Australian infrastructure boom due to China and India

David Nealis in booming Shanghai China

Australia is set for an US$115 billion infrastructure boom as the nation adds ports and railways to feed China and India's appetite for coal and iron ore.

The largest exporter of the key steelmaking materials will build enough railroads to stretch from Washington DC to Los Angeles over the next decade, as well as a new port on the Great Barrier Reef coast that will dwarf the world's biggest bulk harbor. The projects will near-double global coal trade and add 57% to the market for seaborne iron ore.

If you are a Bull on the Australian Market then you better hope China and India keep up their rapid growth.

South Korea and Japan plan the purchase of RMB assets

South Korea and Japan plan the purchase of RMB assets

South Korea said that it intends to invest part of its $300 billion in foreign-exchange reserves in Yuan denominated assets.

David Nealis in Bank of Korea vault

Choo Heung-sik, director-general of the Bank of Korea's reserve management group, was quoted by Bloomberg News as saying that the investment was part of South Korea's plan to diversify its foreign reserves, he went on to say the investment would be made gradually and with a long-term perspective. He added that the initial investment wouldn't be "big" and might start with Chinese government bonds.

South Korea thus becomes the second developed economy, after Japan, with plans to buy Yuan denominated assets with its foreign-exchange reserves and add the Chinese currency to its reserves.

Last month, Japanese Prime Minister Yoshihiko Noda announced plans during his visit to China to buy Chinese government bonds, some analyst believe that the investment might be worth about $10 billion.

Luxury Yacht Maker Ferretti Acquired By Chinese Firm Shandong Heavy Industry Group

Shandong Heavy Industry Group acquires one of the World’s premier yacht builders; the Ferretti Group. This is another example of Chinese firms acquiring assets abroad.

The Ferretti Group, the parent company of CRN, Ferretti Yachts, Ferretti Custom Line, and five other Italian yacht brands, formally announced it is being acquired by China-based Shandong Heavy Industry Group.

David Nealis President Blue Bridge

Shandong Heavy Industry Group, a.k.a. SHIG-Weichai Group, is spending €374 million ($477.8 million) to acquire controlling interest from Ferretti Group’s creditors. Specifically, the sum is comprised of debt financing of €196 million (about $250.6 million) and an equity investment of €178 million (about $227.6 million), SHIG-Weichai Group will have a 75-percent stake in Ferretti Group.The remaining 25-percent will be held Royal Bank of Scotland, Strategic Value Partners, and Oaktree Capital Management.

While SHIG-Weichai Group is known for manufacturing construction machinery and other heavy-duty industrial products, but it also has existing interest in the boating business. In 2009 it acquired Moteurs Baudouin which supplies ferries, trawlers, and yachts with inboard diesel engines, gearboxes, propellers shafts, and propellers.

 SHIG-Weichai Group intends to keep all Ferretti production in Italy and retain the present management team.

Tan Xuguang, chairman of SHIG-Weichai Group, stated that they intend to continue acquiring foreign assets as well as assets within China.

Banking Deals Between China and Taiwan

Will the outcome of this weekend’s presidential election in Taiwan affect banking deals between China and Taiwan? 

David Nealis in Taipei Taiwan

Taiwan recently said it would allow Chinese banks to take up to five percent stake in Taiwanese banks, this isn’t exciting economic news but it is very exciting political news. China and Taiwan signed a trade deal in June 2010 that brought access to investment in China’s banking market but due to its political sensitivity it has been are to implement.  

Two of China’s four largest banks, the Industrial and Commercial Bank of China (ICBC) and the China Construction Bank (CCB) are expected to be the first banks to invest in Taiwanese banks. The other two banks, The Bank of Communication and the Bank of China have been given permission by Taiwanese authorities to upgrade their Taiwan offices to bank branches. The Taiwanese bank Nan Financial is bidding to become the first Taiwanese bank to make a direct investment in mainland Chinese bank, by taking a 20 percent stake in Fujian Haixia Bank this will be the first deal will be the first.

With Taiwan’s economy being export dependent, the global economic slowdown may affect corporate demand for lending on the island, an investment by Chinese banks into the Taiwanese banking sector could help during the downturn of the Taiwanese banking sector.

China Raises Threshold for Oil Tax

China has raised the threshold for a tax on crude oil charged to the nation's two biggest producers, PetroChina and the China Petroleum & Chemical Corp (Sinopec) in an effort to ease their financial burden and encourage output according to statements made by both state owned entities.

The Ministry of Finance raised the minimum level for the levy to $55 per barrel, up from $40.The move is retroactive to November 2011.

Some analysts believe the move would help the corporate earnings of the companies and encourage oil production. And in the short term the news may have a positive effect on their stock prices.

After the news was announced PetroChina was up 1.0 percent at 7.40 Yuan in Shanghai by midday. Sinopec initially gained nearly two percent, but was down 0.3 percent to 7.40 Yuan by midday.

In Hong Kong trading, PetroChina gained 2.5 percent to HK$10.64 by midday while Sinopec was up 1.9 percent at HK$8.81.

This means the Chinese oil producers would pay less tax for crude oil production. The new tax ranges from 20 to 40 percent of the price of a barrel of oil that costs more than $55.

Sinopec agrees USD2.5bn oil shale deal

Sinopec agrees USD2.5bn oil shale deal
China Petrochemical Corporation (Sinopec) has started the new year with a significant international acquisition, agreeing to invest up to USD2.5bn for a one-third stake in five US oil shale projects owned by Devon Energy. Sinopec International Petroleum Exploration and Production Corp, a wholly owned subsidiary of state-owned Sinopec, will pay Devon USD900m in cash for its stake in the projects and as much as USD1.6bn in the form of a drilling carry that will fund 70% of Devon’s capital requirements.

China buys oil from Russia, Vietnam as Iran supply cut

This is another example of China's need to secure energy resources for their domestic consumption, in 2012 we will continue to see Chinese energy companies aquiring assets abroad .

China buys oil from Russia, Vietnam as Iran supply cut
Chinese trader Unipec paid a record premium for a February cargo of Russian crude and bought Vietnamese oil for the first time in at least a year as the China looks to cover for reduced Iranian supplies. China slashed Iranian crude imports by more than half for January 2012 as the two countries haggle over 2012 payment terms. The latest deals show that the dispute could be dragging into talks for February cargoes as well.

Gravity Based Structure

As I mentioned in December, I would provide some educational blogs in-between my normal blog postings here is a definition of a Gravity Based Structure and links to the Drillship and the Oil Platform definition are below.

http://davidnealis.blogspot.com/2011/12/definition-of-offshore-oil-platform.html 

http://davidnealis.blogspot.com/2012/01/definition-of-drillship.html

A Gravity Based Structure or GBS can either be made of steel or concrete and is usually anchored directly onto the seabed.

 Steel GBS are predominantly used when there is no or limited availability of crane barges to install a conventional fixed offshore platform, for example in the Caspian Sea. There are several steel GBS in the world today (e.g. offshore Turkmenistan Waters (Caspian Sea) and offshore New Zealand). Steel GBS do not usually provide hydrocarbon storage capability.

It is mainly installed by pulling it off the yard, by either wet-tow or/and dry-tow, and self-installing by controlled ballasting of the compartments with sea water. At low depths Gravity Based Structures are very affordable, but above 10 meters depth it is not as cost competitive with other types of structures. To position the GBS during installation, the GBS may be connected to either a transportation barge or any other barge (provided it is large enough to support the GBS) using strand jacks. The jacks shall be released gradually whilst the GBS is ballasted to ensure that the GBS does not sway too much from target location. The concrete Gravity Based Structures can last up to 100 years with minimal maintenance. 

Gravity Based Structures can also be used for alternative energy sources like sea based wind farms. The first offshore wind farm in the world was placed on gravity bases. It was 11 large concrete structures weighing in average 908 tons placed in the water near the shore of Lolland, Denmark in1991to hold the wind turbines at the Vindeby offshore wind farm.

Cattle Beat Gold as Safest Commodity in 2011

Last year I met with Jim Rogers in his Singapore home, during our conversation he gave me great investment advice on farming & ranching among other things and  a year later he is proving that his long term market outlook is right on target.

Cattle Beat Gold as Safest Commodity Return in ’11 as Price Swings Widened

By Whitney McFerron - Jan 5, 2012 1:00 PM GMT+0800Thu Jan 05 05:00:00 GMT 2012

Feeder-cattle futures provided the safest returns of all commodities including gold in the second half of 2011, when adjusted for volatility, as high feed costs and drought led to smaller herds and record prices.

The Standard & Poor’s GSCI Feeder Cattle Total Return Index rose 2.45 percent in the six months ended Dec. 31 with volatility of 13.6, for a risk-adjusted return of 0.18 percent, the highest per unit of price swings among 24 commodities tracked by S&P, data compiled by Bloomberg show. While gold gained more, touching a record $1,923.70 an ounce on Sept. 6, the higher volatility of the metal’s total-return index left its adjusted gain at 0.147 percent.

Commodities rose to a 29-month high in April before Europe’s widening debt crisis sent the GSCI Total Return Index down 24 percent by October, fueled by price swings that left only seven raw materials with positive risk-adjusted returns. As gold futures fell 3.4 percent in the fourth quarter, its first drop since 2008, feeder cattle reached a record last month as the U.S. herd shrank and beef exports surged.

Cattle were “one of the best-performing out of any commodity last year, and the reason for that, of course, was the herd liquidation,” Patricia Mohr, an economist and commodity specialist at ScotiaBank Group in Toronto, said in a telephone interview. “At the end of last year, gold lost some ground because of the renewed strength in the U.S. dollar,” and volatility increased as economic concern mounted, she said.

Beef Supply

Feeder cattle are about a year-old and weigh 500 pounds (227 kilograms) to 800 pounds when they are sold to feedlots, where they eat mostly corn for several months until they reach about 1,200 pounds and are shipped to beef processors.

The S&P GSCI Live Cattle Total Return Index (SPGCLCTR), which tracks the price of slaughter-ready animals, advanced 2.39 percent in the second half of 2011, with volatility of 15.4 that gave it a risk-adjusted return of 0.155 percent, data compiled by Bloomberg show. That was ahead of the ratio of price to volatility for gold, which ranked third among GSCI commodities.

Cattle prices may continue to “hold up quite well” during 2012 as beef demand is improving globally, while supplies will be slow to rebound, because it takes the animals about two years from birth to reach slaughter-ready weight, Mohr said.

The worst drought ever in Texas, the biggest U.S. producer, destroyed pastures last year and forced ranchers to cull their herds. The U.S. cattle population was 92.582 million head at the start of 2011, the smallest for that date since 1958, government data show. The U.S. Department of Agriculture will release its 2012 herd estimate on Jan. 27.

Feeder-Cattle Rally

Feeder-cattle futures on the Chicago Mercantile Exchange reached a record $1.508 a pound on Dec. 28, with the most-actively traded contract surging 20 percent in 2011. Slaughter-ready cattle futures, also traded in Chicago, climbed to a record $1.25675 a pound on Nov. 10, finishing up 12 percent for the year.

“You’ve got the whole issue of the expanding middle class around the world and increasing protein in diets, so that’s going to translate into more grain consumption, and ultimately that has put support under beef,” said Sal Gilbertie, the president of Teucrium Trading LLC, which sponsors exchange-traded funds for commodities ranging from natural gas to corn. “Food trumps jewelry. The last thing people will ever do is let themselves be hungry.”

The price gains for both cattle contracts outpaced the 10 percent advance last year for gold, which posted an 11th straight annual gain.

Negative Return

The S&P’s Total Return Index of 24 commodities had a risk-adjusted return in the second half of minus 0.159 percent, after the gauge dropped 3.78 percent during the period with volatility of 23.772. The S&P GSCI Silver Total Return Index, which calculates the return to investors of holding a position in the commodity, was the most-volatile during the second half of 2011 at 55.59, followed by nickel and lead.

Commodity investments may become more volatile in 2012 as central banks grapple with how to support economies globally, while demand for raw materials including industrial metals and energy may weaken if Europe enters a recession, said Michael Pento, the president of Pento Portfolio Strategies in Holmdel, New.

Some members of the U.S. Federal Open Market Committee are leaning toward additional quantitative easing to support the economy, minutes from the group’s November meeting showed. Euro-region economic confidence probably dropped to the lowest in more than two years in December, according to a Bloomberg survey.

“Volatility is going to be off the charts in 2012 for precious metals and commodities in general,” Pento said. “We’ll have very, very slow growth worldwide, and we’ll see stagflation persisting in the U.S. and Europe and in other countries.”

http://www.bloomberg.com/news/2012-01-05/cattle-beat-gold-as-safest-commodity-return-in-11-as-price-swings-widened.html

Sinopec Buys Assets from Devon Energy Corp for 2.2 Billion

The Chinese are keeping up their aggressive buying of resources abroad to assure stability at home.

BEIJING – China’s Sinopec Group said on Tuesday that it will acquire a third of five shale oil and gas assets in the United States from Devon Energy Corp for US$2.2-billion.

Sinopec International Petroleum Exploration & Production Corp (SIPC), a unit of Sinopec Group, will pay 30% in cash and the remaining 70% in carry, and expects to complete the whole payment by the end of 2014.

Heilongjiang Rice Farmers Get Raw Deal

If the Chinese government wants to increase consumer consumption in the Chinese interior they are going to have to help solve issues like this one.

 Rice farmers in Wuchang, Heilongjiang receive less than four Yuan for each kg of their product, which sells for as much as 398 Yuan a kg in the retail, the China Youth Daily reports.

The farmers’ low share of the profit is reportedly the result of a monopoly among several crop processing companies that buy the rice, the rice is well-known across the country for its high quality.  

China, the world’s 2nd largest economy, continues to be the most important market for companies looking for growth and Chinese companies continue to globalize by investing and selling their products in new markets; what is your company’s strategy for engaging China?

Futures and Options Risk Disclosure
Trading futures and options involves the risk of loss. You should consider carefully whether futures or options are appropriate to your financial situation. You must review the customer account agreement and risk disclosure prior to establishing an account. Only risk capital should be used when trading futures or options. Investors could lose more than their initial investment. Past results are not necessarily indicative of futures results. The risk of loss in trading futures or options can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.

'Poison in cat-meat hotpot' kills tycoon

I guess there is more than one way to skin the cat!

This is one of those articles that I could not resist to post on my blog, the events that happened are wrong on so many levels to include those of the police.

'Poison in cat-meat hotpot' kills tycoon

Minnie Chan and Agence France-Presse Jan 04, 2012

Guangzhou police have detained a man suspected of murdering a billionaire tycoon by poisoning the cat meat hotpot they shared.

Huang Guang , deputy director of agriculture in Bajia township, was arrested on Friday by police investigating the death of Long Liyuan , also a Guangdong Provincial People's Congress representative, the Guangzhou-based Southern Metropolis Daily reported.

Long, who made his fortune running a forestry company in Guangdong, died on December 23 after sharing a dinner of cat meat hotpot - a local delicacy - with the suspect and a good friend, Huang Wen .

"Huang Guang, who was helping Long obtain a lease on a forest, had himself used funds provided by Long. This led to an economic dispute and gave Huang the idea to kill Long with poison," said a statement on the microblog of an official in Yangjiang , where the death occurred

Long's family and friends - including Huang Wen, who shared the hotpot - said they were shocked at the news. Long's family posted a 100,000 yuan (HK$122,000) reward last month for more information about the incident.

Huang Guang's family has rejected the allegation that he poisoned Long, saying Huang Guang also fell ill after eating the dish. The newspaper reported that cat bones were found on the suspect's plate.

Long was the first to fall ill, and the two Huangs also had to be rushed to hospital. The newspaper said Huang Guang had to receive dialysis to remove the toxins from his body. He was transferred from an intensive care unit back to a regular ward five days after the dinner. The other Huang also recovered.

The newspaper said police detained Huang Guang because of his financial dispute with Long.

A couple who run the hotpot restaurant said Huang Guang had lingered to make sure the cat meat was cooked and that he had asked the owner's wife to fetch wine for him.

Police suspect Huang Guang slipped a toxic herb, Gelsemium elegans, into the hotpot. Its smell may have been covered by other Chinese herbs used to cook the cat meat.

The newspaper said Long paid Huang at least 3.5 million yuan for various business-related services and other benefits, such as inside information on government projects, taking advantage of his official title.

Long's relatives alleged Huang had recently failed to help Long gain some important official tenders but still asked Long to pay him.

Police also found that Huang had recently been trying to raise more money to settle debts, the newspaper added.

Definition of a Drillship

As I mentioned in December I would provide some educational blogs in-between my normal blog postings here is a definition of a drillship and the link to the Oil Platform definition from my december blog is below.

http://davidnealis.blogspot.com/2011/12/definition-of-offshore-oil-platform.html 

I found a good definition of a drillship at a website called Rig Zone, the definition and the link to the website are below:

Drillship Image source Rig Zone

Truly what it sounds like, a drillship is a marine vessel that's been modified to drill oil and gas wells. While drillships look similar to a tanker or cargo vessel, there are a couple of major differences. Drillships are equipped with a drilling derrick and moon pool. Additionally, drillships have extensive mooring or positioning equipment, as well as a helipad to receive supplies and transport staff. 

Typically employed in deep and ultra-deep waters, drillships work in water depths ranging from 2,000 to more than 10,000 feet (610 to 3,048 meters). Drilling equipment is passed through the vessel's moon pool and connected to the well equipment below via riser pipe, a somewhat flexible pipe that extends from the top of the subsea well to the bottom of the drillship. 

Drillships are differentiated from other offshore drilling units by their easy mobility. While semisubmersible rigs can also drill in deep waters, drillships are able to propel themselves from well to well and location to location, unlike semisubs, which must rely on an outside transport vessel to transfer them from place to place

While capable of drilling in deep and ultra-deep waters, a disadvantage to using a drillship is its susceptibility to being agitated by waves, wind and currents. This is especially troublesome when the vessel is actually drilling, because the drillship is connected to equipment thousands of feet under the sea.

A proper mooring system on a drillship is integral to drilling successful wells. In shallower waters, drillships are moored to the seafloor with anywhere from 6 to twelve anchors. Once the water depth becomes too deep, drillships depend on dynamic positioning systems (DPS) to keep the vessel in place while drilling. DPS relies on several thrusters located on the fore, aft and mid sections of the ship, which are activated by an onboard computer that constantly monitors winds and waves to adjust the thrusters to compensate for these changes. Sometimes, both positioning systems are used. 

Drillships were first developed in the late 1940s by marine architects. Created to overcome water depth challenges offshore California in the Pacific Ocean, the first drillship was a surplus U.S. Navy patrol craft that was equipped with cantilevered drilling equipment. Seeing some success, the next drill ship incorporated a moon pool and an onboard drilling derrick. After its success, companies soon ordered the construction of subsequent drillships.

Transocean, Pride, Seadrill, Frontier Drilling and Noble are a few of the companies that own and operate drillships globally.

 http://www.rigzone.com/training/insight.asp?insight_id=306&c_id=24

Guotai Junan to launch RQFII product

David Nealis in Hong Kong

Guotai Junan obtained approval from the Securities and Futures Commission to launch its first RMB Qualified Foreign Institutional product, becoming the first mainland Chinese brokerage to offer the business.

The RQFII program will allow offshore Yuan funds in Hong Kong or overseas to invest in the Chinese mainland securities market, with a permitted quota of 20 billion Yuan.

Qualified investors should invest no less than 80 per cent of the Yuan funds they raised in fixed income securities, while investment in stocks and equity funds should account for no more than twenty per cent

David Nealis in Hanoi Vietnam

David Nealis in Hanoi Vietnam

I went to Hanoi, Vietnam, it was right before Vietnamese New Year known as Tet, and the city was a buzz with activity preparing for their holiday. The residents of Hanoi were busy buying new clothes, preparing special meals, cleaning their homes, and purchasing lucky plants for their homes, it was great to experience their culture and traditions. Tet is celebrated on the same day as Chinese New Year and it was easy to see some southern Chinese influences on the Viet holiday.

While in Hanoi I met with a Vietnamese friend of mine, who works at the Bank of Vietnam, they showed me around the city and gave me some good insights to the growing economy of Vietnam. 

Hanoi is the capital of Vietnam and the country's second largest city, it is a fascinating blend of Viet, French and Chinese influences, from it architecture to its cuisine. While I was there I went on a tour of the city to the typical tourist sights; the Ho Chi Minh Mausoleum, the Temple of Literature, and many other places around the city.

I have wanted to go to Hanoi for some time; I wanted to see with my own eyes, if this nation was going to be the next Asian Super Economy. I felt Hanoi wasn’t ready for prime time, but it was a good experience. I feel that Hanoi has the same feeling in the air as Shenzhen did fifteen years ago, which might be the start to a wonderful explosion of economic growth.

Time will tell if Vietnam’s tiger roars into the future or if it will continue to be the economic miracle that almost could be.