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Chaos Theory: How Tankers Thrive Amid Energy Crisis And War

Chaos Theory: How Tankers Thrive Amid Energy Crisis And War

By Greg Miller of FreightWaves

Global crises and geopolitical chaos are bad for…



Chaos Theory: How Tankers Thrive Amid Energy Crisis And War

By Greg Miller of FreightWaves

Global crises and geopolitical chaos are bad for most businesses. Not so in industries like defense and energy shipping. Go to a commodity shipping conference in troubled times and you’ll hear a lot about how bullish all that trouble is for freight rates.

The focus at Marine Money’s New York Ship Finance Forum on Thursday was on the worsening global energy crunch, the war in Ukraine, looming sanctions on Russia, the evolving situation in China — and how phenomenal the rate outlook is for tankers carrying crude, refined petroleum products and liquefied natural gas.

‘The party hasn’t even started yet’

The sweet spot for rates is when disruptions are severe enough for inelastic vessel capacity to fall behind demand, but not so severe that demand is destroyed and the global economy melts down. Bad news is good news, until it gets too bad.

“The market likes chaos and dislocations,” said Bart Kelleher, CFO of Ardmore Shipping.

According to Scorpio Tankers President Robert Bugbee, “The party hasn’t even started yet. The host may be drinking a couple of drinks but nobody has come yet. They are at the pub, waiting to go to the party later. The stress hasn’t even begun to be put on the product-tanker market."

“What we are worried about and I’m sure some of the other people here are worried about is that this gets too good,” said Bugbee. “This could get crazy. We cannot do the mathematics now to get required [future] demand for products to match the ships able to transport it.”

On the geopolitical front, the Russia-Ukraine war has been a boon for tankers. One moderator asked a tanker panel: “Do you have any concerns on the horizon — maybe [Russian President Vladimir] Putin concedes?”

But geopolitical chaos, like the energy crunch, is only good for rates if it doesn’t go too far. LNG shipping panelists warned of dire consequences in the event of a China-U.S. war.

“If that happens we’re all screwed,” said Oystein Kalleklev, CEO of Flex LNG (NYSE: FLNG). “It’s almost not even worth worrying about because the consequences are so big. Russia and Ukraine would look like a small bump in the road compared to what would happen. You would have an energy shock like you’d never seen before. The whole world economy would stop. It would be like the Great Depression.”

‘Worst energy crisis since 1979-1980’

Average spot rates for very large crude carriers (tankers that carry 2 million barrels of crude) are now above $100,000 per day. Bugbee said one of Scorpio’s product tankers was just booked at $98,000 per day. Average spot rates for tri-fuel, diesel-engine LNG carriers are now over $450,000 per day.

The more that different parts of the world fall short of energy, the higher the demand for shipping to balance out supply. That’s good for tanker owners — until the supply of energy maxes out and consumer and industrial demand is destroyed by high prices.

“We now have the worst energy crisis since 1979-1980,” said Francisco Blanch, head of global commodities at Bank of America Securities.

“Back then, we had a global oil crisis. Today, we have a crisis in gas and power markets. For the most part, it’s local prices; as people like to say in financial lingo, it’s a ‘glocal’ crisis. It hit China a year and a half ago and Europe a year ago. And unfortunately, I think it is heading straight to the U.S. Northeast.”

Utilities in New England depend on LNG. Import prices have skyrocketed due to war-driven demand in Europe. Furthermore, many New Englanders use heating oil. “Northeast inventories of heating oil are the lowest ever coming into this winter,” said Blanch. “All they can do now is first, pay, and second, pray for warm weather.”

Globally, he said, government strategic oil stocks are the lowest ever and commercial storage is also low. Spare oil production is limited. “When you don’t have inventories and you don’t have spare capacity, any incremental upward demand swing has to be met simply by higher prices and lower demand. You have to restrict demand,” he said.

Fight for LNG to heat up in 2023

Countries are bidding against each other for supplies of LNG and petroleum products. The losing bidders fall short of energy. The shipowner transporting cargo wins either way, providing a vital service for end consumers (and for cargo shippers, who profit even after paying often exorbitant freight).

Gordon Shearer, senior adviser of project development at Poten & Partners, said, “India, Pakistan and Bangladesh made big bets that they could buy LNG at spot prices, and they’ve taken the brunt of this swing in price driven by Europe. We’ve seen demand destruction and blackouts in Pakistan and Bangladesh and cargoes being diverted away from India.”

Competition for LNG supplies will heat up even further next year. According to Jason Feer, global head of business intelligence at Poten & Partners, Europe was able to fill its inventories this winter “because they had piped gas from Russia for four to five months” in addition to LNG imports. Plus, they didn’t face as much competition from China, where imports dropped 20%.

“The issue for Europe is going to be next year,” said Feer.

Europe won’t get Russian pipeline gas in 2023 and Chinese LNG buying will likely rebound. Blanch also noted that there is significantly more regasification (LNG import) capacity coming into service next year compared to liquefaction (LNG export) capacity. “So, we will have more mouths to feed but we don’t really have the amount of liquid gas to feed those mouths,” he said. “That will create more arbitrage opportunities and longer travel distances, and therefore very firm LNG [shipping] rates.”

The scramble for diesel

The same competition for resources is playing out in diesel markets and refined product markets in general.

“The big question is: Do we have the refined products to meet the [post-pandemic] reopening of the global economy? I think the answer is no, because we have severely underinvested in refineries,” said Blanch.

According to Arthur Richier, head of strategic partnerships at Vortexa, “The world needs diesel and we’re in very short supply of diesel. Europe is taking a lot of that diesel away from other economies, especially from Latin America. Europe has the cash to outbid buyers in Latin America.”

The scramble for diesel is leading to fallout in other refined products markets, as well.

“Because diesel markets are tremendously tight, refineries have adjusted their yields to do a lot less naphtha and gasoline,” said Richier. “Some of those trades, such as the gasoline trades in the Atlantic Basin and the naphtha trades heading east [to Asia], have suffered.”

Sanctions on Russian oil loom

The energy crisis caused by underinvestment has been exacerbated by the war. The conflict has already had a major effect on crude, products and LNG shipping markets, boosting rates.

It’s about to have an even bigger effect as sanctions create a whole new level of chaos. Starting Dec. 5, the EU will no longer import seaborne Russian crude. U.K. and EU shipping insurance will no longer be available for any Russian crude exports unless the oil is priced below the G-7 and EU price caps. The same restrictions will apply to Russian products starting Feb. 5.

Replacement EU imports will travel much longer distances, increasing tanker demand measured in ton-miles (volumes multiplied by distance). The question is how much upside will be offset by downside from lower Russian export volumes.

“We’re going to lose about a million barrels of crude oil and petroleum products [per day] as those sanctions come down,” predicted Blanch. “Why someone picked those [sanctions] dates in the middle of winter I have no idea. I’m not sure the politicians understood what they were doing.”

Richier estimated that 2 million barrels per day “will be taken out of the market next year from Russia for both logistical and sanctions reasons.”

Russia will be able to move a portion of its crude aboard “shadow tankers,” vessels insured via non-Western insurers that do not do business in U.S. dollars. But availability of shadow product tankers to carry Russian diesel will be far more limited.

“With clean [products] exports, it’s a very, very different story,” warned Richier. “Whether the oil price cap is agreed to or not, Russia will face a physical logistics issue to move those cargoes. There simply aren’t going to be enough vessels to transport those Russian barrels.”

Tyler Durden Mon, 11/21/2022 - 13:20

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Move over carbon, the nanotube family just got bigger

Tokyo, Japan – Researchers from Tokyo Metropolitan University have engineered a range of new single-walled transition metal dichalcogenide (TMD) nanotubes…



Tokyo, Japan – Researchers from Tokyo Metropolitan University have engineered a range of new single-walled transition metal dichalcogenide (TMD) nanotubes with different compositions, chirality, and diameters by templating off boron-nitride nanotubes. They also realized ultra-thin nanotubes grown inside the template, and successfully tailored compositions to create a family of new nanotubes. The ability to synthesize a diverse range of structures offers unique insights into their growth mechanism and novel optical properties.

Credit: Tokyo Metropolitan University

Tokyo, Japan – Researchers from Tokyo Metropolitan University have engineered a range of new single-walled transition metal dichalcogenide (TMD) nanotubes with different compositions, chirality, and diameters by templating off boron-nitride nanotubes. They also realized ultra-thin nanotubes grown inside the template, and successfully tailored compositions to create a family of new nanotubes. The ability to synthesize a diverse range of structures offers unique insights into their growth mechanism and novel optical properties.

The carbon nanotube is a wonder of nanotechnology. Made by rolling up an atomically thin sheet of carbon atoms, it has exceptional mechanical strength and electrical conductivity amongst a range of other exotic optoelectronic properties, with potential applications in semiconductors beyond the silicon age.

The key features of carbon nanotubes come from subtle aspects of their structure. For example, like a piece of paper rolled up at an angle, nanotubes often have a chirality, a “handedness” in their structure that makes them different from their mirror image. That is also why scientists are looking ahead to materials beyond carbon, which might enable a wider range of structures. One spotlight is on transition metal dichalcogenide (TMD) compounds, made of transition metals and Group 16 elements. Not only is there a whole family of them, TMDs have features which are not seen in carbon nanotubes, such as superconductivity and photovoltaic properties, where exposure to light generates a voltage or current.

To get to grips with the full potential of TMDs, however, scientists need to be able to make single-walled nanotubes in a variety of compositions, diameters, and chirality in a way that lets us study their individual properties. This has proven challenging: TMD nanotubes usually form in concentric multi-walled structures, where each layer might have different chirality. This makes it tricky to find out, for example, what kind of chirality gives rise to specific properties.

Now, a team led by Assistant Professor Yusuke Nakanishi from Tokyo Metropolitan University has come up with a way to do just that. By using boron-nitride nanotubes as a template, they could successfully grow a range of single-walled TMD nanotubes by adding the required elements through exposure to vapor. In previous work, they made single-walled molybdenum sulfide nanotubes. On looking at individual nanotubes in more detail, they have now distinguished a whole plethora of single-walled tubes of different diameters and chirality. Specifically, they measured the “chiral angles” of individual tubes which, taken together with their diameters, determine unique chiral structures. They discovered, for the first time, that the chiral angles of their nanotubes were randomly distributed: this means they have access to the whole range of possible angles, promising new insights into the relationship between chirality and electronic states, a key unsolved question in the field. There were also ultra-thin tubes only a few nanometers across grown inside the template, not outside, a unique platform for observing quantum mechanical effects.

By tweaking their recipe, the team has now also succeeded in switching both the metal and the chalcogen, making molybdenum selenide, tungsten selenide, and molybdenum tungsten sulfide alloy nanotubes. They even made nanotubes with one element on the outside, another on the inside, “Janus”-type nanotubes named after the two-faced god of Roman mythology. The team’s diverse new entries into the nanotube family promise bold new strides in not only our understanding of TMD nanotubes, but how exotic properties arise from their structures.

This work was supported by JSPS KAKENHI Grants (Grant Numbers JP23H01807, JP20H02572, JP21H05232, JP21H05234, JP22K04886, JP22H05468, JP22H01911, JP22H02573, JP21H05017, JP22H05469, JP23H00259, JP23K13635, JP23H00097, JP22H05441, JP21H05235, JPJSJRP20221202), the JST CREST Program (Grant Numbers JPMJCR17I5 and JPMJCR20B1) and the JST FOREST Program (Grant Number JPMJFR213X).

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China’s Birth Rate Plummets 10% To Lowest On Record

China’s Birth Rate Plummets 10% To Lowest On Record

China’s birthrate fell 10% last year to its lowest level on record, a significant drop…



China's Birth Rate Plummets 10% To Lowest On Record

China's birthrate fell 10% last year to its lowest level on record, a significant drop in spite of extensive efforts by the CCP to encourage people to get busy.

Children play outside a cafe in Beijing, China. (AFP)

The country had just 9.56 million births in 2022, the lowest figure since they began keeping records in 1949, according to a report by the National Health Commission.

The high costs of child care and education, growing unemployment and job insecurity as well as gender discrimination have all helped to deter many young couples from having more than one child or even having children at all. -NBC News

China's population also fell for the first time in six decades, dropping to 1.41 billion people - a demographic shift that's caused officials to worry that the country will 'get old before it gets rich' - with a slowing economy and declining tax receipts amid increases in government debt due to soaring health and welfare costs.

According to the report, the demographic downturn is largely thanks to China's one-child policy imposed between 1980 and 2015. Nearly 40% of Chinese babies last year were the second child of a married couple, while 15% were from families with three or more children.

The sharp decline in births comes despite Beijing's efforts to increase child care and provide other financial incentives. In May, President Xi Jinping presided over a panel to study the topic.

Not just China

As we noted in June, Japan's birth rate has also plummeted to a record low for the seventh straight year, with the number of babies born falling below 800,000 this year, health ministry data showed on June 2.

The number of newborns in Japan fell to 770,747 this year, down 40,875 from the previous year and the lowest since the country began record-keeping in 1899, Kyodo News reported, citing health ministry data.

Japan’s fertility rate—the average number of children born to a woman in her lifetime—fell from 1.30 in 2021 to 1.26 last year, equivalent to the previous low recorded in 2005. The number is far below the 2.07 rate necessary to sustain a stable population.

The decline in Japan’s birth rate is attributed to people delaying parenthood due to the economic impact brought on by the COVID-19 pandemic, as well as the prevailing trend among couples to delay marriage, according to the report.

The US birthrate has also been in decline, falling slightly in 2022 compared to 2021, with roughly 3.7 million babies born nationwide. It still hasn't recovered to pre-pandemic levels according to the CDC.

And as Mike Shedlock noted two years ago.

More via Mish Talk, worth a review:

The Pandemic Caused a Baby Bust, Not a Boom

Scientific American reports The Pandemic Caused a Baby Bust, Not a Boom

When the COVID pandemic led to widespread economic shutdowns and stay-at-home orders in the spring of 2020, many media outlets and pundits speculated this might lead to a baby boom. But it appears the opposite has happened: birth rates declined in many high-income countries amid the crisis, a new study shows.

Arnstein Aassve, a professor of social and political sciences at Bocconi University in Italy, and his colleagues looked at birth rates in 22 high-income countries, including the U.S., from 2016 through the beginning of 2021. They found that seven of these countries had statistically significant declines in birth rates in the final months of 2020 and first months of 2021, compared with the same period in previous years. Hungary, Italy, Spain and Portugal had some of the largest drops: reductions of 8.5, 9.1, 8.4 and 6.6 percent, respectively. The U.S. saw a decline of 3.8 percent, but this was not statistically significant—perhaps because the pandemic’s effects were more spread out in the country and because the study only had U.S. data through December 2020, Aassve says. The findings were published on Monday in the Proceedings of the National Academy of Sciences USA.

Birth rates fluctuate seasonally within a year, and many of the countries in the study had experienced falling rates for years before the pandemic. But the declines that began nine months after the World Health Organization declared a public health emergency on January 30, 2020, were even more stark. “We are very confident that the effect for those countries is real,” Aassve says. “Even though they might have had a bit of a mild downward trend [before], we’re pretty sure about the fact that there was an impact of the pandemic.”

Covid Accelerated the Existing Trend

Covid accelerated the already declining birth rates. 

Given the 16-year lag between births and the civilian noninstitutional population coupled with the aging of the workforce there will be fewer and fewer workers supporting retired workers on Social Security. 

Notice the relatively steep decline in the birth rate starting in 2008 and continuing through today. 

That impact will start showing up in 2024 and last a minimum of 12 years.

How long depends on whether the birth rate picks up after Covid. I highly doubt the birth rate will pick up.

Deflationary and Inflationary Impacts

  1. Inflationary: Shortage of workers increases wage pressures
  2. Deflationary: Fewer workers support an increasing number of retirees
  3. Deflationary: Older workers need more assistance, buy fewer things, travel less. 
  4. Deflationary: More government debt and deficits. Government spending has a negative impact on real GDP.

*  *  *

Time for another sexual revolution?

Tyler Durden Fri, 10/13/2023 - 22:40

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The Movie Disney And China Don’t Want You To See

The Movie Disney And China Don’t Want You To See

Authored by Jonathan Miltmore via The Epoch Times (emphasis ours),

Few directors in Hollywood…



The Movie Disney And China Don’t Want You To See

Authored by Jonathan Miltmore via The Epoch Times (emphasis ours),

Few directors in Hollywood have more power than Martin Scorsese, the Oscar-winning director of box office hits such as "Goodfellas," "Casino," "The Departed," and "The Wolf of Wall Street."

(L-R) Actor Richard Gere, director Martin Scorsese, the Dalai Lama, and producer and screenwriter Melissa Mathison hold hands at the end of a brief meeting with reporters prior to a speech by the Dalai Lama at an awards ceremony in New York on April 30, 1998. The ceremony honored Mr. Scorsese and Ms. Mathison for their work on the film 'Kundun.' (Matt Campbell/AFP via Getty Images)

But even the legendary filmmaker lacked the clout to save the fate of his movie "Kundun" (1997) when the Chinese Communist Party (CCP) came knocking on Disney’s door.

The film is probably one that most readers have never heard of, even though it was nominated for four Academy Awards and included the legendary Mr. Scorsese. A historical drama written by Melissa Mathison, "Kundun" explores the life of the young Dalai Lama, who in 1950 saw his homeland of Tibet invaded by the CCP.

Ms. Mathison conceived the project after meeting the Dalai Lama in 1990, and although she had concerns that Hollywood wouldn't be interested in such a film, she caught a break when she convinced Mr. Scorsese to direct the film.

“I’m not saying he wants to do it, but I know he’s going to get it,” Ms. Mathison recalled thinking. “I knew he’d understand the society, the moral code, the journey, and the spirituality of it,” she said in the documentary "In Search of Kundun with Martin Scorsese."

Disney eventually agreed to distribute the film, which was given a $28 million budget. But China had other ideas.

Tibet, along with Taiwan and Tiananmen, is among the forbidden Three Ts—the issues considered most contentious by the CCP. So with China becoming an emerging global power in the 1990s, the CCP decided to flex its muscle and attempted to nix the project.

Two days into the production of "Kundun" in 1996, a representative from the Chinese Embassy approached Disney's chief strategic officer, Lawrence Murphy.

“You started shooting a film in Morocco about the Dalai Lama called 'Kundun,'” the diplomat said before explaining that Beijing had concerns with the film’s subject matter.

'Play by China’s Rules' ... or Else

At the time, Mr. Murphy hadn’t even heard of the film. But it would soon become clear that the CCP wanted the shooting of "Kundun" shut down. Why Beijing would want the movie censored is obvious. "Kundun" describes atrocities that China’s communist regime committed in the 1950s following its invasion of the Himalayan country.

The Chinese have bombed the monastery of Lithang. It has been destroyed,” an adviser tells the Dalai Lama at one point in the movie. “Nuns and monks are made to fornicate in the streets. They put guns in the hands of Khumba children and force the child to kill the parents.”

While the description is horrifying, even more moving is the scene in which an elderly Tibetan woman tearfully and frantically insists that she's “happy and prosperous under the Chinese Communist Party.”

This isn't exactly flattering stuff for the CCP, any more than "Schindler’s List" is for the Nazis. Yet history isn't always pretty.

In any event, the CCP’s decision to lean on the film left Disney CEO Michael Eisner in a pickle.

If Mr. Eisner shut down the film, he’d anger Mr. Scorsese and look weak for caving to the CCP. If he proceeded with production, he risked losing Disney’s commercial and manufacturing foothold in China, as well as the 1.4 billion potential consumers.

So Mr. Eisner opted for a third way. He allowed the shooting of "Kundun" to proceed, but he limited the film’s distribution and marketing. "Kundun" was released on Christmas Day in 1997—in two theaters nationwide.

In other words, in the contest over truth and creative freedom versus government censorship, Disney blinked, and film producer Matt Tabor describes what Disney’s decision meant going forward.

“If foreign companies wanted access to [China’s] market, they were going to play by China’s rules,” Mr. Tabor noted in a recent production by the Foundation for Economic Education on the showdown. “'Kundun' marked the first opportunity for China to flex that muscle in the movie business.”

It was a watershed moment. And if there was any doubt that Disney caved to China, which officially considered the film “an interference in China’s internal affairs,” one need only read the groveling message that Disney sent to China after the dust had settled a year later.

The Apology: ‘We Made a Stupid Mistake’

Despite “sending 'Kundun' quietly to the gulag,” Disney found itself kicked out of China’s burgeoning market, along with other U.S. film studios.

“These films are full of inaccuracies,” a Chinese official told The Washington Post. “That’s why they are not popular within China.”

“We made a stupid mistake in releasing 'Kundun.' This film was a form of insult to our friends. The bad news is that the film was made; the good news is that nobody watched it. Here I want to apologize, and in the future, we should prevent this sort of thing, which insults our friends, from happening. In short, we’re a family entertainment company, a company that uses silly ways to amuse people.”

Mr. Eisner’s complete capitulation would have a profound impact on the global entertainment landscape for years to come. It explains why "Kundun" can’t be streamed on Amazon or Netflix even today. It explains why NBA executives go apoplectic when a single general manager tweets his support of protesters in Hong Kong.

One can appreciate the tough situation that Mr. Eisner was in without agreeing with his decision to banish "Kundun" to Siberia. Companies have commercial interests, and balancing those against doing the right thing or supporting creative expression isn't always easy. Indeed, this balancing act existed before Disney banished "Kundun," evidenced by one executive’s stated reason for passing on the film.

“I don’t need to have my spirits and wine business thrown out of China,” Edgar Bronfman Jr.—the CEO of Seagram, which briefly owned Universal Pictures—replied when pitched on "Kundun."

Yet, the message of Disney’s showdown with China isn’t really about the ethics of dealing with a powerful communist regime. The real lesson is that we should prevent governments from amassing such dictatorial power in the first place, and remind ourselves that governments are hardly arbiters of truth. Indeed, if the past few years have taught us anything, it’s that government officials have no business deciding what's true and what's false—even though it’s a power they clearly desire.

The reality is that those who wish to censor speech are usually far more interested in power than truth—the CCP’s attempt to censor "Kundun" reinforces that idea—and reminds us that sometimes the best way to exercise freedom is to watch a movie they don’t want you to see.

Matt Tabor contributed to this article.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.

Tyler Durden Fri, 10/13/2023 - 21:40

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