Korea Inc's foreign labour crunch puts older workers back in factories

The skyline of central Seoul is seen during a foggy day in Seoul

Mon, August 15, 2022 
By Cynthia Kim

SEOUL (Reuters) - When Hwang Kwang-jo's factory in Seoul faced a staffing crunch earlier this year after the departure of Nepalese workers and younger locals, he hired a 61-year-old to pick up some of the work.

While the job, which involves handling heavy alloy bars, is less than ideal for workers close to retirement, the pandemic has diminished South Korea's pool of foreign labour, forcing firms to widen the net.

Compounding that challenge is younger Koreans' reluctance to take up blue-collar jobs.

"It's incredibly difficult to fill vacancies, I never received any resumes from those in their 20s," said Hwang, chief executive at Iljin Enterprise, an aluminium moulding plant that usually employs about 35 people. "We were able to find Mr. Oh in April after the two Nepalese had to leave the country due to visa issues.

The scramble for labour in South Korea, where unemployment hit a near-record low of 2.9% in July, has led to a surge in the number of elderly people in the workforce with 58% of the job increases driven by people aged 60 and older.

But even that hasn't been enough to ease staff shortages across the industrial and farming sectors in Asia's fourth-largest economy, setting up new price pressures with inflation already running at a 24-year high.

In South Korea, the world's fastest ageing society, 33.1% of people aged between 70-74 are still working, topping the OECD's scale measuring the employment for the age group and far higher than the OECD average of 15.2%.

Central bank data shows over 230,000 of those aged 60 or over have found jobs at factories and construction sites since early 2020, while younger people have been leaving those sectors.

While South Korea's foreign worker contingent, at 848,000, is relatively small compared with other industrialised economies, migrants make an important contribution to the factory sector.

Since early 2020, the monthly inflow of new foreign workers is about 35% of what the country had in 2019, before the pandemic, government data showed.

Japan is experiencing a similar problem, with strict pandemic controls keeping migrant labour out, prompting an even greater reliance on the elderly population to fill vacancies.

Hwang at Iljin Enterprise says while the physical demands of work at his factory make it better suited for younger foreign and local workers, he doesn't have much choice.

"If I can't get any younger folks or foreign workers, it would be my bottom choice but I might need to hire more older folks," said Hwang, who recently gave all his crew a raise on top of the 700,000 won monthly bonuses he gave his foreign staff.

The government said last week it plans to loosen visa restrictions and cut red tape for foreign workers to help fill vacancies.

For Kim Ji-hwang, a land developer in Danyang, two-and-a-half hours south of Seoul, a staff shortage prompted him to hire 64-year-old Park Jang-young.

Park's new job requires him to clean trucks and equipment at the development site and earns him about 3.7 million won ($2,844.18) a month, significantly more than his previous job at a parking lot.

"I know my boss prefers to find younger folks but young people go to Seoul after graduation - even foreign workers are picky, they have a good network and community to share information about pay, working conditions," Park said. "I will stick to this job unless I get fired - it's good pay I think for my age."

(Reporting by Cynthia Kim; Additional reporting by Choonsik Yoo, Kantaro Komiya; Editing by Sam Holmes)

Mexican government issues temporary suspension to 10 mining concessions
Valentina Ruiz Leotaud | August 14, 2022 | 

Coal mine. (Reference image by TripodStories- AB, Wikimedia Commons).

As rescue efforts continue to release 10 miners trapped in a flooded coal mine in Coahuila, Mexico’s General Directorate of Mines issued a temporary suspension to 10 mining concessions that need to prove compliance with safety standards.


In an official communiqué made public on social media, the Directorate — which is part of the Secretariat of Economy — said that, despite what is happening at the flooded Las Conchitas Norte mine, the concession that belongs to El Pinabete mining company is not among those suspended.

The decision to temporarily halt 10 mining concessions followed a series of inspections carried out by the Secretary of Labor and Social Security (STPS). During the investigation that followed the inspections, it was discovered that in December 2021, the STPS had requested the former head of the General Directorate of Mines to suspend concessions 219392, 198194, 224555, 216996, 219420, 240825-240826, 219355, 219316, 243787 and 233958.

“The then Director of Mines did not proceed with the provisional suspension of operations by arguing that the information provided by the STPS on the concessions did not match the registration data held at the General Directorate of Mines,” the statement reads.

“Taking into account this and other possible irregularities, which have been reported to the internal control office of the Secretariat of Economy, the former mining director and the work responsibilities director were dismissed back in June. The goal is now to conduct an investigation and determine responsibilities.”
Las Conchitas

In the same release, the Secretariat of Economy pointed out that it has appointed two experts from the Mexican Geological Service and a specialist in hydrogeology from the Autonomous University of Nuevo León to help the rescue efforts at Las Conchitas.

The federal government has also sent to the site a team of six special forces divers, while the National Water Commission, Pemex, and the Federal Electricity Commission sent water pumps to help drain the mine. About 92 soldiers are also working at the scene.

According to the National Defense Secretariat, there are three flooded wells that have a depth of approximately 60 metres, of which around 34 were flooded.

The accident took place on August 3, 2022, and following the flood, an inner wall collapsed.

Five miners were able to escape and received medical treatment, and two of them have already been discharged from the hospital.

In a statement last week, President Andrés Manuel Lopez Obrador said investigations into those responsible for the mine’s safety would come only after the rescue effort.

SERIOUSLY?!

A Desert Nation Turns to Hydroponics to Make Feed for Its Livestock

Aaron Clark
Mon, August 15, 2022



(Bloomberg) -- The United Arab Emirates is turning to vertical farming and hydroponics to produce food for local livestock as the desert nation tries to reduce its reliance on imports and shield itself from disruptions to global supply chains.Abu Dhabi-based startup World of Farming will begin building on-site operations at local farms later this year to provide fodder for meat and dairy producers that currently rely on imports for as much as 80% to 90% of their animal feed, said Faris Mesmar, chief executive officer of Hatch & Boost Ventures, a venture capital firm that launches and scales its own startups.

“This region doesn’t have a lot of arable land and the dependency on imports is becoming an issue for all local privately held and commercial farms,” said Mesmar in an interview. Local livestock producers “find themselves with no consistent access with food to feed their animals.”Land or resource-scarce countries from the Middle East to Asia are increasingly seeking to insulate themselves against food shocks and global supply chain disruptions caused by the pandemic, politics and extreme weather. Russia’s invasion of Ukraine has disrupted supplies from one of the world’s top grain exporters, while heat waves have been wilting crops in Europe and the US.

Techniques such as hydroponics, drip irrigation and enclosed cultivation allow desert nations such as the UAE to reduce costly imports of high-value fresh produce. Dubai-based airline Emirates opened what it says is the world’s largest hydroponics farm in July to supply leafy greens for in-flight meals. Hydroponic, vertical farms typically grow plants indoors without soil, irrigating the crops with a water-based nutrient solution and often use artificial light.

Still, it’s rare to find the system used to supply animal feed. World of Farming says its technology offers fodder production with a significantly lower carbon footprint than traditional open-land agriculture and requires less water and space. The venture uses artificial intelligence and imagery to monitor the health and growth rate of plants and can optimize output depending on the changing needs of the animals they will feed.

Feed can represent more than 60% of running costs for animal protein producers, so “if vertical farming can provide a consistently affordable source of feed, it can go a long way in supporting a more resilient food system here in the UAE,” said Greg Ohannessian, co-founder of UAE-based food security consultancy Soma Mater, which has worked on vertical and hydroponics projects.

But while feed grown in vertical farms could be cheaper than imports, there are other options livestock farmers could consider to source local feed, such as creating silage from retail food waste, or producing local grasses that can tolerate high-salinity water, Ohannessian said.

World of Farming plans to build, operate and manage growing operations on private and commercial farms across the Middle East and North Africa, with livestock owners paying a monthly fee for the feed produced. Hatch & Boost has committed to pre-seed World of Farming and is aiming to secure more than $2 million in a fund-raising round later this year.

Possible strike from Belarus as Russia accumulates anti-aircraft missile systems and missiles, media


Ukrainska Pravda


MONDAY, 15 AUGUST 2022, 

Belaruski Hajun, an independent Belarusian monitoring group, believes that Russia has accumulated a large number of anti-aircraft missile systems, as well as between 15 and 60 missiles, at the Zyabrovka airfield in Gomel Oblast, Belarus. This might indicate that Russia is planning to carry out a new large-scale attack on Ukraine.

Source: Belaruski Hajun

Quote: "Using satellite images, our team was able to produce…a complete and up-to-date overview of all equipment and weapons that are currently deployed at the Zyabrovka [airfield]."

Details: In particular, Belaruski Hajun reports that there are between 10 and 14 S-400 Triumf surface-to-air missile systems, three KASTA-2E2 and 48Ya6-K1 Podlet radar systems, and two Pantsir anti-aircraft defence systems.

In addition, there are at least 15 and up to 60 missiles for the S-300 and S-400 missile systems at the ammunition depot in Zyabrovka.

Belaruski Hajun notes that Russian Il-76 aircraft are delivering additional S-400 missiles to the Gomel airport; after that, they are taken to Zyabrovka.

The analysts from Belaruski Hajun hypothesise that all of the above indicates that "preparations are underway for a large-scale missile strike on the territory of Ukraine in the coming weeks".

Quote: "The fact that not a single missile has been launched from the territory of Belarus since the last large-scale attack on 28 July suggests that this [the fact that Russia might be preparing for the attack] might be the case…

In addition, there is a large number of various military vehicles, equipment, trenches, tents and the like [in Zyabrovka]. We also know that there are T-72 tanks and Iskander mobile short range ballistic missile systems, which cannot be seen on the [satellite] images."

Background:

Belaruski Hajun shared a video of an explosion near the Zyabrovka airfield close to the city of Gomel.

On the night of Wednesday, 10 August, explosions rocked the area around the Zyabrovka airfield, which is located near Gomel where blasts were heard and flashes seen.

Belarusian Ministry of Defence has published its official version of reports of explosions and flashes at the Zyabrovka military airfield, citing the alleged explosion of "one of the units of equipment".

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Indian Billionaire’s Stock Holdings Worth Nearly $4 Billion in Focus After Death

Abhishek Vishnoi and Ashutosh Joshi
Tue, August 16, 2022 


(Bloomberg) -- The death of Indian billionaire Rakesh Jhunjhunwala puts a spotlight on the nearly $4 billion worth of stocks held by the famed investor, whose trades were closely followed.

The man known as India’s Warren Buffett died of a reported cardiac arrest Sunday at the age of 62. The self-made trader invested in a wide swathe of established businesses and startups, and served on the boards of several Indian firms.

Indian Billionaire-Investor Rakesh Jhunjhunwala Dies at 62

“His portfolio consists of companies which have risen from being value investments to larger players,” said Kranthi Bathini, a strategist at WealthMills Securities Pvt. Jhunjhunwala wasn’t much involved in management of companies in which he owned strategic stakes, Bathini said, adding that “these stocks are unlikely to see any major impact since his investments will be looked after by his company.”

Jhunjhunwala was among the most influential market voices in Asia’s third-biggest economy, with an intense following among the nation’s growing horde of retail investors. His investing success earned him a cult-like following, with news of his trades occasionally sparking stocks to move by their daily limits.

The man also known as “Big Bull” was a fierce backer of the India growth story. Jewelery retailer Titan Co. was one of the largest and most profitable investments for the veteran trader and his wife Rekha Jhunjhunwala, making up for more than a third of their portfolio, according to data compiled by Bloomberg.

Their other top holdings by market value include Star Health & Allied Insurance Co., footwear maker Metro Brands Ltd. and automaker Tata Motors Ltd. Jhunjhunwala held stakes of more than 10% in Star Health, IT firm Aptech Ltd. and videogame maker Nazara Technologies Ltd.

Shares of companies in which Jhunjhunwala held stakes were mixed in Tuesday trading as the market reopened after a holiday. Titan rose about 1% and Star Health climbed as much as 2.5%, while Aptech fell more than 5%.

Jhunjhunwala’s estate, including shares and property, will be bequeathed to his wife and three children, newspaper Economic Times reported Monday, citing an unnamed person aware of the matter. The billionaire had previously worked out the plan, according to the report.

“True to his nature and unerring eye for detail, he had planned and meticulously executed a smooth transition to sustain and enhance his legacy,” Rare Enterprises Pvt., Jhunjhunwala’s investment firm, said in a statement. Rare Enterprises didn’t immediately respond to phone calls and an emailed request for details.

Prime Minister Narendra Modi paid tribute to Jhunjhunwala in a tweet Sunday, saying the “indomitable” investor made “an indelible contribution to the financial world.”

(Adds analyst comment in third paragraph, share moves in seventh paragraph and details on transition in eight and ninth paragraphs)

‘Ticking time bomb’—China’s real estate bust deepens as housing prices fall for 11th straight month

Christiaan Hetzner
Mon, August 15, 2022 


If you’re worried about the price of, say, your Floridian beachfront property sliding, be thankful it’s not in China.

That real estate market, which propelled China’s rapid growth ever since the 2008 financial crisis, is in the midst of a housing bust that has now recorded its 11th straight month of price declines.

China may be half a world away, but its problems could soon be felt closer to home. Should its real estate malaise spill over into other sectors, it could derail a locomotive that has been pulling the global economy—and major U.S. companies like Tesla—behind it for more than a decade.

New home prices in 70 cities, excluding state-subsidized housing, declined in July by just over 0.1% from June, according to China’s National Bureau of Statistics.

By comparison, the S&P CoreLogic Case-Shiller U.S. National Home Price Index still managed to eke out a 1% month-on-month gain in May, according to the latest figures available. Industry analysts have warned of a coming correction that would particularly affect overheated markets like Austin.

“There is an urgent need for active policies around the country to stimulate a market recovery,” Yan Yuejin, research director at a Shanghai-based housing market think tank, told state-run publication Global Times on Monday.

China has for years preferred that its citizens invest in their own four walls rather than the country’s often volatile stock markets in Shanghai and tech hub Shenzhen. Given consumers received virtually no interest on bank deposits and their money is subject to strict cross-border capital controls, the population has had few other places to put their growing savings but in the housing market.

$90 billion wiped out

As a result of the credit-induced boom, Goldman Sachs famously estimated in 2019 that the country’s residential real-estate market was valued at $52 trillion, twice as big as its counterpart in the United States.

Ahead of President Xi Jinping’s expected reelection in the fall to an unprecedented third term, however, cracks are fast emerging. Evergrande, the world’s most indebted company and China’s largest real estate developer, defaulted on its debt last year, while rivals Kaisa Group, Country Garden, Sunac China, and Shimao Group are also in various stages of distress.

Moreover, many Chinese investors are staging a mortgage boycott, refusing to pay installments on a property that may never be built.

According to Bloomberg, the sector has seen at least $90 billion wiped off its stocks and bonds since the year began as a result of the crisis.

Making matters worse, President Xi has not deviated from his zero-COVID policy, imposing draconian lockdowns that keep the economy from returning to its prior boom. Most recently the tropical tourist hotspot of Sanya, a kind of Chinese Hawaii, has been affected by an outbreak, impacting travel to the popular resort.

In a move to alleviate the situation, the country’s central bank trimmed two key interest rates in a surprise move on Monday. Whether that helps stimulate demand going forward is another question.

On Sunday, Hong Kong daily South China Morning Post, which belongs to Chinese e-commerce giant Alibaba, warned 50 million vacant apartments could flood the market, calling it a “ticking time bomb.”

DEJA VU

https://www.latimes.com/archives/la-xpm-1995-09-26-mn-50145-story.html

Japanese Investors Say 'Aloha' : Their Hawaiian real estate buying ... 

Sep 26, 1995 ... A group of Hawaii economists, real estate executives and major landowners recently estimated that the drop in real estate values in Hawaii has ...

https://www.washingtonpost.com/archive/politics/1996/03/12/hawaii-resumes-course-after-speculative-storm/cc6bf1f5-5cf8-451e-b435-322d81ba8e1b

HAWAII RESUMES COURSE AFTER SPECULATIVE STORM 

Mar 12, 1996 ... But boom turned to bust a few years ago as hard times hit Japan's economy and many of those free-spending Japanese investors -- banks, real ...

https://www.hawaiibusiness.com/weaker-yen-japanese-investors-buy-more-hawaii-real-estate

Yen Is Weaker, But Japanese Investors Still Bullish About Hawai'i ... 

Jul 19, 2022 ... Visitors from Japan, traditionally the largest group of foreign homebuyers in Hawaiʻi, have seen their buying power in the Islands decline ...

https://factsanddetails.com/japan/cat24/sub155/item2799.html

RECESSION, DEFLATION AND DECLINE IN JAPAN IN THE 1990s ... 

One banker described the loss "as if Japan had entered a detox center after a financial overdose." The effects of the collapse lasted for years. The price of ...

https://hbr.org/1990/05/power-from-the-ground-up-japans-land-bubble

Power from the Ground Up: Japan's Land Bubble 

But the consequences of Japan's endless real estate boom extend far beyond ... or investment you wish, including real estate and stock market speculation.

https://uhero.hawaii.edu/wp-content/uploads/2019/08/JapaneseInvest.pdf

Japanese Investment in Hawaii: Past and Future - UHERO 

A popular Japanese television series, Soko ga Shiritai, even aired a program in Japan (and Hawaii) which heavily criticized Japanese real estate investments in ...

Saudi Billionaire Made $500 Million Russia Bet at War Onset

Matthew Martin
Mon, August 15, 2022 


(Bloomberg) -- Saudi billionaire Prince Alwaleed Bin Talal invested more than $500 million in Russian firms around the time of Moscow’s invasion of Ukraine, in a sign of the careful political position the Gulf state has maintained with its OPEC+ partner.

Prince Alwaleed’s investment firm, Kingdom Holding Co., acquired depositary receipts issued by Gazprom PSJC, Lukoil PJSC and Rosneft PJSC in February, according to a stock exchange filing. Russia invaded Ukraine on Feb. 24.

No specific dates for the investments were given, and the Saudi firm didn’t respond to questions about whether it still owned them. The value of all those depositary receipts dropped rapidly after the war began, when trading in Moscow was halted and western sanctions were imposed on Russia.

Alwaleed, whose grandfather was the founder of modern Saudi Arabia, is one of the country’s richest men and most high profile international investors. More recently he has been eclipsed by the kingdom’s sovereign wealth fund, chaired by his cousin, Crown Prince Mohammed bin Salman, which acquired a 16.9% stake in Kingdom Holding Co. in May.

Saudi Wealth Fund Takes $1.5 Billion Stake in Alwaleed Firm

The investments highlight Saudi Arabia’s delicate relationship with Russia throughout the conflict as many of its Gulf neighbors have pulled back.

President Vladimir Putin and the kingdom’s de facto ruler Crown Prince Mohammed bin Salman have spoken several times since the start of the war. Both countries have working together within the OPEC+ oil producers group to manage crude supply, largely resisted calls from Western leaders including US President Joe Biden to help tackle global inflation concerns by increasing oil output.

Ritz-Carlton

Prince Alwaleed was detained at the Saudi capital’s Ritz-Carlton hotel in 2017 along with other princes and government officials as part of what the state called an anti-corruption probe. No formal charges were ever presented, and he was released after 83 days, having reached an undisclosed “confirmed understanding” with the government.

Kingdom Holding invested 1.37 billion riyals ($365 million) in Gazprom’s American depositary receipts in February, the biggest stake of those disclosed so far this year. It also invested 196 million riyals in Rosneft’s global depositary receipts the same month, and 410 million riyals in Lukoil’s American depositary receipts between February and March.

The purchases are part of Kingdom Holding’s investment program that’s focused on alternative financing, energy, entertainment, artificial intelligence, insurance, asset management, commodities and funds.

Other Investments

The Saudi firm invested $3.4 billion in global equities and depositary receipts since 2020, based on the filing, a rare bit of disclosure by the company. The largest stake was an investment valued at 2.5 billion riyals in Spain’s Telefonica SA between April to August 2020.

It also disclosed stakes in Uber Technologies Inc., TotalEnergies SE, Alibaba Group Holding Ltd. and BHP Group Ltd., acquired mostly in 2020 and 2021. The most recent deal it disclosed was a 178 million riyal stake in Hercules Capital Inc., made in June. The venture capital firm’s shares have risen 17% since the start of July.

Prince Alwaleed, 67, became one of the highest profile Saudi investors after taking stakes in companies such as Citigroup Inc. and Apple Inc. He’s supported Prince Mohammed’s modernization efforts, including giving women the right to drive.

More recently he’s announced the sale of a stake in his Rotana Music label to Warner Music Group Corp., and he raised $2.2 billion by selling part of his stake in the Four Seasons hotel chain to Bill Gates’ Cascade Investment LLC.

Alwaleed is known for long-term investments and is a fan of famed investor Warren Buffett. He once called himself the Oracle of Omaha’s Arabian equivalent.

Read this next: Broke Oligarch Says Sanctioned Billionaires Have No Sway Over Putin

(Updates with details in fifth and sixth paragraphs)

Most Read from Bloomberg Businessweek

Chipmakers’ Pandemic Boom Turns to Bust as Recession Looms

Ian King
Mon, August 15, 2022 

(Bloomberg) -- Even in an industry famous for its roller-coaster cycles, chipmakers are bracing for a particularly severe shift in coming months, when a record-setting sales surge is threatening to give way to the worst decline in a decade or more.

The semiconductor market enjoyed a massive run-up in orders during the pandemic, sending sales and stock prices to new highs and triggering a global scramble to find enough supplies. There was hope in some circles that the boom could be sustained for several more years without a painful pullback, but chipmakers are now facing a familiar problem: growing inventory and shrinking demand.

It’s a dilemma as old as the computing age. It takes years to build a chip plant, and they don’t always come online when they’re most needed. In the last few years, the problem was a lack of supply. As recently as this quarter, automakers and some other customers were complaining they still couldn’t get enough electronic components.

But fortunes have turned swiftly for the biggest chipmakers. Companies like Nvidia Corp. are reporting more that 40% annual declines in their core businesses, while Micron Technology Inc. warns that demand is evaporating fast in many areas. This week, Chinese government data showed that output of integrated circuits plunged 17% in July after robust growth in 2021, reflecting supply chain shocks as well as a tapering in demand for lower-end chips from the world’s biggest semiconductor market.

The treachery of the semiconductor cycle was driven home when President Joe Biden signed the $52 billion Chips and Science Act to subsidize domestic production -- on the very day that Micron, the US’s biggest maker of memory chips, told investors demand was fading.

“It’s sort of darkly humorous,” said Sanford C. Bernstein analyst Stacy Rasgon. “The politicians are going to find out how quickly shortages can resolve themselves when the industry turns.”

Personal computer makers, some of the biggest buyers of chips, were the harbinger of darker times. Desktop processor shipments dropped to their lowest level in nearly three decades in the second quarter, according to Mercury Research. Total processor shipments experienced their largest year-over-year falloff since about 1984.

It’s a painful hangover following pandemic lockdowns, when the work-from-home trend spurred demand for PCs and other devices. Chipmakers had been rushing to keep up with a flood of orders, and supply-chain snags made customers even more desperate. Manufacturers of electronic devices were willing to buy chips at whatever price they could.

Now consumers are cutting down on big-ticket purchases, and chip buyers are following suit. That’s created what the industry calls an “inventory correction.” The last such downturn was in 2019, and they don’t usually last long.

But this one is expected to be especially pronounced due to a weakening global economy. If an inventory correction happens at the same time the economy slides into recession, the industry won’t get the speedy rebound it saw after the last slump.

“It’s going to be a bad downturn,” said Gus Richard, an analyst for Northland Securities.

Christopher Danely, a Citigroup Inc. analyst, expects the industry’s drop to be the worst in at least a decade, and possibly two. Every company and every chip category is likely to suffer, he said.

One unusual factor this time is a broad push by governments to subsidize new factories and equipment, from the US and Europe to China and Japan. Companies like Intel Corp. lobbied for passage of the Chips legislation, arguing the US needed to be more competitive with Asian manufacturers. Now they’re poised to start adding new capacity at a time of shaky demand.

There are 24 new construction projects of large-scale plants, known as fabs, getting underway in 2022, according to chip equipment industry association SEMI. That’s well above the average of 20 that’s been tracked by SEMI since 2014. Total spending on equipment will reach $117.5 billion in 2022, up 15% from the previous industry record, which was in in 2021. Next year that spending will increase to $120.8 billion, SEMI predicts.

“It used to be a competition between companies,” Richard said. “Now it’s a competition between countries because of the strategic importance. There’s a race between China and the US.”

The business of manufacturing chips has become increasingly precarious because of the massive upfront costs. Plants with a price tag of up to $20 billion need to be run flat-out 24 hours a day to bring a return in the few years before they become obsolete. The scale required to make that kind of investment has reduced the number of companies with leading-edge technology to fewer than five. And just three, Samsung Electronics Co., Taiwan Semiconductor Manufacturing Co. and Intel, account for the majority of production.

Those companies built their dominance by understanding the economics of the industry better than their rivals. They added production lines at just the right time and made their supply chains as efficient as possible.

But the push to build up chip production in the US and Europe, providing an alternative to Asian manufacturing, could disrupt that drive toward efficiency.

The industry is “effectively building duplicate supply chains in the US and Europe,” said Fitch Ratings analyst Jason Pompeii. “This transition will result in short recurring periods of heightened revenue and cash flow volatility, particularly compared with the increasing efficiency the industry has enjoyed over past decades.”

In the immediate term, the risk is “overinvesting in production capacity heading into an economic downturn,” he said.

Chipmakers remain bullish about demand in the long run. Executives still expect the industry to hit $1 trillion in total revenue by the end of the decade. That means their massive factory build-out may well be worth it.

And in the end, no one really knows what will happen, said Bernstein’s Rasgon. That’s the story of the chip industry.

“Everybody is really bad at forecasting demand,” he said. “They’re too bullish, then they’re too bearish.”

(Updates with latest Chinese chip output data in the fourth paragraph)

CRIMINAL CAPITALI$M IS THERE ANY OTHER KIND 

How the US Toppled the World’s Most Powerful Gold Trader


Eddie Spence, Joe Deaux and Tom Schoenberg
Sun, August 14, 2022 

(Bloomberg) -- In December 2018, a man in his early 30s was intercepted on arrival at Fort Lauderdale airport and taken to a room where two FBI agents sat waiting.

The target was scared and already on high alert — one of his associates had recently admitted to crimes he knew he'd also committed. Christian Trunz wasn’t a terrorist or a drug trafficker, but a mid-level trader of precious metals returning from his honeymoon. Crucially: he was also a longstanding employee of JPMorgan Chase & Co., the biggest bullion bank.

The FBI’s airport ambush described by Trunz was a crucial step in the pursuit by US prosecutors of JPMorgan’s precious metals desk, leading up to last week’s climax — the conviction on 13 counts of the man who was once the most powerful figure in the gold market, the desk’s former global head Michael Nowak.

Watched with a mixture of fascination and horror by precious metals traders around the world, the case has shone a light on how JPMorgan’s traders — including Nowak and the bank’s long-time lead gold trader Gregg Smith — for years allegedly manipulated markets by placing bogus orders designed to wrongfoot other market participants, principally algorithmic traders whose high-speed activity became a major source of frustration.

Nowak has become one of the most senior bankers to be convicted in the US since the financial crisis, and faces the prospect of decades in prison, although it could be far less.

Read: JPMorgan Gold Traders Found Guilty After Long Spoofing Trial

Nowak’s lawyers contend Nowak wasn’t a “criminal mastermind” and said they will “continue to vindicate his rights in court.” A lawyer for Smith said during closing arguments last month that his client’s orders were legitimate, and there are other explanations to buy and sell futures contracts at the same time on behalf of customers.

It took three weeks in court for the government to persuade a jury of Nowak and Smith’s guilt. (Jeffrey Ruffo, a salesman who was tried with them, was acquitted.)

But whispers of spoofing had hung over JPMorgan’s trading desk for at least a decade — many years before the FBI first approached Trunz in 2018.

Alex Gerko, the head of an algorithmic trading firm, complained about Smith’s activity in the gold market as early as 2012 to CME Group Inc., which owns the futures exchanges where the US alleged thousands of spoof trades took place. But Smith and Nowak continued working at the bank until 2019, when the US unsealed charges against them.

“The wheels of justice are moving, slowly,” Gerko tweeted last month.

At the Justice Department, the road to JPMorgan began with a decision to begin hunting down traders who made bogus offers to buy and sell commodities that they never intended to execute. The criminal fraud unit hired data consultants to go through billions of lines of trades to spot patterns of market manipulators.

As the vast quantities of data was scrutinized, there were certain traders that stood out. And they worked at JPMorgan.

With the data in hand, investigators went looking for cooperators, which they found in Trunz and his former colleague John Edmonds. Both relatively junior traders pleaded guilty to their own misconduct and agreed to testify against the desk’s boss.

Nowak was arrested in September 2019, sending a shock wave through the metals world, but the Covid pandemic meant it would be another three years until the trial finally took place.

In his testimony, Edmonds, who’d started in an operations role at JPMorgan, described spoofing on the desk as a daily phenomenon and felt obliged to take part because it was part of the normal strategy.

The Justice Department’s move against JPMorgan’s most senior bullion bankers was celebrated in some corners of the gold and silver markets, where investors and bloggers have long accused the bank of a large-scale scheme to manipulate prices lower. Those allegations prompted multiple investigations by the Commodity Futures Trading Commission, the most recent of which was closed in 2013 after finding no evidence of wrongdoing.

The case against Nowak and Smith made no allegations of a systematic plot to suppress prices, instead arguing that they spoofed markets over very short periods of time, and in both directions, to benefit JPMorgan's most important hedge fund clients.

And while the convictions are a victory for the prosecutors, the jury rejected the government’s most sweeping charges — brought under the Racketeer Influenced and Corrupt Organizations Act, or RICO — that the men were part of a conspiracy and that JPMorgan’s precious metals desk was a criminal enterprise.

At JPMorgan, Edmonds said the practice was referred to as “clicking” rather than spoofing, and the traders never discussed it as being illegal despite the firm’s own compliance policies making it plain. Trunz even spoke of a running joke involving Smith, who would click his mouse so fast to place and cancel orders that his colleagues would urge him to put ice on his fingers.

In 2012, Gerko, who is the founder of quantitative trading firm XTX Markets Ltd., complained to the CME about Smith’s trading in gold futures by rapidly entering and canceling orders. The CME began an investigation, which dragged on for three years before concluding he’d likely been spoofing.

“It took a long time after 2010 to get consistent enforcement,” Gerko said in a tweet, referring to the Dodd-Frank act in which spoofing was defined and made illegal.

After another JPMorgan trader, Michel Simonian, was fired in 2014 for spoofing, Nowak called his traders into his office to ask if they'd been doing the same, according to Edmonds. No one said anything. The incident shocked Edmonds, he said, as Nowak knew it had been going on for years.

During the trial, Nowak appeared largely impassive, his face hidden behind a Covid mask. Industry insiders described him in 2020 as introverted and brainy, and testimony during the trial painted him as a well-liked manager, who became friendly with Trunz while the two did a stint working out of JPMorgan’s London office.

During trial, Trunz was asked whether he liked Nowak, the former trader responded: "I loved him."

However, the relationship became more complicated after Trunz was approached by authorities. When he contemplated making a deal with the government, Nowak told him not to, according to Trunz, who became audibly choked up as he gave the testimony.

Defense lawyers painted Trunz and Edmonds as unreliable — proven liars who were testifying against their clients in order to avoid lengthy prison sentences.

Read: JPMorgan Gold Trader Says Boss Coached Him on Spoofing Lie

Nowak and Smith won’t be sentenced until next year. For comparison, two Deutsche Bank AG traders convicted of spoofing in 2020 were each sentenced to about a year in prison.

Last week’s conviction represents the pinnacle of the US Justice Department’s crackdown on the illegal trading practice known as spoofing. So far, prosecutors have managed to convict ten traders at five different banks.

JPMorgan has already paid $920 million to settle spoofing allegations against it.

“Even though the jury rejected the conspiracy and RICO charges, they will consider this a win,” said Matthew Mazur, an attorney at Dechert LLP who defended one of the Deutsche Bank traders. “This is probably the end of the precious metals sweep that was done, but I do think there will continue to be cases.”

Even after the crackdown, some market participants say spoofing still takes place. Back when commodity futures traded in the pits, brokers had to trade face-to-face. Hiding behind a screen makes it much easier to place and pull orders at will.

“We still see spoofing on a regular basis,” said Eric Zuccarelli, an independent commodities trader who began working on the floor of the New York Mercantile Exchange in 1986. “But back then if a person spoofed everybody would come over and punch you in the face and the floor committee would come over and fine you for being an asshole.”

Coal Consumption Was On The Rise Even Before The Ukraine War

Editor OilPrice.com
Mon, August 15, 2022 

This article is the fifth in a series on the BP Statistical Review of World Energy 2022. The Review provides a comprehensive picture of supply and demand for major energy sources on a country-level basis. Previous articles covered overall energy consumption, carbon dioxide emissions, petroleum supply and demand, and global natural gas trends.

Today I delve into the data on coal production and consumption.

Comparing Coal’s Emissions

Coal is the most polluting fossil fuel. What is meant by that?

Fossil fuels are primarily composed of carbon and hydrogen. They are hydrocarbons. When hydrocarbons are combusted, the carbon forms carbon dioxide and the hydrogen forms water vapor. Coal contains a higher percentage of carbon than does oil or natural gas. So, when coal is combusted, it generates more carbon dioxide per unit of energy than oil or natural gas will generate.

According to the Energy Information Administration (EIA), combustion of coal emits about 210 pounds of CO2 per million British thermal units (BTU) of energy. In comparison, oil emits about 160 pounds of CO2 per million BTU, and natural gas emits 117 pounds of CO2 per million BTU.

Coal also produces a lot of other harmful emissions when burned in power plants. Historically, coal plants emitted a lot of sulfur dioxide, which causes acid rain. Regulations eventually reined in that problem, but coal-fired power plants still emit pollutants like mercury. They even emit more radioactive elements into the environment than a nuclear power plant. Thus, there have been many regulations passed that have attempted to lower coal’s impact on the environment.

Because of the various pollution issues associated with coal, most developed countries have moved away from coal-fired power. But because coal is cheap, developing countries continue to rely heavily on coal as a source of power. Coal consumption in developing countries is presently the largest global driver of rising carbon dioxide emissions.

2021 Consumption and Production Statistics

As a result of the Covid-19 pandemic, 2020 saw a record 4.2% drop in global coal consumption. Within the 38 countries that comprise the Organisation for Economic Cooperation and Development (OECD), coal consumption fell in 2020 by 15.2%.

However, as with oil and natural gas, coal consumption bounced back strongly in 2021, growing by 6.3%. Coal consumption in non-OECD countries rose to a new record, while global coal consumption fell just short of the previous record set in 2014. Non-OECD countries now consume 81.5% of the world’s coal.


Six of the world’s ten largest consumers of coal are in the Asia Pacific region. All but one of last year’s Top 10 consumers saw an increase in coal consumption from 2020. Below were the world’s Top 10 coal consumers in 2021. “Change” refers to the growth or decline from the previous year.

Related: China’s Construction Crisis Weighs On Industrial Metals

Germany, which has been phasing out nuclear power and aggressively pursuing renewables, had the largest percentage increase in coal consumption from the previous year (among the Top 10 consumers).

Coal producers are geographically more diverse than coal consumers. Nevertheless, China dominates the world’s coal consumption and production. Below were the world’s Top 10 coal producers in 2021:


The coal industry in the U.S. has seen both supply and demand steadily declining for 15 years. The dramatic decline in U.S. coal consumption is the primary reason U.S. CO2 emissions have fallen sharply in the past decade. Coal consumption in power plants was displaced by cheaper natural gas and renewables, both of which have a much lower carbon footprint. However, that downward trend reversed direction in 2021, which saw a surge in both coal production and consumption in the U.S.

In the next installment, I will take a closer look at global renewable energy trends.

By Robert Rapier