Miles Underground and Sleeping at Work: How to Dodge The Virus

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There’s room for about 2,500 people, a golf simulator and a three-storey cafe at BHP Group’s Mulla Mulla mining camp, deep in Australia’s remote Pilbara region, one of the world’s most important iron ore hubs.

The site and dozens more like it would be a perfect breeding ground for COVID-19. But sending employees to work from home isn’t an option. For much of the year, it is their home; where they eat, sleep and work in close proximity for weeks at a time.

It’s a potentially devastating risk that the biggest resources companies are juggling the world over, from oil rigs in the North Sea to copper mines in the Chilean desert. With much of the world’s raw materials extracted in remote and inhospitable locations, they’re scrambling to protect the well-being of their vast residential workforces while keeping the world supplied with critical commodities.

“We are not a business that can do all of our work remotely,” said Mike Henry, chief executive officer of BHP, the world’s top miner and a company that employs about 72,000 staff or contractors, “We are fully focused on action to reduce the risk of transmission.”

BHP isn’t alone. Mines in Chile to oil fields on Alaska’s North Slope are limiting access, splitting crews into rotating teams and checking temperatures of employees as they step aboard helicopters or pass through access gates at sites.

Isolation zones have been set up at accommodation villages, hot buffets scrapped at canteens, and extra cleaners hired. In Australia, the Royal Flying Doctor Service is on alert to airlift patients from far-flung operations, while at Rio Tinto Group’s Kitimat aluminum smelter in Canada, emergency plans for virus cases are pinned up alongside warnings about the location of grizzly bears.

Producers are also attempting to keep pace with rapidly tightening controls on the movement of people and goods, and preparing for the potential impact of multiple positive cases. “Everyone’s got a bunch of scenarios that they’re planning for,” said Paul Everingham, chief executive officer of the Chamber of Minerals and Energy of Western Australia.

Read more: World’s Miners Slowly Grind to a Halt on Virus Restrictions

Some cracks are appearing, though largely because the drastic government measures around the world to contain the virus are making it unfeasible to keep operating, as opposed to the virus actually taking down the workforce. Platinum powerhouse South Africa this week said it was shutting its mines for three weeks amid a nationwide lockdown, while operations in copper giants Chile and Peru have been curtailed.

A widespread shutdown of global resources production would just deepen the havoc the virus is already wreaking on the commodities industry. While demand is being devastated as swathes of the world go into lockdown, China’s gradually returning to work and is going to start needing more raw materials as its factories fire up again.

The challenge is particularly acute in commodity powerhouses like Australia, Russia and Canada where staff often need to be transported in and housed because production sites are so remote.

About 20% of Australia’s mining workforce of around 218,000 are fly-in staff that typically stay at sites for between one and four weeks at a time. The U.S. oil and gas sector alone employs about 157,000 people, including on offshore rigs.

Canada’s oil sands industry has already had suspected cases and has taken action at camps to reduce the prospects of virus transmission. Producer Suncor Energy Inc. is taking steps including spacing employees out on buses so nobody is sitting next to anyone else.

And in Russia, which churns out everything from crude to nickel in some of the most remote locations on the planet, oil producer Gazprom Neft PJSC has increased the length of shifts at its camps. Crude-pipeline operator Transneft PJSC has done the same.

“We have remote work sites and a relatively tight density of people,” ConocoPhillips Chief Operating Officer Matt Fox said last week on an investor call. The producer has limited the number of workers at its assets in Alaska, freeing up bed spaces to serve as a potential quarantine, and is reviewing options at other sites, including in Norway and China. “If necessary, we can have quarantine available in these locations,” he said.

BP Plc has divided workers at major operational sites into separate shifts, and is restricting contact between the two teams. Other energy producers including Royal Dutch Shell Plc and Inpex Corp. have already had staff test positive for COVID-19 in recent days. South African utility Eskom Holdings SOC Ltd. is housing power station workers in lodges away from their families.

Read more: Oil-Sands Workers Brace for ‘Hellish’ Outbreak in Remote Camps

At BHP’s Whaleback operation, opened in 1967 and the oldest mine in Australia’s Pilbara, yellow tape marks out social spacing distances on the floor of a cafeteria and solo workers sit at opposite ends of communal tables usually crowded with staff.

Employees at other BHP sites are holding meetings in outdoor picnic areas, or using grids laid out on floors to make sure they don’t stray too close when gathered indoors. A small group of tug boat operators who usually commute from Tasmania to Western Australia — typically a nine-hour journey on multiple flights — have been temporarily relocated, along with their families.

It’s inevitable there will be some impact on output at mines as producers implement virus-protection measures, said Paul Mitchell, Sydney-based global mining and metals leader at EY, which is working with clients on handling the pandemic.

“Even if you keep running, there will be some disruption, because running at 100% is going to put pressure on a workforce,” he said. Some companies are examining options to add flexibility by housing additional workers closer to their mines in unused tourist accommodation or construction camps. BHP is seeking to hire 1,500 staff in temporary roles to help operations through the crisis.

There’s a recognition that busy mining camps hold risks of multiple infections once any cases arise, according to Mitchell. “They’re set up to minimize space,” he said. “They’re not set up for isolation because of their very nature.”

Even for miners who return home after their shifts, rather than living in camps, the safest place to be right now may be underground, according to Bob Timbs, a district official for the Construction, Forestry, Maritime, Mining and Energy Union, which represents about 20,000 mining and energy workers in Australia.

Members include workers at South32 Ltd.’s Illawarra Metallurgical Coal operation southwest of Sydney, where shift times have been staggered and less than half the usual number of miners are packing in to cages that ferry them on a journey underground that can take as long as 10 minutes.

“Once they’re underground and in their development teams, they might only have contact with seven or eight people during the whole day, that’s a lot less than in an office environment,” said Timbs, a third-generation coal miner. “I’ve got more concerns for the guys when they are on the surface.”

— With assistance by James Thornhill, Robert Tuttle, Kevin Crowley, Paul Burkhardt, Olga Tanas, and Laura Hurst

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RBA Cuts Rate Further, Launches Asset Purchases To Ease Covid-19 Impact

Reserve Bank of Australia decided to cut its key interest rates further to a record low and launched a money printing scheme as the spread of coronavirus, or Covid-19, disrupts economic activity and financial markets.

At an emergency meeting on Thursday, the Reserve Bank Board governed by Philip Lowe, decided to reduce the cash rate by 25 basis points to 0.25 percent from 0.50 percent. This was the second reduction this same month.

On March 2, the rate was lowered by 25 basis points.

In the forward guidance, Lowe said the rate will not be increased until progress is being made towards full employment and the bank is confident that inflation will be sustainably within the 2-3 per cent target band.

The RBA Governor said the cash rate will remain at its current level for some years, but not forever.

The bank will purchase government bonds in the secondary market targeting the yield on 3-year bonds at around 0.25 percent. The operation to be commenced on Friday is set to address market dislocations.

In order to support credit supply to small and medium-sized businesses, the RBA will provide a three-year funding facility to authorized deposit-taking institutions at a fixed rate of 0.25 percent. The planned size of this facility is at least A$90 billion.

Further, exchange settlement balances at the central bank will be remunerated at 10 basis points, rather than zero.

The bank will also continue its one-month and three-month repo operations in its daily market operations until further notice. In addition, the RBA will conduct longer-term repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant.

In addition to the monetary policy easing, the government on Thursday announced A$15 billion funds to support small and medium-sized businesses.

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Great Barrier Reef Hit By Mass Bleaching, Climate Council Says

Australia’s iconic Great Barrier Reef has suffered its third mass coral bleaching in five years, according to early results of aerial surveys over the World Heritage site.

“I saw coral bleaching both at the surface and as deep as 16 meters,” the Climate Council said in a statement Thursday citing Dean Miller from the Great Barrier Reef Legacy. Miller has recently returned from assessing an area off Cooktown, with the council saying the evidence has been backed up by Terry Hughes, who is conducting aerial surveys this week over hundreds of individual reefs.

Las Palmas Gran Canaria, SpainMost polluted air today, in sensor range -5.​72% Today’s arctic ice area vs. historic average 61% Carbon-free net power in Germany, most recent data

$81.​9B Renewable power investment worldwide in Q4 2019 0 6 5 4 3 2 0 3 2 1 0 9 0 7 6 5 4 3 .0 2 1 0 9 8 0 3 2 1 0 9 0 6 5 4 3 2 0 5 4 3 2 1 0 3 2 1 0 9 0 0 9 8 7 6 Parts per million CO2 in the atmosphere +1.​17° C Feb. 2020 increase in global temperature vs. 1900s average 0 3 2 1 0 9 ,0 8 7 6 5 4 0 1 0 9 8 7 0 8 7 6 5 4 Soccer pitches of forest lost this hour, most recent data

50,​820 Million metric tons of greenhouse emissions, most recent annual data

About the size of Japan, the Great Barrier Reef is the world’s largest single structure made by living organisms and a popular tourist attraction. In 2018, it supported around 64,000 jobs and contributed about $6.4 billion annually to the national economy.

2019 was Australia’s hottest, driest year, according to data from the Bureau of Meteorology, which goes back to 1910. The average temperature last year was about 1.5 degree Celsius (2.7 Fahrenheit) above the 30-year mean, while rainfall dropped to its lowest in figures back to 1900.

That conditions exacerbated a years-long drought in much of eastern Australia, contributing to the summer’s devastating wildfires that burnt out an area almost the size of England. The crisis placed renewed pressure on Prime Minister Scott Morrison’s pro-coal conservative government to take more extensive action to tackle climate change, including punishing greenhouse-gas polluters.

Miller said the “very hot summer” had contributed to water temperatures on the Reef rising up to 2 degrees Celsius above normal.

“While the bleaching is extensive, fortunately tourism hot spots around Cairns and Port Douglas have been spared this year.” Miller said.

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Virgin Australia cuts 90 per cent of flights, stands down 8000 workers

Virgin Australia will cut flying in its domestic network by 90 per cent and temporarily stand down 8000 workers as it grapples with the coronavirus pandemic.

Australia's second largest airline had already cut domestic flying by 50 per cent and was set to cease all international routes from March 30.

Virgin Australia said it was reducing its domestic capacity by 90 per cent and suspending Tiger Airways domestic services, effective immediately.Credit:Bloomberg

The new capacity cuts will take affect from midnight this Friday, with the grounding of 125 aircraft. Virgin's budget arm Tigerair will suspend all flying immediately.

The company said 80 per cent of its 10,000 employees would be stood down at least until the end of May. Like at larger rival Qantas, workers will be able to use leave entitlements but otherwise will not be paid.

"There has never been a travel environment in Australia as restricted as the one we see today," said Virgin chief executive Paul Scurrah.

"The extraordinary steps we’ve taken have been in response to the federal and state governments’ latest travel advice."

Mr Scurrah said he was aware of how much his workers were hurting and the "very tough decisions have weighed heavily on me and my leadership team".

"We are talking to our teams and we are working hard to do what we can to protect jobs and extend payments for as long as possible.”

The financially troubled airline would return to the skies as soon as was viable, Mr Scurrah said, however he said how it operates "may look different when we get to the other side of this crisis".

More to come

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Tom Hanks, Wife Test Positive For Coronavirus

Tom Hanks and his actress wife Rita Wilson have tested positive for coronavirus, the Oscar-winning actor said in a statement posted on Instagram and Twitter. Hanks and Wilson, both aged 63, are in Australia as he is shooting a movie on singer Elvis Presley.

Hanks said both of them were tested for the virus after showing symptoms like body aches, chills and slight fevers.

He wrote, “We felt a bit tired, like we had colds, and some body aches. Rita had some chills that came and went. Slight fevers too. To play things right, as is needed in the world right now, we were tested for the Coronavirus, and were found to be positive.”

Hanks said they will now follow the protocols by the Medical Officials.

He added, “We Hanks’ will be tested, observed, and isolated for as long as public health and safety requires. Not much more to it than a one-day-at-a-time approach, no?”

In Australia, Hanks was to play the role of Presley’s eccentric manager in the movie, directed by Australian director Baz Luhrmann. The filming of the movie was scheduled to start on Monday.

Hanks already has Type 2 diabetes, as revealed on “The David Letterman Show” in 2013.

According to the U.S. Centers for Disease Control and Prevention or CDC, older adults and people who have serious chronic medical conditions like heart disease, diabetes and lung disease are at higher risk of getting sick from COVID-19. The health agency recently urged these higher risk people to stock up on supplies including food and medicines and to stay at home amid the outbreak.

Hanks’ news comes as the World Health Organization or WHO declared COVID-19 as a pandemic on Wednesday, after 118326 confirmed cases and 4292 deaths were reported worldwide as of March 11.

In Australia, confirmed cases were 112 with 3 deaths, while in the U.S., confirmed cases were 938 and deaths 29.

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COVID-19 Mar.11: It’s A Pandemic, 30-Day Travel Ban, NBA Suspends Games

Here are the latest updates of the COVID-19 outbreak as of Wednesday, March 11, 2020.

The World Health Organization has declared COVID-19 as a pandemic because of the alarming levels of spread and severity. This is the first pandemic caused by a coronavirus. The last time such a declaration was made was in 2009 during the H1N1 influenza outbreak, which killed an estimated 284,500 people worldwide.

Globally, 122,928 cases of infections and 4,596 deaths have been reported as of March 11.

China, from which the virus outbreak all began, has so far reported 80,955 confirmed cases and 3,162 deaths. In the past two weeks, the number of new cases of infection in the country has declined while cases outside China have increased thirteen-fold.

In Italy, the second-worst affected country due to the coronavirus after China, the number of infections has climbed to 12,462 and the number of fatalities has jumped to 827. The country, which is home to around 60 million people, has been under lockdown since March 9 and will continue to remain so until April 3.

Indonesia, Bulgaria, Belgium, Ireland, and Sweden reported the first fatalities from the new coronavirus on March 11.

Australia, which is also grappling with the virus, has announced a health package worth A$2.4 billion ($1.56 billion) to combat the outbreak. The country has so far recorded almost 150 confirmed cases and 3 deaths.

Meanwhile, starting Friday, the U.S. has imposed a 30-day ban on travel from Europe into the country as part of mitigating the spread of the coronavirus. However, the ban would not apply on travel from the U.K.

There are 1,135 confirmed cases of COVID-19 infections and 38 deaths in the U.S. as per the latest update.

The National Basketball Association (NBA) has suspended all games until further notice, following one player testing positive for the virus. The player in question is Rudy Gobert of the team Utah Jazz.

A new study on the new coronavirus by the Johns Hopkins Bloomberg School of Public Health suggests that the median disease incubation period, i.e., the time from exposure to onset of symptoms, is 5.1 days. This finding supports the current recommendation of 14 days for active monitoring or quarantine for individuals with likely exposure to the coronavirus is reasonable.

There have been unconfirmed reports from China claiming that AbbVie’s HIV medicine Kaletra/Aluvia is effective in COVID-19 treatment.

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Australian Economy Set to Shrink Based on Treasury, RBA Estimates

Australia’s economy is likely to suffer a quarterly contraction for the first time in nine years, based on an initial estimate of the coronavirus’s impact from the nation’s Treasury and Reserve Bank.

Both told a parliamentary panel in separate hearings that they expect half a percentage point cut from gross domestic product in the first three months of the year. Treasury head Steven Kennedy said the effects may spill into the second quarter, but Treasury wasn’t forecasting a recession.

“The economic impact of COVID-19 is likely to be deeper, wider and longer when compared to SARS,” Kennedy told lawmakers Thursday, referring to the 2003 epidemic. “It will create more risk of a prolonged downturn and fiscal support will be needed to accelerate the recovery of the economy.”

The government is expected to release a fiscal “boost” for the economy in coming days, though it has tempered expectations about its scale. Prime Minister Scott Morrison said the package will be measured and targeted and not in the league of the huge stimulus deployed by the Rudd government in 2008-2009.

Josh Williamson, a senior economist for Australia at Citigroup Inc., projects it will be A$3-A$5 billion ($2$3.3 billion) “at most,” equivalent to about 0.1% of GDP. “Such a package would be designed to offset the expected loss of output, rather than deliver a material boost to activity that closes the negative output gap that existed prior to COVID-19.”

Commonwealth Bank of Australia, the nation’s biggest lender, said Thursday that a contraction in the first quarter is “a distinct possibility.” Citi is also seeing a negative result, as are other forecasters.

The RBA sees exports of tourism and education — which account for about 5% of GDP — falling around 10% this quarter. Deputy Governor Guy Debelle cautioned that the situation is evolving rapidly and the bank’s estimates didn’t include supply chain disruptions.

“We are hearing about that in the construction and the retail sector,” he said. “But how long-lasting and how severe that is, we’re just not in a position to tell.”

The central bank cut interest rates by a quarter percentage point to 0.5% Tuesday and traders are pricing an 85% chance it will do so again in April. That would take the cash rate to its effective lower bound and open the door to unconventional measures.

Kennedy similarly said Treasury’s estimate didn’t include supply chain disruptions or broader sentiment-related impacts.

The Treasury secretary said of the budget, which until recently had been forecast to return to surplus, that “allowing fiscal policy to temporarily deteriorate as a result of this shock” was a sensible response.

Meantime, PWC released a report looking at worst case scenarios, such as the economic consequences of coronavirus escalating to a global pandemic. In such a scenario, 50% of the global population would be infected with the disease.

The economic result would be a 1.3% cut to both global and Australian GDP over the course of a year. At an international level, that’s well below the peak of the financial crisis, when global GDP slumped by 5.2%.

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Virgin Australia among debt-bloated companies the virus threatens to drag down

From Virgin Australia to US-based cinema chains and casino operators, the companies most vulnerable to the coronavirus outbreak are facing mounting pressure in global credit markets.

An escalating outbreak that drives off customers and revenue could lead to ratings downgrades, hinder refinancing efforts, and in some cases trigger defaults. And it's more than just travel companies: Debt-laden commodities producers, shipping firms and luxury automakers have endured waves of selling by bondholders as they ratchet down expectations for global growth.

Investors who've spent years pouring money into nearly everything the credit markets had to offer are balking now that the outbreak has spread to more than 65 countries. That's stoking fears of a prolonged slump in riskier assets. While central banks from the US to the UK and Japan have all said they stand ready to roll out stimulus to support credit markets, it's not clear the tactic will work if the problem is an historic slump in consumer demand.

Virgin Australia is among debt-laden companies internationally that could get into turbulence as the coronavirus affects financial markets. Credit:Philip Gostelow

"We should all be worried," said Azhar Hussain, head of global credit at Royal London Asset Management, who manages £6.1 billion ($11.9 billion) of assets. "First-order effects are likely to be travel and cyclicals with long supply chains, but the concern is that it spreads to the developed-market consumer."

We should all be worried. […] The concern is that it spreads to the developed-market consumer.

Diamond Hill Capital Management's Bill Zox and John McClain told investors on Monday they see little upside from more rate cuts if business activity is increasingly disrupted by the virus and everyone is forced to work from home. "Corporate CFOs won't be Skyping in plans for new capital projects," they wrote.

Below are some of the companies on the watch lists of credit investors and ratings firms as the human and economic toll of the virus increases.

Airlines:

Virgin Australia: The carrier, part of billionaire entrepreneur Richard Branson's Virgin Group, saw its $US425 million ($646 million) of bonds due in 2024 plunge nearly 12 cents since the start of last week to a record low of 85.2 cents on the dollar on Monday. The airline warned last week that the coronavirus is expected to reduce earnings by $50 million to $75 million in the second half of 2020. S&P Global Ratings last week lowered its outlook on the company to negative, citing restrictions on inbound tourism from Chinese nationals.

Garuda Indonesia: The flag carrier's $US500 million global sukuk due in 2020 has slumped nearly 37 cents since the start of last week to a near record low of 60.6 cents on the dollar on Tuesday. Tourism to the country is faltering, and the government forecasts $US4 billion of losses on travel restrictions.

Airline vendors are also feeling the pressure. WiFi companies Gogo and Global Eagle Entertainment, which provide passenger internet for US airlines including United, Delta and Southwest, are declining in debt and equity markets on concern that if more companies suspend business travel, the demand for in-flight WiFi could drop significantly. Both companies carry some of the weakest junk ratings and high debt relative to their earnings.

Gaming:

Codere: If the spread of the virus in Europe isn't contained, the Spanish gaming company may find it more difficult to refinance bonds due next year, according to Lucror Analytics. The debt, €500 million ($848.5 million) of notes due in November 2021, has plunged 9 cents on the euro since February 21 to about 87 cents, Bloomberg data show.

Macau casinos: China's gambling hub shut down 41 casinos for 15 days to contain virus exposure, triggering a record drop in gaming revenue in February. March may bring more of the same, writes Bloomberg Intelligence's Margaret Huang.

That could pressure US casino companies with significant business in Macau. MGM China, a unit of MGM Resorts International, sought to ease covenants tied to a HK$9.75 billion ($1.9 billion) loan to address what MGM China CEO Grant Bowie said "may be an extended recovery period." The company's junk-rated $US750 million of notes due in 2026 have dropped 5.25 cents on the dollar to a nine-month low of 101.25. Meanwhile, the $US1 billion of notes that Wynn Resorts's Macau unit issued in December have plunged to 97 cents from almost 102 on February 12.

Travel:

Cruise lines: Passenger ships have been among the worst-hit in markets after a quarantined ship off Japan's coast with more than 600 confirmed cases led to cancellations and profit warnings. While most of the sector brags of investment-grade ratings and relatively strong balance sheets, the escalating crisis is raising concern that those ratings may be at risk if the virus isn't contained. Take the credit-default swaps market, where credit investors buy insurance against losses. For cruise operator Royal Caribbean Cruises, the cost of the contracts has more than tripled in less than a week.

Tui: The German travel service provider was downgraded to BB- from BB with a negative outlook on Friday by S&P, which said the coronavirus could jeopardise bookings, adding to risks it was already facing from the grounding of Boeing's 737 MAX and unusual weather patterns. Tui's €300 million of notes due in October 2021 have dropped almost 7 cents on the euro to 95.

Entertainment:

Companies and municipalities have been shutting doors to venues like museums, casinos and cinemas to prevent widespread exposure. AMC Entertainment Holdings's bonds plunged to stressed levels last week after the chain closed 22 of its 47 theatres in Italy. While the closures in aren't expected to have a major impact on the company, an outbreak in the US could be a problem, Chief Executive Officer Adam Aron said on an earnings call on Thursday. The company has already been suffering from a decline in cinema attendance, reporting that ticket sales in the US slipped 4.4 per cent in 2019. AMC's $600 million of notes due in 2025 dropped to 81.5 cents on the dollar to yield more than 10 per cent.

Energy:

The world is facing the biggest commodity demand shock since the global financial crisis as the virus outbreak spreads, according to Goldman Sachs. Oil and gas companies across the globe have come under pressure amid fears of a global slowdown.

Some, such as Chesapeake Energy and Whiting Petroleum, have plunged to distressed levels in credit markets, with Chesapeake's notes due 2025 dropping to 60 cents on the dollar and Whiting's plunging to about 38 cents.

In Asia, India's Vedanta Resources's 2024 bonds fell 7.5 cents last week as the virus weighed on commodity prices, and Indonesia's Medco Energi Internasional Tbk has also fallen some in the bond market.

Shipping

China has grown into the maritime industry's main source of cargoes, and sailings to ship goods to consumers around the world has been disrupted.

As the virus wreaks havoc on physical supply chains and global trade, the shipping industry is rife with cancelled voyages, idle containers and falling rates.

CMA CGM, the world's third-largest shipping company is seeking to refinance $US1 billion of debt coming due next year, but coronavirus might disrupt the plans of the highly leveraged shipping operator, which opened shop in Shanghai in 1992. The company's notes due January 2025 are currently up 1 point to 65 cents, but were trading at 70 cents last Monday.

Autos

Aston Martin's bonds lost around 6 cents on the dollar last week, with its April 2022 notes bid at around 92 cents on Monday after it declined to divulge its latest sales figures for a new SUV. The company is relying on growth in China to double its sales output.

Notes issued by Jaguar Land Rover also lost around 6 cents on the euro in the same period. Its November 2024 notes were bid at around 95 cents on Monday as coronavirus fears nixed its plans to issue a US. dollar bond.(Adds details on China's shipping)

Bloomberg

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RBA Rate-Cut Pressure Mounts Just as ‘Gentle’ Upswing Emerges

Australia’s central bank chief Philip Lowe spent the latter part of 2019 asserting the economy was entering a “gentle turning point” — a view that was partly vindicated by data last week showing stronger investment intentions and credit growth.

But that gentle upswing has been superseded by the abrupt downdraft caused by the coronavirus, leaving the Reserve Bank swept up in a wave of worry that has investors pricing in interest rate cuts from Frankfurt to Beijing.

Lowe and his board will keep the cash rate unchanged at a record-low 0.75% at Tuesday’s meeting in Sydney, economists and money markets reckon. From then on all bets are off. Traders are pricing in around a 60% chance of a cut next month and their expectations escalate from there. In the U.S., they see the Federal Reserve easing three times on concern over fallout from Covid-19.

From education to tourism to agriculture and resources, the viral epidemic will set back Australia’s economy. It is the most China-reliant economy in the developed world with about a third of its exports going there.

Markets are pricing in two RBA cuts this year, taking rates to the effective lower bound and opening the door to unconventional measures.

Lowe, who’s worried about financial stability after last year’s easing drove up home prices, may prove a reluctant cutter. One argument may be that monetary policy can’t actually do much to revive growth in the current context — an approach set last week by the Bank of Korea.

Lee Ju-yeol, governor of South Korea’s central bank, surprised markets when he refrained from a knee-jerk cut. He said the appropriate response at this stage was targeted fiscal support for the companies most affected by the biggest virus outbreak outside China.

Australia’s government is also considering targeted stimulus for the worst-hit sectors — a move that may impair the budget’s return to surplus.

What Bloomberg’s Economists Say

“Patience is a virtue, and just as RBA Governor Philip Lowe was about to be rewarded — with a diffusion of trade tensions, a turning in global growth, a rebound in Australia’s housing markets and the realization of a long-anticipated pickup in non-mining business investment — the coronavirus hit. Its shock to the Chinese, and now global, economies looks set to derail the gentle turning point that was becoming apparent across Australia.”

James McIntyre, economist

The virus shock comes after a horror summer of wildfires that engulfed an already drought-stricken east coast. The RBA cut three times last year — mirroring the Fed — to spur firms to invest and hire in order to speed up economic growth and inflation.

The economy’s traditional shock absorber, the currency, has fallen about 7% this year and is trading at its weakest rate since 2009. This is another channel helping the RBA and trade-related industries.

— With assistance by Garfield Clinton Reynolds, and Tomoko Sato

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Two Years On, Musk’s Big Battery Bet Is Paying Off in Australia

Two years after Tesla Inc. installed it, the world’s biggest lithium-ion battery is helping to avert blackouts and lower costs as Australian grids struggle to handle surging renewable power generation.

The Neoen SA-owned Hornsdale Power Reserve has responded to three major system outages, helping to restore stability to the network and lower the costs of running the grid, engineering consultant Aurecon Group said Friday. The battery started in 2017 after Elon Musk famously won a bet that he could get a 100-megawatt system up and running in 100 days to help solve a power crisis in South Australia.

Hornsdale and other grid-scale batteries offer a way to tackle the variability of wind and solar power, and South Australia is seen as a global testbed in the transition away from fossil fuels, with the state getting more than half its power from renewable sources last year. Confidence in the global energy storage market faltered in 2019, mainly as a result of fires in South Korean installations, with global growth shrinking for the first time ever, BloombergNEF said Thursday in a report.

Hornsdale “demonstrates at scale the potential for battery storage to provide fast-acting supply and demand balancing,” Aurecon Managing Director Paul Gleeson said in a media release. That “is critical to maintaining consistent frequency for grid stability and improving integration of renewable energy.”

Batteries smooth out power flows which can threaten network stability when they become volatile. The Tesla battery can respond to these frequency events much more quickly than coal or gas-fired generators, which have traditionally performed the role in Australia, and at a much lower cost, said Garth Heron, Neoen’s head of development in Australia.

“The grid has a heartbeat that needs to be regulated,” Heron said in an interview. “I think there will be a faster battery roll-out than most people expect. They really are able to solve a multitude of problems.”

Hornsdale reduced network costs by about A$116 million ($76 million) in 2019, according to Aurecon, savings Heron said would be passed on to businesses and households in the state. The battery’s introduction also slashed the cost to regulate South Australia’s grid by 91%, bringing it in line with other regions in the nation, according to Aurecon.

“Not only has the Hornsdale Power Reserve identified how batteries can physically help the grid, it has also showed how they can make money along the way,” BNEF analyst Ali Asghar said. “More importantly, it has boosted investor confidence in the storage market by showing developers how revenues from different power based services can be stacked to build a business case for storage in Australia.”

Paris-based Neoen will add a further 50 megawatts of capacity at Hornsdale this year and has ambitious plans for a giant renewables hub at Goyder South, also in South Australia, which would incorporate 900 megawatts of battery storage. Tesla has installed three big battery systems across Australia.

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