Saturday, September 24, 2016

Red tape and infrastructure: Brazil, India, Nigeria and Russia’s real roadblocks to tourism

Tourists steer clear of Brazil, Russia, India and Nigeria because of onerous visa requirements, EM Squared reported last week. But even with easy tourist visas in place, these emerging market giants won’t reach their full potential. The real key lies in enhancing the ease of doing business and developing adequate infrastructure.
Visa policies are certainly a real barrier to tourist arrivals. No matter how beautiful or intriguing your country is as a tourist destination, if you make it too complicated for tourists to visit, they will stay away. That problem is not limited to emerging markets. A few years ago, US Travel Association estimated that the US lost the equivalent of 467,000 jobs due to the difficulty for citizens of primarily Brazil, India and China to obtain a visa.
Still, visa policies are only a piece of the puzzle. In the World Economic Forum’s recent Travel and Tourism Competitiveness Report, “International Openness” – a measure of how easy it is for tourists to visit a country – was one of 14 studied pillars. A country’s enabling environment for doing business, price competitiveness, infrastructure and natural and cultural resources are others factors that were weighted and which mattered.
In the 2015 edition of the report, Brazil came in 28th place globally, followed by Russia (45th), India (52nd) and Nigeria (131st). The significant disparities in these countries rankings make it clear that reforming stringent visa policies is unlikely to be a panacea but rather a key component of a wider set of policy shifts needed. What are they?
Brazil, for starters, should work on its business environment. Despite its vast array of tourism hotspots, the country of carnival, the Amazon rainforest and Copacabana only welcomed 6.3m international tourists in 2014, while Mexico’s arrivals amounted to 32m. In the past, one reason for that may have been the lack of adequate infrastructure. However, in recent years, in preparation for the football World Cup and Olympics, significant progress and investment has been made on air transport infrastructure and connectivity.
The real challenges hindering Brazil’s travel and tourism industry today thus lies in its restrictive business environment. Its red tape in the construction sector and high taxation rates make it hard for the tourism sector to develop adequate infrastructure. A second issue it needs to address is safety and security. Both its crime rates and currently the fear of the spread of the Zika virus remain issues that scare tourists away even if a visa is within reach.
Like Brazil, India’s international arrivals fall short of its potential, with only 8m international tourists visiting the country in 2015, compared to China’s 55m. In addition to its incredible scenery and unique heritage and monuments, India is extremely price competitive compared to other destinations. In the past years, under Prime Minister Narendra Modi’s leadership, India has made significant changes in its visa policies which are starting to bear fruit.
Yet, anyone who has visited India will agree, that infrastructure gaps are a real challenge, ranging from accommodation availability to the quality of roads. The issue of environmental sustainability must also be addressed to ensure the preservation of India’s natural heritage. Tourists and business leaders alike will also speak to the need to tackle health and hygiene issues, including pollution, information and communications technology readiness, and safety and security.
Unlike Brazil and India, Russia welcomed more than 31m international visitors in 2015, a solid performance. The nation’s strong cultural resources and price competitiveness have attracted tourists despite the stringent visa restrictions and lack of prioritisation of the sector. Russia should continue building on its strengths, notably in air transport infrastructure and health and hygiene. Still, key challenges relating to safety and security, environmental sustainability and the overall environment for doing business need to be addressed.
Nigeria’s travel and tourism industry, finally, has been a real missed opportunity to date. In 2013, Nigeria welcomed 600,000 international visitors, with the industry only accounting for 1.5 per cent of gross domestic product. Yet, significant challenges constrain the potential development of the sector in Nigeria, starting with safety and security, which arguably remain the highest priority.
Nigerian business leaders consider the lack of infrastructure as the most problematic factor for doing business. While specific issues relating to travel and tourism remain, including the prioritisation of the sector, visa policies and price competitiveness; addressing the complex issues of security and infrastructure should be prioritised not only for the industry’s competitiveness but also to ensure Nigeria’s development path.
While visa restrictions are barriers to the travel and tourism industry’s potential in these four nations, it is the overall business environment and infrastructure gaps which are truly hindering the sector’s development and these nations overall competitiveness.
These issues may superficially not seem related to the tourism industry but have a significant impact on its development. There is a clear need for a systemic and coordinated approach to achieve competitiveness for the sector and beyond.

Friday, September 23, 2016

Yuval Noah Harari on big data, Google and the end of free will

For thousands of years humans believed that authority came from the gods. Then, during the modern era, humanism gradually shifted authority from deities to people. Jean-Jacques Rousseau summed up this revolution in Emile, his 1762 treatise on education. When looking for the rules of conduct in life, Rousseau found them “in the depths of my heart, traced by nature in characters which nothing can efface. I need only consult myself with regard to what I wish to do; what I feel to be good is good, what I feel to be bad is bad.” Humanist thinkers such as Rousseau convinced us that our own feelings and desires were the ultimate source of meaning, and that our free will was, therefore, the highest authority of all.
Now, a fresh shift is taking place. Just as divine authority was legitimised by religious mythologies, and human authority was legitimised by humanist ideologies, so high-tech gurus and Silicon Valley prophets are creating a new universal narrative that legitimises the authority of algorithms and Big Data. This novel creed may be called “Dataism”. In its extreme form, proponents of the Dataist worldview perceive the entire universe as a flow of data, see organisms as little more than biochemical algorithms and believe that humanity’s cosmic vocation is to create an all-encompassing data-processing system — and then merge into it.
We are already becoming tiny chips inside a giant system that nobody really understands. Every day I absorb countless data bits through emails, phone calls and articles; process the data; and transmit back new bits through more emails, phone calls and articles. I don’t really know where I fit into the great scheme of things, and how my bits of data connect with the bits produced by billions of other humans and computers. I don’t have time to find out, because I am too busy answering emails. This relentless dataflow sparks new inventions and disruptions that nobody plans, controls or comprehends. 
But no one needs to understand. All you need to do is answer your emails faster. Just as free-market capitalists believe in the invisible hand of the market, so Dataists believe in the invisible hand of the dataflow. As the global data-processing system becomes all-knowing and all-powerful, so connecting to the system becomes the source of all meaning. The new motto says: “If you experience something — record it. If you record something — upload it. If you upload something — share it.”
Dataists further believe that given enough biometric data and computing power, this all-encompassing system could understand humans much better than we understand ourselves. Once that happens, humans will lose their authority, and humanist practices such as democratic elections will become as obsolete as rain dances and flint knives.
When Michael Gove announced his shortlived candidacy to become Britain’s prime minister in the wake of June’s Brexit vote, he explained: “In every step in my political life I have asked myself one question, ‘What is the right thing to do? What does your heart tell you?’” That’s why, according to Gove, he had fought so hard for Brexit, and that’s why he felt compelled to backstab his erstwhile ally Boris Johnson and bid for the alpha-dog position himself — because his heart told him to do it.
Gove is not alone in listening to his heart in critical moments. For the past few centuries humanism has seen the human heart as the supreme source of authority not merely in politics but in every other field of activity. From infancy we are bombarded with a barrage of humanist slogans counselling us: “Listen to yourself, be true to yourself, trust yourself, follow your heart, do what feels good.”

In politics, we believe that authority depends on the free choices of ordinary voters. In market economics, we maintain that the customer is always right. Humanist art thinks that beauty is in the eye of the beholder; humanist education teaches us to think for ourselves; and humanist ethics advise us that if it feels good, we should go ahead and do it.
Of course, humanist ethics often run into difficulties in situations when something that makes me feel good makes you feel bad. For example, every year for the past decade the Israeli LGBT community has held a gay parade in the streets of Jerusalem. It is a unique day of harmony in this conflict-riven city, because it is the one occasion when religious Jews, Muslims and Christians suddenly find a common cause — they all fume in accord against the gay parade. What’s really interesting, though, is the argument the religious fanatics use. They don’t say: “You shouldn’t hold a gay parade because God forbids homosexuality.” Rather, they explain to every available microphone and TV camera that “seeing a gay parade passing through the holy city of Jerusalem hurts our feelings. Just as gay people want us to respect their feelings, they should respect ours.” It doesn’t matter what you think about this particular conundrum; it is far more important to understand that in a humanist society, ethical and political debates are conducted in the name of conflicting human feelings, rather than in the name of divine commandments.
Yet humanism is now facing an existential challenge and the idea of “free will” is under threat. Scientific insights into the way our brains and bodies work suggest that our feelings are not some uniquely human spiritual quality. Rather, they are biochemical mechanisms that all mammals and birds use in order to make decisions by quickly calculating probabilities of survival and reproduction.
Contrary to popular opinion, feelings aren’t the opposite of rationality; they are evolutionary rationality made flesh. When a baboon, giraffe or human sees a lion, fear arises because a biochemical algorithm calculates the relevant data and concludes that the probability of death is high. Similarly, feelings of sexual attraction arise when other biochemical algorithms calculate that a nearby individual offers a high probability for successful mating. These biochemical algorithms have evolved and improved through millions of years of evolution. If the feelings of some ancient ancestor made a mistake, the genes shaping these feelings did not pass on to the next generation. 
Even though humanists were wrong to think that our feelings reflected some mysterious “free will”, up until now humanism still made very good practical sense. For although there was nothing magical about our feelings, they were nevertheless the best method in the universe for making decisions — and no outside system could hope to understand my feelings better than me. Even if the Catholic Church or the Soviet KGB spied on me every minute of every day, they lacked the biological knowledge and the computing power necessary to calculate the biochemical processes shaping my desires and choices. Hence, humanism was correct in telling people to follow their own heart. If you had to choose between listening to the Bible and listening to your feelings, it was much better to listen to your feelings. The Bible represented the opinions and biases of a few priests in ancient Jerusalem. Your feelings, in contrast, represented the accumulated wisdom of millions of years of evolution that have passed the most rigorous quality-control tests of natural selection.

However, as the Church and the KGB give way to Google and Facebook, humanism loses its practical advantages. For we are now at the confluence of two scientific tidal waves. On the one hand, biologists are deciphering the mysteries of the human body and, in particular, of the brain and of human feelings. At the same time, computer scientists are giving us unprecedented data-processing power. When you put the two together, you get external systems that can monitor and understand my feelings much better than I can. Once Big Data systems know me better than I know myself, authority will shift from humans to algorithms. Big Data could then empower Big Brother.
This has already happened in the field of medicine. The most important medical decisions in your life are increasingly based not on your feelings of illness or wellness, or even on the informed predictions of your doctor — but on the calculations of computers who know you better than you know yourself. A recent example of this process is the case of the actress Angelina Jolie. In 2013, Jolie took a genetic test that proved she was carrying a dangerous mutation of the BRCA1 gene. According to statistical databases, women carrying this mutation have an 87 per cent probability of developing breast cancer. Although at the time Jolie did not have cancer, she decided to pre-empt the disease and undergo a double mastectomy. She didn’t feel ill but she wisely decided to listen to the computer algorithms. “You may not feel anything is wrong,” said the algorithms, “but there is a time bomb ticking in your DNA. Do something about it — now!”

What is already happening in medicine is likely to take place in more and more fields. It starts with simple things, like which book to buy and read. How do humanists choose a book? They go to a bookstore, wander between the aisles, flip through one book and read the first few sentences of another, until some gut feeling connects them to a particular tome. Dataists use Amazon. As I enter the Amazon virtual store, a message pops up and tells me: “I know which books you liked in the past. People with similar tastes also tend to love this or that new book.”
This is just the beginning. Devices such as Amazon’s Kindle are able constantly to collect data on their users while they are reading books. Your Kindle can monitor which parts of a book you read quickly, and which slowly; on which page you took a break, and on which sentence you abandoned the book, never to pick it up again. If Kindle was to be upgraded with face recognition software and biometric sensors, it would know how each sentence influenced your heart rate and blood pressure. It would know what made you laugh, what made you sad, what made you angry. Soon, books will read you while you are reading them. And whereas you quickly forget most of what you read, computer programs need never forget. Such data should eventually enable Amazon to choose books for you with uncanny precision. It will also allow Amazon to know exactly who you are, and how to press your emotional buttons.
Take this to its logical conclusion, and eventually people may give algorithms the authority to make the most important decisions in their lives, such as who to marry. In medieval Europe, priests and parents had the authority to choose your mate for you. In humanist societies we give this authority to our feelings. In a Dataist society I will ask Google to choose. “Listen, Google,” I will say, “both John and Paul are courting me. I like both of them, but in a different way, and it’s so hard to make up my mind. Given everything you know, what do you advise me to do?”

And Google will answer: “Well, I know you from the day you were born. I have read all your emails, recorded all your phone calls, and know your favourite films, your DNA and the entire biometric history of your heart. I have exact data about each date you went on, and I can show you second-by-second graphs of your heart rate, blood pressure and sugar levels whenever you went on a date with John or Paul. And, naturally enough, I know them as well as I know you. Based on all this information, on my superb algorithms and on decades’ worth of statistics about millions of relationships — I advise you to go with John, with an 87 per cent probability of being more satisfied with him in the long run.
“Indeed, I know you so well that I even know you don’t like this answer. Paul is much more handsome than John and, because you give external appearances too much weight, you secretly wanted me to say ‘Paul’. Looks matter, of course, but not as much as you think. Your biochemical algorithms — which evolved tens of thousands of years ago in the African savannah — give external beauty a weight of 35 per cent in their overall rating of potential mates. My algorithms — which are based on the most up-to-date studies and statistics — say that looks have only a 14 per cent impact on the long-term success of romantic relationships. So, even though I took Paul’s beauty into account, I still tell you that you would be better off with John.”
Google won’t have to be perfect. It won’t have to be correct all the time. It will just have to be better on average than me
Google won’t have to be perfect. It won’t have to be correct all the time. It will just have to be better on average than me. And that is not so difficult, because most people don’t know themselves very well, and most people often make terrible mistakes in the most important decisions of their lives.
The Dataist worldview is very attractive to politicians, business people and ordinary consumers because it offers groundbreaking technologies and immense new powers. For all the fear of missing our privacy and our free choice, when consumers have to choose between keeping their privacy and having access to far superior healthcare — most will choose health.
For scholars and intellectuals, Dataism promises to provide the scientific Holy Grail that has eluded us for centuries: a single overarching theory that unifies all the scientific disciplines from musicology through economics, all the way to biology. According to Dataism, Beethoven’s Fifth Symphony, a stock-exchange bubble and the flu virus are just three patterns of dataflow that can be analysed using the same basic concepts and tools. This idea is extremely attractive. It gives all scientists a common language, builds bridges over academic rifts and easily exports insights across disciplinary borders.

Of course, like previous all-encompassing dogmas, Dataism, too, may be founded on a misunderstanding of life. In particular, Dataism has no answer to the notorious “hard problem of consciousness”. At present we are very far from explaining consciousness in terms of data-processing. Why is it that when billions of neurons in the brain fire particular signals to one another, a subjective feeling of love or fear or anger appears? We don’t have a clue.
But even if Dataism is wrong about life, it may still conquer the world. Many previous creeds gained enormous popularity and power despite their factual mistakes. If Christianity and communism could do it, why not Dataism? Dataism has especially good prospects, because it is currently spreading across all scientific disciplines. A unified scientific paradigm may easily become an unassailable dogma.
If you don’t like this, and you want to stay beyond the reach of the algorithms, there is probably just one piece of advice to give you, the oldest in the book: know thyself. In the end, it’s a simple empirical question. As long as you have greater insight and self-knowledge than the algorithms, your choices will still be superior and you will keep at least some authority in your hands. If the algorithms nevertheless seem poised to take over, it is mainly because most human beings hardly know themselves at all.

Thursday, September 22, 2016

Mothballing the World's Fanciest Oil Rigs Is a Massive Gamble

In a far corner of the Caribbean Sea, one of those idyllic spots touched most days by little more than a fisherman chasing blue marlin, billions of dollars worth of the world’s finest oil equipment bobs quietly in the water.
They are high-tech, deepwater drillships -- big, hulking things with giant rigs that tower high above the deck. They’re packed tight in a cluster, nine of them in all. The engines are off. The 20-ton anchors are down. The crews are gone. For months now, they’ve been parked here, 12 miles off the coast of Trinidad & Tobago, waiting for the global oil market to recover
The ships are owned by a company called Transocean Ltd., the biggest offshore-rig operator in the world. And while the decision to idle a chunk of its fleet would seem logical enough given the collapse in oil drilling activity, Transocean is in truth taking an enormous, and unprecedented, risk. No one, it turns out, had ever shut off these ships before. In the two decades since the newest models hit the market, there never had really been a need to. And no one can tell you, with any certainty or precision, what will happen when they flip the switch back on.
It’s a gamble that Transocean, and a couple smaller rig operators, felt compelled to take after having shelled out millions of dollars to keep the motors running on ships not in use. That technique is called warm-stacking. Parked in a safe harbor and manned by a skeleton crew, it typically costs about $40,000 a day. Cold-stacking -- when the engines are cut -- costs as little as $15,000 a day. Huge savings, yes, but the angst runs high.
“These drillships were not designed to sit idle,” said Willard Duffey Jr., an electrician who spent two decades with Transocean. The Deepwater Pathfinder, a ship he had served on for four years, was among the first to be parked off the Trinidad coast. The ship made the voyage there from the Gulf of Mexico about a year ago. Duffey was one of the last men aboard before the engines were turned off. He fretted constantly -- “did I do everything I could?” -- as he flew back home to Ore City, Texas. “To get the Pathfinder back up would be very difficult to guess actually,” he said.
Once famously labeled the “new Ferraris” of the oil world, these are no ordinary ships. Carrying a price tag of about $500 million a piece, they are loaded bow to stern with sophisticated, and very heavy, gadgetry.
Below the water line sit a half-dozen Rolls-Royce thrusters, coordinated by satellite to push against each other and keep the rig hovering on top of wells lying as much as two miles underwater. Up on deck, there’s a robot that can be launched to work a screwdriver or a wrench under water pressures on the seabed that no human could survive. And the 220-foot-tall, dual-activity oil-drilling derrick is capable of simultaneously lifting and lowering gear down to the seafloor, including a diamond-studded drill bit, a five-story-tall blowout preventer and a heavy-drill pipe. The derrick can handle as much as 5 million pounds of gear -- equal to the weight of some 20 adult blue whales -- going up and down at one time.
All of these fancy elements, though, are what make turning the ships back on so daunting. Chip Keener, whose rig-storage consulting firm advises Transocean, compares it to what would happen if you left a high-tech new car parked in the garage for months. The battery would be dead, sure, but then there’d also be a slew of pre-sets to reprogram. On a drillship, there are thousands and thousands of pre-sets. And unlike your car, those on a ship are essential to its proper functioning. “It’s a big deal,” says Keener.
For now, cold-stacking has been a huge success for Transocean, a long-time Texas powerhouse that’s based today in Switzerland. (It owned the offshore rig that BP Plc was operating in the 2010 Gulf of Mexico disaster.) The company reported a profit of $77 million in the second quarter, surprising investors who had been bracing for a loss. Within minutes the next morning, its stock price had jumped 8.5 percent in New York trading.
"I don’t think a simple congrats on this quarter’s cost beat is really sufficient," one stunned analyst, Scott Gruber at Citigroup Inc., told Transocean executives on a conference call. “A big kudos to all of you.”
Still, there are any number of deepwater rig operators unwilling to turn the engines off: Noble Corp., Rowan Cos. and Pacific Drilling, to name a few. They’re paying anywhere from $30,000 to $50,000 a day to store their out-of-work ships. Chris Beckett, the CEO of Pacific Drilling, said the unknowns of cold-stacking are just too great and the cost to keep the ships running too manageable -- about $10 million a year -- to turn them off. He likes the peace of mind that comes with his approach. “We don’t worry about how you start them again,” Beckett said in an interview at the company’s Houston headquarters.
The cold-stack versus warm-stack dilemma doesn’t figure to go away anytime soon.
Nearly half of the world’s available floating rigs are out of work today, and most observers expect that number will climb further. Not only are the drillship operators’ customers -- the likes of ConocoPhillips and Total SA -- slashing spending in high-cost offshore areas and canceling work contracts early, but new rigs that were ordered in recent years keep rolling out of shipyards. Bloomberg Intelligence estimates as much as $56 billion worth of offshore rigs, capable of drilling in everything from shallow water to oceans more than two miles deep, are still under construction. 
It’s a far different mood from a couple years ago, when crude was hovering around $100 a barrel and just about every single deepwater rig on the planet was in use. Transocean’s Pathfinder was in many ways the symbol of those go-go days. In mid-2014, just as oil prices were peaking, Eni SpA agreed to pay Transocean $681,000 a day to lease the ship. It was one of the richest drilling contracts ever, an amount that’s about triple the rate a deal signed today would fetch. By the end of that year, with oil in freefall, Eni canceled the contract four months before it was due to expire.  
Things are quiet on the Pathfinder these days. The water is calm off Trinidad, one of the top global destinations for drillship storage. A handful of seamen recruited locally make the rounds, in part to ward off criminal elements. They’re joined every once in a while by Transocean mechanics sent in to monitor the ships. The company’s chief operating officer, John Stobart, recently dropped in to check them out himself. CEO Jeremy Thigpen said Stobart came away encouraged.
"He was really impressed with the preservation of all the critical components," Thigpen said at an energy conference in New York this month. "His belief is, ‘Listen, we’re going to be able to reactivate these rigs in a timely and low-cost manner.’"
Stobart’s going to have to wait for his chance. Oil, after having briefly rebounded above $50 in June, is slumping again. And Transocean seems prepared to be in Trinidad for a while. The contract to lease out seabed space that the company’s negotiating, island officials say, could extend through October of 2020.

Monday, September 19, 2016

Demand for rail services set to jump by fifth in next five years

Demand for rail equipment and services around the world is set to jump by almost a fifth in the next five years to €185bn a year, driven by major infrastructure projects in western Europe and the Middle East.
Rail groups such as AlstomBombardierThales and Siemens all have the potential to benefit from this rise in global spending, although in some areas such as China foreign investment in rail is becoming more difficult.
The findings are part of a biennial report produced for Unife, the European rail makers’ association. The report will be presented this week in Berlin at InnoTrans, the world’s largest rail manufacturing show.
“Europe is the biggest growth region for rail equipment and services thanks to a number of mega-projects,” said Andreas Schwilling, partner at Roland Berger, the consultancy that conducted the study.
Growth in Europe was being driven by projects such as the HS2 high-speed rail line in the UK between London and Birmingham, as well as larger spending for infrastructure in Germany and Switzerland, he said.
In the Middle East, the low oil price has led to the cancellation of some projects but growth is still significant due to mass transit systems being built in cities such as Dubai, Jedda and Mecca as well as projects in Iran.
The global rail equipment and services market will grow by 2.6 per cent annually over the next five years, according to the study. Western Europe will see the strongest growth at 3.1 per cent, followed by the Middle East and Africa region at 3 per cent.
The predicted growth in the Middle East and Africa follows a decline in recent years. The return to growth will be driven by large urban projects, for example the modernisation of the Cairo metro as well as the purchase of 450 train cars by Israel Railways.
Philippe Citroën, the director-general of Unife, said that while there was growth in rail infrastructure spending in sub-Saharan Africa, this was of little benefit to European suppliers “as the market is dominated by Chinese groups”.
Accessibility had also been falling for European suppliers on the Chinese rail market as well, said Mr Citroën, although “it is still possible for some of our members to do business here”.
Over the coming years there is expected to be a range of large projects in Asia, for example 550 new vehicles for the Beijing metro system. Outside of China, there is a high-speed train line between Kuala Lumpur and Singapore as well as upgrade of several freight lines in India.
Recent years have seen sharp growth in spending in Latin America, driven by Brazil as it upgraded its transport infrastructure ahead of the World Cup and the Olympics. But this spending has now slowed, and Latin America is expected to grow a more modest 2.3 per cent a year until 2021.

Western aluminium makers face new threat

China Hongqiao, the world’s largest producer of aluminium by output, used its latest annual report to warn that fierce competition in its home market would lead to “survival of the fittest”.
At the vanguard of China’s dominance of the global aluminium industry, Hongqiao appears to be thriving: in March the privately owned company set out plans to expand production capacity to 6m tonnes by the end of this year — 33 per cent more than the combined output of its US rivals in 2015.
These ambitious plans help explain why US and European aluminium producers fear their Chinese competitors could undermine a tentative recovery in the price of the lightweight metal this year. This is because western producers say excess production by Chinese rivals was a key factor behind falling prices between 2011 and last year.
Any fresh deterioration in the aluminium market — the rebound has been attributed to a limited increase in demand allied to some cuts in production in certain countries including China — would have significant repercussions for producers including Alcoaof the US, Norway’s Norsk Hydro and Russia’s Rusal.
Furthermore, Chinese producers are set to become even more potent competitors by pushing into production of high quality aluminium for industries including aerospace and automotive. This area has so far been dominated by European and US producers.
Jeremy Wrathall, analyst at Investec in London, suggests European and US aluminium producers are under severe pressure. “Does the west want an aluminium industry or not?,” he asks. “They’ve got to make a decision if it’s of strategic importance or not.”
The high stakes were highlighted by how President Barack Obama discussed the issue of excess aluminium production by China with President Xi Jinping at a meeting of leaders of the G20 group of nations this month.
“The US and China recognise that due to a weak global economic recovery and depressed market demand, the excess capacity of the … aluminium industry has increased and become a global issue requiring collective response,” said a White House statement.
China overtook the US in aluminium production in 2003, and now, globally, produces half of the metal.
Most of China’s production of primary aluminium — the basic, unworked metal — is consumed domestically due to an export tax levied because of the high energy costs of smelting.
Companies such as Hongqiao deliver the metal in liquid form or cast ingots to Chinese customers that turn it into so-called semi-finished products. These include rolled products, such as aluminium sheet used to make drinks cans, and extruded items like girders for the construction industry.
China’s exports of these products have soared over the past decade, reflecting how production far exceeds domestic demand.
Little wonder that European aluminium producers are worried about China’s output, and the impact on prices.
“Our concern is one word: overcapacity,” says Maximo Miccinilli, director of public affairs at European Aluminium, which represents the region’s producers. It estimates that China has excess aluminium capacity of 10m tonnes a year currently — five times the EU’s total output.
“In the last 10 years [Europe has] lost one-third of our capacity,” adds Mr Miccinilli. "We had to shut down smelters in Europe and of those that are still operating, most are under serious risk.”
Similar concerns exist in the US, where the aluminium industry has been in steady decline since the financial crisis. Production fell to its lowest level in more than 30 years in June.
Western aluminium producers complain of unfair trade, alleging that some Chinese rivals receive subsidies for electricity costs — the largest single expense in smelting. They also claim Chinese producers are dumping aluminium on the global market at lowball prices.
The China Nonferrous Metals Industry Association, which represents Chinese aluminium producers, declines to comment on these allegations.
Western producers now face an additional challenge: Chinese rivals’ ambitions to expand into making higher quality aluminium products for use in aircraft and cars.
“What China lacks is high-value added aluminium products for aviation,” says Laura Zhai, analyst at Fitch. “All Chinese companies would want to get a hold of that.”
A company affiliated to China Zhongwang, the world’s second-largest producer of aluminium extrusions, last month agreed to buy Aleris of the US for $2.3bn including debt.
Aleris specialises in rolled aluminium products for the aerospace and automotive industries, and the takeover “raises very serious concerns for the entire aluminium industry”, says the Aluminum Extruders Council, which represents US producers.
“Zhongwang is a state-supported enterprise and has received large benefits and financing from the government of China,” it adds.
But Lu Changqing, president of Zhongwang, says it has always been a private company and has not received any direct or intermediate investment from the Chinese state.
“Zhongwang … has grown up and developed in a completely market-based process, and in this process, the company has had not special government support and has had no subsidies,” adds Mr Lu.
Yet Zhongwang’s takeover of Aleris could lead other Chinese aluminium companies, both state and privately owned, to hunt for overseas assets, say analysts.
“Chinese aluminium companies are looking outside China,” says Charlie Durant, analyst at CRU, a consultancy.
One potential source of relief for western aluminium producers are signs since late last year the Chinese government is willing to tackle excess capacity in the domestic industry.
Some analysts question Beijing’s commitment, but so far this year Chinese aluminium output has fallen by an estimated 3 per cent compared to 2015.
Zhang Bo, Hongqiao’s chief executive, said in March the company would slow its capacity expansion or even suspend output of basic aluminium if demand faltered. However, since many Chinese aluminium producers focused on semi-finished products are privately owned, it could be difficult to control the country’s output of the metal, says Paul Adkins, founder of AZ China, a consultancy.
“The opportunity for [Chinese industry] leadership and co-ordinated efforts to control overcapacity [in semi-finished products] is extremely limited,” he adds.

Sunday, September 18, 2016

Motivational quotes

Perseverance, hard work, kindness, drive, creativity and more will help you succeed. Here are some motivational quotes to inspire you for success at work:
1. “The greater danger for most of us lies not in setting our aim too high and falling short, but in setting our aim too low and achieving our mark.” —Michelangelo, sculptor
2. “When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.” —Alexander Graham Bell, inventor
3. “I know the price of success: dedication, hard work and an unremitting devotion to the things you want to see happen” —Frank Lloyd Wright, American architect
4. “In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” —Mark Zuckerberg, CEO and founder of Facebook  FB 0.54% 
5. “The successful man will profit from his mistakes and try again in a different way” —Dale Carnegie, motivational speaker and author
6. “The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.” —Alan Greenspan, economist
7. “There comes a time when you ought to start doing what you want. Take a job that you love. You will jump out of bed in the morning. I think you are out of your mind if you keep taking jobs that you don’t like because you think it will look good on your resume. Isn’t that a little like saving up sex for your old age?” —Warren Buffet, CEO and investor
8. “The brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to give us a chance to show how badly we want something. Because the brick walls are there to stop the people who don’t want it badly enough. They’re there to stop the other people.” —Randy Pausch, author and college professor
9. “The first step towards getting somewhere is to decide that you are not going to stay where you are” —J.P. Morgan, American financier
10. “Do what you have to do until you can do what you want to do.” —Oprah Winfrey, Chairwoman and CEO of Harpo Productions
11. “No one of achievement has avoided failure, sometimes catastrophic failures, but they keep at it. They learn from mistakes. They don’t quit.” —President Barack Obama
12. “As long as you’re going to be thinking anyway, think big.” —Donald Trump, U.S. presidential candidate
13. “If at first you don’t succeed, try, try again. Then quit. No use being a damn fool about it.” —W.C. Fields, comedian
14. “Obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.” —Michael Jordan, professional basketball player
15. “The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack of will.” —Vince Lombardi, Hall of Fame football coach
16. “There may be people that have more talent than you, but there’s no excuse for anyone to work harder than you do.” —Derek Jeter, professional baseball player  
17. “Achievement is largely the product of steadily raising one’s levels of aspirations and expectation.” —Jack Nicklaus, professional golfer
18. “The real secret of success is enthusiasm.” —Walter Chrysler, auto executive
19. “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” —Steve Jobs, Apple  AAPL -0.51% CEO and co-founder
20. “Always deliver more than expected.” —Larry Page, co-founder of Google  GOOG -0.37% 
21. “No matter how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team.” —Reid Hoffman, venture capitalist and co-founder of LinkedIn  LNKD -0.10% 
22. “Be nice to colleagues, customers, co-workers and everyone else you come into contact with at work. No one likes to deal with difficult unfriendly people.” —Richard Harroch, venture capitalist and author
23. “The secret of success is to know something nobody else knows.” —Aristotle Onassis, Greek businessman
24. “Be willing to do favors for people, freely and genuinely. Helping others succeed will reward you in the long run.” —Richard Harroch, venture capitalist and author
25. “Never make excuses. Your friends don’t need them and your foes don’t believe them.” —John Wooden, UCLA basketball coach

Thursday, September 15, 2016

Overcapacity, low industry demand putting pressure on power tariffs, in India

Due to large over capacity and low industrial growth, electricity tariff is under pressure this year.
Arrival of cheap hydro-electricity – up by five per cent – has added further pressure on prices. Also coal-based power generation is down by nearly seven per cent in September.
But National Capital Territory of Delhi and three imported coal based power plants in coastal Andhra Pradesh are the exceptions. They along with a host of hydel power stations are top sellers on the Indian Energy Exchange this month.
Over the last week, the NCT area sold 4-9 million units which is approximately 150-400 MW on round- the-clock basis. The selling tariff hovered between ₹2.14-2.68 a unit. The region has three discoms and a mixed source of power.
According to Sabyasachi Majumder, Senior Vice-President of ICRA, the region has excess power. Most of the excess capacity is tied up by discoms, which are refusing to take delivery by paying fixed cost.
This power is offloaded in the open market at zero profit or on a marginal (variable) cost addition basis as higher capacity utilisation is helping in keeping overall costs down.
But this doesn’t hold good for Thermal Power Tech, Meenakshi Thermal and Simhapuri Energy of Andhra Pradesh. All of them are coastal power plants using imported coal for electricity generation.
Over the last week, Simhapuri and Thermal Tech have often been the top five sellers. These two and Meenakshi were top IPP sellers along with a host of hydel power producers.
Chhattisgarh-based Avantha Power and ACB India and, Tamil Nadu-based Neyveli Lignite (NLC) also made it to the list of sellers from thermal power segment but their transactions were either infrequent or marginal in volume (as in the case of NLC).
There are occasions when power was sold below the regional average tariff, which itself is ruling low. On September 12, Simhapuri and Thermal sold over 4 million units each at ₹2.45-47 a unit as against the regional average tariff of ₹2.69.
According to Girishkumar Kadam, also a Senior Vice-President of ICRA, there is no way a thermal power plant can make profits at such tariffs. At the prevailing price of $38 a tonne (FOB) for 4200 kilo calorie Indonesian coal, an imported coal based coastal power station should recover over ₹2.2 a unit in variable cost and another₹1.8-2 unit for fixed cost, he said.
Kameswara Rao, Partner, PwC, says, “Power generators are bidding close to variable costs for dispatching the power. Given the extended monsoon and lean demand, they otherwise risk losing even this limited cash flow.”
According to a source, the IPPs from Andhra are particularly in a sticky wicket due to absence of firm power purchase agreements (PPAs). The State government is expected to enter into agreements soon failing which many producers will suffer losses.
Advantage buyer
However, the buyer is benefiting from this situation in the short and medium term. State-run discoms in Punjab, Telangana, Bihar Haryana and Karnataka are regularly buying power at around ₹2.5 a unit. Hectic buying is also seen from UP and Rajasthan, but less frequently.
But in the long run it might create new problems. While detailed reports on capacity utilisation are not available, Coal India (CIL) reported a drop in sales in the second quarter.
The drop is sharp in August, so much so that the offtake growth which was three per cent in April-June stands at 0.2 per cent in April-August period. Breaking away from tradition, CIL did not release data for August.
Sources say while State government-run generation units reported dramatic fall in capacity utilisation (PLF), many IPPs too decided to shut shop fully or partially.