TPT November 2010

G lobal M arketplace

Index published in mid-August by Industrial Info Resources, total spending on US oil and gas projects scheduled to launch by the end of 2010 is considerably higher than the figure for these starts in 2009, when the global market intelligence provider tracked more than 550 projects valued at $14.08 billion. By midsummer 2010, Industrial Info was tracking more than 670 such projects, representing a projected outlay of more than $24.58 billion. Steel China’s restrictions on steel output make for unsettled demand and pricing conditions through the New Year, at least The limiting of power supplies to mills would probably curtail steel output in China through the end of 2010, the Ministry of Industry and Information Technology said 15 September. The world’s largest steel making nation imposed the reductions to help ensure that its energy-efficiency goals would be met. “The resulting widening in steel maker margins would encourage further production within China once restrictions are lifted and support output in the rest of the world,” SSY Consultancy & Research Ltd said in a report. The consultancy is a unit of London- based Simpson Spence & Young Ltd, the world’s second-largest shipbroker. In advance of Beijing’s exercise in energy conservation, Wuhan Iron & Steel Co, for one, had enjoyed a quite good first half. The company said its profit rose 90.4% as a revival in demand from auto makers lifted steel prices in China over the period through 30 June. In a 22 August statement to the Shanghai stock exchange, Wuhan said that its net income rose to $142 million from $76 million a year earlier; its sales, to $5.29 billion from $3.46 billion. The Hubei province-based unit of Wuhan Iron & Steel Group, China’s third- largest steel maker, said its crude steel output was up by 29.8% to 8.04 million metric tons in the first half from first-half 2009. Steel prices in China gained an average 15% over the period as stimulus spending by the government boosted shipments to the rail, automobile and construction companies. (Wuhan Iron & Steel won the bid to supply 7,000 tons of steel for the Beijing-Shanghai high-speed rail link.) But the China Iron & Steel Association reported that Beijing’s crackdown on property speculation in the two months leading up to the Wuhan filing had already tamped down demand for steel, prompting 40% of mills to trim their output. Warning of higher iron ore, coal and power prices ahead, Wuhan in August acknowledged it faced price declines deriving from reduced demand from the auto and appliance industries. China’s biggest mills, including Angang Steel Co and Wuhan, were also set for lower earnings in the second half after the government’s removal of export tax rebates up to 13% on flat steel. The change, which became effective 15 July, includes hot-rolled coil. Elsewhere in steel . . . › Australia’s largest steel maker, BlueScope Steel Ltd, which already has eight plants in China and has increased its earnings

Oil and gas Managers of $2.5 trillion in assets press energy companies on spill prevention and response plans for deepwater wells While BP continues to pay, heavily, for the oil spill in the Gulf of Mexico – fines and damages will cost it dear, and the company’s stock has lost more than a third of its value since the explosion and fire on the Deepwater Horizon drilling rig on 20 April – a question suggests itself. How much better prepared, if at all, are other big- name oil and gas giants for the hazards of offshore drilling? As reported in Mother Jones, the San Francisco-based nonprofit for investigative journalism, a group of 58 global investors representing some $2.5 trillion in assets intends to have an answer. In an effort spearheaded by Ceres, a business alliance for addressing environmental challenges, the investors have called upon leading energy developers to demonstrate that they are any better able than BP to prevent or deal with sudden calamity in deep water. (“Are Other Oil Giants Better Prepared for a Disaster?”, 9 August) As noted by Mother Jones ’s Kate Sheppard, shareholder harm from the BP spill has focused investor attention on the need for good governance, compliance and management systems worldwide. She added, “The BP Gulf of Mexico disaster has also highlighted the need for clear, comprehensive, well-tested response plans by oil and gas companies for dealing with future offshore accidents.” With signatories including the New York State Comptroller, the California State Treasurer and the Florida State Board of Administration, the overture is no well-intentioned but readily dismissed grassroots initiative. The letter went to the CEOs of 27 oil and gas companies including Petrobras, ExxonMobil and Royal Dutch Shell, the three biggest deepwater drillers; as well as Chevron, ConocoPhillips, Hess and Statoil. › The intention of the investors to hold the oil companies’ feet to the fire is unmistakable. Their letter requests specific information on: how much the firms have invested in spill prevention and response planning; their contingency plans in the event of a spill; and what lessons they have learned from the BP disaster. It also asks to know the companies’ policies on selecting and overseeing contractors, and what internal governance structures they have in place to manage risks. Observing that the Deepwater Horizon sinking has led to one of the greatest environmentally-related destructions of shareholder value in history, the investor groups make plain that what they are after is full and frank disclosure. They wrote, “It is important for all companies involved in subsea deepwater drilling to be open and transparent with investors and stakeholders at this crucial historic moment.” For emphasis, their letter to the oil giants concludes, “We would also welcome the opportunity to meet to discuss these issues in more detail.” › Even as spending this year in other industrial sectors in the US has been relatively weak, spending in the oil and gas industry has seen fairly robust growth. According to the Project Spending

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N ovember 2010

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