months to June 2016 some 14% of all house sales and 7.3% of all unit sales were at a price of at least $1 million, according to the data from real estate firm Corelogic. To put these figures into perspective, just five years ago 7.5% of all house sales and 4% of all unit sales were within this price range. Capital cities have predictably seen a much higher proportion of sales of at least $1 million over the past year. Across all house sales, more than one in five sales, 20.9%, were for at least $1 million compared to 8.9% of all unit sales. In the regional areas of the country housing sales prices are typically lower than they are in capital cities, the report points out, while also showing that the difference between the proportion of house and unit sales of at least $1 million is much narrower. In regional areas that units are only located in larger regional markets and often are positioned in relatively expensive in waterfront locations. The historical data shows that often the proportion of unit sales at or above $1 million has been above that for houses and over the past year, 3.3% of all regional house sales and 3% of all unit sales were at least $1 million. Over the past 10 years in particular there has been a substantial rise in the proportion of sales of at least $1 million. In Sydney over the past year more than two out of every five house sales was at least $1 million and in Melbourne it was one in five. Sydney had a higher proportion of total unit sales of at least $1 million than the proportion of house sales at that price point in each city except for Melbourne. The report also points out that as the supply of affordable homes selling has declined significantly over recent years, an increasing proportion of stock is selling for a seven figure sum. It adds that demand for premium housing and within the most expensive areas of the country remains buoyant which suggests that over the coming year the proportion of sales at a price point of at least $1 million will continue to rise.   Source link

The ability of policymakers in Beijing to roil global commodity markets has been underlined by a breathtaking rally in a key steelmaking ingredient that has caught consumers cold, but promises a profit windfall for the struggling mining industry. The price of premium hard coking coal has more than doubled in the past six weeks to more than $200 a tonne as supplies have dwindled and buyers have scrambled to find cargoes in the spot market. Behind the surge — or ‘met coal mania’ as it has been dubbed by one bank — are production curbs in China where the government is restricting the number of working days at domestic coal mines to 276 a year, down from 330. This policy is mainly aimed at improving the profitability of its bloated and heavily indebted coal industry so it can repay loans to domestic banks. But it has also reduced output and tightened the global coking coal market. Its impact has been magnified by a string of disruptions in Australia, a leading supplier to the seaborne or export market. If the price spike is sustained it could add billions of dollars to the bottom lines of the industry’s biggest producers, which include Anglo American, BHP Billiton, South 32 and Canada’s Teck. Coking coal is an important raw material used in blast furnace steel production. “It’s been a perfect storm on the supply side,” said Christopher LaFemina, analyst at Jefferies. Caught between an oversupplied Chinese market and faltering demand for steel, 2016 was supposed to bring more pain for the coking coal industry. But things have not worked out that way. Instead of adding to last year’s 30 per cent drop, coking coal has staged a dramatic recovery, rising 164 per cent which has made it the best performing commodity of 2016. “In bulk and base commodities if you get Chinese policy right you are a long way towards getting the market right,” said Colin Hamilton, head of commodities research at Macquarie. China sprang its first surprise this year when policymakers, alarmed by slowing economic growth and capital flight, injected a huge amount of cash into the banking system. This boosted construction activity and demand for steelmaking materials such as iron ore and coking coal. The credit surge was followed by the 276-day policy, which first lifted the price of thermal coal, used to generate electricity in power stations. Coking coal did not start its vertiginous ascent until July when heavy rain and flooding reduced supply from Shanxi province. This forced Chinese buyers into the seaborne market, which was then hit by a number of unexpected outages at mines in Australia that further crimped supplies. While about 300m tonnes of seaborne coking coal is produced each year most of it is traded on a contractual basis and priced off the spot market or monthly or quarterly averages. The amount of material readily available to buy — even when the market is not grappling with supply side issues, is very small — less than 10m tonnes according to Mr Hamilton. “We have basically gone from $100 to $200 a tonne on the back of a few deals,” he said of the recent rally. According to Ernie Thrasher, chief executive of US coking coal producer Xcoal, most of the recent buying in the spot market has come from steel mills in Europe and India. “They realised they needed coal but the market had started to run away from them,” he said. “Buyers tend to be much more reactive when the price goes against them.” Industry watchers do not think the price surge can continue for much longer. Knowing that contract prices will rise in the fourth quarter — possibly to $170 a tonne — steel mills will have been buying as much as they can under existing arrangements. Many of these contract have options to buy an extra 10 per cent of agreed volumes, say traders. Tom Price, analyst at Morgan Stanley said that road conditions in Shanxi had started to improve while China’s National Development and Reform Commission has requested a short-term lift in coal supply primarily to cap thermal coal prices. Prices above $200 a tonne will also trigger a supply response, particularly from producers in North America. Mr Thrasher said Xcoal would increase its exports and expected others to follow although they might take a bit longer — between three and six months. This is because many US mines were mothballed in 2015 while others were placed under Chapter 11 bankruptcy protection. “What you will see at this price level is that anyone who can produce will produce,” he said. However, few people expect prices to fall sharply unless Beijing performs a policy U-turn, something that seems unlikely in the near term. “We expect supply increases to put some downward pressure on the coking coal prices in the very near future,” said Mr LaFemina. “But we do not expect a collapse to the levels of earlier this year as the government clearly wants to avoid financial stress in the domestic coal industry.” Sample the FT’s top stories for a week You select the topic, we deliver the news. Source link

National property growth in the United States increased by a moderate 0.6% quarter on quarter but values are barely rising with variations according to location. The home data index from Clear Capital shows that in the Northeast and Midwest regional quarterly growth rates were sluggish at only 0.2% while the South saw a 0.7% rise. These rates come with little to no change from the previously reported quarterly growth rates, all within 0.1% of the figures from the previous month. The firm believes that the current picture is being led by the West where sales have increased 0.3% from 0.9% to 1.2% in a month and it says that this momentum shift is setting the pattern for another strong summer growth season as the region begins to dominate regional performance once again. The continued dominance of the West is easy to see on the firm’s list of Highest Performing Major Metro Markets, where nine of the current top 15 are in the West. Seattle continues to lead the nation with 2% growth over the last quarter, an increase of 0.2% since the previous index, while quarterly growth in Sacramento increased 0.3% to 1.5% quarter on quarter and the rest of the Western top markets all reported at least 1.2% growth over the last quarter. However, the condition of each individual market in the region is varied. Portland, San Jose, and Denver have all surpassed their previous peak market values from before the crash, with Seattle fast approaching its own benchmark. However, homes in Las Vegas are fetching just over half of peak market values from 10 years ago. The index report also points out that the current distressed property saturation rates in cities like Sacramento and San Diego have improved by 50% or more, illustrating a drastic improvement in the overall health of the market, and yet both markets have quite a way to go to recovering all market value lost during the crash. ‘Real estate market headlines have repeatedly documented the strong, potentially bubble like recovery of the West over the past couple years, and this continued trend of performance doesn’t appear to be going away just yet,’ said Alex Villacorta, vice president for research and analytics at Clear Capital. ‘However, it’s important to remember just how varied the standing of each of these Western metro’s recoveries remains. While the West as a whole has seen incredible performance since the lows of 2011, comparisons between individual markets like Denver and Las Vegas can be a sobering reminder of the devastating effects of the crash and that some markets still have a long way to go in terms of regaining lost value,’ he explained. ‘Conversely, those markets that are reaching new market highs are worth keeping a close eye on since the speed at which those recoveries have occurred is clearly unsustainable in the long term,’ he added. BOOKMARK THIS PAGE (What is this?)      Source link