Subscribe to our newsletters & stay updated
When President Donald Trump recently raised eyebrows in calling his predecessor President Barack Obama’s “war on climatological impurities” a hoax, he stunned much of America’s believers, who had approved the cutback in the “belching” of carbon dioxide (CO2). This called for the limitation of coal production and cutting back U.S. manufacturing, in general, to “save the air.”
While signing on to the various global aspects of “air fouling,” the U.S. sacrificed its coal production and employment usage, as most other nations gave only lip-service to this concept, while going full-bent on growth such as China. Anyone who might have witnessed the air in Beijing recently would have been well-served by wearing a gas mask.
The elimination of coal production promised by previous Democrat presidential nominee Hillary Clinton may have lost her the election, with several coal-mining states displaying their hostility. With Trump at the helm, U.S. coal exports are booming. Exports hit their second highest level ever last year, with shipments across Europe, Asia and Latin America.
When it comes to power generation, coal is still supreme in much of the world. Globally, it supplies almost 40 percent of electricity, making it the top fuel for power plants. Strong demand from countries such as India, China and Vietnam will keep U.S. coal production healthy for at least another decade.
But for the long-term outlook, this will lessen as the world’s need subsides; with the U.S. slowly cutting back due to a waning supply/demand factor. The U.S. and Europe are already burning less coal.
Despite the lessening of pressure from the White House for American coal production, China, the world’s top coal utilizer, is committed to cutting back within the next few years, as it seeks to clean up its polluted air. India, with the world’s second-largest population, is already experiencing unacceptable air fouling.
Despite the need for powering its fast-growing industrial economy, India is currently seeking alternative power sources, as its economic growth is booming.
Such turning away from world coal production users will have an even more considerable reduction effort by U.S. coal companies, as the U.S. faces higher costs due to long-distance shipping.
Aramco Bond Sale, Possible Stock Listing
When Saudi Aramco raised $12 billion in its successful debut bond sale earlier this year, it practically assured a significant stock market listing in the foreseeable future.
Government-owned Aramco, better known as Saudi/Arabian Oil company, received more than $100 billion in orders for its bonds, far exceeding initial expectations of less than $10 billion.
Saudi Aramco Oil would be bigger and more profitable than Apple Inc. and Amazon.com combined. But the potential oil firm’s disclosure of its books via the bond sale is the first step toward a potential public offering.
Saudi Crown Prince Mohammad Bin Salman has said a listing of Aramco is one of the central elements of a multi-year economic and social reform program in the kingdom. However, he prefers the country’s sovereign wealth fund to use the ultimate proceeds to invest in new technologies and industries that diversify the Saudi economy beyond oil.
Although demand for the Aramco bond has come despite international criticism of the country over the murder of journalist Jamal Khashoggi, antagonism is still brewing.
The merciless killing of Khashoggi deterred some foreigners from investing in the kingdom. But global debt and equity investors have been eager to buy into Saudi Arabia’s economic-reform expectations.
The yields available on the Aramco bonds were lower-priced than those on Saudi government debt of similar maturities. This indicates the exceedingly strong demand for these bonds at future offerings.
Global experts believe that the over-subscribed deal provides the Saudi government with a platform to push through major reforms at Aramco and raise further capital.
An Aramco initial public offering was initially earmarked for 2018 but stalled over valuation concerns and hesitation among principal Saudi officials.
The strife was mitigated by those who believe raising debt was cheaper and negated the hassle that would come about if the foreign investors would “rightfully” demand the opening of the Saudi books pertaining to these equity investments.
Prince Mohammad valued the forthcoming corporation stock worth above $2 trillion. But most global analysts believe the value was too high, if not by too much.
At this writing, these arguments will likely be decided by Saudi rulers who still believe that public debt sales are preferable to the exposure that information implies.