Australia represents only about 1.5 per cent of global greenhouse gases, but on a per capita basis, it ranks No 1 in carbon emissions.

The  carbon pollution reduction legislation, which has been subject to endless committee hearings, and purposedly delayed to start July 1 2012,  to avoid  the disruption of the global downturn, requires only a modest 5 per cent reduction in carbon emissions by 2020 from 2000 levels.

The legislation went through the lower House, but has been held up in the Australian Senate, by a determined rabble of global warming sceptics, despite getting significant legislative concessions by the Rudd government.

If you measure Australia against a significant grouping of carbon emissions targets by other countries, the lucky downunder country comes out poorly.

The Copenhagen summit, from December 7 to 18, will go a long way to an international agreement, which can be codified in 2010, and if need be 2011, so as to slot in when the Kyoto Protocol comes to an end in 2012.

Carbon emission targets so far promised:

*European Union 27-country bloc’s  longstanding commitment to a 20 per cent cut in carbon emissions by 2020 from below 1990 levels. A few of the country membership, such as UK, Belgium, Netherlands would like the EU to move to a unilateral 30 per cent cut.

However, the eastern European members, particularly Poland, which have  coal dependent economies oppose this move, and would like the 2020 target changed to 2030.

*President Obama’s promise for the US is a  17 per cent emissions reduction by 2020 from below 2005 levels, although the cap and trade legislation is held up in the US Senate. According to the WWF, this is equal to a 4 to 5 per cent reduction from below 1990 levels to have a meaningful comparison with the EU target.

President Obama also said his Administration’s overall goal is to reduce emissions 30 per cent below 2005 levels in 2025, 42 per cent below 2005 levels by 2030, and 83 per cent below 2005 levels by 2050.

* China, which is now the world’s largest carbon emitter, with the US the second largest is committed to a meaningful slowing in greenhouse gas emissions. The undertaking is to reduce carbon intensity by 40 to 45 per cent by 2020 compared with 2005 levels. Carbon intensity is the amount of CO2 for each unit of GDP (gross domestic product).

UN climate officials have said to Associated Press that the 40-45 per cent cut would put China on a path to reduce greenhouse gas emissions about 13 per cent from business- as- usual, the level emissions would have reached without any action. As part of its pollution control policy, China has announced that it plans to invest up to US454 billion in environmental protection in the five years to 2015.

  *Japan is committed to a 25 per cent cut in emissions by 2020 from 199o levels. The new Democratic Party government hasn’t spelled out how the emissions cuts are to be achieved. 

But the Japanese steel industry, which has the most efficient emission controls among world steelmakers, will provide their latest technologies for cutting CO2 emissions to Chinese steelmakers.

 In return, the Japanese can include the emissions reductions in their own quotas under the Kyoto Protocol’s clean development mechanism. If more of Japanese industry  follow the same approach, it won’t be too difficult to reach the Copenhagen target.

*Brazil will be tabling its commitment to cut greenhouse gas emissions by between  36.1 per cent and 38.9 per cent of their business-as-usual level by 2020. The country is the fourth biggest carbon emitter in the world, largely due to deforestation in the Amazon. Brazil is looking to international funding to help in the remediation process.

*Canada is undertaking to reduce carbon emissions 20 per cent by 2020 from 2006 levels, although legislation is yet to be introduced. Even so, its emissions would still be 24 per cent higher in 2020 from 1990 levels.

* India is yet to announce a reduction in either carbon intensity, or in emissions, but it will make its plans known at Copenhagen. A range of incentives is shortly  to be announced  for 714 of the nation’s most energy-intensive installations across nine sectors.

As with China, energy efficiencywill be the key, with a national registry for energy-efficiency certificates, which will have a one year tenure. It sounds like a type of cap and trade. Prime Minister Singh says that the government has “a very ambitious national plan to combat climate change.”

 *Indonesia, the third largest carbon emitter in the world is undertaking to  reduce greenhouse gas emissions 26 per cent by 2020. As with Brazil, a strong campaign to save the forests and more of the peatlands, which  provide the carbon sinks would greatly help to achieve the target reductions. 

* South Korea is committing to a 4 per cent reduction by 2020 from 2005 levels.  This is equivalent to a 30 per cent reduction on the business- as-usual projection for 2020.

POSCO, the world’s fourth largest steelmaker, accounting  for 10 per cent of Korea’s total carbon emissions is currently studying the brand new technology of the hydrogen steelmaking process. This technology  doesn’t emit CO2 emissions, which would be a tremendous achievement, if it can be done.

* Russian President Medvedev said his country “would try” to reduce greenhouse emissions by 25 per cent, and in the process seek to increase energy efficiency by 40 per cent. 

* The 5o African countries, which have no plans to cut carbon emissions are demanding that rich countries commit to deep cuts in carbon emissions that add to global warming. In a show of unity, African countries blame advanced economies for using fossil fuels to take the fast track to prosperity, but at the cost os unleashing today’s climate nightmare.

A similar attitude to Africans is likely to be taken by Central and South American countries.

On the table for consideration at Copenhagen is that the rich industrial countries will subscribe US$ 10 billion a year to help developing countries become equipped to cope with climate change, and to make available technology transfers and know how on renewable energy. 

*

The UN Climate Change chief, Yvo de Boer sees China as the green frontrunner, the world climate change leader of the future.

Although China’s President Hu Jintao didn’t state the country’s emissions target by 2020 at the United Nations General Assembly meeting on climate change (September 22 2009), he confirmed that there would be  deep cuts in carbon intensity over the next decade.

Hu Jintao also confirmed that there would be a 15 per cent increase in renewable energy from 2005 levels by 2020. There would also be a substantial growth in forest coverage by 40 million hectares and in forest stock volume.

Carbon intensity is the amount of carbon dioxide emissions per unit of gross domestic product for each 1,000 yuan (US$147) of economic output.

For the five years to 2010, China set a goal of reducing energy consumption per unit of GDP by 20 per cent to 2010.

A big test for the Chinese will be the need to redouble efforts on carbon intensity from current levels. But the goals for the 12th and 13th Five Year Plans between 2010 and 2020 are still being kept secret.

It will need to be large to have a significant impact, given that between 2001 and 2005, energy consumption grew at 1.2-1.5 times the rate of GDP. As the blog, China Sustainable Energy Energy Program pointed out,”such a low efficiency development pattern is wholly unsustainable. It requires enormous energy input.”

In a report  “China sustainable development strategy report 2009- China’s approach towards a low carbon future,” the team leader Professor WANGI Yi, chief scientist of the CAS Sustainahle Development Strategy sets out a low carbon economic development target.

The recommended scenario is that by 2020, China’s low carbon target be set at 40 to 60 per cent reduction of energy consumption per unit of GDP over the 2005 level, and CO2 emissions per unit of  GDP   be decreasing by about 50 per cent.

The  strategy study group of the Chinese Academy of Sciences suggested that if more restrictive policy measures were adopted for energy saving and carbon reduction, “China’s carbon emissions could be expected to peak between 2030 and 2040, and then stabilise and start to decline afterwards.”

This would be a disappointing outcome for cutting global carbon emissions,as the climate scientists are very concerned that countries have a duty to ensure carbon emissions start to fall before 2020.

There are no climate change sceptics in China’s leadership team.  The State Council Standing Committee, China ‘s Cabinet,(August 12) was told of the urgency of tackling climate change, and the need for domestic objectives to control greenhouse emissions.

Summarising a report from the Xinhua official news agency, Reuters says that the Chinese leadership saw the need for  “setting medium and long term development strategies and plans of government at every level.”

Jiang Kejun, a climate change policy expert at the Energy Research Institute in Beijing said that officials were considering whether to develop a specific plan to address global warming alongside the next five year plan.

“This shows climate policy issues are now a central part of the national strategy,” Kejun said.

Along these lines, the National Energy Bureau is being quadrupled in manpower to about 120 to create a unified national energy management regime to focus on energy supply and production.

China Daily says the Bureau will be in charge of energy policy, project planning and approval, electricity, coal, oil, nuclear power and international co-operation on energy.

China’s policy is firming along the lines, that the country will set dates for reductions in carbon  emissions for 2050 and beyond.  But it will not set caps on emissions for near term years, such as 2020, or 2030.

Financial Times (August 14 2009) reports that Su Wei, director general of the climate change department of the powerful National Development and Reform Commission is keeping to the line that “China still needs to grow its economy to help its people escape poverty.”

But as the FT reporter noted,  Su Wei “indicated an opennesss to compromise.”

“China will not continue growing emissions without a limit or insist that all nations must have the same per capita emissions.”  China sees its emissions peaking between 2030 and 2040. According to a UK study, If China’s emissions peak in 2030, this would be equivalentto  carbon emissions about 57 per cent above its current 2009 levels.

To its credit, China’s current five year plan to end in 2010 has a target of reducing energy intensity per unit of gross domestic product by 20 per cent,  and the next five year plan will reduce energy intensity on a far more reaching basis. From 2005 to 2008, energy intensity decreased 10 per cent.

The consultancy, McKinsey in its February 2009 report “China”s green  revolution” February 2009, estimates that for every five year plan period over the next 20 years, China cold achieve a 17 to 18 per cent reduction in energy intensity per unit of GDP.

 American observers agree that China has improved upon the most common coal technology to create some of the world’s most efficient power plants, allowing for higher energy production from the same quantity of coal.

But in a note of caution, McKinsey says that even with the degree of energy intensity reduction envisaged, China with  over 40 per cent of the world’s coal consumption would by 2030 still be utilising an immense amount of hydrocarbons- 4.4 billion metric tons of coal and 900 million tons of crude oil. Hardly a healthy outlook for reducing CO2 in the atmosphere.

In its international negotiating stance, the US Senate Foreign Relations Committee noted in its report “Seizing the opportunity for meaningful US-China Collaboration on Climate Change” (July 21 2009), that “China has staked out a particularly demanding and uncompromising position.”  It is calling for a 40 per cent cut in greenhouse gas emssions by 2020 by developed countries, as well as additional assessed contributions, indexed to GDP.”

China Daily quotes Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University urging the developed countries to offer financial and technological aid to developing countries, such as China and India to cut emissions. “That is the way to bring them into the deal,” said Lin.

I wrote a post last year on the theme that financial speculators play too big a role in the setting of many commodity prices.

In a letter to the Financial Times (July 25 2008), Senator Joe Lieberman, the Democrat leaning chairman of the US Senate Homeland Security and Government Affairs committee and two other Senators said that “financial speculators are overwhelming our commodity markets and leading to substantial increases in food and energy prices for years to come.”

The reality is that the speculators are at it again, despite the slow recovery from the global financial crisis, and the misery caused by a reported one billion poor people in the world, who are under- nourished, and can’t afford the continuing high food prices in many countries.

Right now, it is sugar prices which have risen fast, but it won’t be too long before cereals join in the stampede for higher prices.

Oil prices too are on the increase, despite the still intense recession in most countries.

The chief economist of the International Energy Agency, Fatih Birol told the Financial Times in London (August 4 2009), “that the world economy cannot sustain any further rise in the oil price,” and said that prices higher than US$70 a barrel “could damp a world recovery.”

Oil prices in Europe this year have so far reached a high of US$73.87. Speaking to the Independent newspaper in the UK, Birol said that “global oil production was now likely to peak within 10 years and that governments were woefully under-prepared for such an eventuality.”

According to an investigation of more than 800 oil fields by the IEA, the average rate of decline in oil production (this is the depletion rate) is now running at 6.7 per cent a year, compared to a 2007 published figure of 3.7 per cent. (Business Green.com August4 2009)

Against a future where oil supply will peak and start to decline, with the inevitability of fast rising energy prices, oil price speculation at this stage  is just  plain greed and gouging and should be controlled.

Gary Gensler, chairman of  the  Commodity Futures Trading Commission (CFTC), the US regulator, (July 27 2009) told Bloomberg financial service that the US “must seriously consider” strict position limits on energy markets to curb speculation.

Back in 2008, under the Bush Administration, the CFTC was opposed to any transparency, suppressing the data on the activities of speculators trading in commodites. Fortunately, the Obama change of government has brought a realisation that commodity prices should not be the plaything of financial speculators.

Jeff Korzenik, who writes the financial blog (www.inefficientfrontiers.com) in a piece for FT Energy Source (July  30 2009) pointed out that the current levels of speculation are “unequivocally bad.”  Commodities are conveniently treated in financial circles as an alternative asset class, but they are very different to stock prices.

As Korzenik says, there are a lot of ” innocent bystanders including the world’s poorest, who are disproportionately impacted by higher fuel prices.”

Let’s hope that the CFTC acts soon to curb the Wall Street financial speculators, not only in energy prices, but in other commodities as well.

Researchers at James Cook University in Townsville, which is situated north of the tropic of Capricorn say that “climate change is rapidly expanding the size of the world’s tropical zone, threatening to bring disease and drought to heavily populated areas.”

The findings showed the tropics now extended well beyond the traditional definition of the equatorial band circling the Earth between the tropics of Cancer and Capricorn.

The researchers led by Professor Steve Turton have been looking at long term satellite measurements, weather balloon data, climate models and sea temperature studies to determine how global warming was impacting on the tropical zone.

These now sub-tropical areas include regions of southern Australia, southern Africa, the southern Europe-Mediterranean-Middle East region, the south western United States, Northern Mexico, and southern South America.

All of these areas are predicted to experience severe drying. “If the dry subtropics expand into these regions, the consequences could be devastating for water resources, natural ecosystems and agriculture, with potentially cascading environmental social and health implications.”

Professor Turton, who is executive director CSIRO/JCU Tropical Landscapes Joint Venture said that tropical diseases such as dengue fever were likely to become more prevalent.

James Cook vice chancellor, Sandra Harding said the evidence showed climate change was already affecting wildlife and rainfall in Australia. She said studies showed changes to wind patterns meant rain was now being dumped in the ocean south of the continent, rather than over land.

There is also evidence that many Australian animal and plant species are moving south in an attempt to track their preferred climatic conditions. “Some won’t make it. Tropical climate conditions are expanding and the impact of this expansion is immense, because the tropics are a big, complex and important zone of the world,” Professor Harding said.

The Minerals Council of Australia (MCA) is a fierce opponent of the Australian Government’s carbon reduction scheme.

 MCA commissioned Dr Brian Fisher, a one time director of the Australian Bureau of Agricultural and Resource Economics (ABARE) to prepare a report estimating the employment effects in the mining industry from the government’s carbon pollution reduction effects out to 2030, both on a national, state and regional basis.

Fisher’s report from his firm Concept Economics dated May 21 2009 is available on the web, with quick facilities for downloading. The report says that direct and indirect employment in Australian mining and related industries total an estimated 200,000 workers. This is made up of 142,000 directly employed in mining, together with 20,000 in the smelting and refining of minerals, and the indirect employment effects of the many communities dependent on mining commodities.

There is no question that these industries contribute a dominant share of Australian exports, with coal the largest export earner. Equally, the regional impacts given the geographical diversity of mining and related activities in north and central Queensland, most of Western Australia and the Hunter Valley and Illawarra regions of New South Wales are extremely large in terms of contribution to gross state product.

The Australian Government’s proposed 5 per cent reduction in carbon emissions by 2020 from 2000 levels is estimated on an Australian wide basis to displace 23,510 mining and allied workers by 2020, and 66,400 by 2030.

What I don’t like about an emotional study of this sort, designed to create hysterical levels of objection to an even modest reduction in carbon levels, is that there is no attempt to estimate the impact of a successful transition to a carbon capture and storage future, prolonging the carbon based regional economies for many years to come.

Equally, there is no allowance for a rapid resumption of medium term growth in demand for commodities, which is less than five years away.

To take just one example of why quick econometric projections on future employment usually turns out to be wide of the mark, the Beijing based consultancy Dragonomics, which publishes the China Economic Quarterly, with its own blog Dragonbeat in the Financial Times has an upbeat view on China and the medium term outlook for commodities..

Tom Miller, the managing editor of the China Economic Quarterly says- “somewhere between 2010 and 2013- China will again emerge as the key driver of global demand.” Financial Times (April 3 2009). Miller quotes a recent study by McKinsey Global Institute, which is forecasting that 100 new cities with populations of 500,000 to 1.5 million will mushroom around the country.

“By 2025, current trends suggest that six new cities- Tianjin, Guangzhou, Shenzhen, Wuhan, Chongqing and Chengdu- will join Beijing and Shanghai with real urban populations exceeding 10 million. As China’s growth and urbanisation continues for another couple of decades, Chinese demand for commodities will rise substantially, especially hard commodities for building houses and roads.”  

 Nor is there any acknowledgement, that the regional impact of employment effects of renewable energy projects in the mining communities could offset to some extent any direct or indirect loss of employment opportunities in mining communities.

The Climate Institute is claiming that renewable energy projects is likely to create 26,200 new jobs mostly in Australian regional centres. This ‘tit for tat’ report has about as much accuracy as the report from the Minerals Council. Tit for tat of equivalent retaliation, a strategy in game theory has Milton Hooke of the Minerals Council in one corner and John Connor of the Climate Institute in the other corner. Both are seasoned performers and enjoy the contest.

In reality, there is a bit of truth in the reports from both groups of lobbyists.

The quotation is from Samuel Taylor Coleridge’s Ancient Mariner. It echoes the dilemma facing the planet today, where devastating droughts and floods are already leading to water shortages world wide.

The world population is expected to rise 2.5 billion to 9.2 billion by 2050, the increase being equivalent to the total population in 1950. The whole of the increase will be in the developing countries to reach 7.9 billion in 41 years, which for some countries will be standing room only. By that time, 3 billion people will be severely short of water.  

International Alert in a 2007 report A Climate of Conflict identified 46 countries home to 2.7 billion people, where climate change and water-related crises create a high risk of violent conflict. A further 56 countries, representing another 1.2 billion, are at high risk of political instability.

The danger of water shortage is not confined to the poorer countries. In the US, California’s governor Arnold Schwarzenegger said a few days ago that the state “is headed toward one of the worst water crises in its history.” The state’s Department of   Works says that that California seems on track for its worst drought since the early 1990s.

Catherine Brahic (New Scientist February 1 2009) says that the three year drought may be a consequence of the expanding tropics, which are gradually growing as greenhouse gases warm the planet. “”Climate scientists have documented a slow progression of low latitude weather systems towards the poles, and matched by rising temperatures in many temperature regions.

Thomas Reichler of the University of Utah says the subtropics is more feared than widening of the tropical zone itself. While the tropical belt is hot and humid,the subtropics suffer from severe drought.  According to the US Environmental Protection Agency, 36 states will face water shortages by 2013, with the bulk of the population projected for the driest areas.

The intensity of the drought on the US west coast is mirrored in Australia, which has been severely affected by the worst drought in more than 100 years across the south eastern areas, hitting hard the food bowl of the Murray Darling river system.

The Pacific Institute in releasing the latest edition of the World’s Water 2008-2009, has an alarming chapter on China’s intense water problems. “China’s water resources are overallocated, inefficiently used, and grossly polluted by human and industrial waste, to the point that vast stretches of rivers are dead and dying, lakes are cesspools of waste, ground water aquifers are over-pumped and unsustainably consumed, and direct adverse impacts on both human and ecosystem health are widespread and growing.

Of the 20 most seriously polluted cities in tthe world,16 are in China. Three hundred million people lack access to safe drinking water. Significant outbreaks of illness, including cancers, are being reported in heavily polluted regions, driving up health care costs and growing public concern. There is growing internal dissent and conflict over both water allocation and water quality, raising new political pressres on the central and provincial governments to come to grips with water problems.”

Over a number of years, investment bankers in America and England created toxic securities, almost as deadly as weapons of mass destruction, and the consequences are now tipping the world economy into a severe and prolonged recession.

The immediate countries engulfed are United States, United Kingdom and European Union. The S&P Case-Shiller home price index in 10 major US metropolitan areas fell by a record 17.5 per cent in July 2008 from a year ago level, and there are more price falls to come. Home prices are also tumbling in the UK, Spain and Ireland.  

The secondary consequences involve a slow down in China and India, as European and American customers reduce demand for imported goods. In turn, metal commodity prices are falling steadily with commodity suppliers Russia, Brazil, Canada, Australia, and South Africa being affected as well. Agricultural prices fell again in August, with the FAO food price index falling nearly 6 per cent, and if this trend is repeated in September, the whole world will feel the ill winds of recession.

The US Congress will ultimately pass a taxpayer bailout to banks of US$ 700 billion. With $300 billion already outlaid by the US government on Fannie Mae, Freddie Mac and American International Group, and write offs by banks already of $500 billion, these sizeable funds are still not enough to stabilise the world economy.

International trade is slowing. The Baltic Dry index, which measures dry bulk shipping costs plunged by nearly a quarter last week, 10per cent on September 30 alone. The index has become very volatile, twice doubling and then falling back within 15 months. The slide also reflects a weakening in Chinese raw material demand.

Chinese prices for key steel products have been falling 15 per cent to 20 per cent in the last two months. Indian steel prices are similarly falling. Some base metal prices have fallen by more than 50 per cent. The Chinese and Indian economies slowed in the June quarter, and this trend of further slowing is expected in coming months.

Indeed, the single most dramatic indicator of slowdown in Asia has been China’s reversal of its previous monetary policy. Instead of the Chinese central bank constantly raising interest rates to curb excess demand and inflation, September 2008 has seen for the first time in six years interest rates falling, and banks have been allowed to set aside smaller reserves, as weakening export demand slows the economy.                                                                                                                                                                                                 

The consequences of the world downturn is that countries will slow their efforts to reduce greenhouse gases (GHG). We will all be the losers for that. The inevitable result is that the pace of cutting GHG emissions will be substantially lower than what scientific advisers are constantly urging, and almost pleading.

The chances of a successful world agreement on cutting emissions at the Copenhagen meeting in November 2009 are not very high.

But not all hope is lost. There is a way out. If other countries were to follow the lead of the US in introducing investment tax credits on installation of renewable energy solutions, there is no need to sit idly by as greenhouse gases gets steadily worse.

Investment tax credits, available to homeowners and businesses that invest in solar power equipment, and the production tax credits based on kilowatt hours of energy produced by wind, solar, geothermal, biomass and other renewables have been the catalyst for the US to grow its renewable share of electricity consumed.

The result has seen dramatic increases in installation of wind power and solar energy technology in the US over the last two years, thanks largely to the investment tax credits. But because the tax credits require yearly renewal in Congress, there is no consistency in US growth of renewables.

The US Congress allowed the credits expire in 2000, 2002 and 2004. In those three years, wind capacity installation dropped 93 per cent, 73 per cent and 77 per cent respectively from the previous year.

A consulting company advising on renewable energy technology estimated that US investments in wind and solar power in 2009 would amount to $26.6 billion with tax credits, but fall to $7 billion without them. These credits are expected to total $334 million, according to congressional estimates.

by  Ray Block

While commodity prices remain in long term uptrend, the short term cyclical outlook is dramatically down. The speculators are at it again, driving prices down with the same intensity as they were doing, when commodity prices were being pushed up to extreme levels earlier in the year.

The fast money people, including hedge funds are testing out how far down they can go in pushing oil prices lower, given that no one seems to know the floor price. The price charts are in breakdown mode.

But accompanying the speculators, there is an economic downturn gathering pace in an increasing number of countries, as they head into recessionary conditions. The credit crisis engulfing international banks now 13 months old continues to grind on showing no sign of ending over the next 18 months.

The economic blog, RGE Monitor (August 3 2008) said that a group of countries is “navigating towards (or through) recession. The list included the US, Canada, Spain, Ireland, Italy, UK, the small Baltic countries and New Zealand. And moving closer to zero growth are the two heavyweights of the European Union – Germany and France, and Japan is in the same boat.

The only good news is that the commodity price falls should help to puncture the high level of international inflation.

Motor gasoline demand has been in decline since the last quarter 2007, and with consumption still down in the second half of 2008, even demand in 2009 is expected to further shrink. In August 2008, despite a slide in oil prices, US auto sales tanked 15.5 per cent from a year ago, with demand for SUVs and truck pickups are still in the doldrums.

Crude oil prices have tumbled to $108 a barrel since it peaked six weeks ago. The International Energy Agency on August 11 cut its estimate of US oil demand by 6 per cent. With speculators eyeing $100 a barrel as a likely level, it is a long way down from July 2008’s high of $147.27. Oil consumption is contracting not only in the US, but in Europe as well, with sharp falls in Italy and Spain.

Iran is now demanding that the OPEC cartel should shore up prices by cutting production levels, and Saudi Arabia, OPEC’s most powerful member, which had increased its crude production to more than 9.5 million barrels a day in July may well agree to a cut.

The oil price slide triggered off a broader fall in commodity prices such as copper, corn and soybeans, with the Reuters-Jefferies CRB raw materials index, about 18 per cent down from July’s peak. In another sign of commodities in downturn, the Baltic Dry Index which measures the cost of shipping dry bulk commodities fell almost 5 per cent, the lowest level since February 2008.

Of the 21 commodities tracked by Deutsche Bank, only four – live cattle, lumber, sugar and pork bellies showed positive returns so far in the second half of this year. In three of the commodities- live cattle, lumber and sugar, the increase was 10 per cent or less. But in pork bellies, the rise has been quite dramatic, increasing by 30 per cent over the two months to August 2008.

Steel is the latest commodity to show weakness in demand and prices. Arcelor Mittal, the world’s largest steel group announced that it would cut prices in South Africa, as much as 8 per cent across all its steel products, because of lower international prices. The cut will start on October 1 2008. The lower steel outlook has been echoed in China, which collectively accounts for more than 35 per cent of world steel production.

Steel consumption in China, which grew by 16 per cent in the June half 2008 is forecast to increase by only half this level in the December half. Paul Waldmeir in Shanghai for Financial Times (September 3 2008) says that major Chinese industries consuming steel- such as construction, household appliances and car production are all showing signs of weakness. Steel prices have been sliding since July.

In Eastern Europe, the price for hot-rolled steel has fallen about 30 per cent in less than two months. In the US, the Wall Street Journal reported (September 3 2008) that prices of domestic hot-rolled and cold-rolled steel are off about 8 per cent. The three month price of nickel has fallen 23 per cent on the London Metal Exchange (LME), and along with the fall in demand for stainless steel, the substantial rise in stockpiles augurs unfavourably for further price weakness.

Aluminium is at a seven month low on the LME. In food commodities, wheat, soybeans and corn are well off their 2008 highs, with soybeans and corn more than 20 per cent lower than their 2008 highs.

Accompanying the commodity price falls, the commodity driven dollar currencies of Australia, Canada and New Zealand, along with the South African rand are all in retreat, and even the emerging market Asian currencies are also trending down.