Australian LNG

Australian LNG has a long history of pioneering investment. From the North West shelf to the first floating LNG project ever constructed.

Like other Australian commodities this history aligns with that of development economics of Asia. The first wave of Australian LNG development grew to service a modernising Japan and its demand for energy.  This bilateral relationship has a long history of cordial relations, share-equity investment and oil-linked contract pricing to satisfy both parties.

The second wave of Australian LNG was far more chaotic, matching the staggeringly swift rise of the much larger Chinese economy. It began along with the pre-GFC oil boom and Malthusian assumption that the world was going to fall short of everything as the enormous Chinese and then Indian middle classes ballooned and consumed more energy per capita.

Multitudinous LNG projects were sanctioned in Australia which found itself by 2010 developing no fewer than seven LNG project simultaneously. Needless to say this did not end well with gigantic cost blowouts for all as they competed for labour and other resources.

Yet, as the commodity super cycle peaked in 2011, demand suddenly fell well short of expectations and kept doing so over the next four years. Making matters worse, the US shale revolution suddenly turned that nation from net LNG importer to net exporter of a magnitude equal to Australian LNG. The global glut from 2015 was enormous.

The Australian LNG boom included a particularly cavalier offshoot in QLD where coal seam gas was liquefied via three projects on Curtis Island. As the boom subsided, and oil-linked prices crashed, the companies involved were all either sold or destroyed.

The legacy left by the projects was one of very high Australian gas prices with very low Asian gas prices, also delivering an huge blow to the competitiveness of the east coast economy. Thus the $200bn investment proved to be the greatest single capital mis-allocation in the history of the Australian economy (and surely global energy markets) and was little more than a monument to Banana Republic economics as tax takes failed, income fell and hollowing out transpired on raised local costs.

MacroBusiness was the only analytic house to call the Australian LNG bubble early, track it and predict its demise. It continues to cover the LNG sector with daily updates and a large grain skepticism and is a must read for anyone that needs to know the economic forces coming to bear on the sector.

Also check – Daily Iron Ore Price, Australian Dollar

2

Global energy falls off a cliff

It’s looking good for the transitory inflationists as energy prices free fall around the world. The oil price has flamed out as the US and China combine to thwart Goldman Sachs with releases of strategic reserves. Europe’s COVID outbreak and the Chinese property bust are not helping: Even Goldman admits a surplus now looms in

2

China fixes energy, Europe breaks it

The Chinese energy crisis is over. Coal output is surging: The one thing that China has plenty of is coal and it’s digging it up at record pace. Inventories and demand are now approaching normal: This is crashing Chinese coal prices for both thermal at $120: And coking at $300: Seaborne prices for thermal coal

1

Global energy deflates some more

More deflation yesterday in global energy markets and it can’t come soon enough. Thermal coal led the way: Coking coal bucked the trend: JKM sagged as well: Along with European gas: It’s still about Putin: The resumption of Russian gas flows “have calmed traders’ nerves and prices after a week of volatility,“ said Emily McClain,

7

Global energy prices smashed

It’s being led by China where thermal coal prices re-entered free fall yesterday: Significantly, this is happening despite the NDRC trying to slow it down which tells us that the market is capitulating. Seaborne thermal rolled and will catch up in due course: Coking coal appears to be breaking down as well. I have never

17

Morrison announces Marshmallow Storm to fight China

It is a breakthrough technology.  Using an electronic propulsion and launch system derived from Australian intellectual property, Marshmallow Storm rains sticky, roasted, sugar bombs upon enemy infantry. The effect is threefold: The enemy immediately stops its advance to feast upon the confectionary making them easy targets for an entrenched defensive position armed with the Australian

7

Putin delivers second round energy shock

After a couple of weeks of things getting better for global energy, Russia has decided to make things worse again: In late October, the market rejoiced and nat gas prices puked (even as we warned this was just the latest joke the Kremlin was playing at gullible Europe’s expense) after news that Russian President Vladimir Putin had

0

China’s coal glut takes shape

This is what happens when you get an artificial energy panic leading to draconian intervention to stabilise prices owing to politics: China’s daily coal output hit 11.7 million tonnes on November 3, close to the highest level this year, and output is expected to increase further as planned maintenance at coal mines gradually ends, the

3

Energy volatility returns

The global energy volatility machine rolled on yesterday. In China, the NDRC surprised the market and me by removing the jackboot: Traders took cue from a meeting earlier on Wednesday as the country’s top economic planner, the National Development and Reform Commission, told miners and power plants at a web-based conference that prices should not

3

Coal crash begets metals crash

Not a lot of news for energy prices today but prices kept falling for thermal coal yesterday and markets are now pricing my sub-$100 target for 2022: However, seaborne coking coal is still sticky. I expect it will crash in due course as Chinese EAF output is restored: Global gas prices lifted yesterday on no

4

Global energy crash intensifies

What a week for energy markets. These are the most crucial input prices of the global economy and they have become as volatile as crypto. The real economic implications of that do not bear thinking about. China continued to annihilate its twin coal bubbles last week. Coking coal was limit down again though stabilised Friday

15

Nationalise Santos

The irony of it all. Back in the early 2000s Australia (and the world) had a plan for decarbonisation that made a lot of sense. It was that coal-fired power would be phased out in favour of gas which would act as the “transitional fuel” as renewables ratcheted down in price. Australia was superbly placed

1

Global energy bubble deflates

The breathtaking adjustment in Chinese energy has continued with thermal coal thumped again yesterday: We’re going back to $100 and below next year, in my view. Coking coal finally caught a bid but how long that lasts is anybody’s guess. It is still massively oversupplied with big falls still in the offing: Moreover, JKM futures

5

Chinese energy bubble bust resumes

The Chinese energy bubble continued to burst yesterday as coking coal futures were put to the sword again: Given the collapse in Chinese steel output, this was the craziest of the energy bubbles. Really, the only reason for its bid was some possible switching from thermal to coking coal in power consumption but that was

5

Chinese coal bubble collapse sucks in metals

The Chinese energy crisis is cooked. Put a fork in it: On Friday, the NDRC said it held a meeting with large state-run companies including oil refiner Sinopec, aluminium giant Chinalco and steelmaker China Baowu on “rational” energy usage by industry on Thursday and said they should take the lead in energy-saving and carbon reduction.

11

China drops jackboot on energy bubble

I have been wondering why it has taken China so long to get to this. It worked very well for iron ore: China’s top economic planner is studying ways to intervene in the coal market as the government tries to rein in rising prices and curtail shortfalls that are threatening energy security and economic growth.

9

Energy crisis rocks global economy

Energy futures have calmed a little in the past 48 hours. LNG: Thermal coal: But the damage is being done. John Kemp leads us off: Europe’s gas and electricity prices are setting record highs on a daily basis and rising at an accelerating rate as the market tries to destroy enough demand to protect depleted inventories ahead of the

32

Putin enjoys the popcorn as Europe freezes

Ah Europe. The cheese-eating surrender monkeys of geopolitics. It means well but without any kind of force projection is completely useless. Witness Vladimir Putin now running rings around it on energy: “Let’s think through possibly increasing supply in the market, only we need to do it carefully. Settle with Gazprom and talk it over,” Putin

5

Nordea: Energy crisis to get worse

Nordea with the note: They say that god created economists to make the meteorologists look good, which we basically concur with, but it probably hasn’t ever been of a bigger relevance to combine weather- and economic forecasting than just now. The current extreme energy crunch is clearly weather-linked and even the Green Eurocrats probably hope for an

6

The energy bubble will burst like lumber and iron ore

Some folks never learn. COVID disruptions to both supply and demand have blown rolling bubbles and busts through commodities including lumber, iron ore, precious metals, and foodstuffs. Base metals are still inflated though beginning to struggle. The new bubble is energy. Each time the formula is the same. Temporary virus distortions boost demand. Temporary supply

28

Russia is driving the global energy shock

There have been a lot of articles pointing to the Chinese ban on Australian coal imports as the cause of the global energy shock. This was partly the case earlier in 2021. But Australian coal has been going out roughly as normal more recently, just to other markets. The key driver is, in fact, choked

2

How long the energy crunch?

For thermal coal, it’s going to be a glorious winter and a poor spring, Yuan Talks: Several regions in China are in the grip of a power crunch partly caused by short coal supplies and surging coal prices. Industry insiders say that policymakers’ efforts in boosting coal production in the past few months have so

15

The Chinese economy is shutting down

The Chinese economy is shutting down. Yuan Talks: China’s ongoing energy use restrictions and power crunch are hurting industrial production across several regions and dragging on the country’s economic growth, analysts say. The current round of power shortage is mainly due to the country’s so-called “dual energy control”, referring to the country’s efforts to cut

5

China IS commodities and it’s going to break ’em ALL

When will China relent on its economic reform program around property developers? When will it stimulate? My answers are not yet and don’t hold your breath. Why? Let me show you two charts. The first nicely captures the extreme bullshit being peddled by Wall Street about a new commodities supercycle. Note that the trigger is

2

Global energy crisis calms a little

Thermal coal and LNG futures both came off overnight. The former: The latter: Oil was still strong as we await the return of hurricane shuttered US production: Beijing continues its campaign to reduce power output. After steel cuts, which have curtailed a lot of EAF production, next is cement: Several Chinese regions have imposed restrictions