March 22, 2021
Welcome to this week’s JMP Report
BSP was the only stock to trade last week with 329,633 shares trading unchanged at K12.00 and with a final dividend of .97t provides a gross dividend of K12.97, holding BSP shares makes for a nice little earner.
Please refer the closing price details below;
WEEKLY MARKET REPORT 15.03.21 – 19.03.21
On the interest rate front, the TBill market was again offered well by BPNG with 364 paper averaging 7.20% in the auction.
Finance company money remains with FIFL offering up 5.50% for 12 month money.
We have seen activity in the secondary bond market. If you are a GIS/TBond holder, please feel free to give me a call to discuss today’s valuation on your bond holding.
The PNG Fixed Interest Yield curve remains unchanged, ranging from 7.20% in the short end and 11.92% in the 10yr with no whispers at this stage on a date for the next GIS Auction announcement.
What we have been reading this week
Five factors powering South Korea’s massive focus on hydrogen as fuel of future
South Korea is challenging all of Europe in developing hydrogen as an energy source in the times to come.
Although in infancy currently, hydrogen is seen by many as the fuel that powers the world in the future.
South Korea is one among only a handful of nations that have clearly set sights on hydrogen as the energy source of the future. With plans of injecting massive amounts into development of technology that can harness hydrogen as a fuel source, South Korea wants to take the lead and is mounting a challenge to Europe as the centre for the emerging technology.
Bloomberg reports that South Korea has the potential of taking the lead when it comes to harnessing hydrogen power and that it could be at the core of its plans of going carbon neutral.
Here are five factors that are of note in South Korea’s dreams and vision for hydrogen power:
Hydrogen is a carbon-free gas that can be burnt or used in fuel cells for power generation or transportation. Cleaner than wind or solar, the technology is expected to eventually play a major role in the global energy mix but is still in its infancy and requires a lot of investment before it’s commercially viable.
South Korea is in a list of nations which primarily has countries in Europe that are working on making hydrogen technology commercially viable.
Five Korean conglomerates will invest 43.4 trillion won ($38 billion) in hydrogen technology by 2030, the Ministry of Trade, Industry and Energy had previously said.
South Korea has stepped up its embrace of hydrogen since it followed China and Japan in setting a carbon neutral goal. The announcement of that 2050 target followed Seoul’s release of a Green New Deal that aims to triple renewable electricity generation by 2025. That will require a fast pivot away from coal and nuclear, which still account for almost half of power generation in the country.
South Korea is aiming to more than double the amount of hydrogen vehicle refuelling stations to 180 by year-end, while Hyundai Motor Co. is looking to scale up production of fuel cell vehicles that run on the gas and build more charging stations. SK Group, which own South Korea’s biggest oil refiner, is planning to build what it says will be the world’s biggest grey and blue hydrogen plants by 2023 and 2025, respectively, to power the growing transport fleet.
Hydrogen projects will need to demonstrate to lenders they can generate more certain returns to attract the required $230 billion of funding this decade, according to French bank Natixis SA.
Many experts say that the industry is plagued by lack of cost-competitiveness and that government support, therefore, becomes absolutely crucial.
Offshore wind could meet nearly all of US 2050 Electricity Demand – Report
Offshore wind has the potential to deliver 90 per cent of America’s projected 2050 electricity demand, according to a report released by Environment America Research & Policy Centre and Frontier Group.
The report, Offshore Wind for America, examined the Atlantic, Pacific, Gulf, and Great Lakes regions and found that each has the capacity to develop offshore wind.
The Atlantic region is the clear frontrunner in terms of its potential to generate offshore wind, with the capacity, if fully developed, to generate four times as much electricity as the region used in 2019.
The Gulf is second, followed by the Pacific, and then the Great Lake regions in their potential capacity.
Based on research by National Renewable Energy Laboratory, the US offshore wind has a technical potential to deliver 7,203 Tw of electricity each year. The country’s electricity usage with full electrification is projected to stand at 7,930 Tw in 2050.
”Offshore wind is a renewable energy gold mine begging to be used,” said Johanna Neumann, senior director of Environment America Research & Policy Centre’s Campaign for 100% Renewable Energy.
”If we went out today and maximized its potential, offshore wind alone could provide almost double the amount of electricity used by the entire U.S. in 2019. But even if we just unlock a fraction of America’s offshore wind capacity, it would help put us on track for a future powered by 100 percent renewable energy. Coupled with other renewable energy sources like solar and onshore wind, offshore wind promises to throw open the gates to a cleaner, healthier future for our kids and future generations.”
In total, 29 states were examined in the report. Massachusetts has the potential to generate the most offshore wind power of any state, while Maine has by far the highest ratio of potential offshore wind power to its current and future electricity needs.
For projections of 2050 electricity demand, the report assumes that US buildings, industry, and transportation will all be powered by electricity rather than fossil fuels by mid-century.
”Nineteen states have the potential to produce more power from offshore wind than all the electricity they used in 2019,” said co-author Bryn Huxley-Reicher of Frontier Group.
”And eleven states have the technical capacity to produce more electricity than they would be expected to use in 2050, even if they go all-electric. When you pair that potential with energy conservation and efficiency, you can start to imagine a world that really is fossil fuel-free.”
The report also highlights how the rise of offshore wind in Europe and Asia has played an important role in advancing offshore wind technologies. Notably, turbine size, generation capacity and efficiency are improving, while the introduction of floating turbines will be crucial for expanding offshore wind potential in states with especially deep coastal water, such as Maine and California.
”Offshore wind has already proven to be a tremendous success internationally, so these are not uncharted waters,” said Hannah Read, Go Big on Offshore Wind associate with Environment America Research & Policy Centre.
”America needs to follow the trend and develop renewable energy sources close to where we need the power, on our coasts where 40 percent of Americans live.”
The US currently has two operational offshore wind farms and dozens of projects in the pipeline.
Several Atlantic states have set enforceable targets for offshore wind in their energy mixes, but the report concludes that more state leadership and regional collaboration is needed to drive demand for offshore wind.
”For offshore wind to succeed, we need to set strong, enforceable targets around it,” Read said.
”The sheer abundance of this incredible renewable resource should convince our state leaders to make bold commitments to start powering our homes with offshore wind.”
Uptrend in container rates looms over 2021 contract negotiations
Carriers exerting pressure on contracts
Trans-Pacific contracts signed at $2,000/FEU and above
Houston — A bull run in container freight rates has left shippers at a disadvantage during annual contract negotiations, with many seeing more commitments than years past, market sources said.
Annual negotiations between container carriers and shippers are entering their final phase at the start of the second quarter. Shippers remain on the backfoot with spot rates at multi-year highs and space on ships at a premium, though both are expected to soften later this year as the COVID-19 vaccine rollout eases coronavirus-related supply tightness.
This has put shippers in a quandary about how to guarantee their volumes, while seeking to mitigate their losses should future spot market pricing ease in the latter part of 2021.
The surge in goods demand as consumers turn end masse toward e-commerce has been a tailwind for major retailers, and shipowners have taken their piece of the pie as US import volumes from Asia, and accompanying freight rates, sit at record levels.
Many importers now expect demand to remain elevated through the second or third quarter, and downward pressure on the spot market to likely come after demand begins to slow down. And faced with a more consolidated and disciplined carrier group, importers have been forced to make concessions on rates, to guarantee quantity commitments.
Quantity forecasting crucial
“I can’t stress this enough, the most important thing that an importer and BCO (beneficial cargo owner) can do is to accurately forecast their needs going into the new contracting season,” said Stephanie Loomis, vice president of Full Container Load product with Vanguard Logistics.
Precise quantity forecasting on the part of shippers gives carriers confidence in allocating capacity, while affording shippers the best possible rates, market sources said.
“If a shipper can keep us up to date on a weekly basis how much cargo they will need to move, we will take that into consideration when signing contracts,” a trans-Pacific carrier source told S&P Global Platts.
Even so, contracted rates are set to be significantly higher in 2021 than in years past, a trend that is set to stay for the short and medium term as negotiation and pricing power is once again in the hands of carriers, sources said. And with global freight rates at, or near, record highs, many shippers have found themselves footing significant increases when compared with last years’ rates.
Carriers raise term rates
The bull run in spot pricing seen over the course of 2020 and into 2021 has been underpinned primarily by global equipment shortages and elevated consumer demand for containerized goods beginning in the second half of 2020.
And nowhere is this clearer than on the trans-Pacific trade lane. Platts Container Rate 13 – North Asia to West Coast North America – was assessed at $4,000/forty-foot equivalent unit (FEU) on March 17, an increase of 142% over the same date last year.
Moreover, year-on-year rate increases for the PCR 1 North Asia-to-North Continent and PCR 11 North Asia-to-UK were 645% and 708%, respectively, with PCR 1 assessed at $9,500/FEU and PCR 11 at $10,500/FEU on March 17.
Our book opens the week with orders on both sides for BSP, nett seller of CCP and we are also looking for short and long bonds. Please feel free to discuss your options,
I hope you enjoy the read, have a great week.
Chris and the team
Head, Fixed Interest and Superannuation
Level 1, Harbourside West, Stanley Esplanade
Port Moresby, Papua New Guinea
Mobile (PNG): +675 72319913
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