Running wars on batteries

From foot-slogging infantry to the F-35 Joint Strike Fighter, weapon designers look to high-performance electric batteries to deliver more capability. On the ground, increased demand for battery power comes from soldiers fitted with personal radios to keep them plugged into the battlefield network, as well as night-vision goggles and other electrical equipment. In the air, engineers have discarded hydraulics to drive the F-35's flight control flaps and are using electricity instead. That calls for a high-performance, 270-volt backup battery that can provide juice to fly a jet at 40,000 feet. In the sea, silver-based batteries allow heavyweight torpedoes to hunt for an hour and accelerate to 50 knots.

Saft, based in Bagnolet in the southern suburbs of Paris, France, makes batteries for civil and military applications on land, sea, air and space. Thus a military trend toward fielding more electronic equipment should spell easy business success for Saft. But there are headwinds, as readers of the commodities pages will know. Rising metals prices dented Saft's earnings for the first half of this year, with soaring demand for nickel from stainless steel makers crimping profits - nickel prices were at $45,000 per metric ton in the first half of 2008. Saft paid out an extra 25 million euros for raw materials, reducing the profit line. The chronically weak U.S. dollar also hurt profits, as some 40% of sales are denominated in dollars.

Ground troops are heavy users of lithium batteries. Every time troops deploy, demand surges. Saft made 18 million euros in sales of lithium batteries to the Army last year. Primary, or nonrechargeable, lithium batteries are in demand in the military market, offering lightness and power. Lithium prices were around $7,000 to $8,500 per ton [March 2008]. Much of the demand for lithium batteries comes from the global automobile market. In the military aircraft market, the choice of lithium for the F-35 is due partly to efforts to shave weight off the stealthy plane. A contract with the F-35 program, notionally set at 3,000 aircraft, is worth hundreds of millions of dollars for Saft. The most dynamic market is what Saft calls new defense systems, including rechargeable batteries for hybrid vehicles in the U.S. Army's Future Combat Systems program. "Lithium's the answer," Saft CEO John Searle said. "It's an enabling technology. Kilowatts per kilo, it's orders of magnitude better than any other technology."

- As in many areas of technology, the military leads the way.

TSMC may raise prices as costs increase due to inflation

news.yahoo.com :

Top contract chip maker Taiwan Semiconductor Manufacturing Co (TSMC) said on Tuesday [27 May 2008] it may raise prices for its higher-end chips as rising costs threaten to squeeze profits. Semiconductor makers face higher costs to build state-of-the-art chip plants for most cutting-edge chips, and are also feeling the pain of rising inflation. Jason Chen, a company vice president in charge of global sales and marketing said, "We face some structural profit pressure. In the short term, we also face pressure from inflation and oil prices." Consumer prices in Taiwan, where TSMC is based, rose 3.86% in April, with core inflation up 3.1% - a nine year high.

TSMC, Samsung and Intel have said they would jointly develop next-generation bigger silicon wafers to boost efficiency in chip manufacturing. Analysts say a factory designed to make chips on 18-inch wafers could cost $10 billion or more to build, nearly triple the price of a current 12-inch wafer factory.

- Technological development is usually deflationary, and for the past decades has mostly had the upper hand over inflation. Consumers have been the primary beneficiaries, enjoying better technology at lower prices - be it computers, electronic gadgets, automotive systems, and so on. But in recent years, inflation has fought technological deflation to a standstill, and it now seems that the forces of inflation are starting to win the battle. And, contrary to the opinions expressed by the TSMC vice president, the "pressure of oil prices" will not be a short term phenomenon. When the effects of Peak Oil start to kick in, global hyperinflation will not be too far behind.

(2008-06-05 22:07:24 SGT) [Biz] Permalink

Saudi Aramco eyes $129 billion investment in next 5 years

peakoil.com -> rigzone.com, uk.reuters.com :

State oil giant Saudi Aramco plans to invest $129 billion on new energy projects in the next five years, the company's executive vice president of operations said on Sunday [25 May 2008]. Saudi Arabia is the world's largest oil exporter and Aramco is expanding to increase crude, gas, refining and petrochemical capacity. Total investment would be higher as it would include some of the $65 billion that Aramco is investing in projects that are already under way. "We are clearly focused on the downstream as the area of greatest potential for future growth and impact," he said earlier in a conference speech.

- This is interesting from a peakoiler's point of view, as this means that with increased local demand and these increased investments in domestic refineries and petrochemical plants, Saudi Arabia will be using more of its own crude oil and natural gas production, and consequently there will be less available for export to consumer countries. Also, read up the earlier story about the Saudi's building 4 new industrial cities, including the world's largest aluminium smelter.

Vietnam CPI inflation rate accelerates to 25.2% - fastest since 1992

bloomberg.com :

Vietnamese inflation accelerated to 25.2% in May [2008], the fastest since 1992, driven by record rice and energy prices, according to a statement released by the General Statistics Office in Hanoi today [27 May 2008]. Food costs have been the primary culprit for faster inflation, underpinned by surging international prices of rice, of which Vietnam was the third-biggest exporter and fifth-biggest consumer last year [2007]. Prices in the food category including rice jumped 67.8% in May from a year earlier.

To combat inflation Vietnamese authorities have told banks to cut lending, put in place some price controls and instructed government agencies to halt non-essential construction projects. Last week the central bank raised its key interest rate to 12% from 8.75% and allowed banks to offer lending rates of up to 18%. Vietnam's Ministry of Finance has proposed that the government provide further compensation to oil and gas companies to sell petrol at prices below market rates.

- In the long run, it is never a good idea for governments to subsidize petrol or diesel prices. Eventually rising crude oil prices will put an increasingly heavy burden on the government and cause the budget to run into a deficit, or worsen existing deficits.

On the inflationary front, it also didn't help that food prices, especially rice, have been on an uptrend in the past years (recent technical corrections notwithstanding). A CPI inflation rate of 25.2% is very high - if it goes any higher it would be heading into hyperinflationary territory.