Energy watchdog warns against reliance on fossil fuels

The Paris-based International Energy Agency warned today that world governments are locking themselves into a potentially disastrous future that depends too much on fossil fuels. The message came as the IEA released its annual World Energy Outlook.

The IEA has served as a kind of energy watchdog for industrialized nations since the 1973-74 oil crisis.

"We cannot continue to rely on insecure and environmentally unsustainable uses of energy,” said IEA Executive Director Maria van der Hoeven, adding that recent events helped illustrate the dangers, "The Fukushima nuclear accident, the turmoil in parts of the Middle East and North Africa and a sharp rebound in energy demand in 2010, which pushed CO2 emissions to a record high, highlight the urgency."

The IEA has projected a growth in world energy demand of 33% by 2035, most of it driven by China, India and emerging economies. But it also believes that the share of global energy provided by renewable sources, under current mandates, will rise from 13% currently to only 18% during the same period.

That means that the demand for oil, for example, will only continue to increase, from 87 million barrels a day in 2010 to 99 million barrels a day in 2035, the IEA said. The use of coal, the IEA predicts, will rise 65% by 2035.

“Governments need to introduce stronger measures to drive investment in efficient and low-carbon technologies," van der Hoeven said.

The IEA said the modest rise in the share of energy gained by renewables by 2035 was also predicated on a growth in government subsidies from a current $64 billion to $250 billion by 2035, a rise that is by no means certain "in this age of fiscal austerity." The IEA also noted that government subsidies of fossil fuels amounted to $409 billion in 2010.

Also: Gasoline could hit record highs in 2012

A boom in U.S. oil production

Expected delay in pipeline decision

-- Ronald D. White

Photo: A National Transitional Council fighter patrols the Libyan Oil Refining Co. in Ras Lanuf, west of Tripoli. The Libyan civil war shut down that country's 1.6-million-barrel-a-day oil production. The unrest throughout the Middle East was a sign, says the IEA, of the peril of dependency on fossil fuels. Credit: Youssef Boudlal / Reuters

 

 

Inflation and property prices ease in China

Inflation in China eased for the third consecutive month in October on government policy tightening that has also started to drive residential property prices down with greater momentum.

China’s annual inflation rate fell to 5.5%, the country's National Bureau of Statistics said Wednesday, down from 6.1% in September.

The decline potentially gives the central government room to ease new credit after months of strict controls aimed at cooling down the country’s overheated economy.

Looser bank lending may soon be necessary to blunt the effects of another global recession and carefully guide economic growth down from unsustainable annual rates of 9% to 10%.

“Weakness in the export sector will be the main hindrance to economic growth in the coming quarters,” Jing Ulrich, an economist for J.P. Morgan, said in a research note. “However, with falling inflation clearing the way for policy easing, we believe that China will manage a ‘soft landing,’ achieving respectable GDP growth of 8.3% in 2012.”

That will require delicate policy tinkering as signs are growing that China’s frothy property market has begun its long-awaited correction.

A national index of property prices in 100 cities has declined two consecutive months as cash-strapped developers are experiencing steep declines in sales.

Tight credit and rules targeting speculators could drive prices down 10% to 30%, according to Barclays Capital.

That’s a relief to potential homebuyers priced out of the market and to a government worried a property bubble was stoking social instability.

So far, only angry homeowners have openly protested changes in prices. Last month, hundreds gathered outside the offices of a Shanghai developer that cut prices, demanding refunds and contract cancellations.

The government risks sinking prices at its own peril. Real estate accounts for a fifth of China’s economy, according to some estimates, and contributes up to half of local government revenue in the form of public land sales.

Still, Premier Wen Jiabao remains committed to driving residential prices down.

“We aim to lead housing prices back to a reasonable level and promote a healthy development of the real estate industry at the same time,” Wen told reporters Sunday.

RELATED:

China appears unlikely to come to Eurozone's rescue

China's economy slows in third quarter

Inflation remains a worry in China

-- David Pierson  

twitter.com/dhpierson

Photo: Two women look at buildings under construction in Chongqing, China. Credit: Getty Images

Thin profits, high fuel costs winnow Pacific trade players

Most of the cargo lumbering along on the gigantic ships of the transpacific trade are traveling between Asia and the United States. But only two U.S.-flagged and -headquartered companies have a piece of the action, and it's a very small piece indeed.

As of Thursday, there will be only one.

On Nov. 10, a cargo ship operated by Charlotte, N.C.-based Horizon Lines will depart the U.S. West Coast with supplies for Guam for the last time. That voyage will end the company's Five Star Express service between China, Guam and the U.S., which had been in operation for less than a year.

Horizon Lines had begun the service in December, when the recovery from the deep global recession still seemed strong, and had hoped to grab a share of what was then a lucrative route in international trade. But trade levels failed to meet expectations, competition drove down freight rates, and high oil prices drove up the cost of the bunker fuel that the ships use.

"This has been a very difficult decision," said Stephen H. Fraser, president and chief executive of Horizon Lines. "Our decision to exit this highly volatile market will allow Horizon to focus on our core domestic ocean shipping services, and provide the opportunity to produce a more profitable and stable financial performance over time."

The transpacific trade, like most of the world's major ocean shipping routes, is dominated by huge foreign carriers that are large enough to roll with tough times. The three biggest -- APM Maersk of Copenhagen, Geneva-based Mediterranean Shipping Co. and Marseille-based CMA-CGM -- each has a fleet larger than that of the U.S. Navy.

Horizon is small by comparison, ranked 33rd in the world by the French maritime industry consulting firm AXS Alphaliner in terms of the amount of cargo it can haul and the number of ships it has in operation.

Alphaliner said that Horizon is one of six companies that entered the transpacific trade in the last two years. All but two have since dropped out.

Horizon said the amount that it could charge customers to transport a 40-foot cargo container has fallen 37% in the last 12 months, down to $1,500. During the same period, Horizon's fuel costs rose by 40%.

Oakland-based Matson Navigation Co., a subsidiary of Honolulu-based Alexander & Baldwin Inc. and the last U.S. carrier on the transpacific trade route, has said it will offer service to Horizon's customers.

Also:

Cargo surge takes a holiday

Manufacturing growth slowed in October

Chinese economy grows at slowest pace in two years

-- Ronald D. White

Photo: A forklift arranges cargo containers near a port in Shanghai. Declining freight rates and high fuel costs along the ocean route between Asia and the U.S. have resulted in a rising number of companies abandoning the trade. Credit: Eugene Hoshiko / Associated Press

Jefferies suffers as investors look for the next MF Global

As investors wonder which Wall Street firm might be the next to catch the cold that brought down MF Global last week, most of the suspicion has fallen on one originally founded in Los Angeles, Jefferies.

Investors have sent Jefferies stock down nearly 20% from before MF Global's bankruptcy, leading the firm to spend much of the last week beating off rumors that it may soon suffer from the same problems with European sovereign debt that brought down MF Global.

MF Global took a series of ultimately fatal bets on the bonds of struggling European nations, causing clients to worry that MF Global would find itself unable to sell those bonds and unable to carry out other customer business. That fear proved contagious and ultimately sunk MF Global, according to industry experts.

Just this morning, Jefferies announced that it took the highly unusual step over the weekend of selling off 50% of its holdings of European bonds, just to show that it could.

"We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book,” Jefferies Chief Executive Richard Handler said in a statement explaining the move. 

The big bets on European bonds at MF Global were part of a strategy -- initiated by its recently hired chief executive, Jon Corzine -- to expand the firm through risky bets made with the company's own funds.

Jefferies has had a similar business model to MF Global's -- at least before Corzine took over -- but Jefferies executives have been trying to convince investors that they did not take the kind of bets that Corzine pushed for at MF Global.

Last week, Handler released a full accounting of Jefferies' holdings of European bonds. 

"We decided the only way to conclusively dispel rumors, misinformation and misplaced concerns is with unprecedented transparency about internal information that is rarely, if ever, publicly disclosed," Handler said in a statement on Nov. 4.

That was not enough to calm worried investors. The stock price continued to sink, leading to the unusual moves over the weekend. This morning, those moves gave Jefferies stock an initial boost, but it has recently sunk down again almost to the level where it closed Friday afternoon. It is currently trading up 1.6%, or 19 cents, to $12.26.

A columnist at the Wall Street Journal this morning wrote evocatively that Jefferies is "being strip-searched at gunpoint by the markets."

RELATED:

Jon Corzine resigns as CEO of MF Global

Jon Corzine caught up as MF Global inquiries escalate

MF Global is investigated for possible misuse of customer funds

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Airline traffic worldwide up nearly 6% in September

Airline passenger traffic jumped nearly 6% in September over the same month last year but industry leaders worry that future numbers won't be as positive.

The International Air Transport Assn., the trade group for the world's largest airlines, reported the September increase but said economic uncertainty in Europe and proposed tax increases in the U.S. could jeopardize future growth and profits.

While passenger traffic increased 5.6% in September, air freight traffic dropped 2.7% in the same month, marking the fifth straight decline, according to the trade group.

The trade group attributed most of the increase in global passenger traffic to growth in emerging markets, such as Latin America, where demand jumped 10.6%, according to the trade group. A weak euro may have prompted more travel into Europe, sparking a 9.2% increase in traffic among European-based airlines, according to the group.

In North America, demand increased only 1.2% in September, compared with the same month last year, the association said.

IATA's director general, Tony Tyler, said economic uncertainty and a proposal by the Obama administration to increase taxes on airlines could cut into growth and future airline profits.

"September's strength in passenger demand was a pleasant surprise," Tyler said. "We are still expecting a general weakening in passenger traffic as we head toward the year-end."

Related:

International travel to the U.S. expected to boom

Airline industry continues to hire for now

Christmas travel spending to increase, survey says

--Hugo Martin

Photo: Passengers wait for flights at Los Angeles International Airport. Credit: Los Angeles Times.

Wall Street: Stocks and gold rise

Gold: Trading now at $1,647 an ounce, up 2.1% from Thursday. Dow Jones industrial average: Trading now at 11,738.45, up 1.7% from Thursday.

Looking to Europe. European leaders are beginning crucial talks aimed at finding a solution to the sovereign debt crisis, and investors seem to be optimistic about the outcome.

Citi's roadblock. Citi is trying to put its subprime mortgage problems behind it with a settlement this week -- but first the settlement has to make it past a judge who has rejected past deals that let banks off without any admission of guilt.

Main Street needs Wall Street. Time magazine takes a look at why the recent struggles of Wall Street banks are not a good thing for Main Street.

Baldwin on the Fed. On a walk through the Occupy Wall Street encampment, Alec Baldwin calmly takes on a number of Ron Paul supporters asking the actor to throw his weight behind ending the Federal Reserve.

-- Nathaniel Popper in New York
Twitter.com/nathanielpopper

Photo credit: Stan Honda / Getty Images

Seaport traffic will grow slightly through the end of the year

Global Port Tracker, the monthly study of retail goods imported to the U.S. through the nation's largest seaports, has greatly reduced its expectations for the remainder of 2011. The numbers suggest the economic recovery is weaker than  previously believed.

One month ago, the report's authors, Hackett Associates, had been expecting a nearly 12% increase in imported goods in September. The jump in September was also to have been followed by a slow tapering off of holidays sales traffic, but the initial surge never materialized.

Now, Global Port Tracker says that cargo imports through the ports of Los Angeles, Long Beach, Oakland, Seattle Tacoma, New York-New Jersey, Virginia, Savannah, Charleston and Houston rose by just 2.7% in September when compared to the same month a year ago.

October is now expected to show a 2.6% increase in import traffic compared to a year earlier, but the National Retail Federation was putting the numbers in the best possible light.

"Retailers are poised to succeed in maintaining the careful balance between inventory and sales that keeps customers happy while keeping retailers profitable,” said Jonathan Gold, vice president for supply chain and customs policy for the National Retail Federation.

The National Retail Federation is also forecasting 2.8% growth in holiday sales this November and December, for a total of $465.6 billion, compared to the same two months at the end of last year.

Although the numbers aren't a strong as the National Retail Federation would have liked, Hackett Associates founder Ben Hackett said that it could have been much worse.

“General economic indicators are giving us a mixed set of signals,” Hackett said. “Yet at the same time there are indications that things are not quite that bad. We are of the opinion that the probability for economic growth is higher than the probability of recession.”

Also: Cargo surge takes a holiday

Cleaner engines for short line railroad

 Southern California needs this jobs generator

--Ronald D. White

Photo: A Pacific Harbor Line locomotive on the right hauls cargo containers of imported goods bound for the nation's store shelves. Credit: Katie Falkenberg / Los Angeles Times

 

China's economy slows in third quarter

China's economy grew at its slowest pace in two years in the third quarter on weaker demand for exports, tighter credit and home-buying restrictions.

The country's gross domestic product rose 9.1%, compared with 9.5% in the second quarter and 9.7% in the first quarter, China's National Bureau of Statistics said Tuesday.

The increase was below a median forecast of 9.3% in a survey of 22 economists by Bloomberg News and less than the 9.2% median estimate in a Dow Jones Newswire survey of 14 economists.

Though its growth rates are the envy of the world, China's central government is trying to engineer a controlled cool-down of the economy, which is battling its highest inflation in three years.

Policymakers say China needs slower and more sustainable growth after record amounts of lending in 2009 and 2010 fueled soaring debt and excess real estate investment and infrastructure construction.

The government faces the risk of tightening the economy too much and triggering a so-called hard landing. Worsening economic conditions in Europe and the U.S. make that task even harder because of the threat of declining demand for Chinese exports.

"Growth has come in lower than market expectations, but we remain of the opinion that the Chinese economy continues to chug towards a soft-landing, even as the risk of a hard-landing is rising on account of weakness in advanced economies," analysts at IHS Global Insight wrote Tuesday.

Investors have already shown diminishing faith in Chinese shares. Before rebounding modestly this week, the Hang Seng China Enterprises Index of Chinese stocks was one of the worst performing benchmark indices, sinking 20% for the year. The MSCI China Index has lost about 25% of its value in the last 12 months.

A Bloomberg poll of investors, analysts and traders released last month found that 59% of respondents thought China's economic growth would expand by less than 5% by 2016.

That doesn't mean demand by the Chinese for imported commodities, consumer goods and automobiles will collapse, say analysts at GaveKal Dragonomics, a China-based research firm.

In a note to clients Monday, the firm said China's economic output was on track this year to equal $7 trillion. That's more than double the $3 trillion of five years ago.

"So every percentage point of GDP growth now has much more real impact," the firm noted. "In fact, China's economy is so large now that it is now creating more new domestic demand, in raw dollar terms, than it did when headline GDP growth was in double digits. Even a slowdown to 7.5% next year would still probably mean China is adding more new domestic demand than the Euro zone or the U.S."

RELATED:

Inflation remains a worry in China

China's trade surplus narrows in September

Shaky underground banking system raises fears in China

-- David Pierson
Twitter.com/dhpierson

Photo: Chinese workers on a construction site in Shanghai. Credit: Qilai Shen / EPA

Wal-Mart executives resign in China labeling scandal

Wal-Mart said Monday it was replacing the head of its operations in China, the giant U.S. retailer's latest setback in the country after employees were arrested and detained last week in the western city of Chongqing in connection with a labeling scandal.

The company said in a statement posted on its website that Ed Chan, its chief executive in China since 2007, was leaving the company for personal reasons. Clara Wong, a senior executive for human resources, was also stepping down, the statement said.

Though Wal-Mart did not link the personnel moves to the controversy in Chongqing, the company continues to deal with fallout from charges that it sold about 140,000 pounds of pork over the last two years that was mislabeled as a more expensive organic variety. The added cost to consumers amounted to about $115,000, according to the city government's website.

Poll: Americans struggling more than Chinese to keep families fed

Nearly 20% of Americans found it difficult to put food on the table over the last year, according to a Gallup poll released this week. In China, however, only 6% of residents are running into the same problem, the study found.

It’s a sharp turnaround from 2008, when 9% of Americans were worried about feeding their families, compared with 16% of Chinese.

But the nominal economic recovery has been difficult in the U.S. with incomes slipping amid high food and gas prices. Meanwhile, the class of uber-wealthy Chinese seems to be growing, even as a huge portion of the country remains poor.

On the housing front, Americans are better equipped to afford a place to live, with 11% of U.S. residents struggling to afford shelter compared with 16% of Chinese.

But that gap may narrow –- the percentage of people grappling with housing prices has shrunk in China since 2008 while growing in the U.S.

The Asian superpower lashed out this month at the U.S. over accusations that its yuan currency is undervalued. Not long after a bill that would impose tariffs on Chinese goods cleared the Senate, China's Foreign Ministry urged the House to reject the legislation.

"This won't solve America's own economic and employment problems," said Ma Zhaoxu, a Foreign Ministry spokesperson, in a statement.

RELATED:

China's trade surplus shrinks on weakened global demand

Chinese inflation remains high amid signs of economic slowdown

Trade deficit with China cost nearly 2.8 million U.S. jobs since 2001

-- Tiffany Hsu

Photo: A vendor waits for customers at a Beijing fruit stall. A recent Gallup pound found 20% of Americans struggled with putting food on the table compared with 6% of Chinese residents. Credit: AFP/Getty Images

China's trade surplus shrinks on weakened global deman

Chinese inflation remains high amid signs of economic slowdown

Inflation in China moderated in September for the second consecutive month, but still remained stubbornly high amid growing signs of a global slowdown.

China’s consumer price index, the main gauge of inflation, grew 6.1% from a year earlier, down slightly from a 6.2% rise in August.

The index remains far above the 4% annual target set by the central government, making it difficult to loosen monetary policy if China’s economy is pulled into a global decline.

There’s evidence that the world’s second-largest economy may be slowing down.

Trade data released Thursday showed Chinese exports decreased in September over slackening European demand and a strengthening yuan, the country’s currency.

Prices for crude oil and copper fell on news of the data, reflecting jitteriness in China’s ability to import commodities as voraciously as it has in the past.

Meanwhile, thousands of small businesses in China’s coastal provinces are reportedly being squeezed by the country’s credit crunch. China’s State Council said it would support the small firms by increasing loans and offering tax breaks.

But central leaders say reining in inflation remains an overall priority –- dulling expectations that policymakers will loosen credit, drop interest rates or lift buying restrictions in China’s stagnant residential property market.

“For the moment, we remain in policy stasis -– no more tightening, but no real loosening -– while Chinese authorities nervously eye developments in the Eurozone,” said Alistair Thornton, an analyst for IHS Global Insight in Beijing. “It is the Eurozone and U.S. that form the greatest downside risk for China’s outlook.”

RELATED:

China’s trade surplus narrows in September

China calls on U.S. to oppose currency legislation

Senate OKs sanctions for nations holding down currency values

-- David Pierson  

Twitter.com/dhpierson

Photo: Customers look at prices for vegetables at a supermarket in Hefei, China. Credit: Reuters