MARKET REPORT
SHORT READ PART 2
2022 APRIL QUARTERLY ISSUE
Written by : Andrew Sia
In this second part of the report, we covered in areas for the sustainability, situation of Covid-19 in different parts of the world and their different approaches, the war in Ukraine and how it would affect our supply chain.
Our heart goes out to the people of Ukraine during this unjustified war, its inhumanity, and its challenge to the free world.
We pray that the world will return to its normal pace and bring our life to a level that we can live and trust one another.
Contents:
Brazil and the Desertification
Hong Kong’s “Zero-Covid” Policy
American Truck Drivers
Supply Chain Under the Warfare in Ukraine
Global Warming Has Turned on the Deft Ears
Small Businesses in New York City Are Threatened by Shoplifters
China’s “Zero-Covid” Policy is Holding Up the World’s Growth
Panasonic’s Combat With Carbon Emissions
Export Restrictions on Technology Sales to Russia
Plastics Footprint
Are We Ready for the Cyberattacks
China’s Challenge During Its National People’s Congress
How Did the Last Pandemic End?
Brazil and the Desertification
Desertification is a natural disaster that is playing out in slow motion in areas that are home to half a billion people, from much of Brazil’s vast northeast, to northern China and North Africa, and to remote Russia and the Southwest America.
It is the process that does not lead to rolling sand dunes that created the Sahara Desert, but higher temperatures and less rain combine with deforestation and over farming dried the soil. It is unable to support crops or even grass to feed livestock.
Brazil’s northeast is the world’s most densely populated drylands with roughly 53 million people living there and is among the most at risk. But things are getting worse as the region has experienced its longest drought on record from 2012 through 2017. But in 2021, another drought desiccated much of Brazil. The satellite images showing 13% of the land has already lost its fertility and nearly the rest of the region is at risk.
We have reported that its president, Jair Bolsonaro, has not following the environmental regulations as always and he allowed the miners and ranches to clear the land for their activities. Brazil has 60% of the Amazon rainforest and it is suffering its worst deforestation in 15 years.
Amazon rainforest is able to absorb carbon dioxide from the atmosphere and it is playing an important role in the climate change.
Hong Kong’s “Zero-Covid” Policy
Hong Kong is going to endure its worst three months since the Covid-19 pandemic began. With new cases running at thousands a day have become tens of thousands now, the financial and trading hub with 7.5 million people are told to stay home. This “zero-covid” policy is more lean towards the interest of China and already the greater part of the world has chosen to be “co-existence” with the virus.
Knowing that the China’s way of handling this would have the city totally lockdown, but Hong Kong’s government choose to conduct the test and because of the cases it has overwhelmed its hospitals and the quarantine sites.
Xi Jinping openly expressed his desire that the Covid-19 should be eliminated by stern measures, like the way it has been practiced in China since the beginning. Perhaps Xi is taking this as his pride and wants to tell the world that the China’s policy is more superior. We have to know that the resistance from the people of Hong Kong has turned soft, but this doesn’t mean that they will accept the Chinese way. One has not to forget that for a very long time the place enjoyed democracy and have been operated under the system built by the British. Already China’s “dynamic zero covid” was added with the skeptical remark that Carrie Lam, the city’s Chief Executive Officer, added and she was not the initiator of the strategy. To practice this would perhaps needs someone who is a patriot and believes in the doctrine of the China Communist Party. For the moment it is hard to keep the Beijing’s expectation as there is the lack of people that China can motivate and manipulate to reach its goal.
For the moment, Hong Kong is caught between the world and China with this spread of Omicron.
American Truck Drivers – New York Times, February 10, 2020
Who wants a job that spend long hours and days on the road, stopover for junk food, away from home most of the time from the loved ones, and we can continue as it is reflecting the life of a truck driver in the U.S.
There is always a shortage of truck drivers because of the condition of work and the problem is becoming more acute in this Great Supply Chain Disruption where there are shortages for so many things.
Actually there is no shortage of truck drivers as there are more than 10 million commercial driver’s licenses being issued in 2019. This was nearly the triple of 3.7 million trucks and the problem is that it is really a bad job.
There is the “loss of attention” on that highway that can be fatal and it is necessary to “keep an edge” and stave off “highway hypnosis” as the emergency braking can take more than the length of a football field.
Supply Chain Under the Warfare in Ukraine – New York Times, March 2, 2022
The global supply chain is still in disarray during this time of the pandemic, but the invasion of Russia in Ukraine is going to lengthen the time, increase the costs and create other inconvenience to the global trade.
We come to know now that Ukraine is such a large country in between Europe and Asia, has caused some flight cancellations or reroutes, and resulted disruption for the cargo shipments.
It has also putting the global supply to the shortage of products like platinum, aluminum, sunflower oil and steel. Together with Russia, they have sent the energy price higher and has increased the freight costs.
The war has caused sanctions imposed on Russia and we have seen international companies who went on to cutoff their trade with Russia. It is still at its early stage and we don’t know the impact on the global trade after taking the Russians out of the equation.
We have seen the automakers are hit by the shortage of key materials—palladium and platinum, used in the catalytic converters, as well as aluminum, steel and chrome.
Semiconductor manufacturers are looking at the supply of neon, xenon and palladium which are necessary for their production.
Makers of potato chips and cosmetics could face shortage of sunflower oil.
If the war is prolonged, it will affect the harvest of wheat in the summer, which is used in bread, pasta, packaged food, which are supplied to Europe, North Africa and the Middle East. This will increase the food price.
Already shipping lines, Maersk, Ocean Network Express, Hapag-Lloyd and MSC have announced their suspension of all shipments to and from Russia by sea, air and rail with the exception of food and medicine.
Russia is accounted for a fifth of the global trade in natural gas, and both Russia and Ukraine are the major exporters of wheat, barley, corn and fertilizer. The supply will be affected.
Russia faced with further sanctions and export controls and later certain Russian banks are delisted from using the SWIFT messaging system. This further limits shipment of high-tech goods, trading the ruble and even went further to freeze the global assets of Russian oligarchs.
Shipping ports around Black Sea have closed. Air shipments between Asia and Europe airspace have to be diverted. This has gone further when the Western Europe and Russia have imposed reciprocal flight bans. And because of the longer flight, this will add up time and cost and will affect the supply chain.
Global Warming Has Turned on the Deft Ears – New York Times, March 2, 2022
Intergovernmental Panel on Climate Change (IPCC) released a new report, with the help of 270 experts on climate change, was released on February 28, Monday. It was a report of 3,675 pages that concluded the global warming is outpacing our ability to cope.
Each IPCC assessment is a huge, multiyear effort by researchers and representatives from 195 governments. Every line and chart in the report is fine-tuned to ensure that it is backed with evidence.
The report is done by the group of scientists who are not paid for their work and they have found that it is hard to convince the governments although they have all went through 26th Conference of the Paris (COP26).
In this case, the science doesn’t provide the solution but only provide the facts that because of the planet which will be warmer by three degrees Celsius in the end of this century.
It will also bring risks to the global supply chain and climate-related situation, such as severe climate situation can create hazards like floods, droughts that can affect economies and food supply.
Small Businesses in New York City Are Threatened by Shoplifters – New York Times, March 1, 2022
The pandemic has brought job losses, mental illness, verbal abuse and leads to shopliftings and robberies that are hurting the small businesses the most. Now the business is willing to call their staff to work but how willing are the commuters ready to go to work is still very dependable on the actual situation. Small businesses, including the bars and restaurants are closing earlier at night because commuters are afraid to stay late, and New York City is already considered as safe.
Last year, the shopliftings were 16% higher than in 2019, according to the New York Police Department. An index of major crimes, including murders and felony assaults, was up 7.5% compared to 2019. Although New York remains one of the safest large cities in the U.S., a poll released last month found that 74% of its voters believed that crime is a very serious problem.
The city’s new mayor, Eric Adams, is lobbying to toughen the state’s bail laws.
The smaller businesses are already facing lower foot traffic and labor shortages. The online marketplace can sell easily any stolen goods. During pandemic, an organized nationwide shoplifters started to target retailers and steal specific merchandise to sell through the online network. This makes the small business owners very weary and scared.
A sense of safety for everyone, be it the business operators, commuters or shoppers, is important for the economy recovery.
We were told that the situation is worse on the West Coast.
China’s “Zero-Covid” Policy is Holding Up the World’s Growth – WSJ, February 14, 2022
It is already mentioned that if China continues its lockdowns can proved to be a significant blow to its economy. It is already known that wherever the coronavirus gained its foothold, there would be a disruption for businesses, infected people would seek medical treatment, or go into quarantine, and suffered from deaths.
Fortunately that Omicron causes milder symptoms in vaccinated people than its predecessors. Many European countries have lifted restrictions as the Omicron variant tends to do less damage and a more willingness to coexist with the virus but with a certain level of alert is still being observed.
China, being the country with as high as 86% of its population being vaccinated. The vaccines most widely used, Sinopharm and Sinovac, are less effective for Omicron than the mRNA vaccines developed by Moderna, Pfizer and BioNTech. But China still choose to continue its “zero-covid” strategy with the less effective homegrown vaccines.
China is the world’s leading supplier of the parts to supply other countries. If lockdown continues in China, these intermediate goods can hold up supply of the household goods to the Western countries and can cause higher inflation and lower growth. In another word, it would hold up global supply chain.
Already the IMF economists said that this has caused the reduction of one half to one full percent of global economic in 2021. If the lockdown in China will continue this year, it will affect the global economy.
In according to WTO, China sold $354 billions of intermediate goods to other countries in the three months through June 2021.
Panasonic’s Combat With Carbon Emissions – WSJ, February 14, 2022
Panasonic spent six years to find the way to reduce its carbon footprint and take one of its factory in Wuxi, near Shanghai, which produces batteries. It incrementally trimmed its energy consumption through measures like replacing its workers with robots, florescent lights with LEDs, bought carbon credits and use renewable energy. By the end of last year it announced the success of neutralized the plant’s carbon emissions.
Panasonic pledged to eliminate or offset all its greenhouse emissions by 2030. It is known as one of the biggest carbon emitters in the world and with its achievement in its Wuxi plant, it has to do 37 times over to neutralize roughly 2.2 million metric tons of greenhouse-gas.
All those emissions are 2% of the 110 million metric tons Panasonic estimates it is responsible for when Panasonic starts to include its suppliers and the use of its products. Its 2030 goal is only from its direct operations, but to deal with the entire carbon footprint, Panasonic has given 2050 as the goal.
We have to know that Panasonic is a 104-year manufacturing company with more than 10,000 intermediate suppliers.
The Wuxi plant makes lithium-ion and nickel-metal hydride batteries for laptops, electric bikes and emergency lighting. It is using a lot of electricity and fossil fuel-generated steam for dryers and humidifiers. Panasonic calculated that in total the plant would be responsible for 60,000 metric tons of gas emissions a year. It is the highest among its 50-odd manufacturing sites in China.
With the electric it is consuming, it is using solar energy, a clean form of energy, from solar panels installed on the roofs of the factory buildings.
Also with numerous ways to help to cut carbon emissions, it bought renewable energy certificate, each of which represented a megawatt-hour of power produced by a local wind, solar and other clean-energy project. This purchase can effectively replace the equivalent amount of electricity from China’s grid which tends to rely heavily on coal-fired power plants.
To complete the goal, the factory bought carbon credits issued by projects of planting trees or protecting forests that reduce carbon in the atmosphere.
For the time being these efforts are still within the cost of manufacturing the batteries, but going forward when green manufacturing will catch on, the price may go up due to the demand. The managers in the factory are already thinking about the way to further compensate the cost to make it effective.
Export Restrictions on Technology Sales to Russia – WSJ, March 3, 2022
This restricted export control for semiconductors, lasers, information-security equipment. And other technology for the Russian defense, aerospace and maritime industry, of which are aiming at Vladimir Putin’s defense capabilities.
This is coordinated with allies in Europe and Japan to form part of the economic sanctions.
It will now be expanded to include Russia’s ally, Belarus. And new export controls on extraction equipment for Russia’s oil and gas industry, will also be added to the export blacklist.
Plastics Footprint – FT, March 4, 2022
There is this global agreement to tackle plastics pollution and almost 200 countries have agreed to enter into a legal binding UN treaty to cover the complete chain. It is not only the plastic pollution in oceans but also the full lifecycle of plastics from production to disposal.
Those behind this accord are Peru and Rwanda, who lead the proposal at the assembly in Nairobi, the American Chemistry Council who does the lobbying, ExxonMobil Chemical Company, Shell Chemical and Dow, are among its members.
The UN Environmental Program will bring together a negotiating committee to start work in the second half of the year and aim for agreeing the treaty by the end of 2024.
Plastic production rose from 2 million tons in 1950 to 348 million tons in 2017. It is a global business valued at $522.6 billion. It is projected to double in 2040.
Consumer goods group who are using plastic packaging are including Coca-Cola, PepsiCo, Unilever, and Nestlé, had called for a treaty to cover the whole lifecycle of plastics to help to bring down the price of recycled material and drive packaging innovation.
Are We Ready for the Cyberattacks – New York Times, March 5, 2022
The Western world is so vulnerable to the cyberattacks as the Russians are known for their destructive malware that has been attacking over hundreds of Ukraine’s websites and computers since Putin announced his invasion. We have not to rule out that such attack would only be restricted to Ukraine, but to the free world as well. Unfortunately, our businesses are not ready for a war in cyberspace. The fact is also that the U.S. government doesn’t have the infrastructure in place to protect the American businesses from this kind of attacks.
First of all, all those authoritarian states, Russia, China, North Korea and Iran have developed such malware with the sophistication that are at their disposals to come out against the U.S. government departments, businesses and citizens.
We don’t have the cyberdefense system as we are still waiting for a system to put together by a centralized regulator, not knowing our counterparts have set up its system to monitor its own people and put everyone at bay. They use it to rule and to protect their national security to their party’s interest.
While we are still arguing over rules on cyberregulation in Capital Hill, we have already as many as 80 committees and subcommittees that claim jurisdiction over various aspects. We have to come to understand the centralizing cyberdefense regulations and move away the partisanship and our routine objections to regulation.
Our answer to the question as raised at the title of this writeup is: We are not ready!
China’s Challenge During Its National People’s Congress – FT, March 4, 2022
On March 6, will be China’s National People’s Congress which could have been Xi Jinping’s triumph for his second term in office. He could brag about the success of its covid containment policies while focusing on his effort to revive the economy after he hit so hard on the property market. This has all been smeared by his support for Putin’s invasion in Ukraine and the collapse of his zero-covid policy in Hong Kong. This can also hinder his unprecedented third term in power for the quinquennial CCP Congress in October/November.
Russia’s invasion of Ukraine came just three weeks after Xi greeted Putin’s visit in Beijing on the eve of the Winter Olympics and official hailed their “no limit” partnership. China is now being viewed in the eyes of the West as a willing enabler of Russian adventurism. This is going to be his biggest foreign policy blunder of his first two terms among many other missteps.
At the National People’s Congress, Premier Li Keqiang, revealed the target for the annual economic growth of 5.5% which will be largely depending on its state-led infrastructure investment and the boost of the property sector.
But the first two months’ property sales fell by almost one-third and its banks are commenting that it is a good thing for it as it could have gone too far.
Combine the increasing infrastructure investment and strong export growth and offset its sluggish consumption, but hit by sporadic covid outbreaks that lead to lockdowns, I don’t know where the growth of 5.5% is coming from.
Hong Kong is also dragging its feet and it is already said that to enforce a lockdown to mass test the entire population would probably be inevitable. To return Hong Kong to its zero-covid status is unprecedented for a big international city. It has already sparked an exodus of its residents and foreign nationals.
How Did the Last Pandemic End? – New York Times, February 6, 2022
Historians said that the 1918 influenza pandemic, also known as the Spanish flu, killed at least 50 million people worldwide and claimed that it ended in the summer of 1919 when a third wave of the respiratory contagion subsided.
With the current one, Covid-19, it has reached 6 million deaths and it started in January 2020 until now. It is the total of 27 months.
Yet the 1918 influenza continued to kill as a new variant emerged in 1920 and it was counted as the fourth wave. It exceeded the second wave and created havoc situation in Detroit, Milwaukee, Minneapolis and Kansas City. Deaths even exceeded the second wave. At the time the U.S. population had plenty of natural immunity from the influenza virus after two years of infections.
During the second wave, nearly all cities-imposed restrictions which peaked in the fall of 1918.
People were weary of influenza, and so were public officials. People were numbed to the horrible news in the newspaper. The fourth wave came and no one was aware. In the end the total deaths stand at more than 675,500 in that pandemic, and was the deadliest disease in American history.
Today, America already exceeded that number and we are approaching one million.
Today, omicron cases are declining and they are milder. It is also said that nearly the entire U.S population will soon have been infected or vaccinated. This can strengthen the people’s immunity.
Omicron is infecting the upper respiratory tract and this is the reason why it is so transmissible. It seemed less able to infect the lungs and so it is less virulent.
There is the sign of weariness around us. Although we have over 70% of the adult population that is fully vaccinated. But the progress has stagnated. Only 44% of us have received booster shots.
Schools have to remain open for our children, but only 20% of children age 5 to 11 are fully vaccinated.
Omicron may seem less virulent, but the seven-day average for daily Covid-19 deaths in the U.S. is higher than Delta’s peak in late September.
The virus may not be finished but it will be less dangerous and mutations are random. It can be more cunning and can evade immune protection.
We need to know that the influenza pandemic returned in 1957 and 1968.
In the meantime we have to protect ourselves with vaccines, masks, ventilation and the antivirus drugs and steroids. We have to observe social distancing, and avoid crowds. To return to our social life is depending our approach collectively.