LITTLETON, Colorado, Sept 19 (Reuters) – The deepening debt crisis in China’s construction sector – a key engine of economic growth, investment and employment – may trigger an unexpected climate benefit in the form of reduced emissions from the cement industry.
Cement output and construction are closely correlated, and as China is by far the world’s largest construction market it is also the top cement producer, churning out roughly 2 billion tonnes a year, or over half the world’s total, data from the World Cement Association shows.
The heavy use of coal-fired kilns during manufacturing makes the production of cement a dirty business. China’s cement sector discharged 853 million tonnes of carbon dioxide in 2021, according to the Global Carbon Atlas, nearly six times more than the next largest cement producer, India.
The cement sector accounts for roughly 12% of China’s total carbon emissions, according to Fidelity International, and along with steel is one of the largest greenhouse gas emitters.
But with the property sector grinding to a halt due to spiralling debt worries among major developers, the output and use of cement are likely to contract over the next few months, with commensurate implications for emissions.
HOUSING SLUMP
The property markets account for roughly a quarter of China’s economy, and for years Beijing has used the sector’s substantial heft to influence the direction of the rest of the economy by spurring lending to would-be home buyers and fostering large scale construction projects.
But the big property developers racked up record debt loads in recent years that have forced borrowing levels to slow, stoked concerns among investors, and slowed spending across the economy.
China Evergrande Group, once the second largest developer, defaulted on its debt in late 2021, while top developer Country Garden has drained cash reserves to meet a series of debt payment deadlines in recent months.
Fears of contagion throughout the property industry has spurred households to rein in consumer spending, which has in turn led to deteriorating retail sales and further economic headwinds.
Beijing has stepped in with a slew of measures designed to right the ship, including easing borrowing rules for banks and lowering loan standards for potential home buyers.
But property prices in key markets remain under pressure, which has served to stifle interest among buyers and add to the pressure on investors and owners.
CEMENT CUTS
With construction activity across China slowing, and several major building sites stopped completely while tussles over debt payments among developers continue, cement output is likely to shrink to multi-year lows by the end of 2023.
During the March to August period, the latest data available, total cement output was 11.36 million short tons, down 2 percent from the same period in 2022 and the lowest for that period in at least 10 years, China National Bureau of Statistics data shows.
In addition to curtailing output in response to the bleak domestic demand outlook in the property sector, cement plants may be forced to curb output rates over the winter months as part of annual efforts to cap emissions from industrial zones during the peak season for coal heating.
Some cement producers will likely look to boost exports in an effort to offset lower domestic sales, and in July China’s total cement exports hit their highest since late 2019.
But Chinese firms will face stiff competition from lower-cost counterparts in Vietnam, which are by far the top overall cement exporters and already lifted overall cement shipments by close to 3% in the first half of 2023, data from the Vietnam National Cement Association (VNCA) shows.
Some Chinese firms may be prepared to sell exports at a loss for a spell while they await greater clarity over the domestic demand outlook.
But given the weak state of global construction activity amid high interest rates in most countries, as well as the high level of cement exports from other key producers such as India, Turkey, United Arab Emirates and Indonesia, high-cost Chinese firms may be forced to quickly contract output to match the subdued construction sector.
And if that’s the case, the sector’s emissions will come down too, yielding a rare climate benefit to the ongoing property market disruption.
The opinions expressed here are those of the author, a columnist for Reuters.
Reporting By Gavin Maguire; Editing by Miral Fahmy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
[1/2]Damaged rooftops of a Fort Myers apartment complex are seen from a U.S. Army National Guard helicopter as U.S. National Guard Bureau Chief General Daniel Hokanson tours the area by air after Hurricane Ian caused widespread destruction in Fort Myers, Florida, U.S., October 1, 2022. REUTERS/Kevin Acquire Licensing Rights
Aug 31 (Reuters) – Hurricane Idalia is expected to increase insurance costs for Florida commercial real estate (CRE), particularly owners of apartments and other multifamily properties already grappling with soaring premiums driven by climate change, industry executives and analysts said.
Idalia on Wednesday plowed through Florida’s Gulf Coast as a Category 3 storm, lashing the area with sustained winds of up to 125 mph (201 kph), accompanied by torrential rains and pounding surf, before heading north to the Carolinas.
The storm follows wildfires in Hawaii’s island of Maui, the deadliest in the U.S. in more than a century, which burnt the resort town of Lahaina to the ground, leaving at least 115 people dead and hundreds missing.
Scientists say global warming is fueling such disasters and
making hurricanes worse.
Ten industry executives and analysts said that in turn is pushing up insurance costs for commercial real estate developers in California and the southern coastal Sun Belt States, particularly Florida, which is hit by more hurricanes than any other state, according to U.S. government data.
This year, Florida commercial property insurance rates have climbed to 93 cents per $100, from 68 cents per $100 in 2022, according to estimates provided to Reuters by real estate investment firm Walker & Dunlop.
That 37% jump was driven in large part by last September’s Hurricane Ian, the worst storm to hit the state in two decades, causing $53 billion of insured damages.
“The bottom line is the economics of climate change are coming into our business, and if you’re not focused on it, you’re missing something,” said Willy Walker, CEO of Walker & Dunlop, one of the largest U.S. CRE lenders.
Costs have risen the most on multifamily properties such as apartments and condos, according to industry executives and data from credit ratings agency Moody’s. That is because such buildings often have wood frames which are more prone to fires, and because high tenancy rates generate more claims.
In Florida, UBS expects Idalia to result in insured losses of $9.36 billion based on preliminary estimates, the brokerage said. Those losses will mainly arise from homeowners and commercial property lines, according to Moody’s.
“Compared to other CRE asset classes, multifamily has half, if not a third the amount of insurers willing to underwrite the risk,” said Ryan Barber, a managing director at Marsh, a leading insurance broker.
Florida multifamily property owners are bearing the greatest insurance cost increases of all states and asset classes in the U.S., according to Martha Bane, managing director of the property practice at Gallagher, a major insurance and reinsurance broker.
“Wood frame multifamily assets in Florida will be skewed in the impact from a financial standpoint,” Bane said, referring to Idalia and the peak in hurricane season expected in September.
“They are most likely to suffer significant damage, already have high deductibles, and they are going to see elevated rate increases and just a general pullback in coverage.”
Property insurance costs to multifamily assets in Florida have gone up anywhere from 30% to 70% in the past year, and are even higher for those with prior losses, non-renewing insurance carriers or valuation issues, she said.
Nationally, CRE properties’ insurance costs have grown roughly 7.6% annually on average since 2017, according to an August Moody’s report.
Some insurance firms have pulled out of Florida in recent years because of the risk of heavy losses.
RENTS, CAP RATES
Rising insurance premiums on multifamily properties have contributed, among other factors, to rent increases in Florida and elsewhere, said three industry executives.
Apartment rents have increased by over 20% on average since 2020, according to an August report by ratings agency KBRA. The Florida markets of Miami, Tampa and Orlando topped the list, each seeing hikes of over 33% from January 2020 to April 2023.
Insurance costs are also forcing CRE lenders to boost due diligence on refinancing and when pricing deals on apartment blocks, executives said.
For example, insurance costs are increasingly factoring into the so-called “cap rates” that CRE lenders use to assess the profitability of a prospective loan used to finance apartment blocks, which in turn affects the loan interest rate.
“When we’re looking at cap rates in Florida right now on our sales, we do a pre-insurance/post-insurance cap rate adjustment,” said Walker. “Insurance cost is a huge issue.”
Reporting by Matt Tracy; editing by Michelle Price and Marguerita Choy
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SYDNEY, July 28 (Reuters) – The Australian state of Victoria will ban natural gas connections to new homes from next year as part of a plan to cut emissions and lower energy bills, the state climate action minister said on Friday.
Australia’s second-most populous state is the country’s largest consumer of natural gas with around 80% of homes connected but also has ambitious plans to reach net zero emissions by 2045, five years ahead of the federal government.
Minister for Climate Action Lily D’Ambrosio said on Friday that new homes requiring planning permits must connect to all-electric networks. The gas sector contributes 17% of the state’s emissions.
“Reducing our reliance on gas is critical to meeting our ambitious emission reduction target of net zero by 2045 and getting more Victorians on more efficient electric appliances which will save them money on their bills,” D’Ambrosio said in a statement.
The changes will apply to all new public buildings yet to reach the design stage, including housing, schools, and hospitals.
Victoria also launched several grant and training programmes to support electrification, including a A$10 million ($6.7 million) programme to lower prices for solar equipment and heat pumps and a A$3 million package to train tradespeople on new equipment.
The plan comes as southeastern Australia faces potential gas shortages from mid-decade as output falls from the offshore fields, operated by Exxon Mobil Corp (XOM.N), that have long supplied the region.
Rewiring Australia, a non-profit which advocates for electrification, backed the move and said “electrification is the fastest and most cost-effective way to shave thousands of dollars a year from energy bills and lower our emissions.”
Australia last month finalised a package of rules for the domestic gas market including a cap on wholesale prices that was first introduced in December.
($1 = 1.4932 Australian dollars)
Reporting by Lewis Jackson; Editing by Stephen Coates
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KAMPALA, July 26 (Reuters) – France’s TotalEnergies (TTEF.PA) said on Wednesday it had begun commercial drilling this month at its Tilenga petroleum project in Uganda’s west ahead of an expected start of oil production in the east African country in 2025.
TotalEnergies has faced fierce resistance from environmental protection groups and green energy campaigners who say the Tilenga project, which is partly located in a national park, and a planned crude oil export pipeline are a disaster for the planet.
“Drilling of the Tilenga wells began in July 2023, with production scheduled to start in 2025. A total of 420 wells will be drilled at Tilenga,” a spokesperson for TotalEnergies said.
TotalEnergies and its partner, China’s CNOOC, have said production in Tilenga will hit a peak of 190,000 barrels per day.
Tilenga is one of Uganda’s two oil projects. Commercial drilling at Kingfisher, the second project – which is controlled by CNOOC – begun in January.
A coalition of environmental pressure groups said on Wednesday that drilling in the Murchison Falls National Park (MFNP) and the associated crude oil pipeline was detrimental to global efforts to cut reliance on fossil fuels and would devastate the park’s ecosystem.
“The decision by TotalEnergies and its partners to drill for oil within MFNP, while ignoring the biodiversity conservation, climate change and socio-economic risks … is a direct contradiction to the global urgency to protect our remaining wild spaces and reduce fossil fuel reliance,” they said in a statement.
The park, one of Uganda’s largest and most visited, is bisected by the River Nile and is famed for its spectacular vistas and rich biodiversity that includes wild animals such as elephants, giraffes, hippos and chimpanzees.
The park is also home to a wetland site designated to be of international importance under the Ramsar Convention – the Murchison Falls-Albert Delta Wetland System.
TotalEnergies says it is committed to protecting the park’s biodiversity and that development will be limited to an area that is less than 1% of the park land.
Reporting by Elias Biryabarema in Kampala and Benjamin Mallet in Paris; Writing by Elias Biryabarema; Editing by George Obulutsa and Mark Potter
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[1/2] Greenpeace activists hang a banner to protest Deutsche Bank and DWS investment policies on Deutsche Bank’s headquarters in Frankfurt, Germany, June 14, 2023. REUTERS/Tom Sims
FRANKFURT, June 14 (Reuters) – Greenpeace activists scaled Deutsche Bank’s (DBKGn.DE) headquarters in Frankfurt on Wednesday and strung up a large yellow banner to protest against the climate investment policies of the German lender and its asset management company DWS.
The action came a day ahead of the annual shareholder meeting of DWS (DWSG.DE), which is mostly owned by Deutsche Bank and has drawn attention from activists and regulators over allegations that it misled investors about “green” investments. DWS has disputed the allegations.
Deutsche Bank said that sustainability and climate protection were “strategic priorities”, and that it supports DWS in the development of its sustainability policies and standards.
The German-language Greenpeace banner was unfurled shortly after 6 a.m. CEST (0400 GMT) and stretched across part of the glass facade on the lower section of Deutsche Bank’s twin office towers. The banner translated as “Force DWS, protect the climate”.
The event drew a half dozen police vehicles, but an officer said there would be no arrests.
Last year, the chief executive of DWS stepped down after raids by prosecutors over the allegations of so-called “greenwashing”.
The new CEO, Stefan Hoops, plans to tell shareholders at Thursday’s meeting that DWS has been cooperating with investigations, according to a transcript of prepared remarks on its website. The company also continues to stand by its financial disclosures and its fund prospectuses, Hoops will add.
Mauricio Vargas, a Greenpeace finance expert who was standing outside Deutsche Bank’s headquarters, said: “DWS’s scandal is Deutsche Bank’s scandal.” He plans to address shareholders on Thursday.
DWS said in a statement that it agreed with Greenpeace that climate change requires decisive action but disagreed on “how to get there”. It said it had recently adopted new policies on dealing with coal companies.
Reporting by Tom Sims, Editing by Rachel More and Jamie Freed and Sharon Singleton
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BRUSSELS, June 9 (Reuters) – The European Commission is working on plans to speed up investment in capturing and storing carbon dioxide emissions, it said on Friday, as the bloc prepares to slash its net greenhouse gas emissions to zero by 2050.
In a public consultation on the plans, the Commission said infrastructure to capture and store CO2 underground or use it in industries was not developing fast enough, hampered by factors including high costs to develop storage sites.
To try and boost the industry, the Commission said it will produce an EU strategy that could include 2040 and 2050 targets for CO2 storage infrastructure, or EU-wide standards on CO2 quality and access to carbon capture infrastructure.
Carbon capture and storage (CCS) projects are in their infancy in the EU and have a history of controversy in countries including Germany, where states blocked past efforts to launch projects. Some campaign groups have also opposed the technology on the grounds that it could be used to extend the life of coal power plants and polluting industries.
But plans to remove CO2 from the atmosphere have regained some traction as countries map out how to achieve net zero emissions – which will require some CO2 removals to balance out remaining emissions from industries that cannot reduce their CO2 output to zero, like aviation or agriculture.
“Emission reduction remains the highest priority of EU climate policies,” the Commission document said.
The EU already has targets in place requiring countries to expand forests and other natural ecosystems that can absorb and store CO2.
Brussels proposed a target in March for the EU to be able to store 50 million tonnes of CO2 per year by 2030, and has said this may need to reach 550 million tonnes by 2050 to hit the bloc’s net zero emissions goal.
For comparison, the EU’s total CO2 emissions from energy use were nearly 2.4 billion tonnes in 2022, according to Eurostat data.
Reporting by Kate Abnett;Editing by Elaine Hardcastle
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BEIJING, May 11 (Reuters) – China has decreased its second batch of export quota volumes for refined oil products, consultancies and trader sources said on Thursday, focusing on local demand during the refinery overhaul season and boosting domestic sales amid poor export margins.
The export volumes, comprising 9 million tonnes of refined products and 3 million tonnes of marine fuel, were allotted primarily to state-owned refiners, according to two refining sources and consultancies Longzhong and JLC.
China Petrochemical Corp (Sinopec) , China National Petroleum Corp , China National Offshore Oil Company <0883.HK> and Sinochem Group (600500.SS) were the main recipients of these quotas, taking around 92% of the total allocation.
Reuters has asked the four companies for comment.
In addition, private refiner Zhejiang Petrochemical Corp, a refinery subsidiary of state defence conglomerate Norinco and China National Aviation Fuel Company were assigned 1.01 million tonnes.
China’s Ministry of Commerce did not immediately respond to a faxed request for comment.
The quota was less than the first batch of 18.99 million tonnes in early January but double the allocation of 4.5 million tonnes issued around a year earlier, Reuters records show.
The smaller export quota comes as refiners stockpile products amid strong demand expectations for gasoline and diesel in the peak summer season.
China’s gasoline and diesel export volumes have fallen for three consecutive months as refiners kept more cargoes for the domestic market where they are earning better profit margins, despite overall slow domestic demand growth.
While refiners have been unwilling to export because of the stronger local margins, the year-on-year increase in quotas mean that they can still choose to export should domestic demand turn weak at some point in time.
Longzhong estimated refiners could lose about 482 yuan ($69.73) a tonne on gasoline exports and 734 yuan a tonne on diesel exports in the current market.
“This year, quota holders have greater flexibility to prepare export plans and capture arbitrage opportunities,” said Energy Aspects analyst Sun Jianan.
The 3 million tonnes of low-sulphur fuel export quotas in this second batch was down from 8 million tonnes in the first batch for this year.
However a trader from a state-owned Chinese oil company said the previous batch of low-sulphur fuel quotas had yet to be used up as marine bunkering demand was weak in the first quarter.
($1 = 6.9121 Chinese yuan renminbi)
Reporting by Andrew Hayley in Beijing and Muyu Xu and Trixie Yap in Singapore; Editing by Jacqueline Wong
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WASHINGTON, May 3 (Reuters) – Oklahoma is seeing a sharp increase in foreign investment interest, especially in its renewable energy sector, and is on the cusp of signing large new deals with firms in Switzerland and Asia, Governor Kevin Stitt told Reuters on Wednesday.
Stitt said Oklahoma, which just signed a trade agreement with Britain, said foreign governments were increasingly looking to bypass what he called “dysfunction” in the U.S. Congress to forge favorable trade deals with states like his.
“If you want a manufacturing center in the U.S., there’s not a better state to be located in than Oklahoma. We’re dead center located in the middle of the U.S.,” he said, citing a big push by countries and companies to diversify their supply chains and reduce reliance on China.
The state’s low energy costs – about one-third the cost of energy in Europe and the lowest in the United States – were a big draw, Stitt said, adding that Oklahoma derived about 45% of its electricity from renewable sources.
He said he had met recently with officials from Germany, Switzerland, South Korea, Taiwan, France and Qatar, and was in talks with various firms about potential deals valued at around $1 billion, but ranging higher.
One Asian firm was preparing to finalize an investment deal valued at $5 billion, with another deal imminent with a Swiss firm in the “green energy” space, he said.
Stitt, in Washington for the SelectUSA Investment Summit, gave no further details about the companies involved.
Japan’s Panasonic Holdings (6752.T)), a battery supplier to electric vehicle maker Tesla Inc (TSLA.O), said on Sunday it is considering building a battery plant in Oklahoma, its third in the United States.
Stitt said agriculture and rare earths production were other promising areas.
USA Rare Earth is investing heavily in a rare-earth metal manufacturing facility in Stillwater, Oklahoma, Stitt said.
(This story has been refiled to correct the name of the governor in paragraph 1)
Reporting by Andrea Shalal; Editing by Lincoln Feast.
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OTTAWA, March 20 (Reuters) – Canada must boost investments in the green transition in this year’s federal budget due out next week, or else it risks losing out on a one-time opportunity to boost jobs and the economy, Finance Minister Chrystia Freeland said on Monday.
Canada’s budget will include a “serious investment” in clean technologies, Freeland said without providing details, though she also promised fiscal restraint in the face of high inflation.
“Today, and in the years to come, Canada will either capitalize on the historic opportunity before us, or we will be left behind as the world’s democracies build the clean economy of the 21st century,” Freeland said in a speech in Oshawa, Ontario.
Countries across the globe are trying to take advantage of a rapid shift to low-carbon energy, and the passage in the United States of the Inflation Reduction Act (IRA) last year provides massive incentives for those who invest there.
Canada has limited financial firepower compared with what the United States put forward in the IRA, which many experts say will lead to more than $1 trillion in investment, so it is going to focus on increasing the capacity of the electricity grid, on battery manufacturing and on mass timber construction.
“From clean energy, to clean technology, to battery manufacturing, to electric vehicles, we can become a global leader in the growing clean economy,” she said in her speech. “We can create hundreds of thousands of good, middle class jobs.”
Freeland also said there would be targeted inflation relief for the “most vulnerable” Canadians. Inflation slowed to 5.9% in January, still almost three times the Bank of Canada’s target.
“This support will be narrowly focused and fiscally responsible,” she said.
Reporting by Steve Scherer
Editing by Chris Reese and Richard Chang
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BERLIN, March 17 (Reuters) – Volkswagen (VOWG_p.DE) plans to invest in mines to bring down the cost of battery cells, meet half of its own demand and sell to third-party customers, the carmaker’s board member in charge of technology said.
Europe’s biggest carmaker wants its battery unit PowerCo to become a global battery supplier, not just produce for Volkswagen’s own needs, Thomas Schmall told Reuters in an interview.
PowerCo will start by delivering cells to Ford (F.N) for the 1.2 million vehicles the U.S. carmaker is building in Europe on Volkswagen’s electric MEB platform, he said.
Long-term, Volkswagen plans to build enough cells to meet half its global battery needs, with most production capacity located in Europe and North America, according to Schmall.
“The bottleneck for raw materials is mining capacity – that’s why we need to invest in mines directly,” he said.
The carmaker was partnering on supply deals with mining companies in Canada, where it will build its first North American battery plant.
Schmall declined to comment on further locations under consideration or where or when Volkswagen might invest directly in mines, saying the company would not disclose that information until the market was more settled.
“In future, there will be a select number of battery standards. Through our large volume and third-party sales business, we want to be one of those standards,” he said.
AMBITIOUS ROADMAP
Making or sourcing batteries at a reasonable cost is a key challenge for carmakers like Volkswagen, Tesla (TSLA.O) and Stellantis (STLAM.MI) as they seek to make electric vehicles (EVs) affordable.
Only Tesla has pledged more investment into battery production than Volkswagen, according to a Reuters analysis – though even the U.S. EV maker is struggling to ramp up production and is recruiting Asian suppliers to help.
Few carmakers have disclosed direct stakes in mines, but many have struck deals with producers to source materials like lithium, nickel and cobalt and pass them onto their battery suppliers.
PowerCo, set up last year, is targeting 20 billion euros ($21.22 billion) in annual sales by 2030.
It’s an ambitious roadmap for a unit not yet producing at scale. Production will start in 2025 at PowerCo’s plant in Salzgitter, Germany, 2026 in Valencia, Spain and 2027 in Ontario, Canada.
Still, Schmall is confident the carmaker can expand quickly – and must do so if it wants to build an affordable EV, in which 40% of the costs come from the battery.
Volkswagen released on Thursday the details of a 25,000-euro EV it aims to sell in Europe from 2025.
China’s BYD, which also produces batteries, is far ahead of Volkswagen in the affordable EV race and outsold the German carmaker for the second time in four months in China in February.
REDUCING COSTS
In Volkswagen’s 180-billion-euro five year spending plan, up to 15 billion is earmarked for its three announced battery plants and some raw material sourcing.
The carmaker has so far nailed down raw material supply until 2026 – by which time the German and Spanish plants will be in operation – and will decide in the next few months how to meet its demand from then on, Schmall said in the interview.
It has also ordered some $14 billion in batteries from Northvolt’s Swedish plant.
“Bringing down battery costs further is a challenge,” Schmall said. “We’re using all the instruments with PowerCo.”
Asian producers like CATL, LG Chem and Samsung SDI dominate global cell production, with almost half of planned battery cell capacity in Europe by Asian players.
Half the staff at Volkswagen’s PowerCo are industry veterans from Asia, Schmall said, enabling the battery unit to enter the industry at the top of the learning curve.
($1 = 0.9427 euros)
Reporting by Victoria Waldersee; Editing by Susan Fenton
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