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The Chinese Dream: Energy and Commodities in an Era of Change

Multiple Operators Suffer Damage to Fiber Networks from Hurricane Michael

Factbox Energy demand impacts to linger in wake of Hurricane Michael

Factbox: Hurricane Michael Impact Turns from Production Loss to Demand Destruction

Fast-moving Michael destroys gas demand across US Southeast

The Chinese Dream: Energy and Commodities in an Era of Change

China is a country of superlatives, of enormous capacities and gargantuan appetites. With an estimated population approaching 1.4 billion and a mid-ranking GDP per capita of $8,582 in 2017, it cannot be anything but.

Nowhere do the superlatives flow faster than in the commodities sphere. Last year, the country became the world’s largest importer of crude oil, overtaking the United States. It is already by far the world’s largest producer and consumer of coal, and its natural gas consumption and imports are rising fast. China’s hydrocarbon dependencies embed it increasingly at the center of world commodity trade, to such an extent that changes in its domestic policies reverberate around global markets.

And more so than ever, China is looking outward.

It has chosen to use “soft power” — encapsulated in the ambitious multidecade Belt and Road Initiative — to consolidate its international supply chains and spread more widely its cultural and economic influence, investing in production capacity and major infrastructure projects abroad from ports to railways and power plants.

This creates demand for its companies, as earlier super-heated rates of growth cool within its domestic economy, and earns development plaudits, as China ties the economic success of its foreign partners to its own, albeit with Beijing the center around which this universe revolves.

China has notably not sought to export ideology, but has maintained its commitment to a state-led economy, pragmatically adopting market structures where they provide more efficient economic outcomes. But there can be no question that China’s economic development has reached an inflexion point.

It has built vast “pillar” industries in coal, steel and refining and become the manufacturing center of the world. It is now rationalizing these pillars, weeding out inefficiencies, improving industrial structures and environmental performance.

It is looking beyond the smokestack industries of the past to emerging technologies, such as cloud computing, renewables, artificial intelligence and robotics, focusing on its growing capacity to innovate and lead. It hopes to take advantage of technological disruption to leapfrog into the future.

Recognizing the vulnerabilities of hydrocarbon dependence, China has become a leader in renewables and electric vehicle manufacture. For each superlative in the fossil fuel arena, another can be found within the new energy economy.

Driven by both local and global concerns, environmental policy is increasingly at the heart of China’s industrial strategy and for a simple reason: it stands to benefit most from the “green dividend.”

Nonetheless, China’s environmental ambitions are, for now, a rapidly-growing but thin slice of a giant fossil fuel economy. As a result, the country will increasingly occupy two spaces; one the gravitational center of trade in hydrocarbons and metals; and second an emergent center of technology based on new, more secure supply chains and manufacturing.

However Beijing chooses to manage these complex and often seemingly contradictory positions, China is entering a new epoch in its development, one that extends far beyond the visions of its inception as the People’s Republic of China in 1949.

Multiple Operators Suffer Damage to Fiber Networks from Hurricane Michael

Communications providers are working to restore services in areas impacted by Hurricane Michael, but storm debris, power outages and significant fiber damage are hindering progress in those counties most devastated by the storm.

As of Oct. 14, a number of counties along the Florida Panhandle had more than half of their cell sites down, including Bay County — home of Panama City and Mexico Beach, described as "ground zero" of the storm by U.S. Federal Emergency Management Agency administrator Brock Long — where 66.1% of cell sites were down. Similarly, neighboring Gulf County had 69.6% of cell sites down, according to data from the U.S. Federal Communications Commission.

Based on the amount of damage in the area and ongoing power outages, it could be weeks before services are restored. Long said Oct. 12 that after search and rescue, restoring communications in impacted counties is among FEMA's top priorities.

"You have to be able to communicate to appropriately respond and we are trying to do everything we can to get the private sector vendors, the Verizon [Communications Inc.]'s of the world, to get in to try to get their systems back up and running," he said.

Long added, however, that the process is not easy. "There was a tremendous amount of debris. When you look at the damage in Mexico Beach, that is where the ocean rose potentially 14 feet … and shoved buildings out of the way. When you have that type of damage, it takes time to get in and go through," he said.

Hurricane Michael made landfall Oct. 10 near Mexico Beach as a Category 4 hurricane with 155-mile-per-hour winds.

For its part, Verizon said the "vast majority" of Florida and Georgia service has been restored, with 99% of the company's network in Georgia in service and 97% of its network in Florida. But the company noted there are pockets, particularly near Panama City, where the damage is severe.

"The storm caused unprecedented damage to our fiber, which is essential for our network — including many of our temporary portable assets — to work. Our fiber crews are working around the clock to make repairs, and while they are making good progress, we still have work to do to get the fiber completely repaired," the company said Oct. 14.

Fiber is the connecting component of a network that carries data from point to point. It is necessary for Verizon's permanent and temporary cell sites to be operational. The company noted that while it has multiple fiber paths to carry data, "The severity and intensity of the storm caused damage to all duplicate routes in the Panama City and Panama City Beach area."

In terms of wireline services, the FCC said 291,300 subscribers remain out of service as of Oct. 14, including 205,643 subscribers in Florida. The figures were down from a day earlier, when a total of 337,223 subscribers were without service, including 233,843 in Florida.

The top residential video and broadband provider in Bay County is Comcast Corp., according to MediaCensus data from Kagan, a research group within S&P Global Market Intelligence. Comcast, the largest cable operator in the U.S., said in an Oct. 12 statement that it is working to get Xfinity services back online.

"As power returns … and it becomes safe for our technicians and restoration crews, we will work to repair any damages affecting our network," the company said.

As of Oct. 15, more than 162,000 customers in Florida remained without power, including all 27,275 customers served by Gulf Coast Electric Cooperative. The cooperative said in an Oct. 12 Facebook Inc. post that its distribution system "suffered catastrophic damage"

In Gulf County, the top residential video provider is AT&T Inc.'s satellite video service DIRECTV, according to MediaCensus data, while the top residential broadband provider is Mediacom Communications Corp., the fifth-largest cable operator in the U.S.

Mediacom said Oct. 14 that its recovery efforts are underway but its network in Florida has 14 miles of severely damaged fiber near Walton County, as well as 25 miles of damaged fiber east of Panama City that is obstructing video transmission from Gulf County to Walton County.

"Our current priority remains focusing on repairing damage to our high-speed data transport network and main transmission facilities and repairing downed lines where we have access to the area. We have outages from widespread loss of commercial power along with downed lines, and structural damage throughout our systems," the cable operator said.

Factbox: Hurricane Michael Impact Turns from Production Loss to Demand Destruction

Houston, Oct. 11 2018 — Hurricane Michael made landfall at the Florida panhandle as a Category 4 hurricane Wednesday with 155 mph winds, quickly destroying demand for power, natural gas and refined oil products. Shut-in oil production rose modestly from Tuesday to over 700,000 b/d, but the storm has stayed east of much of the region's production, which means supply should be back online quickly.

Meanwhile, the severity of the storm has surprised to the upside, which could a mean longer lasting and more severe impact on demand for power, natural gas, refined products and ultimately crude oil.

"We expect the impact on refined products demand to be below that of previous hurricanes in the Gulf Coast such as Harvey in 2017, as the region impacted by Michael has lower population density than Houston ... Nevertheless, the impacts are favoring the high side of our estimates given the sheer severity of the storm," said Claudio Giamberti, Head of Demand and Refining at S&P Global Platts Analytics.

As of 7 pm EDT, the eye of Michael was moving over southwestern Georgia with maximum sustained winds still at 100 mph, according to the National Hurricane Center. The storm is expected to move northeast across the Carolinas before heading back out to sea Friday morning.