KhanSerai » Global Economy

China and Rare Earth Elements

serai — Wed, 26 Aug 2009 21:41:30 +0000

China produces some 95% of the world’s rare metals, mostly mined in Mongolia. With its virtual monopoly over the world’s rare earth elements (REE) supply, China is considering banning the export of some and drastically reducing the export of others to ensure sufficient supply for its internal demand. So why do we care?

REEs are essential ingredients in a variety of technologies that we rely on: low energy light bulbs, solar panels, wind turbines, semiconductors, smart phones (yes, the iPhone is included in this list), TVs, hybrid cars, smart bombs, lasers, Stinger missiles to name a few. Many industries will be impacted if such a ban is enforced and that will directly reflect on availability and prices in the short to medium term. The existing smuggling trade will flourish.

The Japanese government already has a “Strategy for Ensuring Stable Supplies of Rare Metals” and Japanese companies are trying to create agreements with countries like Kazakhstan and Indonesia to ensure a steady REE supply for themselves.

In the longer term, the supply of REEs will stabilize once again as private companies that were previously driven out of the market by China will reinvest in their mines to meet the gap.

So China is going to cut supplies and Japan is already hoarding- what are other countries planning on doing?

Jet Blue Launches “All-You-Can-Jet Pass” for $599

serai — Thu, 13 Aug 2009 04:33:06 +0000

If you had the option for unlimited travel for one month would you do it?

Jet Blue recently launched a promotion that allows passengers to do exactly that for $599, from September 8 to October 8, 2009.

At a time when the global recession has taken a huge hit on air travel (business and leisure), Jet Blue is one of very few airlines that are still in the black. Their ridership is up, no doubt attributable to their policies: their rates are still reasonable, they still do not charge for bags, their flights are still no frills, their seats are still more comfortable than any of the larger carriers like United.

The timing of this offer (right after the end of summer vacations) suggests that the target market is business travelers, not students or leisure travelers (as does the language of their marketing material). Which raises the question, as attractive as the offer might sound, how many businesses are going to change their meetings/travel plans for the sake of this promotion? The likelihood is low as the break even point for most people is high (almost 6 flights). Jet Blue’s prices are already so competitive that buying individual legs is just as easy. For leisure travelers the weekends do not provide sufficient opportunity to make the most of this offer.

While it certainly sounds good on paper, the reality of availing this promotion might not be as easy. However it certainly provides a competitive advantage for JetBlue. Let’s see what promotions other airlines come up with in response to this one. In any case, the consumer is the one that will benefit.

2009 Gloom & Doom Update: Third Quarter Outlook

serai — Wed, 01 Jul 2009 21:41:28 +0000

Over the last quarter the global economy has not improved much despite various stimulus plans (as expected because of the lag factor). There have been the usual fluctuations in stocks and oil, however there is no major recovery in sight.

The next quarter will be no better for most of the world. After the first major round of layoffs in the 1st quarter and steady trickle since then, the next round of layoffs will be happening in the third quarter. More bankruptcies will be announced and the average man on the street will continue to suffer. As usual the poor will get worse and no one will care about them (read this wonderful op-ed on the New York Times by Barbara Ehrenreich “Too Poor to Make the News”).

For fresh graduates and the currently unemployed things will start to get better by the end of the fourth quarter and beginning of the next year. Until then, hold tight everyone, it’s going to stay hard for a little while longer.

2009 Doom & Gloom Update: Protests in Singapore

ruhsa — Sun, 08 Mar 2009 13:01:25 +0000

Singapore is famous for its efficiency (thus the nickname Singapore, Inc) and infamous for its harsh penal codes for seemingly minor infractions like littering and spitting. Like any other country it has been shaped by the circumstances under which it was created, and the environment in which it has survived since then.

This “red dot in a sea of green” faced race riots in the 1960s that left several people dead. Neighbors turned on neighbors and most Singaporeans in their late 40s and older remember the time vividly. In the words of many, they would rather live in a controlled but safe country than have more freedom but face uncertainty. This mind-set drives the laws of the country where people are not allowed to congregate in groups larger than 3-4 people without explicit permission. Peaceful protestors like the Fallun Gong have been known to be arrested or removed.

With this backdrop it is shocking to hear that there were protests in Singapore by around 100 unemployed Bangladeshi migrant workers in front of the Ministry of Labor. An indication of the desperation of the workers in the recession plagued economy, Singapore is gearing up for an increase in what it calls “recession crimes“. Several other ASEAN countries like Thailand and Indonesia are also expecting an increase in violence as a result of economic malaise.

2009 Gloom & Doom Update: Protests in Germany and Bosnia

ruhsa — Sat, 28 Feb 2009 10:59:28 +0000

As the situation gets worse in Europe, with unemployment rates reaching new highs, the social unrest (see previous posts) is spreading. Germany is the latest in the string of countries that is seeing protests show up. This is important to note as Germany was one of the first countries that had been working on a stimulus plan and has tried hard to off-set the anticipated problems.

Problems in Bosnia are less surprising as this was not a strong economy to start off with. Given their political precariousness (two regional, uncoordinated governments), this is a country that is possibly in line for a change in administration in the style of Iceland or Latvia.

What to watch out for in the upcoming weeks: collapse of airlines. Several airlines are already facing problems as fewer people are flying (Singapore Air, Lufthansa, Swiss Airlines etc)- let us see when some of the weaker players are pushed out of the market or will need to be bailed out.

2009 Gloom & Doom Update: Suicide Rates on the Rise

ruhsa — Fri, 27 Feb 2009 19:21:57 +0000

One of the side effects of the worsening global economy and unemployment is the increase in suicides and suicide attempts. The numbers of cases (high profile and of “normal people“) being reported has increased significantly.

Asian economies like South Korea, Japan and Hong Kong have all reported increases and are planning for more. South Korea and Japan are installing blockades for railway tracks so people do not jump in front of trains. Hong Kong has increased the numbers of operators for its suicide hotlines.

The US is also experiencing an increase in calls to suicide hotlines in places like New York, Tampa, Dallas, Washington DC metro area and California. What is far more worrying is the increase in suicide attempts at universities like the University of California, Santa Barbara. Europe is not spared either with countries like Serbia reporting the highest suicide rates in Europe and 55% of the population shows signs of depression.

The global economy is going to get worse over the upcoming months. If anyone you know is showing signs of depression make sure they get help.

2009 Gloom & Doom Update: Protests in Ireland & Latvian Govt Collapse

ruhsa — Sun, 22 Feb 2009 05:22:03 +0000

A few weeks ago, there were reports of protests in Latvia, amongst several other countries (see previous post). Now, the Latvian government has resigned. That makes two governments that have collapsed so far, directly attributable to the economy.

There are now protests in Dublin, Ireland about the economy, and strikes are expected soon.

Let’s see how far the ongoing protests in various countries will go. It is a matter of time before people acknowledge that the recession (2 quarters of negative growth or unemployment increase by 1.5% in 12 months) is actually a depression (GDP declines by more than 10%) in certain countries.

2009 Gloom & Doom Update: Economy Takes a Bite Out of Your Lunch!

ruhsa — Fri, 06 Feb 2009 02:26:51 +0000

2009 gloom and doom update

Like all other sectors of the economy, the food and beverage sector is also facing a crunch. The cost of food supplies has risen globally, as have costs associated with packaging and distribution. All large and small suppliers, manufacturers and vendors are facing the same issue.

At the end of the day, all costs will be transferred to the customer- the question is simply: how? The supply side faces two simple choices: increase the price or reduce the size?

In the case of restaurants and prepared food vendors, it is often easier to reduce portion size rather than increase prices. From Dubai eateries to Girl scout cookies in the US, all are becoming smaller.

In the case of basic food, global food prices have been SOARING and the news has been littered with stories of global food crisis for months. You name the country and there is a report about it. Here is a sample across the continents: South America, North America, Europe, Africa, Asia, Australia.

This has been an ongoing problem which attracted major attention last year- it’s just that we forgot about it amidst all the recent sobbing over economic woes. It is also a problem that is not going away and will be (along with the financial side) the reason for upcoming political instability in several emerging markets.

People are not interested in moral high ground and democracy mantras when they are starving and burying their children!

2009 Gloom & Doom Update: Overspending and the Global Financial Crisis

ruhsa — Thu, 05 Feb 2009 03:13:14 +0000

There have been lots of articles on what has caused the problem and how it can be solved. An article in the NY Times addresses one part of the cause: over-spending. This excerpt summarizes it brilliantly:

In other words, shopping was part of the problem and now it’s part of the cure. And once we’re cured, economists report, we really need to learn how to save, which suggests that we will need to quit shopping again.

My advice to individuals out there is simple: get rid of your debt before you start to spend on new things. You’re not helping the economy at all if you add to your debt, in fact, you’re making it worse.

The retail sector wants you to spend so that it helps them. That does not mean it helps you!

2009 Gloom & Doom Update: France Strikes and Demonstrations

ruhsa — Tue, 03 Feb 2009 05:36:45 +0000

My social unrest post of Jan 27 mentioned that France, Germany and United Kingdom had avoided demonstrations but my commentary was a tad premature.

It turns out that Jan 29 was a day of mass demonstrations and strikes in France with a 2.5 million turnout in a country of a mere 65 million population (almost 4% of the population was simultaneously out on the streets!). An excerpt from one article states:

Thursday’s day of action throughout France in defence of jobs, the purchasing power of wages and social services, called by the eight major trade union federations, brought an estimated 2.5 million workers and youth onto the streets of some 200 cities and towns. Some small towns reported the largest demonstrations in many years. Workers went on strike in great numbers, as did high school and university students.

Not surprisingly, the French economic stimulus of 26 billion euros ($33.1 billion) was released 3 days later. On the pro side, the stimulus package has been introduced before the country has officially entered a recession; on the con side the size of the package is generally considered insufficient to reverse the general trends.

Small-scale union supported strikes are also starting in Scotland against hiring of foreign workers. And most unexpected of all, Obama openly stated that more banks are expected to fail. Such bluntness is not customary for US presidents as they tend to sugarcoat the truth. Or perhaps he is sugarcoating?