Archive for the ‘A Thomas Ng Articles’ Category

China Overseas Ports Investments in Europe – A case of Piraeus Port and COSCO

Thursday, July 21st, 2016

China Overseas Ports Investments in Europe – A case of Piraeus Port and COSCO

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China Overseas Ports Investments in Europe – A case of Piraeus Port and COSCO

Just when Greece was near the brink of bankruptcy in late 2008 and early 2009, came the COSCO deal for Piraeus Port. At that time, I remembered few insurance companies were willing to consider even insure shipping to Greece due to the credit crisis.

In 2008, Piraeus handled 433,000 TEUs.

Since 2009, COSCO has been operating one of the Piraeus port’s container terminals and have consistently surprised other Mediterranean ports with its ever increasing port volumes.

In 2014, with COSCO management, Piraeus handled 3.6 million 20-foot equivalent units (TEUs) of containers and is investing a further 230 million euros to build a second container terminal at the port.

In January 2016, Greece named COSCO as the sole bidder for Piraeus Port, a gateway to Asia, eastern Europe and north Africa.  Sadly, two other shortlisted investors—APM Terminals, owned by Danish shipping conglomerate A.P. Moller-Maersk A/S, and Philippines-based port operator International Container Terminal Services Inc.—didn’t submit binding bids.

On 8 April 2016, COSCO signed a binding agreement with Greece’s privatisation agency for Piraeus Port.

COSCO will buy 51 percent of Piraeus for 280.5 million euros and the remaining 16 percent for 88 million euros after five years and once it completes investments of 350 million euros over the next decade.

China COSCO Chairman Xu Lirong said, “Let the ship sail and bring the Golden Fleece. China COSCO Shipping … will continue to be committed to Greek growth in the long-term.”

Cosco’s control of Piraeus many believe will turn the Mediterranean port into a logistics hub for Chinese exports to Europe. Cosco also uses Piraeus as a transhipment hub for Asian exports to Europe arriving on container vessels from China, given its proximity to the Suez Canal.

According to Reuters, the total value of the COSCO contract is 1.5 billion euros, including additional investment, as well as revenues of 410 million euros, dividends and interest Greece is expecting to collect under the 36-year concession deal between Piraeus Port and the government.

In response to the One Belt One Road Strategy, COSCO had expressed interest in buying the Greek train operator TRAINOSE, which is on sale. This may help Piraeus to be a Southern European logistics hub.

COSCO had earlier sounded its intention to ​develop the Piraeus into a logistics center that will move goods, mostly via rail, to Eastern Europe.

The conclusion of this Piraeus Port deal end 2 years of uncertainty for COSCO and Piraeus Port.

The success of the deal will further push for more Chinese port investments in Europe.

We need to watch this space for further developments. Things are getting more interesting, to be sure.

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

9 comments


3mo


Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

Hercules: calculation not mine, based on reuters report. I will amend the posting to mention that it is according to reuters. In your opinion how much is the TOTAL value. According to the signing date, it was 360 million euros.

3mo


Prof. Hercules Haralambides

President at Haralambides & Associates

the 1.5 billion is taken out of a study by a Greek research institute under the name IOBE. This is based on a macroeconomic econometric model of the Greek economy no one has seen. I asked for it albeit to no avail. The study is based on unwarranted assumptions (given the state of the Greek economy) and on rather obscure data sources.

3mo


Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

still, so many bidders look at the port and yet COSCO is sole bidder. Why?

3mo


Prof. Hercules Haralambides

President at Haralambides & Associates

Actually there were only two: cosco and APMT. The latter withdrew at the last minute. The “why” I leave it to you…

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The Chinese is buying up the world on the cheap as it is experiencing a recession again!

Thursday, July 21st, 2016
Thomas Ng

Thomas Ng

The Chinese is buying up the world on the cheap as it is experiencing a recession again!

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I refer to below article:

www.bloomberg.com/news/articles/2016-03-30/great-leap-upward-behind-china-s-100-billion-shopping-spree

Great Leap Upward: Behind China’s $100 Billion Shopping Spree

What the Chinese are doing looks “like” Japan after the Plaza Accord in 1985, when it gone senseless buying up America with a super strong Yen. I still keep a book called Pax Nipponica and the crash in Japan came in 1989.

No. The Chinese approach is different.

The Chinese themselves resisted revaluation pressure from the western powers and still the RMB appreciated 20% since 2003 (8.28 to 6.46 today, 1 Apr 16) when Bush Jr started calling RMB as undervalued. The appreciation was gradual and had served the Chinese economy well.

Now the Chinese is buying up the world on the cheap as it is experiencing a deep recession again!

My friend, Jack Arthur commented: Why invade with armies when you can buy your way in.

My response was: It is risky for the Chinese to buy their way in —  as this will mean that the Chinese will be buying without military projection capabilities. Their Y-20 plane is ready for delivery this year and should help boost that capability.

I think what happened to Chinese Oil investments in Libya shocked their leaders.

After 2011, their militarisation Zoom ahead. Today, the Chinese do go ahead to take on riskier investments, but we need to beware whether the Chinese military may backup their claims in cases of disputes.

Winners and Losers in Libya: Western Companies Win, Chinese Lose

 

Having founded a AIIB, the Chinese investments globally will be protected institutionally, and is there is EVER a military intervention, it is then done on a righteous way.

The Chinese learnt the Japanese lesson after 1989 and their leap today is a different one indeed.

More strategic than tactical indeed.

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

15 comments


3mo


Jonathan Shoemaker, CTL

Global Supply Chain Management with a Passion in Developing Data Analytics & Operations Research

Maybe I’m naïve or the fact I live in the US, but why would China need their military to back up their investments? I understand the US did this 2 centuries ago with the whole “Banana Republic” aspect associated wit the United Fruit Company (and I am not talking about the retail store). Long term fallout is a distrust of the people against the US. This is additionally th

3mo


Héctor Mendoza

Assistant-Consultant en Inter-American Development Bank

I think you raise interesting points, however I think a Chinese intervention to protect its assets overseas will depend on the circumstances. For example, an investment in Canada is unlikely to be blown up to pieces or expropriated since in Canada there is the rule of law, something absent in many parts of the world (Lybia being a good example). Moreover you assume that U

3mo


Christian Schuster

Big Truck Territory Manager MEA bei Hyster-Yale Group

… I like the dragon!

Strategic Options for Container Shipping Lines

Thursday, July 21st, 2016
Thomas Ng

Thomas Ng

Strategic Options for Container Shipping Lines

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Strategic Options for Container Shipping Lines

A recent article by WSJ:

Container Shippers’ Three Options: Shrink, Merge or Die – WSJlnkd.in/eQPsq5F

To Die – Oh for a shipping and logistics hub like Singapore – unthinkable!!!

Causes for the ‘depression’ in container shipping include slowing economic growth in China, Japan and Europe and even recently, the US is probably going to re-enter recession.

As such, the global financial crisis appeared to have returned and to some in trading centres like Singapore, the economy this year may be worst when compared to 2008.

As a result of the global economic crisis, BCO and shippers have also been redoubling efforts to control costs and shipping rates have fallen to new lows never seen before.

Over container shipping capacity is another big issue.  Building capacity appears to be mostly unneeded, especially in these uncertain times.

What then are our strategic options ?

To let the industry die ???  Sell out ??? – No…..

To Evolve and Restructure! Yes!!!

Operationally and internally,

some container shipping lines could still see more performance improvement, in areas such as Sales and Marketing; Bunkering costs control, port/terminals and related intermodal costs optimisation; Optimised container fleet management and better stowage planning with superior software tools; More Fleet network optimisation tools could be employed to reduce costs further.

Externally, in fact, most Shipping Groups have other divisions other than container shipping lines.

Generally, most of these other divisions are in trouble. But still, there are bright spots. APL for example handled  5% (in 2011) of US military ocean shipments and this should be booming (or will boom) as US pivots to the Asia Pacific since 2012.

Maersk Gains From U.S. Military’s $11.5 Billion War Shipmentswww.bloomberg.com/news/articles/2012-04-26/maersk-gains-from-u-s-military-s-11-5-billion-war-shipments

“Maersk got $800 million from the Pentagon in the fiscal year that ended Sept. 30, up almost sixfold from the previous year, according to data compiled by Bloomberg. That represents 1.3 percent of the company’s $60.2 billion in 2011 revenue, and 2.9 percent of its container shipping business. American President Lines Ltd., part of Neptune Orient Lines Ltd. of Singapore, received $421 million in defense contracts in fiscal 2011. That represented 4.6 percent of the the parent company’s revenue of $9.21 billion in 2011, and 5.4 percent of Neptune’s shipping business.”

These figures were in 2011, 2015 could be more.

The US Navy today is certainly relocating lots of resources to Asia (60% ?), with the Aircraft carrier USS John Stennis recently moved to the main Japanese Yokosuka naval base – ie – together with USS Ronald Regan – 2 Aircraft Carriers Strike Groups in Japan – WOW! – 15,000 navy staff on these two CSG alone.

Container shipping lines should also consider diversify into rail-freight across the overland Asian-Europe! Moving into the Chinese One Belt One Road.

I think Container shipping needs to face up with more competition overland – in particular via rail freight as China takes world leadership in global train development and construction.

Like AP Moller-Maersk – who is a conglomerate of container shipping, oil exploration; ports; 3pl and shipping related services – diversification is probably another key to ride out the “monkey” biz year of 2016.

In the mist of all these deep troubles in container shipping, AP Moller-Maersk looks into the brighter future and just completed the acquisition of Spanish TCB for US$1 bil. CMHI did US$ 950 mil for Kumports 50% in Sep 2015; Turkish Yildrim group acquires Portugal’s Tertir for an undisclosed amount; Brookfield/Qube A$9.28 bil Asciano deals in Feb 2016, Cosco Pacific did roughly US$200 mil for 51% of Piraeus Port, SPIG and other Chinese groups also doing more abroad, many other container ports groups like DP World and PSA International have been expanding all over the world, and locally, ports construction are booming.

So, let cheers up and continue our search for OPPORTUNITIES.

Certainly, this may be  wonderful time for vultures to be bottom fishing!

In summary,

Operationally and internally, some container shipping lines could still see more performance improvement, in areas such as Sales and Marketing; Bunkering costs control, port/terminals and related intermodal costs optimisation; Optimised container fleet management and better stowage planning with superior software tools; More Fleet network optimisation tools could be employed to reduce costs further.

External environment wise, areas of diversification for container shipping includes:

Military ocean shipping for all militaries. Russian and China are hyper active as well, though these activities will likely not benefit Maersk & APL, Such military contracts are pure politics.

Rail container freight across Asia-Europe. China’s belt and road effort is transforming Central Asia, Middle east overland and eastern central Europe.

Invest in Ports – expansions all round the world – bottom fishing everywhere.

Good Luck!

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

2 comments


4mo


Can smuggling be tackled with IMO SOLAS container weighing?

Thursday, July 21st, 2016

Can smuggling be tackled with IMO SOLAS container weighing?

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Can smuggling be tackled with IMO SOLAS container weighing?

In Italy’s Gioia Tauro port, it had been reported that the Ndrangheta crime syndicate relies on men whom it has placed in key ports along cocaine trafficking routes. A ‘Ndrangheta member strategically placed at a port who opens up a container bound for Gioia Tauro, and hides cocaine parcels inside it. His counterpart in Gioia Tauro is then informed of the container’s number. When it arrives at the Italian port, the crime syndicate rushes to empty it before customs or police are able to check it.

Police in the Netherlands and Belgium in 2012 discovered a container computer hacking scheme where criminals smuggled two tons of cocaine and heroin, a machine gun, a suitcase stuffed with $1.7 million, and hard drive cases turned into hacking devices inside containers.

A mix of international drug gangs and digital henchmen actually started this plot in 2011.

Drug traffickers first recruited hackers to penetrate computers that tracked and controlled the movement and location of shipping containers arriving at Antwerp’s port.

The simple software and hardware hacks—using USB keyloggers and more sophisticated purpose-built devices—allowed traffickers to send in drivers and gunmen to steal particular containers before the legitimate owner arrived.

The scheme was first noticed in 2012, when workers at a container terminal in Antwerp began to wonder why entire containers—said to contain cargo like bananas and timber—were disappearing from the port. In January 2013, the plot appeared to culminate in a daring raid in the province of Limburg, near Antwerp. A truck that had left the port and was unwittingly carrying containers stuffed with drugs was attacked by suspects armed with AK-47 assault rifles. According to police, the gang had assumed the driver, who was not killed, was from a rival drug gang.

In June 2013, a joint operation by Belgian and Dutch police resulted in raids on more than 20 homes and businesses, where they seized six firearms, bullet-proof vests, and 1.3m euros in cash inside a suitcase. Fifteen people are now awaiting trial in Belgium and Holland, including two suspected hackers. Police did not say where the containers originated.

Most cargo owners or shippers don’t have a clue as to what to do to secure a container from tampering by smugglers and terrorists, who, could possibly use them to conceal dirty bombs.

The cyber attack began with simple social engineering: a spear phishing attack through emails that tricked employees into installing malware.

The container companies discovered the initial breach and installed a firewall installed to prevent further attacks. But police say the suspects managed to get onto the physical premises to install key-logging devices directly onto the keyboards of computers, allowing them to gain wireless access to keystrokes typed by staff as well as screen grabs from their monitors.

The gangs also reportedly built their own hardware, concealing small homemade devices inside normal hard drive cases and power strips. These allowed them to access and remotely control data on the shipping companies’ computers, and to gain security codes so drivers could pick up particular containers.

There were reports that Police inspecting shipping containers have found cocaine stolen away inside frozen sharks.

Shipping containers are thought to be integral to large drug smuggling operations. The iconic intermodal freight container was introduced in the 1950s as a way of standardizing the way goods are moved around the world. Rising in parallel with computers, containerization is how ninety percent of our stuff moves around the world everyday. But that scale—some 450 million containers are shipped annually—means that customs officials tend to inspect only around two percent of those shipments per year.

Estimates about the use of containers by smugglers are rough.

But a report in 2012 by the Stockholm International Peace Research Institute found that the ships unwittingly involved in the trafficking of drugs, guns and other substances, like those used in building WMD, are primarily commercial lines based in Germany, Greece and the US.

“Containerization provides trafficking and proliferation networks with the same cost- and time-saving transport mechanisms that have allowed the world’s multinational companies to deliver their products quickly and cheaply, penetrate new markets and expand their global customer base,” the SIPRI report concluded.

In one demonstration, a group of researchers using cheap radio equipment showed they could hijack a system used to track shipping vessels worldwide, causing fake vessels to appear, real ones to disappear, and to issue false emergency alerts. In another, GPS researchers proved they could hijack a ship’s navigation system and actually steer it—a technique they’ve also used on drones.

Simpler computer exploits of shipping systems have also been discovered. An investigation by Australian authorities in 2012 revealed that drug gangs were able to use public databases to track which shipping containers in port were under inspection by police, allowing them to abandon those shipments.

And the technique used in Belgium isnt’t completely new either: in season two of The Wire, a drug gang in Baltimore hires dockworkers to alter the computer records of containers with drugs that have been planted inside.

A requirement to weigh containers may therefore be a convenient way of identifying shipments that might contain illicit drugs.

A containerload of hollowed-out boards stashed with cocaine might not weigh much less or much more than a normal load of the same boards.

Some shippers have also caution that the weighing requirement would impose added costs on some carriers, without doing much to improve security.

It is estimated that there is probably a minimum cost of $100,000 to purchase a portable scale for port. The cost to install a more sophisticated scale would be much greater.

Every additional requirement a port lay down does put extra cost onto the terminal handling operation, and may even slow down the operation, as some operators pointed out.

Hence, no matter what permissists claim on containers weighing, it may actually help to tackle smuggling globally.

Can you think of other types of smuggling that Customs globally will find container weighing invaluable in deterring smuggling?

The bidding battle for Terex has ‘officially’ begin.

Thursday, July 21st, 2016

The bidding battle for Terex has ‘officially’ begin.

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The bidding battle for Terex has ‘officially’ begin.

With Asciano bidding battle just ‘closed’ with CIC as key investor, Zoomlion has secured financing for Terex bid of US $3.3 billion, topping the bid from Konecranes.

“Given the uncertainties involved with the merger and proposed acquisition (by Zoomlion), the decision was made to halt information sharing, work on integration, and synergies between the businesses, until further clarity can be had on the course of action,” Terex said.

Terex views Zoomlion’s bid as a realistic alternative since it had stopped integration work with Konecranes.

Zoomlion has offered $30 per share in cash for Terex, versus the Konecranes offer of 0.8 share for each Terex share which Terex shareholders stand to receive under the deal that was agreed upon in August.

Terex shares jumped as much as 9 percent after the news of the halt in Konecranes integration work, and were still up 4.2 percent at $23.02 in early afternoon on the New York Stock Exchange on Friday. Konecranes shares ended trading down 5.3 percent at 20.20 euros ($22.5) in Helsinki.

According to Chinese press, Zoomlion first reached out to Terex to express interest in Q4 2015 and made its latest offer on Dec. 4.

What do you think?

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

5 comments


5mo


5mo


There are 3 other comments. 

Malaysia is an important part of China’s Maritime Silk Road. Will Malacca’s port initiative shake up the regional port sector?

Thursday, July 21st, 2016

Malaysia is an important part of China’s Maritime Silk Road. Will Malacca’s port initiative shake up the regional port sector?

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Malaysia is an important part of China’s Maritime Silk Road. Will Malacca’s port initiative shake up the regional port sector? updated 16 Feb 2016 7.25 pm

China’s premier Li Keqiang visit to Malaysia in Nov 2015 saw him offering loans and endorsement of China’s plans all over Malaysia – designed to boost the Maritime Silk Road.

In September 2015, Guangdong province governor Zhu Xiaodan visited Malacca and signed an MOU to build an artifical island mega container port, aimed to challenge Singapore in 10 years. Others include a port & shipping logistics park and industrial park initiatives.

During his visit to Malacca in November, Li was updated on an industrial park initiative spearheaded by Malacca state and Guangdong province, part of Malaysia’s “Malacca Gateway” project to expand the port facilities.

Li also promised to hold an $7.8 billion (50 billion renminbi) quota for Malaysian investors under the Renminbi Qualified Foreign Institutional Investor (RQFII), paving the way for more Malaysian investment in China.

In Dec 2015, the Star Paper Malaysia reported that Malacca will soon control the key waterway of the Straits of Malacca, which links shipping routes between Asia and Europe, with the construction of a floating deep-sea entrepot close to its shores.

A renowned public-listed foreign construction company has agreed to inject RM12bil for the first phase of the harbour facility. The entire multi-billion ringgit project that will be developed in three phases is expected to be fully completed by 2025.

Malacca Chief Minister Idris Haron said the first phase of the entrepot is expected to be completed by 2020 and the remaining phases within the following five years.

“The construction company is a giant and well-known globally, but I can’t divulge the details for now as it must come from the company itself,” he said recently.

The purpose for the Malacca mega artificial island port that challenges Singapore is more strategic than commercial, similar to what PTP was planned for. For the Chinese, Malacca will break Singapore stranglehold on the Straits of Malacca, where over 80% of China and Japan products are transported. This dilemma will then be resolved.

It will be interesting to note that in fact the British port in Singapore in 1819 actually challenged Dutch’s Malacca. The British ‘closed’ Malacca after 1824, in favour of British Singapore.

The Chinese is back today to reopen it.

If Greece in Europe is any example, from 200 k teu to 3 Mil teu in 3 yrs under Cosco control – then the threat in the Straits here is real.

To the Chinese, investing heavily in Malacca may be held as a showcase to the rest of South East Asia as the ‘return’ of the benevolent ChengHo- providing a challenge to the US dominance in the region.

A re-pivot to Chinese favour.

Many Chinese Presidents and Premier has always take the extra efforts to go to Malacca whenever they are in Malaysia. Li Keqiang praised Nonya food as an innovative combination of the Chinese & Malay.

Parameswara in 1400s was not able to use Temasek as his new port but Malacca. This rebel Parameswara was against Indoneisa Majapahit in Surabaya in those days. Today, the picture is sounding ‘similar’.

So what do you think?

Will other Malaysian ports feel challenged?

How about Singapore?

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

26 comments


5mo


Philip Teoh

Partner and Head of Practice, Azmi & Associates Malaysia

In terms of cargo volume and ship calls Port Klang and Johor will still lead. I have been doing port related work in Malaysia for the past 25 years. However the OBOR initiative will increase trade and interaction between China and Malaysia. I covered this when I presented a paper on Transport Issues in ASEAN AEC in an ASEAN Conference in Singapore last August.

3mo


Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

Under the port alliance BTW Malaysia & China , 10 Chinese ports – Dalian, Shanghai, Ningbo, Qinzhou, Guangzhou, Fuzhou, Xiamen, Shezhen, Hainan and Taicang will collaborate with six Malaysian ports – Port Klang, Malacca, Penang, Johor, Kuantan and Bintulu. WOW.

There are 24 other comments. 

Bidding battle for Australia port & rail group Asciano

Thursday, July 21st, 2016

Bidding battle for Australia port & rail group Asciano

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Bidding battle for Australia port & rail group Asciano

The offer for Asciano took an interesting turn with Asciano’s board endorsing of the Qube higher offer at A$9.05 billion. (A $9.24 per share) on 9 Feb 2016.

Brookfield infrastructure Partners will be forced and put into its matching rights  or give up the bidding war.

The Canadian Brookfield has already indicated on 7 Feb to Asciano that it is prepared to raise its cash and stock offer, probably to A$9.28 per share.

We probably will see some interesting port mergers news from down under soon.

Let’s keep watch.

Interesting to see CIC, GIC, Canadian Pensions Fund, probably even Qatar Investment Authority all taking their bets on Aussie port assets.

CIC declaration of interest in Aussie rail assets put all into focus of Chinese money and Chinese rail coming to Australia. Part of that ONE BELT ONE ROAD?

In the mist of all these mixed news from the port sector, lots more acquisitions are made possible.

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

3 comments


5mo


Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

Exclusive – Canada’s Brookfield to raise Asciano bid: sources lnkd.in/bHgFz9b

5mo


Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

Bloomberg – Asciano Abandons Brookfield as Qube Bid Accepted by Board bloom.bg/1PNjEXk

THE RED-HOT GLOBAL ARMS MARKET GOES STEALTH

Thursday, July 21st, 2016

THE RED-HOT GLOBAL ARMS MARKET GOES STEALTH

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We heard recently that the Chinese J20 has gone Low rate initial production with 2102 & 2101 and the numbers probably should get up to 24 by end 2016.

Then I hear of stealth missiles kh-101 from Russia, which I think the Chinese should also be thinking of producing.

Stealth Train Russian ICBM, Chinese version, etc

Stealth Bomber – New B3 bomber from US; Y20-style of Stealth bomber from China ?

Stealth Helicopters – stealth version of UH60 Black Hawk from US and maybe China and Russia will follow (?)

Stealth Drones, X47B, and chinese ones? anyone?

Stealthy ships like LCS from US, and …

Stealthier submarines ?? – Black Hole Russian Sub…

Stealth fighter jets – F22, J20, F35, J31

Looks like the fifth generation of stealthier military weapons are coming on-line.

With the Singapore Airshow starting from 16 Feb, more to look out for indeed.

The arms race is real and stealthy weapons are red-hot.

Thomas Ng

Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

2 comments


5mo


5mo


Thomas Ng

Chairman, The Global Ports Forum; Open to All Opportunities in Ports

A single S-400 missile that costs a few million dollars could bring down an asset worth hundreds of millions of dollars, such as the RQ-4 unmanned intelligence aircraft, F-22 or F-35 fighters, or worse, a B-2 bomber worth over $2 billion… show more How China’s New Russian Air Defense System Could Change Asia

New Energy’s Challenge to Old Oil – New Oil Wars

Thursday, July 21st, 2016

New Energy’s Challenge to Old Oil – New Oil Wars

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Lots of conspiracy theories abound for oil price to have crashed in this new year to below USD 30 a barrel.

Some of the cited reasons are :-

1. US and Saudi Arabia in a conspiracy to punish Russia.

2. Slowing demand for oil, in particular from China, where 50% of the global oil exports go to. At 6.5% economic growth for 2016, China will still demand a respective size of world’s oil.

3. OPEC and US shale gas – conspiracy goes that the oil countries are pushing prices to below US 30 and causing massive bankruptcies in the shale oil business which needs oil to stay at US 60 to be profitable.

4. Iran – the return of Iran will result in a definite over supply and thus the further fall in prices.

Further to the above, what’s important is also highlight that perhaps OLD oil money is challenging new ENERGY money by drastically crashing the prices of oil to make new energy efforts not viable.

The recent ignorance of the downward adjustment of retail oil prices (ie pump prices remain unchanged) in China when prices dropped further is perhaps a recognition that low oil prices may KILL off new energy products SALE in china.

Vast amount of money – maybe more than USD 100-200 billions – particularly from China are being poured into clean energy such as hydro, solar, wind, nuclear.

China is the world leader in many of these fields today and has a strong interest to ensure the success.

Interestingly, after so many years of “investments”, none of the oil majors are heavily involved in new energy. Thus, the conspiracy goes, the Paris Accord on 12 Dec 2015 was probably a major reason for a FURTHER crash of oil prices, as oil producing countries such as US and Saudi Arabia see a big threat from the new energy efforts from China.

Hang on to 2016 as this year will certainly be as exciting or even confusing as the one just ended in 2015.

The Kra Canal – to build or NOT to build, that’s three centuries old question.

Thursday, July 21st, 2016

 

The Kra Canal – to build or NOT to build, that’s three centuries old question.

www.linkedin.com/pulse/kra-canal-build-thats-three-centuries-old-question-thomas-ng?trk=mp-author-card

 

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The Kra Canal – to build or NOT to build, that’s three centuries old question.

As we know, China’s promotion of its “One Belt, One Road” strategy  may gradually reshape the Eurasian continent, but within this grand vision of a “New Silk Road”, it may well be the construction of the Kra Canal in the south of Thailand which could perhaps have the greatest impact.

The Kra Canal was an idea that first emerged in the 17th century. The idea is to build a canal across the less-than-30 mile Kra Isthmus in Thailand – connecting the Andaman Sea in the Indian Ocean to the South China Sea.

The logic supporting the Thai Canal, or Kra Canal, is solid – ships would no longer have to go the long way around Singapore, through the pirate-infested chokepoint known as the Strait of Malacca.

Shippers could shave off three or four days from their travel time, translating to a $300,000 savings on the cost of a 100,000 ton cargo ship voyage.

More than 15 million barrels of oil per day – about 17% of the world’s daily production – are transported through the Strait alone.

The Kra Canal would also alleviate congestion. The Strait can currently accommodate about 122,000 ships. However, by 2025, roughly 140,000 ships will be plying the waters.

The canal is estimated to cost nearly $30 billion to build.

And of course, there’s the matter of complicated Thai politics. Some in Thailand say the canal will divide the nation into two countries.

Neighboring countries, Singapore and Malaysia, who want to keep benefiting from the ship traffic through the Strait, are strongly opposed to the canal.

Overlaying this is the geopolitical battle between China and the United States. for influence in the region.

China would like to make the proposed canal a part of its Maritime Silk Road. This was suggested in the ambitious plan unveiled in 2013 by Chinese President Xi Jinping – a plan to create the modern-day equivalent of the historic Silk Road. The plan aimed at having new land and water routes tying China to trading partners all the way to Europe.

According to proponents, the Kra Canal would not be a substitute for the Strait of Malacca but perhaps a necessary complement.

One fourth of internationally traded goods crossing the Strait of Malacca have congested the stretch of water between the Malay Peninsula and Sumatra, and while China is on the way to become the world’s largest economy the opening of another trading conduit closer to continental Southeast Asia may be the answer to an objective need.

With special economic zones integrated both in the south and in the north of the canal, Thailand could enter one of the most prosperous periods of her long history.

Far to exacerbate the existing tensions in southern Thailand, the Kra Canal would have instead the opposite effect by rebalancing the distribution of the Kingdom’s economy whose center, Bangkok, produces around 30% of the country’s economic output.

In May 2015, there was a supposed agreement between Thailand’s Asia Union Group and China-led China-Thailand Kra Infrastructure & Development to start a feasibility study to consider building the canal.The Chinese company is already building other infrastructure in Thailand.

But within days, there were denials of any deal. Thailand likely backed away under intense diplomatic pressure from the United States.

But the Thai government may later give a China-led project the thumbs-up.

The economic opportunity to become a regional maritime center, surpassing Singapore and Malaysia, is going to be too good to pass up.

And China maybe patient enough to wait for Thailand’s approval.

What do you think?