The new Clean Power Plan from the Environmental Protection Agency (EPA), set to be finalized in mid-summer 2015, has a lot of US manufacturers worried about whether their bottom lines will be affected. On a global scale, US companies are concerned about how increased compliance and other costs initiated by the EPA Clean Power Plan will hinder their competitiveness with international manufacturers.
However, metals purchasing and other procurement professionals shouldn’t despair. Rather, they should reach for the #1 tool at their disposal at this point in the game: educating themselves. The key for procurement folks is understanding the costs and risks involved – and once there, knowing how to implement the proper risk mitigation strategies.
The 30-megawatt, $290 million wind power project began construction this week 18 miles off the coast of Rhode Island, but, itself, is a much smaller project than the stalled Cape Wind farm project originally planned for the area around Cape Cod in Massachusetts. Read more
The gold itself was valued at about $11.2 billion. Some researchers, according to the report felt that in many cases, it made sense to recover the metals.
More Scrap Recycling Needed
Not much was diverted for recycling. Only about one-sixth of last year’s e-waste was moved from landfills for reuse, according to the report.
Let’s try to recycle more scrap metal for fun and profit, okay?
While advanced countries have robust recycling policies for electronic goods and most major cities in the US have, at least unofficial, scrap gathering and recycling networks involving local scrapyards and trucks that gather metals and bring them to the for-profit yards for recycling. A majority of the brands operating from India, for example, do not have a tangible policy for taking back or managing the end of life of their products. Read more
E-waste, for this discussion, includes electronic and electrical equipment. Everything from printers and computers to discarded cell phones, calculators and other personal electronics was counted by the UN. Even vacuum cleaners, toasters, electric shavers, video cameras were included in the total as all were dependent on being plugged into a wall.
We’re Number One! (Sorry)
India found itself in the 5th spot, having discarded 1.7 million metric tons of electronic and electrical equipment in 2014. The US (7.1 million mt) followed by China (6 million mt) topped the “Global E-Waste Monitor 2014,” report compiled by the United Nations University (UNU). Together, these two were responsible for about 32% of global e-waste.
Regionally, most e-waste in the world last year was generated in Asia at 16 million mt. The top three Asian nations with the highest e-waste generation in absolute quantities were China with the aforementioned 6 million mt, Japan with 2.2 million mt and India with its 1.7 million mt contribution.
I always think it harsh, particularly for those of us sitting in northern Europe often under leaden skies, that the Middle East is not only blessed with vast reserves of cheap and easy to extract oil and natural gas, but even more limitless supplies of sunshine.
When the oil runs out they will become the powerhouse of the world again, but this time generating electricity. True sandstorms in desert areas are a source of considerable maintenance and repair cost, but clearly aren’t a major hindrance as solar and wind farm investments have boomed in 2014 driven increasingly by economics, not subsidies.
Japan and China Investing in Renewables
After all the hand wringing we have done over the years about subsidies paid to wind farms, it comes as a welcome development to report that some 95 gigawatts of increasingly economic renewable generating capacity was created in 2014 at a cost of $270 billion, led by China and Japan who combined, invested $75 billion in solar power. Read more
The US ranks 41st in the world in terms of the ease of gaining federal permits to proceed with construction or infrastructure projects, according to the 2014 World Development Indicators‘ Ease of Doing Business Index.
Philip K. Howard of Common Good, recently discussed with us how permitting, not funding, is the biggest obstacle to renewing and replacing the nation’s crumbling infrastructure.
A Chief Permitting Officer
Senators Rob Portman (R. – Ohio) and Claire McCaskill (D. – Mo.) have introduced a bill that requires the first chief permitting officer for federal agencies. The bill would impact projects that cost more than $25 million and receive federal dollars, which includes most interstate roads and bridges. However, it does not give the new CPO the right to force individual agencies involved with projects to make decisions or move forward on projects in a timely manner.
“It’s a multi-headed federal bureaucracy that we have,” Howard said. “The problem with their bill is the CPO doesn’t have any authority. He can’t lean on one unreasonable agency if it’s holding up a project. There needs to be a dialectic here. If any one of 19 different agencies involved (in the Bayonne Bridge project in New Jersey) decides it’s going to dig in its heels in, there is no alternative but to give in to what they want. That feeds the paralysis. There needs to be a presumptive authority somewhere. There needs to be someone who can cut through that. If that authority is too high-handed that won’t work, either. You want an incentive for everyone to be reasonable and agree to make decisions within a reasonable timeline.”
The Canadian province that gave us one of the original six NHL teams (the Toronto Maple Leafs), several original sketch and improv comedians (John Candy, Martin Short, Dan Aykroyd, Rick Moranis to name only a few) and a good deal of original (read: primary) nickel mining production now gives us an unoriginal carbon emissions reduction choice.
Ontario, Canada – a heavyweight in population and GDP for our Neighbors to the North – just decided to undertake a cap-and-trade approach in reducing their greenhouse gas emissions, joining its Frenchier neighbor Quebec and the US state of California under the so-called Western Climate Initiative and its cap-and-trade program, to invest further in a green future. According to an article in the Financial Times:
“Under the banner of the Western Climate Initiative…California and Quebec already cap industry emissions such as those from electricity plants and oil and cement producers, and oversee more than 180 million metric tons of greenhouse gas emissions…Quotas are imposed on businesses that can purchase additional emission allowances, also called permits, and sell any they do not use.
Governments reinvest revenues from allowance auctions into clean energy initiatives and green transportation. California estimated in February that its revenues from the auction of allowances would reach about $2 billion or more 2015-16.”
Cap-and-Trade vs Carbon Tax: How Well Has It Worked?
For an example of how carbon emissions trading schemes have worked for manufacturing and heavy industry (such as steelmaking), look no further than Europe and the UK.
As background, initially the EU had set a goal of 20% reduction in greenhouse gas (GHG) emissions by 2020, and more recently they set a much more ambitious target of 40% reduction by 2030 – a very bold goal, considering President Obama promised a 26% to 28% reduction in US emissions by 2025, from 2005 levels, while the EPA is trying to push through its Clean Power Plan by this summer, calling for states to reduce existing power plants’ emissions by 30% by 2030. Outside of Europe, Australia scrapped its carbon tax system last year.
Back to cap-and-trade and carbon taxes, in general. According to Andrzej Kotas, managing director of Metals Consulting International and CEO of steelonthenet.com, neither work so hot across the pond. We asked Kotas whether he’s seen novel technologies that companies in the EU have developed that have helped counter the onslaught of regulations. He responded:
“I would say that very evidently the emissions trading system has been a failure in that sense. It was designed around the whole idea of having high-cost CO2 and charging people for producing a lot of CO2 gas would stimulate investment in new technology, but it has been a patent failure in that sense because it has simply not done so.
“We are talking, in the EU, about a CO2 tax of around 50 dollars per ton of CO2 generated kicking in about 2020, a tax expected to be about 120 dollars or more by 2030. That’s not going to apply if I’m making steel in Africa; neither would it apply if I’m making steel in China. I think if you speak to steelmakers they’ll tell you the whole emissions trading system has been failure; where it was economic to do so and returns to make on investments, steelmakers have made these decisions, so [ultimately] it hasn’t stimulated that investment – what it has done, I think, is the opposite: prompted investment abroad.”
Will Companies Leave Ontario?
If UK steelmakers, for example, have already been finding ways to produce offshore, will the same happen in the provinces and states under the Western Climate Initiative?
According to the FT, although Canada’s Prime Minister, Stephen Harper, has said that “Canada would release its greenhouse gas emissions targets before G7 meetings in June, after Canada’s premiers meet to discuss climate policy and an energy strategy,” he also is quoted as saying last December that, given the decline in oil prices, it would be “crazy economic policy” to apply unilateral emissions penalties on the oil sector.
It remains to be seen how Canada’s oil sector – and a host of other industrial sectors, especially those with operations in Ontario – will fare under the cap-and-trade scheme.
A three-nation trip by Indian Prime Minister Narendra Modi – to France, Germany and Canada – begins April 14, but metal analysts here are focusing on the Canadian leg. They expect India and Canada to sign a commercial deal for the supply of Canadian uranium for India’s nuclear power plants during Modi’s three-day visit.
In 2010, Canada and India signed a civil nuclear cooperation agreement, followed by another agreement in 2012. Since then, Canada’s main uranium supplier Cameco has been in talks with Indian officials about supplying uranium to India. Diplomatic circles of both nations expect the deal to be sealed when Modi visits Canada next week.
Modi dropped several hints about the deal in his Facebook posts. He said India was looking into resuming its civil nuclear energy cooperation with Canada, especially for sourcing uranium fuel for nuclear power plants. Canada, incidentally, was the first country to have completed all the formalities for civil nuclear cooperation with India in 2008. Canada sits on vast uranium reserves, and is one of the largest uranium producers in the world.
On this front, Canada, too, has been making overtures in the last few years. Late last year, Brad Wall, Premier of the province of Saskatchewan in Canada, let it be known that he was discussing sale of uranium to India along with proposals for partnering with India in clean coal technologies.
In fact, going by media reports here, Modi’s focus on this three-nation foreign tour will be garnering investments in energy, security, space and military sectors, under his favorite project’s mantle – Make in India.
One report also suggests that problems related to nuclear liability will be discussed by Modi and his French counterpart, President Francois Hollande. French company Areva is involved in the 9,900-megawatt Jaitapur power plant project in India.
In recent times, India has been bullish on acquiring fuel for its reactors, and Modi’s European and Canadian trip will only serve as one more opportunity for that.
India already has Australia on its side. As MetalMiner reported in September, India and Australia concluded a long-pending civil nuclear deal, which involved the supply of uranium from Canberra to India. The Australian supply, expected to have started shipping in the first quarter of 2015, has run into opposition, especially because of India’s stated position that all foreign nuclear material was subject to scrutiny under the guidelines of the International Atomic Energy Agency, thus negating bilateral checks, something the Australians are not giving in to so easily.
While funding in Washington is bogged down by partisan resistance to new taxes or cutting spending in the complicated process of trying to replenish the Federal government’s Highway Trust Fund, funding is only one part of the problem of why our crumbling infrastructure isn’t being replaced. Much of it is simply held up in red tape.
Philip K. Howard, Chairman of Common Good, an organization that seeks to streamline government bureaucracy, recently wrote in The Daily Beast that even with funding, “no government body has the ability to approve the work or to build it in a commercially reasonable way.”
The eastern span of the Bay Bridge connects San Francisco to Oakland. Rust and microscopic cracking were found after one of the 424 high-strength steel rods, intended to keep the tower from being damaged in an earthquake, was removed for testing last year.
“Red tape is so dense that even obvious fix-it projects require years of review. Raising the roadway of the New Jersey-to-New York Bayonne Bridge, for example, was a project with almost no environmental impact, because it used the bridge’s existing foundations and right of way,” Howard said. “But it still required 47 permits from 19 government agencies, and a 5,000-page environmental assessment.” Read more
Today, in MetalCrawler: a federal regulator urged replacement of rail tank cars, but just wants new tank cars and doesn’t want to replace them with pipelines. Alcoa, Inc., insists it’s now a “multi-materials” company and not just an aluminum producer, and construction associations have petitioned the federal government for guaranteed costs for change orders on federal projects.
The current rail car fleet should be aggressively replaced or retrofitted with better protection against heat from fires and by increasing the capacity of pressure relief devices, the National Transportation Safety Board recommended.
“We can’t wait a decade for safer rail cars,” NTSB Chairman Christopher Hart said in a statement. “Crude oil rail traffic is increasing exponentially. … The industry needs to make this issue a priority and expedite the safety enhancements, otherwise, we continue to put our communities at risk.”
The New Alcoa
Alcoa is at the forefront of two trends changing the metals industry, the Wall Street Journal reports, both of which will be on display Wednesday, when the company is expected to report earnings of 25 cents a share, up from nine cents a year earlier. In January, it reported its best full year results since 2008.
The first trend: an eastward shift in raw production, driven by economic growth in Asia and changes in relative costs.
The second: a turn by metals companies toward making parts for fast-growing markets like aerospace and automotive, which are more profitable than making raw metal.
Alcoa now produces predominantly in places such as Iceland and Saudi Arabia, and has scaled back in Tennessee and upstate New York. The US might have cheaper energy these days, thanks for the natural-gas boom, but it also has too many other industries—and people.
The groups want the Federal Acquisition Regulation (FAR) amended to “make explicit” that before ordering a change to a construction contract, the contracting officer must assure that funds are available to pay for additional work being ordered.
“Our members are facing increasing numbers of instances in which a Contracting Officer will direct a change in the scope of work on a construction project, lacking funds available to pay for the increased costs being imposed upon the contractor,” the associations wrote in a March 18 letter to OFCPP Administrator Anne Rung.
The groups signing the letter included the Design-Build Institute of America, the American Council of Engineering Companies, the American Subcontractors Association, the Associated General Contractors of America, the Mechanical Contractors Association of America, the National Association of Surety Bond Producers, the National Electrical Contractors Association, the Sheet Metal and Air Conditioning Contractors’ National Association and The Surety & Fidelity Association of America.