Archive for Decision Making

Coal Industry Seeks Unusual Partner in the UN Green Climate Fund for poorer nations’ energy needs

If you cannot beat them, try to join them… …in order to help the poor nations achieve desperately needed energy supply.

Yes, from environmentally harmful coal.

The coal industry, viewed as a key contributor to global warming, is seeking a once-improbable collaborator They are trying to work with a fund set up under United Nations climate negotiations.

With more than 2,000 new coal power stations planned or being built in Asia to Africa, the UN Green Climate Fund should help finance making the plants more efficient, according to Mick Buffier, the chairman of the World Coal Association.

New coal technology can cut climate-warming gases by about a third per unit of power, though it adds about 50 percent to the $315 million cost of a 500-megawatt plant in China, the group said.

The Green Climate Fund is meant to channel climate-related aid from industrial nations to developing countries. Bangladesh alone said it needs $16.5 billion in the 20 years through 2030 to ensure its plants will use so-called “super-critical” clean technology.

At the same time, older funding sources like Citigroup Inc. announced on Monday that it will cut back on financing for coal projects.

To read the entire article, go to bloom.bg/1N1eoA3

So cheap that neither Bureaucrats at FAA or the Pilot Union Can Holdback Cockpit Video Forever….

Technology smallness and it’s cheap cost will overwhelm the opposition

“Resistance is futile”

Railway trains too.

From a Bloomberg report on Oct 8, 2015

It was after 11 p.m. on March 30, 2013, when the Alaska Department of Public Safety helicopter lifted off near Talkeetna, north of Anchorage, after rescuing a stranded snowmobiler. Freezing rain was changing to heavier snow, and visibility was decreasing. Within minutes the chopper had crashed, killing its pilot, a state trooper, and the person they’d been sent to rescue. Usually, investigators from the National Transportation Safety Board have to guess what went wrong in such situations. But when they examined the chopper’s charred wreckage, they found a treasure in the ashes: a cockpit video recorder.

The footage, from a camera mounted on the ceiling behind pilot Mel Nading, ruled out mechanical problems or ice as factors in the crash. Rather, investigators could see that Nading was confused. He allowed the helicopter to slow and start rocking back and forth, then reached out and reset the device that should show whether the craft is flying level—a decision that sealed his fate, making it “very unlikely that he would regain control of the helicopter,” the NTSB said in its report.

In the dark, without an accurate reading, Nading had no way of knowing which way was up. “It really gave us the insight that this pilot was spatially disoriented,” says John DeLisi, the NTSB’s chief aviation investigator.

“Without that video, we would have been looking at a pile of burned-up wreckage, trying to figure out what caused the erratic flight path that led to this crash

Since 2000, the NTSB has recommended that the Federal Aviation Administration require cockpit cameras. The Air Line Pilots Association, North America’s largest flight crew union, has opposed the change, arguing that video can be misleading, especially where it’s not clear whether a pilot is fighting a malfunction or causing a plane to lose control. The money spent on cameras would be better invested in training and other safety measures, the union says. “Cameras in the cockpit will not prevent a single accident,” ALPA President Tim Canoll said in a statement.

The problem for the union is that video equipment has become so cheap that cameras are increasingly common in aircraft. That’s made their benefit more than theoretical.

After the Talkeetna accident, Alaska’s public safety agency began requiring pilots to receive instrument training every 90 days so they’d be able to navigate in whiteout conditions. (Nading hadn’t had such training since 2003.)

“Video recorders in the cockpit can provide information that would not otherwise be available,” says NTSB Chairman Christopher Hart. “Simply put, more information is better. And video, by its nature, has proven to be a rich source of it.”

OVERCOMING RESISTANCE BY OTHER AGENCIES

An FAA spokesman referred to letters the agency has sent the NTSB saying that it has no plans to revise its policy on cockpit cameras. At least one U.S. lawmaker, Florida Republican Representative John Mica, says he’ll push for a cockpit video requirement next year, when Congress is scheduled to pass legislation reauthorizing the aviation agency.

The bottom line: The spread of cockpit video technology is boosting the NTSB’s push to make it standard in aircraft. T

in rail trains too.

To read the entire article, go to bloom.bg/1OofeKn

Here is how BNSF is growing // with a shift to Stack Trains

Much of the world operates railroads that lack the necessary vertical clearances and the standard 1435mm heavy axle track gauge that allows for double stacking international goods in huge containers.

The World counts containers as 20-foot long boxes. In North America the standard is a whopping 53 feet long box.

Thirty years of big train progress in North America has given the Mexican to Canada rail companies the market ability to sustain self financed rail growth as coal shipments drop in the modern world

What is your railroad doing to adapt?

This story is found in a Bloomberg report.

Railroads are already winning more of this so-called intermodal business here across North America. Rail shipments of containers grew 15 percent over the last decade That offset the traffic losses as other cargoes, such as coal and ores have dropped in some cases by 11 percent to as much as 20 percent in the eastern US coal area.

Intermodal traffic is actually growing on the US railroads by about double GDP and also by about twice the rate of truck over the highway mode. Even with a somewhat slower US economic growth this year— intermodal rail freight is up 2.3 percent in 2015, the Association of American Railroads reports.

But persuading shippers to switch still isn’t always easy to do. It has to be significantly cheaper per trailer or container mile if rail rather than by highway in order for it to be a better transport deal for shippers.

Shippers decide. Not politicians. At least in the US markets.

It is strictly a matter of economics. While it might be cheaper by ton-mile to send freight by rail, it generally takes just a bit longer in time and a bit more in distance rather than by straight trucking from origin to destination.

There is also a cost of transferring containers onto the trains and then back to trucks for final delivery.

All of this geography of intermodal makes it difficult to compete with direct trucking on trips of less than about 600 miles here in North America. That is confirmed in an interview with Larry Gross, a partner at FTR Transportation Intelligence. Trucks are more punctual and flexible. They generally will always be quicker than by a truck to rail to truck intermodal substitute.

For more about the successful private BNSF rail investment report, log onto:    www.bloomberg.com/news/articles/2015-10-07/buffett-bets-on-rail-superhighway-to-beat-trucks-as-coal-fades

Mind numbing, jaw bone breaking numbers

A Bloomberg commodities index that tracks returns from 22 raw materials has fallen 50 percent since a 2011 high

Down BY HALF!

Not by a crummy 3% to 5% . Or even Ten percent

By a jaw breaking 50% range.

Who is getting fired for these numbing numbers? Where was the due diligence? ————

What did your strategic plan assume?

To read the entire Bloomberg report, go to bloom.bg/1MKPHrc

Interesting leadership observations offered to the railroad industry

Those who were at the keynote Railway Interchange 2015 address by retired Navy SEAL Robert O’Neill heard this leadership message.

Mr O’Neill held the crowd’s attention with his humor and stories of war, including headline making raids that resulted in the rescue of Captain Richard Phillips in April 2009…

His message to attendees about the topic of success & leadership was one that translates from the theater of war to the operations of an office or a railroad:

Never quit. That is his personal mantra.

O’Neill touched on several main points when developing a “never quit” attitude. 1) developing people skills, 2) knowing the difference between over planning versus being prepared, and 3) removing emotion from the decision-making process.

His advice — to keep moving forward through challenges

To recognize that all stress is self-induced

To recognize that failure is a great learning tool.

He also noted that keeping a sense of humor helps.

Lessons there for all of us

Commodity Collapse — might last a lot longer than many think

From Alaska to Mongolia, and South Africa to Brazil, old strategic plans are being trashed.

“It would take a brave soul to wade in with both feet into commodities,” says Brian Barish, who helps oversee about $12.5 billion at Denver-based Cambiar Investors LLC. “There is far more capacity coming on (line) than there is demand physically.” — “the only way that you fix the problem is to basically shut capacity in, and you do that by starving commodity producers for capital.”

// Projects on the drawing boards for a decade are now being abandoned. From mines to ports to railways. Investors this year are clearly dumping future commodities based holdings.

The Bloomberg Commodity Index, a measure of returns for 22 components, is poised for a fifth straight annual loss

This news WAKE UP CALL harks back 24 years… This index slide is the longest slide since the data begin in 1991.

It’s a reversal from the previous decade, when booming growth across Asia fueled a synchronized surge in prices, dubbed the commodity super cycle. Now, that output is coming to the market just as global growth is slowing.

Investors need to brace for a “long winter,” with the commodities bear market predicted to last for many years and oil dropping to as low as $35 a barrel, said Ruchir Sharma, who helps manage $25 billion as the head of emerging markets at Morgan Stanley Investment Management in New York.

Goldman Sachs has an even dimmer outlook.

AMONG THE CONSEQUENTIAL STRATEGIC CHANGES… … are these two. 1) Chesapeake Energy Corp. has cut its workforce by 15 percent. 2) Caterpillar Inc. may shed 10,000 jobs as demand slows for mining and energy equipment. 3) The big railroad freight companies in the lower 48 are again storing locomotive power.

For more, see: www.bloomberg.com/news/articles/2015-10-05/commodity-collapse-has-more-to-go-as-goldman-to-citi-see-losses

Another Bridge Too Far Rail Scheme? // Europe into N. Am. Via Russia!

siberiantimes.com/business/investment/news/n0160-plans-for-new-transport-route-unveiled-to-link-pacific-with-atlantic/

We may have missed this probable last great rail plan proposed earlier this year.  But it is still on the Internet for all to read.

// Plans for new transport route unveiled to link Pacific with Atlantic

By The Siberian Times reporter23 March 2015

“New cities and industries could be created from construction of high-speed railway and motorway routes spanning whole of country”reads the story line.

At a meeting of the Russian Academy of Science, the head of the Russian Railways Vladimir Yakunin presented the idea for the Trans-Eurasian belt Development (TEPR).  That was back in th Spring.

Politicians fostered the concept  “as a powerful and versatile transportation corridor that would join up to other networks and reach from the Atlantic to the Pacific, via the heart of Siberia and the Far East.”

Me?  I think it is a really bad idea.

The suggested plan has zero published economic feasibility supporting it. Just a lot of political leaders and academics. No shippers are clamoring to use the route? Why pay for the suggested long land route rail services where super sized container ships are far cheaper?

It reads like “Just another great plan, wrapped In golden chain” so to speak.

And it’s lead RZD rail supporter is no longer in that promoting job as the summer ends.

The admitted rough capital cost estimate from supporters is in the TRILLIONS of dollars.  Yet back in the spring, without documentation, Mr Yakunin of RZD insisted to reporters that the economic returns would outweigh these investments.

Viktor Sadovnichy, rector of the Moscow State University, said the network would help the Far East and Siberia feel more in touch with the rest of the world.

Or is the entire scheme simply economic nonsense?

So far, no one is advancing the cash to build it. It is just another wish list railroad idea. Investors should beware.

Amtrak’s blue ribbon Chicago report // Incredable $800 billion annual harm estimate. // What is a logical economic estimate?

Sometimes news headlines are so absurd. Is this a misprint or a economist’s big error?

A Blue Ribbon Panel convened by Amtrak is recommending co-located train dispatchers, improved operating practices, and capital improvement projects to help relieve rail gridlock in and around Chicago.

www.railwayage.com/index.php/passenger/intercity/blue-ribbon-panel-how-to-unclog-chicago.html?channel=492&Itemid=502   This is one reporting source.

The claim according to multiple sources is that improvements are needed to prevent an estimated $800 billion in nationwide economic impacts resulting from the annual congestion.

BILLIONS?     8 HUNDRED BILLIONS?

That has to be a misprint. Or a colossal economic miscalculation.

THINK ABOUT IT

$800 billion is the capital cost to build about 130 or more Panama Canals

That is about nine to nine times the market value of the Union Pacific Rail company.

Or about 40 times the annual operating expenses of the very large BNSF railroad.

Is no one looking at these relatively easy economic comparisons?

There may indeed be economic net benefits to support more Chicago CREATE joint public/private economic benefits. But this inflationary statement is not the way to make “the pitch.” ==============================

The panel that oversaw the study was chosen by Amtrak President and CEO Joe Boardman. It reported its findings with two university and policy groups on Oct. 1, 2015 in Chicago.

The panel released a study it commissioned from Frost & Sullivan and MSY Analytics which shows that the massive delays to passenger and freight rail traffic in the Chicago Gateway create an economic vulnerability of up to $799 billion every year…

As an economist, I find that number unjustifiable. And I cannot find the published documentation to support it.

If you assumed a half billion to maybe one billion annual economic harm, that might be believable.

What do you think?

Stunning graphs on resource capital project spending is a “wake up call” for planners

From mines around the world to the dependent rail and port projects, the changing global economics commodity cycle suggests a downer “Bear” market for projects that add to global capacity and output.

This down cycle could last from a short 2 to 3 years OR AS LONG AS 7 or more years. Strategic Planners to to rethink their now outdated assumptions from supporting logistics projects in diverse places like Mozambique, Botswana, Mongolia, Brazil, and even in the Canadian/Alaska Yukon region.

What ever capital plans for building the supporting ports and railways they had developed by big engineering companies — the underlying due diligence economic assumptions are now likely “under water” so to speak.

Billions and billions of proposed dollars in drawing board completed project engineering can no longer pass an economic feasibility test for recovery of he rail project capital P&I.

Instead these industry planners should brace themselves for at least another two years of shrinking budgets and outlays. The earliest signs of a “subdued” resource recovery might not be until early in 2018 say some experts.

But even this prediction might be too bullish. Why? Because metal prices have already fallen 12% further than they did during the bear market in the 1990s. In that bear market, capex only recovered to its pre-crash (1997) level after seven years (2004),” according to Mark Fellows.

Mark Fellows, director of consulting for a mining research firm reports that “while sustaining capital expenditure is down 13% since the peak in 2012, capital expenditure on new developments has been even harder hit.” “Spending on brownfield expansions is down 25% while greenfield project expenditure has plummeted by nearly one third” on a global basis.

Mr Fellows concludes this by comparing the current 2013-2015 downturn to the previous bear market in mining which ran from 1997 to 2002. He therefore argues that the current witnesses global capex cutbacks are far from over.

The report is published by SNL Metals and Mining. DOLLARS OF PROJECT EXPANSION PLANS AT RISK

The report finds that total capital spending across all mining companies has declined by around $70 billion since the 2012 peak to just over $150 billion forecast for this year. As one business case example, the project investment at BHP Billiton this year will be $10 billion below its 2013 peak. The world’s number one miner only has four projects in the works, two of which are almost complete, compared to 18 mine and infrastructure developments just two years ago.

In a Mining.com press story by Frik Els on 21 September 2015 titled: “This is the scariest mining chart you’ll see today”, the investor alert numbers are brought out visually.

This is another piece of economic trend evidence in my blog’s strategic theme of changing times for traffic that feeds the dreams of massive new rail freight projects.

“a Bridge Too Far” analysis?

Only the strongest as low cost per ton-kilometer cost new rail projects might be competitive.

Too many rail projects on the drawing boards are simply under designed as to the necessary competitive productivity to prosper as investment grade scenarios. Trains would be too small because they often lack big train technology design features of the most successful resource rail carriers. Axle loads too small. Train lengths too short. Clearances too shallow. Net to tare wagon rates are too low

Too many are now ill advised rail schemes. “Schemes” in North American business language generally means a buyer beware concept plan”.

In Africa alone, I estimate that as many as two thirds of “announced” rail line freight projects may be too risky to build as currently designed around old market demand and old post World War-2 rail engineering standards. That could mean as much as $25 to $34 billion of “schemes” seriously require a second due diligence look just in Africa.

Africa is not alone. The billions in proposed rail engineering in the Canadian Yukon/Alaska region also need serious market demand re-examination. If not by the project sponsors, then certainly by the investors they will approach. Brazil, Mongolia, Swaziland, Senegal — all of their rail design and expected market traffic assumptions need serious review for their current planning.

For more, log onto Mining.com

Chart Sources: SNL Metals & Mining

Greenfield cap ex spending chart

Bear market recovery projection for commodities chart

Caterpillar projections to investors. // Looks gloomy market wise

Caterpillar is reorganizing only four years after making its biggest acquisition ever, spending $7.5 billion on Bucyrus International Inc.

The company faces what it says is the first four-year sales decline in its 90-year history.

In a Bloomberg report: Caterpillar `Bites the Bullet’ as Oil Rout Compounds Mining Pain the metrics are presented.

The last time Caterpillar Inc. cut thousands of jobs, a mining slowdown was to blame. Now the main culprit is oil, as slumping prices batter drillers.

The investigative reporter Sonja Elmquist wrote on Sep 24, 2015 that the world’s most valuable machinery producer by market cap announced a plan to cut as many as 10,000 jobs, or 9 percent of its workforce, through 2018 as the effects of crude’s collapse ripple through the industry.

The measures — including the second reduction in sales guidance in two months — represent the biggest round of cuts since 2013, when the company reduced its headcount by 13,000 as sales to metal producers declined along with prices.

According to Bloomberg Intelligence. “They’ve finally opened up the manila envelope that says ‘doomsday’ on it and they’re executing the plan that they hoped they would never have to execute,” Sameer Rathod, a San Francisco-based analyst at Macquarie, said by telephone.

No one is sure yet as to the shape of the long term market recovery timeline.

The company will cut as many as 5,000 workers this year and another 5,000 by 2018. It reduced a 2015 revenue projection by $1 billion and said sales are expected to drop 5 percent next (2016)…

SHARES WAY DOWN    —

Caterpillar at the time of the announcement fell about 6.3 percent to a five-year low of $65.80.  The stock has lost 28 percent this year, the biggest annual drop since 2008.

As a comparison, the MSCI Emerging Markets Index has fallen 18 percent in 2015 while the Dow is down 9.8 percent.

The company’s consolidation plan may affect more than 20 plants…

To read the entire article, go to http://bloom.bg/1KDMgQr