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News Wrap

IN THIS morning's News Wrap: Oversupply threatens resources sector; Poland's richest man creates ...

Noel Dyson
News Wrap

Supply threat

HSBC co-head of Asian economic research Frederic Neumann reckons the chief challenge facing Australia’s resources sector is not demand but from potential oversupply.

Neumann told The Australian that China’s demand for commodities would continue to grow robustly but that the “supply response to the boom over the last 10 years” had come at a cost.

He said Australia was “lucky because of your competitive ability to produce cheaply” but warned that many projects were coming on stream around the world, especially in Africa and Latin America.

“A lot of commodity cycles suffer from an over-investment in extraction during the good years,” Neumann said.

“Now it’s a question of whether the supply side will lead to prices falling at some point.’

Neumann said Australia could benefit greatly if India followed in China’s footsteps.

If it can get its economic growth up to 8-9% and keep it there for a decade, he reckons global commodity prices would stay high.

Polish power

Poland’s richest man Jan Kulczyk is combining his Polish energy assets under PEP to forge the country’s largest private utility.

Reuters reports Kulcyzk will raise his stake in PEP and a China-backed fund CEE Equity Partners will take a minority stake.

Under the plan, PEP will change its name to Polyenergia and beef up its renewable energy production with coal-fired generation.

It will also add a gas-fired unit producing electricity, along with the distribution of gas and electricity.

Indian coal calamity

India’s biggest power company, NTPC, has warned that coal shortages at six of its power stations are threatening to disrupt electricity generation in 22 of the country’s states and territories.

The Wall Street Journal cites a letter to India’s Power Ministry from NTPC chairman Arup Roy Choudhury saying the generating stations had coal supplies sufficient for two days or less of power production.

According to the paper, Choudhury’s letter does not explain why the coal was running low.

Power supplies are particularly strained in India with hot summer temperatures pushing up demand, and below normal monsoon rainfall denting hydroelectric generation.

Coal shortages, mainly due to failures by the state-run coal monopoly to deliver adequate supplies, are a major cause of power outages in India.

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