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Union Pacific reports higher quarterly profit due to strong freight demand
Union Pacific announced a 'rise' in its second-quarter profits on Thursday as a result of?strong freight demand? and pricing gains? that overshadowed an increase in operating expenses? U.S. Railroads have benefited from their pricing power and operational discipline. They have also improved network reliability and performance on time to support freight volumes and attract more business. West Coast Railway's net income for the second quarter was up 6.6% to $2 billion or $3.36 a share from $1.9billion or $3.15 a share compared to a year ago. The company's revenue increased 12% from the previous year to $6.86 billion. The freight revenue of the company also increased 12%, to $6.52 billion. Fuel costs are still a major challenge for transportation firms after the U.S. and Israeli strikes on Iran. These strikes have sent energy 'prices soaring, which has squeezed margins in all sectors, from trucking to logistics, and even airlines, causing one of the largest disruptions since the COVID-19 pandemic. The average U.S. gasoline price rose to $4 per gallon for the first time in?more than three years in March, marking the largest monthly increase since decades. Fuel-intensive industries are under pressure as prices remain at $4 per gallon. The shares of the company rose marginally during premarket trading.
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EU urges Houthis not to attack in Red Sea
Kaja Kallas, EU's foreign policy chief, said that Iran's Houthi ally in Yemen must stop all actions?that endanger?international?shipping?and the lives of?seafarers?. Kallas stated that recent threats by Yemeni Houthis of imposing a maritime blocade against Saudi Arabia "poses a direct threat to the regional stability and constitutes a dangerous escalated situation". The Houthis said on Thursday that they had struck two "Saudi oil tanks" as part of a blockade against Saudi Arabia. This could create a second chokepoint for global oil supply alongside the Strait of Hormuz. Kallas called such attacks "unacceptable", and said they inflamed an already fragile situation. The EU's top diplomat said that navigation must be unimpeded in the Strait?of?Hormuz as well as the Red Sea. She added that the EU's ASPIDES naval operations remained committed in protecting freedom of navigation in the Red Sea and surrounding international waters.
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Maguire: Wildfires are a threat to the US power sector in multiple ways.
Wildfire season in the American West was seen as a major threat for years. It was mostly viewed as a danger to homes, trees and utility infrastructure. As smoke from fires blankets vast swathes of the nation, it's becoming a challenge for the power sector. The U.S. grid has changed. The U.S. grid is changing. Smoke from wildfires interferes with all of these. Smoke is unlikely to derail America’s renewable-energy growth, but it is a source of operational insecurity that can reduce solar production, 'complicate grid management', and add stress to transmission system at a time when electricity demand is on the rise. Here are five reasons why wildfires continue to affect the U.S. electricity system. 1. SMOKE BLOCK Sunlight is the fuel for a solar-powered power system. Smoke from wildfires reduces solar radiation that reaches photovoltaic cells by scattering it and absorbing it before the sunlight reaches the earth. The Colorado State University researchers found that the daily average solar resources around major fires in California during 2020's intense wildfire season fell from 11% to 17% for global horizontal irradiance, which conventional solar panels depend on, and direct normal irradiance dropped by 32% to 40%. Close to active fires, the impacts can be greater. In heavily affected areas, monthly average reductions for DNI and GHI reached up to 61%. According to the National Interagency Fire Center, utility-scale solar power is now a major source of electricity in states like California, Texas and Arizona, where there are several wildfires currently burning. Smoke is a weather variable that can reduce power production in entire regions as the grid depends more on solar output. 2. BAD TIMING Solar losses arrive when grids are least able to afford them. Large fires are more likely to occur in periods of extreme heat and drought, as well as when electricity demand is high. These same conditions lead to increased air conditioning use, which drives power consumption towards seasonal peaks. Smoke can also suppress solar production, just as heatwaves are increasing demand. This can create a double-hit for grid operators, as there is less renewable energy available at times when electricity demand is highest. In the past, planners of power plants were concerned about clouds that reduced solar output. They must increasingly take into account dense smoke plumes which can persist over large geographical areas for several days, if not weeks. 3. FLYING BLINDS Grid operators need more than just power. They need reliable power. Wildfire smoke is capable of rapidly changing solar output across hundreds of miles. This makes solar forecasting difficult, and forces system operators to purchase?additional reserve to maintain reliability. Smoke-related losses have been found to influence reserve requirements, electricity market outcomes and reserve requirements in a study by the National Laboratory of the Rockies. As renewable penetration increases, the problem becomes more acute. The weather is not a factor when it comes to fossil fuel generators. The output of solar panels is affected by environmental factors. Smoke adds an additional layer of uncertainty to forecasts, which previously relied on cloud cover and temperature. Wildfire season is becoming more of a grid management challenge than a simple environmental one. 4. TRANSMISSION OVERLOAD Impacts are not restricted to the power generation industry. According to research, wildfire smoke and heat can cause airborne combustion particles that reduce the air insulation properties around high-voltage transmission cables. These conditions can lead to more flashovers, faults, and automatic line trips. Intense heat can cause conductor sag, which can reduce operational margins. The U.S. Energy Transition relies heavily on the expansion of transmission systems in order to move renewable energy from remote production areas to urban demand centres. Smoky air can affect electricity production as well as the infrastructure required to deliver it. 5. Not just the Wild West The most significant shift in the economy is likely to be geographical. Wildfire smoke is now a continent-wide phenomenon. Canadian fires have spread smoke over the Midwest, Northeast, and Mid-Atlantic. Western U.S. Fires also affect areas hundreds, if not thousands, of miles away from the flames. The good news, however, is that the long-range smoke appears to have only a modest impact on average annual solar resources. Researchers found that outside areas near active fires, average reductions in photovoltaic-relevant GHI generally remain below 5%, even during major smoke years. The findings do contain an important caveat. Smoke doesn't need to be a major problem to cause operational issues. The design of electricity systems is based on managing peak periods and extreme events. It is more important to have a few days with a significantly reduced solar output in a heat wave than it is to make a small difference in the annual generation figures. Wildfire smoke is not likely to stop America's long term solar buildout, which is good news for those who support renewable energy. Researchers have found that photovoltaics resources are relatively stable in most parts of the country, even during extreme fire seasons. Smoke is another climate-driven problem for grid operators who are already struggling with rising demand, frequent heatwaves and a generation fleet that is increasingly dependent on weather. As?electricity markets have learned to manage risks from clouds, wind speeds and temperatures, they will soon be forced to include smoke in their summer power planning. Wildfire season, in a grid powered increasingly by sunlight, is both an environmental and an energy story. These are the opinions of the columnist, who is also an author. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn, X and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets 7 days a weeks.
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QatarEnergy extends LNG Force Majeure and charters tankers until October, sources claim
QatarEnergy extended force majeure for?liquefied gas (LNG), and continued to?lease out some of their LNG tankers until mid-October. Trade sources indicated that they expected a?continuation of export disruptions? as the Strait of Hormuz remained closed. QatarEnergy has been forced to close liquefaction train, declare force majeure for deliveries, and suspend exports due to the 'Iran - war. The renewed Iranian attacks on tankers that transit the Strait this month have lowered expectations for a return of pre-war LNG flows. Qatar is responsible for about one fifth of the global LNG trade. A prolonged outage could?shorten supplies and increase prices The key Asian buyers as we head into the winter in the Northern Hemisphere. QatarEnergy, according to four sources including an official from Petrobangla, has extended the force majeure notices on LNG deliveries to buyers in South Korea and India. One source said that notices which were due to expire between August and September have now been extended to mid-September. Abdul Mannan, Petrobangla acting chairman, said that "the uncertainty about Qatari supplies?remains an issue for us". "We have had to ?turn to the costlier spot market ?and are exploring other options, including government-to-government arrangements with alternative suppliers. The disruption will add to the burden of energy subsidies for the government if it persists. QatarEnergy is expected to extend its force majeure until at least October, according to two other sources. They declined to name the sources because they weren't authorised to talk to media. QatarEnergy didn't immediately respond to an? QatarEnergy did not immediately respond to a request for comment. TANKERS AVAILABLE FOR RENT THROUGH MID OCTOBER Two shipbrokers have confirmed that QatarEnergy's QatarEnergy LNG Marketing and QatarEnergy Trading continue to lease some of their LNG tanks through October. QatarEnergy may have chartered only a few vessels out of its fleet?of almost 70?LNG carriers. However, sources in the trade said that the move could be interpreted as a sign that a prolonged disruption is expected because the vessels were leased under spot deals lasting 30?to 90?days. According to recent fixture reports at least nine QELM/QET controlled LNG carriers have been sub-chartered by third parties, including Chevron (twice), BP, EnBW Cheniere, Kansai SOCAR LMCS Trafigura, Kansai SOCAR and Kansai. She said that the?vessels were leased despite falling freight rates on a LNG?market which is rapidly deteriorating. She added that Qatar's willingness to fix ships as rates dropped suggests the country is prioritising fleet usage over waiting for market recovery. Reporting by Marwa Rashed in London, Emily Chow and Ruma Paul from Dhaka. Editing by Susan Fenton & David Goodman.
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India's IndiGo posts quarterly loss on soaring fuel costs
IndiGo, India's stop?airline, reported a?loss in the first quarter on Thursday due to?high fuel prices?caused by?the Iran war. Budget carrier reported a loss for the quarter ending June 30 of 3.82 billion rupees (about $39.6 million), compared to a profit of 21.61 billion rupees one year ago. IndiGo and other airlines that do not hedge their fuel have been battling with rising jet fuel prices. The Iran war has pushed crude oil to above $100 per barrel during the quarter, reducing margins. Revenues grew by 20% in the quarter to 245.84 billion Rupees. However, expenses increased at a faster rate of 35.1%. The largest increase was in the?aircraft-fuel expenses, which grew by nearly 86% to 108.3 Billion Rupees. IndiGo has incurred higher costs as more than 60% of its expenses are dollar-denominated. Last quarter, the airline announced that it would "explore fuel hedges". Fuel costs are hedged by airlines through financial contracts which 'lock in' prices. This helps 'cushion sudden spikes?in fuel cost and improve cost prediction.
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Chinese titanium firms look to expand beyond their home market
Chinese titanium suppliers used this week's 'Farnborough Airshow' to court aerospace customers. They bet that tight global supplies of a critical metal will outweigh any concerns about U.S. Tariffs. Titanium is a vital material in aircraft production because of its light weight, strength and corrosion resistance. It's used for landing gear, jet engines and airframes. Supplies have been squeezed by a number of shocks over the past few years. From the COVID-19 pandemic to Western sanctions against Russia, a major producer of titanium after its full-scale invasion in Ukraine 2022. To U.S. Tariffs on Chinese Imports under President Donald Trump. Nearly two dozen 'Chinese' firms, such as HST Titanium (HongshengTai), Jinda Titanium (Jinda Titanium) and Baoji YongshengTai (Baoji YongshengTai), showcased products ranging in size from titanium sponges and ingots, to ceramic brake plates, at Farnborough. They were looking to expand their market beyond the domestic one dominated by COMAC, "There is a lot of competition within China, and they want to expand their overseas market," Karolina Jackowicz, a metals specialist at CCMA (a raw materials distributor that advises Chinese suppliers) said. CHINA SEEKS OVERCOME TRUMP TARIFS While U.S. Tariffs on Chinese Titanium initially hurt the suppliers, executives in the industry said that they still see opportunity in America, where supplies are constrained and production has stopped. Also in Europe, there was a lot of interest. Airbus has confirmed that at least three Chinese suppliers who declined to name themselves, have their titanium used in the aircraft. Airbus has not responded to a request for comment regarding its use of Chinese Titanium. John Strickland, an aviation analyst, said that the large Chinese presence at Farnborough - one of the largest aerospace events in the world - highlighted a renewed push for Western markets. They are networking. They're networking. They are explaining their product. He said, "They're showing off their product." COMAC was the most prominent Chinese aerospace and defense firm at the air show. COMAC is attempting to compete with Boeing and Airbus in commercial aviation, but it remains dependent on foreign suppliers of key technologies including jet engines. Strickland expects COMAC, and Chinese aerospace suppliers, to play an increasing role in the global market. However, they will have to develop the support ecosystem that is essential to Boeing and Airbus’s success. This includes?maintenance networks, spare parts distribution, engineering support, and aircraft leasing services. Strickland stated that "if they deliver their planes... in terms reliability, performance and in particular, a market that shows they can develop infrastructure worldwide, that's what the airlines want." (Reporting and editing by Joe Brock, Sharon Singleton and Shivansh Twary)
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Kuehne+Nagel's boss does not see a return to normal Mideast Shipping
Kuehne+Nagel CEO, Kuehne, said on Thursday that a return to normal shipping operations in the Middle East was unlikely in the near future, as little improvement had been seen along the main trade routes. Stefan Paul said that despite the fact that there are still some restrictions in the Strait of Hormuz and that carriers continue to avoid the Suez Canal to a certain extent, ships will continue to be routed around Cape of Good Hope, at the southern tip of Africa. He said, "Nothing fundamentally has changed since the past couple of weeks." The CEO's remarks underscore the fact that despite some tentative signs of recovery,?the industry is still far from returning to normal. Hapag-Lloyd, Maersk and other container carriers announced earlier in July that they would resume some trips through the Suez Canal. Paul said, "I doubt that this will happen." Since years, Middle East security issues have reshaped global supply chains. The Red Sea is a major shipping corridor in the world, and the Suez Canal handles about 12% global trade. It's a vital route for container ships, energy products, and industrial supplies. The repeated attacks of Iranian-aligned Houthi terrorists since late 2023 have prompted many shipping companies to reroute their ships around Africa. This has added about 10 days to Asia to Europe voyages and increased costs. These disruptions have led to shipping and logistics companies imposing emergency fuel surcharges. The French shipping company CMA CGM is among the most recent to do so. Paul stated that fuel surcharges for air freight, ocean cargo and road transportation would continue to be in place. Reporting by Anastasiia Kozolova and Amir Orusov; editing by Milla Nissi-Prussak
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QatarEnergy extends LNG Force Majeure and charters out tankers until October, sources claim
QatarEnergy extended force majeure for liquefied natural gas (LNG), and continued to lease some of its LNG tanks through mid-October. This signals that trade sources expect export disruptions will continue as long as the Strait o fHormuz remains closed. QatarEnergy has been forced by the Iran war, which is a major cause of LNG exports, to close liquefaction tracks, declare force majeure for deliveries, and suspend exports. The renewed Iranian attacks on tankers that transit the Strait this month have lowered expectations for a return of pre-war LNG flows. Qatar is responsible for about a fifth (or more) of the global LNG trade. A prolonged outage could cause a shortage and increase prices. The key Asian buyers as we head into the winter in the Northern Hemisphere. QatarEnergy, according to three trade sources, has extended force majeure for LNG deliveries to South Korea and India. One source said that notices which were due to expire between August and September have now been extended to mid-September. QatarEnergy is expected to extend its force majeure until at least October, according to two?other sources. All sources refused to be identified because they weren't authorised to talk to the media. QatarEnergy didn't immediately respond to an inquiry for comment. TANKERS AVAILABLE FOR RENT THROUGH MID OCTOBER Two shipbrokers report that QatarEnergy's entities QatarEnergy LNG Marketing and QatarEnergy Trading continue to lease some of their LNG tanks through October. QatarEnergy may have chartered only a few vessels out of its fleet?of almost 70 LNG carriers. However, sources in the trade said that the move could indicate a long-term disruption?because the vessels were leased under spot deals lasting 30 to 90 day. According to recent fixture reports, nine QELM/QET LNG carriers were sub-chartered by third parties, including Chevron, BP, EnBW (twice), Kansai SOCAR LMCS Trafigura, EnBW Cheniere Kansai SOCAR and Trafigura, said Ikram Eloumi. She said that the vessels were leased despite falling freight rates in a market for LNG freight that is rapidly deteriorating. She said that Qatar's willingness to fix ships as rates dropped suggests the country is prioritising fleet usage over waiting for market recovery. (Reporting from Marwa Rashad and Emily Chow, both in London; editing by Susan Fenton).
American Airlines lowers its full-year profit goal due to higher fuel prices
American Airlines lowered its full-year forecast profit on Thursday, as renewed U.S.-Iran conflict pushed up oil prices anew. This increased the fuel bill.
The carrier expects a loss adjusted of 65c per share and a profit adjusted of 65c per share. This is compared to its previous forecast of?an adjusted loss?of 40c to a profit?of $1.10/share.
In premarket trading, shares of the airline dropped by about 4%.
This move shows how unstable fuel markets have affected airline earnings forecasts, due to renewed U.S. - Iran fighting and reduced 'traffic' through the Strait of Hormuz. Before the war, about a fifth global oil and gas was shipped through the strait.
After a truce was reached between Washington and Tehran, jet fuel prices dropped sharply after the spring. Oil prices have increased again since the fragile agreement collapsed in early July. This has renewed upward pressure on airline fuel.
American spent an average of?$4.05 per gallon in the second quarter compared to the?$4 per gallon that was assumed by its April guidance. According to the forward fuel curve of July 21, it expects a?third-quarter average price of $3.75 per gallons. (Reporting and editing by Joyjeet Das in Bengaluru. Nandan Mandayam is based in Bengaluru.
(source: Reuters)