WORKERS KAPITAL

Netherlands’ $900 Billion Pension Funds Ready to Invest Big in Renewables

By Alex Kimani - Mar 27, 2024

The Netherlands' five largest pension funds have said they are willing to invest billions in the country’s renewable energy sector and the electricity grid. The funds, with a combined 900 billion euros ($975 billion) in assets, have offered to help with finances and expertise in the nation’s electric grid expansion and sustainable heating projects.

"We want to make a bigger impact, we can and want to invest more in the Dutch energy transition," the funds said in a letter addressed to the country’s political parties looking to form the next government.

Pension funds across the globe are becoming increasingly engaged in the clean energy transition and frequently oppose the fossil fuel sector. 

Four years ago, New York City’s Mayor Bill de Blasio and former Comptroller Scott M. Stringer announced that the city’s $226B pension fund would divest the majority of its fossil fuel investments and cut ties with other companies that have been contributing to global warming. 

New York State officials are yet to make a final decision whether to sell their $1 billion in investments in major U.S. oil and gas companies, including Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) in what could be one of the biggest divestment drives by a pension fund. The fund has already sold off most assets in coal and Canada’s oil sands, although it still holds its  $1.5 million investment in Arch Resources (NYSE:ARCH), the second largest U.S. coal producer.

Last year, Norway’s largest pensions manager, KLP,  blacklisted Gulf companies listed in the United Arab Emirates, Saudi Arabia, Qatar and Kuwait due to  human rights violations and also divested from Saudi Aramco due to climate risks

Meanwhile, last year, Norway’s giant sovereign wealth fund supported proposals by ExxonMobil and Chevron shareholders at their annual general meeting to introduce emissions targets.

With $1.4 trillion in assets, Norway's wealth fund is the largest in the world, and the sixth-largest investor in Exxon with a nearly 1.2% stake.

By Alex Kimani for Oilprice.com

EU Banks shying away from fossil fuels bolster private credit deals

Bloomberg News | March 26, 2024 |

Stock image.

Private credit managers are doing significantly more fossil-fuel deals now than just a few years ago, as they step into a void left by banks exiting assets they worry pose too big a climate risk.


The value of private credit deals in the oil and gas industry topped $9 billion in the 24 months through 2023, up from $450 million arranged in the preceding two years, according to data provided by Preqin, an analytics company that tracks the alternative investment industry. That’s based on the limited pool of deals reported publicly or disclosed directly to Preqin.

The figures offer the clearest signal yet that fossil-fuel exclusion policies among banks — driven by regulatory and reputational concerns — are shifting some oil, gas and coal assets to less transparent corners of the market. It’s a trend that investors say is only going to increase in the coming years.

The expectation is that some banks “will just exit” the loans market for coal, oil and even gas, said Ryan Dunfield, chief executive officer of SAF Group, one of the largest alternative lenders in Canada’s energy sector.

The shift is particularly pronounced among banks based in Europe, where climate regulations are stricter than in other jurisdictions. Lenders stepping up restrictions on fossil-fuel loans include BNP Paribas SA and ING Group NV. The trend is hardest felt by less diversified mid-sized companies with weaker environmental, social and governance policies, according to Dunfield.

European banks that used to be involved in financing oil and gas in SAF’s home market of Canada “have backed out over the past five years,” Dunfield said. Combined with a partial retreat by some US banks, the development has left a financing gap, he said.

Canada is “a very progressive country,” but “a big part of our GDP comes from energy,” Dunfield said. As a result, the “economic engine conflicts with public policy in that sense.”

For companies shifting from banks to private credit, the cost can be considerable. Sydney-based Whitehaven Coal Ltd., whose recent efforts to secure a $1.1 billion loan attracted 17 private credit lenders and just one bank, is paying 650 basis points, or 6.5 percentage points, over the so-called secured overnight financing rate, Bloomberg News reported last week.

The wider development has meaningful implications for everything from credit risk to climate change. From a climate perspective, the riskiest assets are becoming harder to track because their owners aren’t subject to the same disclosure requirements as banks. From a credit perspective, it’s not clear how tougher climate regulations will affect the valuations of high-carbon assets in the years ahead.

Some banks are looking into models that might allow them to shoehorn high-carbon assets into their ESG strategies. HSBC Holdings Plc and Standard Chartered Plc are among lenders currently exploring so-called transition credits. Such financial instruments would be issued by the owners of coal plants to generate the funds needed to cover the cost of closing down operations early.

Other models currently being explored include capital-relief products. Both SAF and Newmarket Capital, a Philadelphia-based alternative asset manager that specializes in structured credit, are pitching so-called emissions-weighted risk transfers to banks. These would see banks packaging and offloading the emissions associated with their loans to third-party investors who aren’t subject to the same climate regulations or scrutiny.

However, such examples of financial engineering have already drawn skepticism from climate activists, who warn they’d do little to actually cut greenhouse gas emissions. Others drew parallels to the kinds of products that are now associated with financial meltdowns.

“Surely the world has learned something” from the global financial crisis of 2008, Simone Utermarck, senior director of sustainable finance at the International Capital Market Association, said in a post on Linkedin.

In the meantime, private credit investors are positioning for more banks to back away from high-carbon clients. A few years ago, SAF launched a C$750 million direct-lending fund for energy companies in Canada. It now has about C$2 billion in capital allocated to the sector, with loan commitments typically ranging from C$20 million to C$250 million for maturities ranging from two to five years.

“We come in and provide incremental capital,” Dunfield said. If banks drop out of group-lending vehicles, SAF can “come in and plug a hole.”

(By Natasha White)

Ferrexpo hit with corporate rights restrictions for Ukraine subsidiaries

Reuters | March 26, 2024 | 

Ferrexpo’s FPM mine. (Image courtesy of Ferrexpo)

Iron ore pellet producer Ferrexpo said a court has prohibited the transfer of ownership and other shares-related corporate rights of the company’s subsidiaries in Ukraine.


“It is understood that the restrictions are part of an ongoing series of legal proceedings against Kostyantin Zhevago relating to Bank Finance & Credit and are not related to the Ferrexpo Group,” the London-listed miner said on Tuesday.


Why it’s important

Ukrainian billionaire Zhevago, Ferrexpo’s biggest shareholder, has been facing legal challenges amid Ukraine’s efforts to clamp down on corruption, which is vital to meet the conditions for joining the European Union, despite Russia’s full-scale invasion.

Context

Zhevago in January won a bid to throw out a London lawsuit over allegations he embezzled money from the now bankrupt lender Finance & Credit Bank.

Ukrainian prosecutors have also taken action in the Ukrainian courts against Zhevago and frozen shares held by Ferrexpo, in its three Ukrainian subsidiaries.

The restrictions announced on Tuesday are separate to those under the share freezes, Ferrexpo said.

The response

Ukraine-focussed Ferrexpo said it has “no intention, and never has had any intention of transferring shares in its subsidiaries”.

Zhevago, who is also facing legal proceedings related to Finance & Credit Bank in which he had a 95% indirect shareholding before its 2015 collapse, has repeatedly denied any wrongdoing.

What’s next

Ferrexpo said it was currently analyzing the potential legal and other remedies available and intends to “vigorously defend its rights”.

(By Yadarisa Shabong; Editing by Shounak Dasgupta)

Dynasty Gold used slave labour in China, Canada watchdog says

Jacob Lorinc, Bloomberg News

A Chinese national flag waves at the Chinese consulate after the United States ordered China to close its doors on July 22, 2020 in Houston, Texas. Photographer: Go Nakamura/Getty Images North America , Photographer: Go Nakamura/Getty Images North America

A Canadian watchdog is calling for penalties against Dynasty Gold Corp. after it concluded the company used forced labor at its Chinese mine, which the miner denies. 

The Canada Ombudsperson for Responsible Enterprise, an arm of the federal government that investigates possible human rights abuses by companies, conducted a review of the Hatu mine in the Xinjiang region after a coalition of 28 Canadian organizations filed complaints alleging human rights abuses. 

China has come under international pressure for subjecting Uyghurs, a Muslim minority, to forced labor in detention centers and transfer programs that remove Uyghurs from their homes in rural areas to work in factories in urban areas.

The watchdog said it has evidence based of pervasive use of forced labor among Uyghurs as well as an admission by Dynasty’s joint venture partners of their involvement. Dynasty owns a majority stake in the mine through a subsidiary, according to the watchdog. 

In an email, Dynasty Chief Executive Officer Ivy Chong said the report is “full of errors and inaccuracies” and is “totally absurd.”

“Dynasty has no operation in China since 2008,” said Chong. “Dynasty has never conducted mining in the Hatu mine. It was an exploration operation from 2004 to 2008, there was no report of forced labor at that time.” 

Sheri Meyerhoffer, the ombudsman, is calling on Canada’s trade minister to refrain from supporting the company in international disputes and ban it from receiving financial support from the country’s export-credit agency. 

“There is clear evidence that Uyghur forced labor was used at the Hatu gold mine,” said Meyerhoffer. “Like all Canadian companies operating outside Canada, Dynasty has a responsibility to respect human rights. In this case, Dynasty failed to operate responsibly.”

The watchdog said Dynasty and its senior officers declined to participate in the investigation

Canada watchdog says human rights abuses

likely occurred at a Dynasty Gold mine in

China

Reuters | March 26, 2024 | 

Credit: Dynasty Gold Corp.

Canada’s corporate ethics watchdog on Tuesday said it was likely that human rights abuses of using Uyghur forced labor had occurred at a mine in China operated by Vancouver-based firm Dynasty Gold.


In a report, the Canadian Ombudsperson for Responsible Enterprise (CORE) recommended the federal government refuse to provide any future financial support to Dynasty until it implemented recommendations to combat abuse.

Dynasty Gold told Reuters that the report is full of errors and inaccuracies.

The report by CORE is a result of an investigation over complaints filed by 28 Canadian organizations who alleged that Dynasty Gold used or benefited from Uyghur forced labor at the Hatu mining operations that took place in 2017, 2019 and 2020.

In its final report the watchdog concluded that Dynasty contributed to the use of forced labor through its relationship with its joint venture partners Xinjiang Non-Ferrous Metal and Western Region Gold. These two companies had relationship with another company called Terraxin in which CORE said Dynasty is a majority shareholder.

Ivy Chong, CEO of Dynasty Gold, told Reuters that CORE decided to publish the report without providing any evidence to support the claims, even though the company repeatedly explained the situation and the timeline of the events.

However, Chong said the joint venture company (Terraxin) in Xinjiang lost its exploration license in 2008 and business license shortly thereafter. And there has not been any relationship between Dynasty and the State-owned Xinjiang companies since 2008.

A report by the UN human rights chief in 2022 said that China’s treatment of Uyghurs, a mainly Muslim ethnic minority that numbers around 10 million in Xinjiang, in the country’s far west, may constitute crimes against humanity.

Beijing has denied these allegations.

CORE said Dynasty Gold did nothing to identify, assess, and mitigate the risk of Uyghur forced labor at the mine, which led to the watchdog to reach its conclusion.

The watchdog has asked Dynasty to make significant financial donations to organizations working to combat Uyghur forced labour, assess its leverage to prevent or mitigate use of forced labour at Hatu mine and determine whether it should exit responsibly from its business relationships in the Xinjiang region.

Dynasty shares were up 3.7%.

(By Divya Rajagopal and David Ljunggren; Editing by Sandra Maler)

. 

Chinese miners eye overseas deals after battery metals slump

Bloomberg News | March 26, 2024 |  

Workers at Zijin facility (Credit: Metso)

Battery metal prices are on the floor, and massive expansions by Chinese miners have been instrumental in driving them lower. Now, with many Western rivals cutting output or shutting down entirely, they want to get even bigger.


Zijin Mining Group Co., China’s most valuable producer, said this week it’s planning acquisitions of “ultra-large mines or mining companies with global influence” to boost business in lithium and other metals.

CMOC Group, which last year overtook Glencore as the world’s top cobalt producer, said the return of “rational” pricing in battery metals opened a window for global acquisitions.

Attention will now turn to what Tianqi Lithium Corp. and Ganfeng Lithium Corp., which report results in coming days, say on the matter.

The miners’ opportunistic growth plans should give pause to traders, investors and rival producers hoping for an imminent rebound in battery-metal prices. They also may add to the alarms in Western capitals about China’s stranglehold on many critical minerals.

Even with landmark spending packages rolled out by the US and European Union, there’s a strong chance China’s dominance in cobalt, nickel and lithium will be greater in a few years. Tsingshan Holding Group Co., the world’s top nickel producer, is also pushing ahead with expansion.

Zijin, for one, expects resistance. Chairman Chen Jinghe said the company “will be targeted for sure” as geopolitical tensions become “increasingly grim.”

Even so, these are raw materials that will be needed in ever-greater volumes as the energy transition gathers pace, regardless of who mines them.

Efforts to curb China’s expansion through diplomatic and legal means will likely continue, but for the good of the planet, politicians’ time might be better spent focusing on efforts to keep pace.

(By Mark Burton)

Tsingshan unit plans Indonesian battery plant as trade frictions mount

Bloomberg News | March 26, 2024 

Tsingshan’s industrial park in Indonesia. Credit: Tsingshan Holding Group

The battery unit of Tsingshan Holding Group Co., the world’s top nickel producer, plans to build a plant in Indonesia, the latest in a series of Chinese investments that will help the Southeast Asian nation step up from commodities production to more lucrative processing and manufacturing.


REPT BATTERO Energy Co.’s first overseas battery factory could be housed alongside Tsingshan’s existing operations in Weda Bay and may begin operating as soon as next year. The intention is to steal a march on rivals planning new capacity elsewhere in the world, and take advantage of its parent for raw materials and infrastructure. Locating in Indonesia could also head off concerns over trade frictions that threaten to disrupt exports from China.

“Many battery manufacturers are building factories and ramping up in Europe and North America, but we expect their capacity will only operate from around 2026 or after,” Jason Hong, US general manager of REPT, said in an interview. “We want to get ahead of them with the factory in Indonesia.”

China is one of Indonesia’s top investors, spending more than $7 billion there last year, with much of the cash deployed on building out processing facilities for the nation’s abundant reserves of raw materials. Jakarta has ambitions to develop as a hub for electric vehicles, a sector in which China leads in terms of sales. Indonesia is the world’s biggest miner of nickel and No. 2 for cobalt, ingredients crucial to the production of EV batteries.

REPT began by selling batteries for energy storage systems, but has since expanded to carmakers including Stellantis NV, Li Auto Inc. and SAIC Motor Corp. It ranked as China’s No. 9 in terms of EV battery installations in the first two months of 2024, up from No. 11 last year, according to China Automotive Battery Innovation Alliance.
New listing

The company listed in Hong Kong in December, at a time when EV sales growth has slowed after a period of rapid expansion. REPT warned last month that its net loss in 2023 could be as much as 2 billion yuan ($277 million), or four times worse than the previous year, due to lower prices, delayed payments from customers and the costs of expansion.

China’s dominance in EVs and the processing of many critical minerals has drawn scrutiny from trade officials in the US and European Union. Hong said policy uncertainty is potentially an issue for the company, and putting a factory in Indonesia could help mitigate the threat. But no final agreements have been reached, and REPT could consider other Southeast Asian locations too, the company added.

The US is keen to develop supply chains that don’t rely on China, while Jakarta is lobbying for closer trade ties with Washington to ensure its exports can benefit from the green subsidies available in the Biden administration’s Inflation Reduction Act. The two countries are also partners in a landmark climate finance pact.

“Labor and power costs in Indonesia are similar to China,” said Hong. “Tsingshan has comprehensive infrastructure built, and its extensive experience in the country would help with budget estimates,” he said. “We also have a good relationship with the Indonesian government, which is supportive of new energy sectors.”

Still, Indonesia isn’t without risks. For one, the nation’s power supply is heavily reliant on coal, the dirtiest fossil fuel, which could raise environmental concerns among buyers and investors. A deadly explosion at a Tsingshan nickel plant in January has also unnerved some of REPT’s customers.

“We did have clients concerned about how we can prevent this from happening again,” Hong said. “They are attaching great importance to this matter.”

Most rescue efforts suspended at Russian gold mine due to collapse risk

Reuters | March 27, 2024 

Search and rescue efforts are underway at the Pioneer gold mine in Russia. Credit: Ministry of Emergency Situations, Russia

Most rescue efforts have been suspended at a gold mine in Russia’s far east, where 13 miners were trapped by a rock fall on March 18, due to the risk of another collapse, state news agency TASS reported on Wednesday.


The Pioneer gold mine, one of Russia’s largest, is in the Amur region which borders China, about 5,300 km (3,300 miles) east of Moscow.

Emergency workers would study water deposits discovered at the bottom of four shafts, the emergencies ministry said in a statement posted on the messenger app Telegram.

“This will allow us to establish a complete picture of the entire depth of the mine and make a decision on further work,” it added.

The ministry earlier said that the mine was probably flooded.

(By Felix Light; Editing by Andrew Osborn and Andrew Heavens)

Several people killed in accident at abandoned Liberia gold mine

Reuters | March 26, 2024 | 

Iron ore mine site in Liberia. Stock image.

Several people have been killed in Liberia in an accident at an abandoned gold mine, the West African country’s mines minister said on Tuesday.


Minister Wilmot Paye said on Tuesday seven people died in Monday night’s incident, but acknowledged the authorities could not yet provide an exact death toll until a team reached the site in River Cess County in south-central Liberia.

“I was told that seven persons died, but I can’t say much until the team gets there. The mines had been abandoned several months ago,” Paye told Reuters, adding that he did not know which company had operated the site.

“If we get the details of the company, the law will take its course,” he said.

Liberia, one of the world’s poorest countries, is rich in minerals including gold, diamonds and iron ore. Paye gave no details about the nature of the accident.

(By James Harding Giahyue, Alphonso Toweh and Portia Crowe; Editing by Alison Williams)

GEMOLOGY

Alrosa agrees to sell part of its production to the state

Reuters | March 27, 2024 | 

Alrosa’s Udachnaya diamond mine in Russia’s Sakha Republic. 

(Credit: Alrosa)

Russia’s finance ministry has agreed with sanctions-hit diamond producer Alrosa to purchase part of the company’s production in 2024, a source familiar with the matter saidon Wednesday.


Interfax news agency earlier on Wednesday reported on the agreement, citing two sources familiar with the matter.

As part of this agreement, state-owned precious metals and gems repository Gokhran purchased the first batch of diamonds from Alrosa this month.

The amount of the transaction is unknown.

Both Alrosa and the finance ministry have not yet responded to Reuters’ request for comment.

The European Union added Alrosa, Russia’s biggest diamond producer, to its sanctions list in January as part of punitive measures it has imposed on Moscow over the conflict in Ukraine.

(Reporting by Anastasia Lyrchikova and Maxim Rodionov; Editing by Alexandra Hudson and Paul Simao)

Column: Green steel is possible and even affordable, but still unlikely

Reuters | March 27, 2024 |

Steelmaking. (Reference image by SSAB).

Decarbonizing steel production is key to achieving global net-zero emission targets and the good news is that it can be achieved, and the cost isn’t prohibitive for some uses.


The bad news is decarbonizing steel isn’t likely to happen without regulation, coupled with price incentives that drive a shift in investment and consumption.

Steel production accounts for about 8% of global carbon emissions and about 30% of emissions from industry, and the sector is the major consumer of metallurgical coal, which is a key source of heat and carbon needed to turn iron ore into steel.

The determining factors in any discussion about switching to producing green steel is how much more will it cost than the current, well-established methods, and whether it can be scaled up fast enough.

The cost premium shows how it can work, and equally why it likely won’t.

The good news is that the premium is not as big as many would fear, depending upon how and where you produce the green steel.

The premium may be almost nothing or up to about $150 a metric ton, according to the consensus of presentations at last week’s Global Iron Ore and Steel Forecast Conference, held in Perth in Western Australia, the state that produces the bulk of the world’s exported iron ore.

To put that in perspective, hot-rolled coil futures in Shanghai ended at 3,782 yuan a ton on Tuesday, equivalent to $524.24, while London-traded US steel ended at $803.

Figures from Monash University in Australia show that green steel could be made in Western Australia for about A$850 ($570) a ton using a mix of wind, solar, battery storage and hydrogen.

The bad news is that even a relatively modest premium likely makes green steel unviable for much of the market, where costs are a major factor.

China steel

Take China’s steel demand as an example.

China produces about half of the world’s steel and buys just over 70% of global seaborne iron volumes.

Its steel consumption in 2024 was 907.3 million tons, according to data from S&P Global Commodity Insights.

The only sector that may be prepared to pay a premium for green steel is automotive manufacturing.

This is because the volume of steel per car is probably around 1-1.5 tons, meaning that even assuming a premium of $150 a ton for green steel, the impact on the retail price of a vehicle is negligible.

It’s possible the marketing value of saying the car is produced with green steel may exceed the actual cost of using the environmentally friendly product.

However, China’s automotive sector used 54 million tons of steel in 2024, according to S&P Global, which is a mere 6% of total demand.

The biggest steel consumers are property and infrastructure, which used a combined 518 million tons in 2024, or 57% of the total.

A modern skyscraper building may use about 700 tons of steel per floor, meaning a 100-story building would use some 70,000 tons, which at a premium of $150 a ton would add about $10.5 million to the cost.

High-speed rail can use between 30,000 and 60,000 tons of steel per km, and even using the lower figure means going green adds $4.5 million per km.

Both of these numbers mean that green steel is likely unaffordable for these applications, especially in Asia, the world’s most populous continent and the biggest driver of steel demand currently and likely for the next 30 years.
Investment switch

The second major factor confronting green steel is how to switch from the current method of using a blast furnace to turn iron ore into pig iron using coal, and then using a basic oxygen furnace (BOF) to turn this into steel.

There are several different paths available, but the one most likely to succeed involves using green energy to upgrade iron ore into direct reduced iron (DRI), which can then be turned into steel using an electric arc furnace or by using a hydrogen or natural gas powered BOF.

However, DRI is too volatile to be shipped, meaning that if Australia was to upgrade its iron ore to DRI, it would have to be further beneficiated into hot briquetted iron (HBI), a solid form that can be shipped.

It’s possible that HBI could be shipped from Australia to steel mills in China, Japan and other producing countries in Asia, but these countries would have to have the green hydrogen or clean electricity available to produce the final steel products.

All of this requires extensive capital investment, and currently the money isn’t flowing in this direction given China and other countries across Asia are still building blast furnaces and BOFs designed to use coal.

This is why the only way to drive a switch to green steel is likely through regulation and price signals such as carbon border taxes.

But getting global agreement on a carbon pricing system for steel is likely to be fraught, as developing nations in Asia will almost certainly push back on having to pay more for their steel.

(The opinions expressed here are those of the author, Clyde Russell, a columnist for Reuters.)

(Editing by Jamie Freed)

 

Outgoing Boeing CEO came from 'same

culture' that caused issues, says expert

Daniel Johnson , BNN Bloomberg

Following news that Boeing Co.’s CEO will step down, aviation experts are applauding the restructuring efforts while criticizing the company's emphasis on reducing costs. 

On Monday, the aerospace giant announced that Chief Executive Officer Dave Calhoun will leave the company at the end of the year. Richard Aboulafia, the managing director of AeroDynamic Advisory, said in an interview with BNN Bloomberg on Monday that he was “elated” to hear about the CEO change. 

“The problem is that he came from exactly the same culture that caused all of these problems,” he said. 

“My feeling was if he stayed, there'd be more of that emphasis on cost-cutting and very little regard for the company's actual core capabilities. And that's exactly how it's played out, I'm afraid.” 

The CEO change was coupled with other moves at the company, including that Chairman Larry Kellner will not stand for re-election and Stan Deal, the head of Boeing’s commercial airplane division, will retire. Efforts by the company to restructure come amid a crisis with its 737 Max jetliner. 

Under Calhoun’s leadership, Aboulafia said the company engaged in an “endless litany of cost-cutting rather than actual strategy.” He also highlighted that at the end of last year Calhoun moved to eliminate Boeing’s strategy department, adding that new leadership would be a welcomed change. 

John Gradek, a lecturer and coordinator at McGill University’s Aviation Management Program, said in an interview with BNN Bloomberg on Monday that the CEO change is “not unexpected” given that the company needs to look for ways to improve its reputation among customers and regulators. 

“People have been talking about the Boeing culture and the need to change the Boeing culture. The first step is really looking at the leadership and get a change of leadership in place,” he said. 

Aboulafia said the CEO change is a “very necessary, very big first step” and that the company operates in an industry with high barriers to entry, with “a lot of good people still” and “great technologies.” 

“All of this implies that with the right leadership, they can get back maybe even to a position of equality with their competitors and maybe even leadership in years to come,” he said. 

With files from Bloomberg News.