Materials Risk

A pile of dry timber and twigs in the forest will just sit there, undisturbed, dormant. Unless that is, it is disturbed by some change in the environment; an especially hot day coupled with litter lout picnickers. That catalyst – the change in the environment – increases the risk of a forest fire.

Asset markets can also remain dormant for years. As the years go by, industries begin to lose their luster, commodity markets suffer decade long bear markets as over-capacity grinds away at returns, and markets disappear off the radar of even the most committed of investors. read more

Commodity trading firms are the ultimate middlemen, linking the suppliers of raw materials – often countries that are hotbeds of corruption – with consumers in wealthy and emerging economies. They may earn wafer thin margins, but with large volumes they generate huge revenues. Their unique position means that they have become some of the most influential companies in the world. Yet few outside of the commodity trading world have heard their names (Trafigura, Vitol, Cargill…), far less have the remotest idea of the power that they wield. read more

For many carbon capture is the ultimate panacea when it comes to combating carbon change. Capture the carbon dioxide, store it and carry on, business as usual. Carbon sequestration efforts can be broadly classified primarily into two main categories; natural sinks (natural carbon reservoirs that can remove carbon dioxide) and carbon capture, utilisation and storage technologies (CCUS).

The latter include the capture and storage of carbon by the energy sector (coal, natural gas and oil) but also other high carbon emitting industries (cement, fertiliser, etc.). According to a 2019 report by Goldman Sachs (Carbonomics: The Future of Energy in the Age of Climate Change) the cost of these technologies varies from $25 per tonne for natural gas CCS to $200 per tonne for cement CCS. read more

The worlds largest container ship, the Ever Given has blocked the narrow Suez Canal this morning. Travelling from China, the giant ship was due to be travelling onwards to Rotterdam in the Netherlands. However, it appears that the ship lost power, and in windy conditions drifted sideways, blocking the canal.

According to data from the US Energy Information Administration almost 10% of total seaborne oil trade and 8% of global LNG trade passes through the Suez Canal. Although attention naturally focuses on the risk to energy supplies, the canal also provides a major route by which agricultural products (both grain and fertiliser) move between Europe and Asia. read more

Beijing and other cities are frequently plagued by some of the worst smog in the world, typically from the burning of coal. In recent weeks, pollution levels have escalated in Beijing and across other cities on the eastern seaboard. In response, authorities in China have ordered steel plants to dial back their operations. The hope being that less coal is burnt, and so the smog that has shrouded the region begins to dissipate.

Announcements ordering steel plants to curb their output tend to result in an immediate impact on iron ore and coal prices. Steel plants rely heavily on coking coal, and so restrictions on their operation also result in less demand for iron ore. read more

Things are starting to look up in the UK (famous last words!). Recent data indicates that between 35 and 40 per cent of the population have received at least a first vaccine dose. Depending on where you are in the country you can, for the first time in months, get your hair cut.

Things are not of course so rosy elsewhere in the world. The vaccine roll out in the EU has been stymied by the suspension of the AstraZeneca vaccine across many of the largest counties in the region. Some countries are tightening lockdown restrictions as a third wave gathers strength. read more