- China’s Factory Prices Ease as Commodity Market Surge Abates
China’s producer price gains slowed more than expected in April, adding to signs of a potential easing of global reflation fueled by the world’s second-largest economy.
- Producer price index rose 6.4 percent from a year earlier, versus a 6.7 percent Bloomberg survey estimate and 7.6 percent gain in March
- Consumer price index climbed 1.2 percent, versus 0.9 percent gain a month earlier, the statistics bureau said Wednesday
Resurgent producer prices, which rose the most in eight years in February, have helped fuel the world’s shift away from deflationary pressures and their recent easing signals that the boost may not endure for much longer. Moderated inflation also means stronger industrial profits may be harder to sustain and suggests corporate debt burdens may grow heavier.
Global commodities sank to a five-month low last week, nearly erasing the gains since Donald Trump’s surprise U.S. election win. The retreat has been led by industrial metals and oil, two sectors that fueled raw-materials price rises earlier this year on the view that faster global growth would boost demand.
“PPI has already peaked in China and it’s on the way down further from here,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “The shadow-banking crackdown and housing tightening policy will slow investment and a decline in global commodity prices will help China contain price pressures.”
“April’s price data add to the impression of moderating momentum in China’s economy heading into the second quarter,” Bloomberg Intelligence economists Tom Orlik and Fielding Chen wrote in a report. “Rapid gains in producer prices had buoyed corporate profits, lowered real borrowing costs, and made the corporate debt mountain a little easier to scale. Slower price increases reduce those benefits.”
“Falling prices and destocking are reinforcing each other,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong, adding that growth is likely to slow after accelerating in the first quarter. “The Chinese economy passed its peak.”
“A softer PPI has two sides,” said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. “It negatively affects corporate profit but helps put down the stagflation fears people had early this year. At least there’s no need to tighten from the inflation point of view.”
- Producer prices fell 0.4 percent on month, the first drop since June
- Consumer prices climbed on non-food inflation, as airline tickets and hotel rates strengthened during the tomb-sweeping holiday in early April and the Labor Day holiday weekend at the end of last month, the National Bureau of Statistics said in a statement
- Sectors have diverged with non-metal minerals, nonferrous metals and textile prices rising, the NBS said
Petrol Subsidy Likely to Gulp N2T This Year –Rainoil GMD
Nigeria may end up spending N2 trillion on petrol subsidy this year if the current situation persists, the Group Managing Director, Rainoil Limited, Dr Gabriel Ogbechie, has said.
Ogbechie said this on Sunday at the Nigeria History Series of the Centre for Values in Leadership, themed ‘Indigenous participation in the downstream oil and gas sector’ moderated by Prof. Pat Utomi.
While lamenting the lack of deregulation in the downstream sector, he said the government was spending about N8m daily on petrol subsidy.
He described the sector as highly regulated, saying, “I wonder if there is any other sector of the economy that is as regulated as the downstream.”
He said, “The biggest elephant in the room today as far as the downstream is concerned is the failure, so to speak, of the government to deregulate the downstream – fixing the price at which petroleum products are sold, I believe, is very seriously harmful to this economy.”
According to him, the landing cost of the petrol imported into the country is about N300 per litre, based on the current naira-dollar exchange rate.
Sirius Petroleum and Baker Hughes Collaborate on OML 65 Drilling in Nigeria
Sirius Petroleum, the Africa-focused oil and gas production and development company, has signed a memorandum of understanding with Baker Hughes. The MoU names Baker Hughes as the approved service provider for Phase 1 of the Approved Work Program (AWP) of the OML 65 permit, a large onshore block in the western Niger Delta, Nigeria. Baker Hughes will provide a range of drilling and related services at a mutually agreed upon pricing structure to deliver the initial nine-well program.
Sirius has signed various legal agreements with COPDC, a Nigerian joint venture, to implement this program. COPDC has signed a Financial and Technical Services Agreement (FTSA) with the Nigerian Petroleum Development Company (NPDC) for the development and production of petroleum reserves and resources on OML 65. The FTSA includes an AWP which provides for development in three phases of the block. and Sirius has entered into an agreement with the joint venture to provide financing and technical services for the execution of the PTA.
The joint venture will initially focus on the redevelopment of the Abura field, involving the drilling and completion of up to nine development wells, intended to produce the remaining 2P reserves of 16.2 Mbbl, as certified by Gaffney Cline and Associates (GCA) in a CPR dated June 2021.
Commenting, Toks Azeez, Sales & Commercial Executive of Baker Hughes, said: “We are extremely happy to have been selected for this project with Sirius and their JV partners. This project represents an important step towards providing our world-class integrated well-service solutions in one of the most prolific fields in the Niger Delta. Baker Hughes’ technological efficiency and execution excellence will help Sirius improve its profitability and competitiveness in the energy market.”
Bobo Kuti, CEO of Sirius, commented: “We are delighted to have secured the services of one of the world’s leading energy technology companies to work with our joint venture team to deliver the approved work program on the block. OML 65. We look forward to building a long and mutually beneficial partnership with Baker Hughes.”
Egbin Decries N388B NBET Debt, Idle Capacity
Egbin Power Plc, the biggest power station in Nigeria, has said it is owed N388bn by the Nigerian Bulk Electricity Trading Plc for electricity generated and fed into the national grid.
The company disclosed this on Tuesday during an oversight visit by the Senate Committee on Privatisation, led by its Chairman, Senator Theodore Orji, to the power station, located in Ikorodu, Lagos.
The government-owned NBET buys electricity in bulk from generation companies through Power Purchase Agreements and sells it to the distribution companies, which then supply it to the consumers.
The Group Managing Director, Sahara Power Group, Mr. Kola Adesina, told the lawmakers that the total amount owed to Egbin by NBET included money for actual energy wheeled out, interest for late payments and available capacity payments.
Egbin is one of the operating entities of Sahara Power Group, which is an affiliate of Sahara Group. The plant has an installed capacity of 1,320MW consisting of six turbines of 220 megawatts each.
The company said from 2020 till date, the plant had been unable to utilize 175MW of its available capacity due to gas and transmission constraints.
Adesina said, “At the time when we took over this asset, we were generating averagely 400MW of electricity; today, we are averaging about 800MW. At a point in time, we went as high as 1,100MW. Invariably, this is an asset of strategic importance to Nigeria.
“The plant needs to be nurtured and maintained. If you don’t give this plant gas, there won’t be electricity. Gas is not within our control.
“Our availability is limited to the regularity of gas that we receive. The more irregular the gas supply, the less likely there will be electricity.”
He noted that if the power generated at the station was not evacuated by the Transmission Company of Nigeria, it would be useless.
Adesina said, “Unfortunately, as of today, technology has not allowed the power of this size to be stored; so, we can’t keep it anywhere.
“So, invariably, we will have to switch off the plant, and when we switch off the plant, we have to pay our workers irrespective of whether there is gas or transmission.
“Sadly, the plant is aging. So, this plant requires more nurturing and maintenance for it to remain readily available for Nigerians.
“Now, where you have exchange rate move from N157/$1 during acquisition in 2013 to N502-N505/$1 in 2021, and the revenue profile is not in any way commensurate to that significant change, then we have a very serious problem.”
He said at the meeting of the Association of Power Generation Companies on Monday, members raised concern about the debts owed to them.
He added, “All the owners were there, and the concern that was expressed was that this money that is being owed, when are we going to get paid?
“The longer it takes us to be paid, the more detrimental to the health and wellbeing our machines and more importantly, to our staff.”
Adesina lamented that the country’s power generation had been hovering around 4,000MW in recent years.
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