Shipping companies feel the heat as investors shun coal

By Jonathan Saul and Simon Jessop

LONDON (Reuters) – Shipping companies that transport the world’s coal are in the crosshairs of some financial backers who are cleaning up their businesses in the absence of a truly global drive by nations to renounce the dirtiest fossil fuel.

In a sign of investors taking the initiative, six European firms collectively representing over 5% of the estimated annual $16 billion capital financing requirements of the dry bulk industry told Reuters they were either reducing their exposure to vessels that transport coal or were considering doing so.

Such carriers – titanic vessels stretching up to 270 meters (885 ft.) long and able to carry hundreds of thousands of tonnes of cargo – are the cheapest way to transport coal and other commodities like iron ore and grain in large quantities.

Swiss Re told Reuters that from 2023 it would no longer cover the transport of thermal coal via reinsurance treaties, where it covers a portfolio of insurers’ policies. It exited the direct insurance of coal cargoes in 2018.

“There is much more pressure on the insurance companies in terms of ESG,” said Patrizia Kern-Ferretti, head of marine at Swiss Re Corporate Solutions, referring to the sustainable investment sphere. “I hear from brokers they are having difficulty placing coal policies in the insurance market,” she added. “More and more companies are applying direct guidelines.”

Esben Saxbeck Larsen, senior portfolio manager at Denmark’s Danica Pension, said it favored greener shipping firms as they provided the best risk/return characteristics. The fund has “close dialogue” with firms about their ESG strategies.

“If we are uncomfortable with such answers, we will not invest in the company,” he added, without elaborating on the specifics of the methodology.

Such pressures pose new challenges for the shipping industry, which hitherto largely hasn’t been drawn into the center of the coal debate by policymakers and investors focused on production and consumption rather than transport of the fuel.

Andreas Sohmen-Pao, chairman of BW Group, which operates a diverse fleet including oil and gas tankers, offshore vessels and dry bulk carriers, said ESG pressures on investors and banks – capital providers to the industry – were growing.

“How that plays out in terms of outcome is a different question. Sometimes, people shun a sector and the returns only get better as supply moderates,” he added.

“Everyone has to do what they think is right. Sometimes, you can have counter-intuitive effects.”

There’s good money be made from delivering coal, which broadly accounts for about 30% of cargo volumes and has hit record prices amid a shortage of fuel including natural gas to provide the power needed by a global economy recovering from a pandemic.

And demand beckons for decades to come after major consumers including China and India failed to join a pact to phase out coal power at U.N. climate talks being held in Glasgow this week; while Europe and the United States are retiring coal-fired plants, Asian nations are building almost 200 more.

Khalid Hashim, managing director of Precious Shipping, one of Thailand’s largest dry cargo ship owners, said investors should target the consumers and producers of coal.

“All we do is deliver it from the point of origin to the point of consumption, like a messenger delivering his message,” he added. “Coming after ship owners seems the easy cop-out route as we have no voice.”


The six firms that spoke to Reuters about their coal concerns collectively own, finance, insure or reinsure more than $1 billion of capital in the dry bulk industry, based on the estimated value of shipping assets.

Leading shipping financiers more broadly currently provide close to $290 billion of lending to the industry annually, with capital requirements for the dry bulk segment accounting for about $16 billion, according to analyst and Reuters estimates.

The investor pullback, part of a wider shift in the financial industry away from fossil fuels, threatens to drive up the cost of finance and insurance for some shipping firms in the dry bulk sector, which carries close to half of global seaborne cargo volumes.

London-based specialist asset manager Marine Capital, which owns and operates shipping assets on behalf of institutional investors, said it anticipated that funders would not support investments in the largest bulk carriers that typically carry coal, known as capesize vessels.

“When it comes to small bulk carriers below panamax size the amount of coal they carry is relatively modest and our experiences suggest that certainly now institutions would take the view that the relationship with coal is, from their perspective, de minimis,” said Marine Capital CEO Tony Foster.

Tufton Investment Management, another prominent investor in shipping, said it had been increasingly limiting its exposure to coal carriage, especially thermal coal, since 2018 by favoring charterers less likely to carry the fuel.

“For example we choose agricultural houses over miners and utilities,” said Paulo Almeida, the chief investment officer.

Separately, at least two major ports are making big shifts; Antwerp has turned its back on coal, for example, while Peel Ports is redeveloping its former Hunterston coal import terminal in Scotland to be able to handle offshore wind, dry docking for ships, aquaculture and the recycling of energy.


Some bulk shipping players are looking to get ahead of the climate curve by refocusing their businesses away from fossil fuels. Others, who have seen patchy profits in recent years, are loathe to the turn away from the returns on offer from coal.

Monaco-based Eneti is in the former camp, and it has shifted entirely out of dry bulk shipping this year into providing specialist vessels for the offshore wind sector.

“An important consideration when we exited the dry bulk sector was thermal coal,” managing director David Morant told Reuters, saying trying to clean up coal transportation was “only applying lipstick”.

“As a publicly-listed company, renewable energy through offshore wind is higher growth, environmentally responsible and attractive to our investor base.”

Similarly Purus Marine, which has leading U.S. investment company Entrust Global as its founding shareholder, says it is focused on more environmentally friendly ocean industries.

“Our business model is to own vessels and maritime infrastructure involved in offshore renewable energy, seafood, ferries and the climate-aligned sectors of industrial shipping,” said CEO Julian Proctor.


The impact of higher prices for shipping coal would be felt most in Asia, which consumes 80 percent of global coal supply and is more reliant than elsewhere on coal-fired power.

Even though emissions from burning coal are the single biggest contributor to climate change, the priority for many developing countries is to provide power to a rapidly growing population rather than converting to renewable plants.

An abrupt transition from coal would drive up logistics costs for producers and consumers, said Vuslat Bayoglu, managing director of South African investment firm Menar, which holds stakes in South African thermal coal, anthracite and manganese producers.

“The worst-case scenario is to see countries being plunged into darkness and manufacturing being hit hard, thus heralding a global economic crisis of sort,” he added. “This would be highly irresponsible, as many countries are crawling out of long periods of recession and COVID-induced decline.”

(Additional reporting by Carolyn Cohn in London and Helen Reid in Johannesburg; Editing by Simon Webb, Veronica Brown and Pravin Char)

GM hit by chip shortage, to cut production at four plants

By Ben Klayman

DETROIT (Reuters) – General Motors Co became the latest automaker hit by the global shortage of semiconductor chips as the U.S. automaker said on Wednesday it will take down production next week at four assembly plants.

GM said it will cut production entirely during the week of Feb. 8 at plants in Fairfax, Kansas; Ingersoll, Ontario; and San Luis Potosi, Mexico. It will also run its Bupyeong 2 plant in South Korea at half capacity that week.

GM did not disclose how much volume it would lose or which supplier was affected by the chip shortage, but said the focus has been on keeping production running at plants building the highest-profit vehicles – full-size pickup trucks and SUVs as well as the Chevrolet Corvette sports car. GM said it intends to make up as much lost production as possible.

AutoForecast Solutions, which tracks production, estimated GM’s combined lost volume would total almost 10,000 vehicles next week.

“Despite our mitigation efforts, the semiconductor shortage will impact GM production in 2021,” GM spokesman David Barnas told Reuters in a statement.

“Semiconductor supply for the global auto industry remains very fluid,” he added. “Our supply chain organization is working closely with our supply base to find solutions for our suppliers’ semiconductor requirements and to mitigate impacts on GM.”

Affected GM vehicles include the Chevrolet Malibu sedan, Cadillac XT4 SUV, Chevy Equinox and Trax, and GMC Terrain SUVs and the Buick Encore small crossover vehicle.

The chip shortage has led several automakers, including Volkswagen AG, Ford Motor Co, Subaru Corp, Toyota Motor Corp, Nissan Motor Co and Stellantis NV, to cut vehicle production.

Mazda Motor Corp is considering cutting its global output by a total of 34,000 vehicles in February and March due to the shortage, sources told Reuters on Wednesday. Nissan said on Tuesday it cut three days of production on the truck line at its Canton, Mississippi, plant.

The chip shortage is expected to cause production in the global auto sector to be 672,000 vehicles lower than anticipated in the first quarter, IHS Markit said on Wednesday. The forecasting firm expects the shortage to last into the third quarter.

AutoForecast Solutions announced lost production globally so far due to the shortage has totaled 564,000 vehicles and estimated the total impact this year could be 964,000 vehicles.

Taiwan, home to the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and other major tech firms, is at the center of efforts to resolve the shortage.

Taiwanese chipmakers have promised to increase production and the government has urged them to address the problem.

Taiwan economic officials will hold a virtual meeting with the United States at the end of this week to discuss supply chains, with semiconductor firms present.

On Tuesday, 15 U.S. senators, including some from key automotive states like Michigan, Ohio, Tennessee, Illinois, Indiana and South Carolina, urged the White House to work with Congress to address the chip shortage.

(Reporting by Ben Klayman in Detroit; Editing by Matthew Lewis)

North Korea appeared to resume plutonium production this year

File photo of North Korean flag flying on a mast at the Permanent Mission of North Korea in Geneva

VIENNA (Reuters) – North Korea appeared to resume activities this year aimed at producing plutonium, which can be used in the core of an atomic bomb, the U.N. nuclear watchdog has confirmed, though it added that signs of those activities stopped last month.

Pyongyang vowed in 2013 to restart all nuclear facilities, including the main reactor at its Yongbyon site that had been shut down and has been at the heart of its weapons program.

It said last year that Yongbyon was operating and that it was working to improve the “quality and quantity” of its nuclear weapons. It has since carried out what is widely believed to have been its fourth nuclear test.

“From the first quarter of 2016, there were multiple indications consistent with the radiochemical laboratory’s operation,” International Atomic Energy Agency (IAEA) chief Yukiya Amano said in a report to the agency’s annual General Conference, referring to a site used to reprocess plutonium.

“Such indications ceased in early July 2016,” Amano said in the report posted online and dated Friday. Those indications included deliveries of chemical tanks and the operation of a steam plant linked to the lab, the report said.

The IAEA, which has no access to North Korea and mainly monitors its activities by satellite, said last year it had seen signs of a resumption of activity at Yongbyon, including at the main reactor.

There were signs the reactor had been running in the past year, with a pause between October and December, probably to refill it with enough fuel for the next two years, according to the report dated Friday.

Amano said in June that the agency had seen signs of reprocessing, the production of plutonium from spent reactor fuel, at Yongbyon.

Japan’s Kyodo news agency last week quoted North Korea as saying it had resumed plutonium production by reprocessing and had no plans to stop nuclear tests as long as perceived U.S. threats remain.

North Korea’s Atomic Energy Institute, which has jurisdiction over Yongbyon, also told Kyodo it had been producing highly enriched uranium necessary for nuclear arms and power “as scheduled”.

“There were indications consistent with the use of the reported centrifuge enrichment facility,” Amano’s report to the General Conference, which will be held at the end of September, said, adding that construction work had been carried out around the building that houses the facility.

“There were new construction and refurbishment activities on the (Yongbyon) site, which are broadly consistent with (North Korea’s) statement that all the nuclear facilities in Yongbyon have been ‘rearranged, changed or readjusted’,” it added.

(Reporting by Francois Murphy; Editing by Dominic Evans)