What happened Monday

A review of things you need to know before you go home on Monday; No retail rate changes, low auction activity, Synlait stumbles, green hydrogen looks promising, swaps stable, NZD holds, & more

27th Sep 21, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report here today.

TERM DEPOSIT RATE CHANGES
None here either.

DOWN LOW BUT NOT OUT YET
Activity in Barfoot & Thompson's auction rooms hit a new low last week but numbers are picking up this week.

STUBBED TOE
Synlait (SML, #48) has reported at -$28.5 mln loss, but looks for return to 'robust profitability' and sees return to 'similar levels' of profits as prior to this year by 2023.

NZX50 WINNERS & LOSERS
Last week on the NZX50, capitalisation rose just +0.1% in the week to be +12.3% higher than a year ago, and now at $135 bln (or 39.7% of GDP - or 11.8% of residential housing values excluding rentals). Napier Port (NPH, #50) fell -3.3% and two places to last place. Largest % fall for the week was Pushpay Holdings (PPH, #23) down -5.1%. The largest increase was Fonterra (FSF, #46) and up +8.0%, and Skellerup (SKL, #30) which was up +7.6% for the week.

GREEN HYDROGEN INTEREST PIQUED
A proposal to build the world’s first large-scale green hydrogen plant in Southland has been met with strong interest from domestic and international businesses. Meridian (MFT, #4) and Contact (CEN, #6)'s Southern Green Hydrogen project has attracted more than 80 responses to its registration of interest process. There is a strong focus on using green hydrogen produced from renewable energy for export and also to decarbonise carbon-intensive sectors including heavy transport, aviation, shipping and agriculture in New Zealand.

MONOPOLY CONTROL OF A CHOKE POINT
In Australia, unions are about to launch extended industrial action on their waterfront, designed to exert maximum pressure leading up to the end-of-year import rush. It could get ugly in a system already near breaking point. Previous ongoing slowdowns have led to ship wait times of 18 days in Sydney, 9 days in Melbourne and Brisbane. Union employees also took random sickies 7500 times in the past few months. These workers are paid an average of AU$172,000 for a 35 day roster to work 200 days a year and are seeking better conditions than that.

GERMAN ELECTION UPDATE
Further vote counting in the German MMP election suggests that the SDP is increasing its lead (up by +5%) with the far left probably failing to reach the 5% threshold, the far-right AfD floundering (down by -2%) but safely above the threshold, the Greens up by +5%, and the CDU (ex Merkle) down by -8%). That might squeeze the center party FDP out (up by +1%). A grand coalition SDP/CDU is still possible, excluding all the little parties. Counting continues.

PANDEMIC PRESSURE EASES
In Australia, there were another 787 new community cases in NSW reported today with another 596 not assigned to known clusters, and these numbers are a material improvement - or perhaps they just relate to weekend testing. They now have 11,260 active locally acquired cases. Victoria reported another 779 new cases today. Queensland is still reporting zero new cases. The ACT has 25 new cases again. Overall in Australia, more than 51% of eligible Aussies are fully vaccinated, plus 24% have now had one shot so far. There were no new cases in New Zealand at the border, and 12 more in the community, all in Auckland and all linked to already isolating cases. So far, 43% of eligible Kiwis now have both shots, another 34% the initial shot. So far the New Zealand vaccination effort (77% of Kiwis and rising) and the resistance seen in Australia is fading with theirs now at 75.8%.

GOLD FIRMER TODAY
Compared to where we were this time Saturday, the gold price has risen +US$4 at US$1754/oz in early Asian trade.

EQUITIES MIXED
The NZX50 started positively today, but has now turned negative and is down -0.2% near the end of trading. Meanwhile the ASX200 is still positive, up +0.6% in early afternoon trade. Tokyo is up +0.2% in very early trade. Hong Kong is up +% and Shanghai is up +%. Europe will be affected by the stalemate in the German MMP election. The S&P500 futures suggests Wall Street will open up +0.3%.

SWAP & BONDS RATES HOLD
We don't have today's closing swap rates yet. We will update this if there are significantly different changes when the end-of-day data comes through. The 90 day bank bill rate firmed +1 bp to 0.63%. The Australian Govt ten year benchmark rate is now at 1.42% and up +2 bps from this time Saturday. The China Govt 10yr is now at 2.89% and unchanged. The New Zealand Govt 10 year rate is now at 1.94%, unchanged from this morning, and now well above the earlier RBNZ fix for that rate at 1.91% (+1 bp). The US Govt ten year is now at 1.45% and unchanged from this time this morning.

NZ DOLLAR HOLDS
The Kiwi dollar is now at 70.2 USc and just marginally firmer than were we opened this morning. Against the Aussie we are just over 96.5 AUc. Against the euro we are also higher at just on 59.9 euro cents. The TWI-5 is just on 73.7, and moving up but still not quite at the top of the 72-74 range we have been in for most of the past eleven months.

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BITCOIN RISES
The bitcoin price is now at US$43,473 and a mere +0.6% above where we opened this morning. Volatility in the past 24 hours has been high at just over +/- 3.8%.

This soil moisture chart is animated here.

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36 Comments

by keithwoodford | 27th Sep 21, 4:08pm 1632712122

It is important that 'green hydrogen' is recognised as a storage and delivery mechanism for electricity that has been created by some other process. So it is not cheap energy. In this case the electricity would be generated at Manapouri and then converted to hydrogen - a two stage process. It may be a good solution but it won't be cheap. Businesses will be salivating at the investment opportunities associated with building and operating the plant.

KeithW

by positivelywallstreet | 27th Sep 21, 4:43pm 1632714203

The US has targeted $1US per kilogram for hydrogen in the next decade so let’s sober up and use that for the budgets now.

This is the same team that drove down the cost of solar with high level research.

by Jonny.Foe | 27th Sep 21, 6:06pm 1632719194

I thought the big shifts in price of solar came when Germany invested massively in social power and production was seriously scaled up and streamlined. The tech barely changed throughout the biggest price reductions.

by solardb | 27th Sep 21, 6:28pm 1632720485

Partly , but the Chinese really made(I should say brought) the big breaks in technology and production. Suntech brought an Australian's Universtiies break through technology back in the late 90's / early 2000's, and became the first big producer Now virtually all panels are made in China, and the top brands are unbeatable on price and performance.Australia no longer manufactures pv panels.

You are correct that the tech has not changed massively , they've gone from about 17 % efficient to the low 20's % efficient.

by theglc | 27th Sep 21, 4:50pm 1632714620

True, however it can utilise off peak electricity to minimise wastage and it is cleaner than anything else out there

by Nzdan | 27th Sep 21, 6:33pm 1632720800

Another thing to consider, is that electricity might not be an ideal energy source for certain applications. Aviation being an example. Strapping a bunch of heavy batteries to an aircraft is not viable. But if we can use wind/hydro/solar derived electricity to refine hydrogen fuel then while the EROI is negative, the outcome is a usable fuel source.

by Brock Landers | 27th Sep 21, 7:39pm 1632724752

Molecular hydrogen is impractical.

Better to combine it with carbon dioxide captured from the atmosphere to make kerosene.

Our aircraft already run on it.

by powerdownkiwi | 27th Sep 21, 7:54pm 1632725663

NZdan - yes, but a society going backwards that much, energy-wise, ain't flying. We are already unable to underwrite a dollar of global GDP, without ' creating' more than a dollar's worth of debt. In other words, society is already unable to pay it's way - even with a count which avoids stuff. By the time we're down to hydrogen, the debt has been defaulted on. One way or another....

Brock - too entropic; it'll never fly......

by Brock Landers | 27th Sep 21, 11:17pm 1632737838

I don't subscribe to the energy shortage doom and gloom. There is boundless wind and solar in any desert. Failing that we know how to build small modular nuclear reactors and have limitless supply of fuel. Only anti-nuclear hippies stand in the way.

Necessity is the mother of all invention and technology can be developed to solve most problems.

by Hardly | 27th Sep 21, 5:06pm 1632715594

I’m concerned Meridian and Contact’s market power creates a conflict of interest. They know removing the supply will increase prices elsewhere. Would they go the hydrogen route if manapouri was their only interest in the energy market?

by positivelywallstreet | 27th Sep 21, 5:36pm 1632717382

That is a high level question, could I answer a simple question like how to turn Manapouri water into Wine?

Guaranteed to make money.

by Jonny.Foe | 27th Sep 21, 6:09pm 1632719389

There are lot of people queing up to use that surplus nighttime electricity - charging our EVs and electric buses / ferries / planes, batteries in homes, pumping water up the hill at Onslow, making 'green' hydrogen etc. It's almost like we might need a 'plan' of some kind.

by The Person | 27th Sep 21, 10:59pm 1632736758

what 'surplus electricity'?

At night we have surplus grid capacity, but we don't have surplus water sitting in the lakes that is getting spilled. The water is held back to produce during tomorrows peaks.

by nigelh | 27th Sep 21, 10:37pm 1632735455

"it is not cheap energy" This suggests its not expensive either. I'd suggest it more like very expensive.

The next stage is we made a lot of hydrogen gas, what do we do with the gas and how do we transport it?

After gas production is also likely to be expensive, perhaps hideously so. Unfortunately I don't have numbers. It would have been done by now if it was economic to do and I suspect massive subsidies or disincentives in other forms of energy will be needed to make it viable for the end user.

by Yvil | 27th Sep 21, 4:41pm 1632714113

Did anyone see the interview on the AM show this morning with John Key and Jacinda Ardern? (you can see on TV3 on demand)

- JK, we need a plan and dates for unlocking the country and incentives to increase vaccinations

- JA, we hope... we're looking at modelling... our intention is... the plan is to look at it... we cannot say when

by solardb | 27th Sep 21, 5:15pm 1632716112

JK, just parroting popular opinion as usual . Virtually every commentator / opinion poster has said the same thing.

you'd have to be pretty naive or one eyed to think that government is not planning for many different scenarios going forward. JA's answer is correct , the plan must be flexible to allow for different infection rates, different strains, etc.

The incentives are been provided by local providers , depending on the local need. There's alot of money avaliable for testing / vaccinations , the incenntives can come out of that , and the health provider still makes money .

by Carlos67 | 27th Sep 21, 6:30pm 1632720631

Rubbish, JA is just bumbling along without a plan in a totally reactive mode. Crunch time is coming and coming fast, cannot keep Auckland locked down forever, another week or two at level 3 and people will demand change or simply ignore the lockdown.

by oldbloke1 | 27th Sep 21, 6:36pm 1632721010

I'm sure the virus is on board with planning, and will let the Health Ministry know about its intentions.

by Carlos67 | 28th Sep 21, 5:38am 1632760719

You need a plan mate, do you live your whole life without a plan or goals ? Failure to plan is planning to fail, no guessing required as to where this Labour lot are right now. If you cannot see that this is quite possibly the worst government in NZ history, I'm sure you will in a couple more years.

by HouseMouse | 27th Sep 21, 8:57pm 1632729455

From what I can see there's already quite a few people flouting level 3.

by frazz | 27th Sep 21, 5:21pm 1632716514

you lost me first at "AM show" and 2nd at "John Key"

by Roger the dodger | 27th Sep 21, 10:23pm 1632734587

Better than tv1 breakfast and better than the current leader would be my take.

by Yvil | 28th Sep 21, 11:40am 1632782422

It's OK to be lost frazz

by Independent_Observer | 27th Sep 21, 8:18pm 1632727119

Having spent time working in various government departments in Wellington, its most likely that the government won't have an agreed upon plan because nobody in a political environment would want to put their neck on the line and commit to a plan that they are responsible for executing. They might end up looking bad so its best to not have a plan in the first place!

(its been a few years since I've been in Wellington....so lets hope its changed....but from what I see with government and the RBNZ....I doubt that it has).

by 1986 | 27th Sep 21, 11:38pm 1632739113

yup, can confirm, it's still the same

by solardb | 27th Sep 21, 5:09pm 1632715755

Decision on Tiwai point needs to be made now. No use waiting till 2024, then the smelter will have the upper hand again.

I have not seen an efficiency comparison between Hydrogen and lithium battery storage.I would think the emphasise for the government will be on preserving or creating jobs in Southland. if the smelter closes , it seems likely the coal mines will close too( dairy factory and others drops coal for electricity). a plan to create a carbon neutral Southland could create jobs locally. Battery powered trains , planes , ferries, trucks and cars. A new transmission line to at least Dunedin would still be desirable.

by waymad | 27th Sep 21, 5:31pm 1632717061

"Battery powered trains , planes, ferries, trucks and cars" - um, only cars are commercially available at the moment, and the dreadful combination of physics and infrastructure tends to rule out any but small, light versions of all the rest. Infrastructure can be fixed with gobs of Munny, physics cannot.

by solardb | 27th Sep 21, 5:53pm 1632718384

By 2024 all will be available. Trains, planes and ferries available now.

by Jonny.Foe | 27th Sep 21, 8:21pm 1632727290

Hydrogen fuel cells hold around 10 times more energy per kg than lithium ion batteries. BUT, they lose 65% to 75% of energy between charging and propulsion due to electrolysis, compression, transportation, etc. Comparable loss figures for lithium ion batteries are losses of 10% to 30%.

by solardb | 27th Sep 21, 8:25pm 1632727540

Cheers , good to know.

by oldbloke1 | 27th Sep 21, 5:49pm 1632718156

The German far left party has won 3 of their equivalents of electorate seats - that will give them their voting percentage in seats (they got 4.9%)

by jfree | 27th Sep 21, 6:16pm 1632719761

How do you take a sick day that isn't random? I'd love to be able to plan when I get sick if someone could share...

by J.C. | 27th Sep 21, 6:20pm 1632720014

Last week on the NZX50, capitalisation rose just +0.1% in the week to be +12.3% higher than a year ago

For comparative purposes, the Smartshares NZ Dividend Fund returned 19.93% over the same 12-month period.

by Uncle Bulgaria | 27th Sep 21, 7:35pm 1632724504

Workers are paid an average 172 grand Aussie for 200 days a year.... man I knew I should have not studied at school.

by Ngrrk | 27th Sep 21, 10:55pm 1632736535

I hear you! The money they get, for essentially unskilled work, is obscene.

by The Person | 27th Sep 21, 11:02pm 1632736973

How is the expensive green hydrogen supposed to compete with cheap hydrogen produced from natural gas reforming?