PARIS — Treasury Secretary Timothy F. Geithner took direct aim at China on Saturday at a meeting of the world’s most powerful economies, saying that its currency was still “substantially undervalued” and that recent steps taken by Beijing to adjust its value were too small.
Meeting here over the weekend, financial leaders from the Group of 20 agreed on a set of guidelines to identify when economic and financial developments in some countries would create problems for the rest of the world.
The agreement was forged after France and Germany persuaded China to accept a compromise that includes measuring a country’s currency exchange rate as a gauge of the potential problems.
Even though China has allowed its currency, the renminbi, to appreciate against the dollar since last summer, it has not been enough, Mr. Geithner said. As such, the United States and its European partners say, China still retains an unfair edge in trade that is contributing to a two-speed global economy.
Mr. Geithner’s blunt assessment added to a yearlong drumbeat that the United States has led, aiming to push Beijing to let the value of its currency rise and address its trade imbalance, pressure the Chinese have stiffly resisted.
Nevertheless, China did agree to compromise language on the yardsticks measuring imbalances in the global economy.
China had originally tried to quash efforts to gauge imbalances by looking at real exchange rates and currency reserves, which the United States and other Western countries see as having contributed to the financial crisis.
China has accumulated substantial currency reserves in United States dollars, helping it to hold down the value of the renminbi and run up a large trade surplus.
But China, after discussions with France and Germany, agreed to include those elements in the guidelines, although the rules were softened, along with public and private debt levels.
These guidelines are a “first step,” said Christine Lagarde, the finance minister of France, which is leading the G20 this year.
They grew out of concerns that fast growth in China and other emerging markets would stoke inflation and trade imbalances that could destabilize a recovery, even as advanced countries struggle to overcome lagging growth and high unemployment in the wake of a recession.
Unemployment is expected to stay high for the foreseeable future in the United States and Europe as they recover from the downturn.
Dominique Strauss-Kahn, the head of the International Monetary Fund, said that while the financial crisis was over, “the social crisis is still there, and very strong. If you have growth that doesn’t transform into jobs, what does that mean for the man in the street?” he asked.
Jobs and growth are also a major concern in North Africa and the Middle East, where demands for greater democracy and equality have emerged in part from a paucity of economic opportunity, a concern cited by the leaders gathered here in Paris.
Mr. Geithner, citing the “historic events” that have unfolded in North Africa in the last several weeks, said the United States was committed to working with its international partners to secure “a peaceful and orderly transition in Egypt and Tunisia and support the economic reforms necessary to promote broader gains in living standards.”
One of the major factors fanning wide social unrest in the region, he and others said, were high food and commodity prices.
The International Monetary Fund estimates that commodity prices jumped 20 to 30 percent last year, a trend that Mr. Strauss-Kahn said was “creating a lot of problems for low-income countries and vulnerable people.”
In a separate telephone call with a small group of journalists, Robert Zoellick, the president of the World Bank, said, “We’re reaching a danger point” in these countries. He said he urged G20 officials to “put food first in 2011,” even as they bicker over technical ways to measure imbalances in the world economy.
Mr. Geithner said the United States would support measures to limit the potential for the manipulation of commodity prices through greater transparency and oversight of the commodity and derivative markets, which some critics worry are being used by speculators to drive up commodity prices.
Beijing’s currency policy has helped stoke a breakneck pace of growth in China that, together with other emerging markets, has been cited as a contributing factor in the runup in food and commodity prices.
Not surprisingly, each country is pursuing its own self-interest to resolve internal economic problems. These include high unemployment in the United States and difficult austerity measures in Europe, as countries tighten their belts to mend finances.
“It’s very difficult to see any government doing something in its fiscal affairs just to benefit the broader system,” Jacob Frenkel, the chairman of JPMorgan Chase International, said in Paris last week at a meeting of the Institute for International Finance.
Cajoling Beijing, however, is a losing proposition, Mr. Frenkel said, because the Chinese don’t want to be seen as being pushed around.
Instead, he said, governments should tell China they understand why it has a savings glut, “and then say, ‘Let us help you design a system that helps you save less,’ ” he said. “That would be a win-win strategy,” he said.
Saturday, February 19, 2011
Asian Currencies Gain as Interest Rate Outlook May Attract Funds to Region
Asian currencies gained this week, led by South Korea’s won, on speculation investors will pour more funds into the region as interest rates are raised to stem gains in consumer prices.
The yuan had its biggest weekly advance in a month on speculation China’s inflation fight will lead to faster appreciation sought by major trading partners including the U.S., Brazil and India. Finance chiefs from the Group of 20 nations will today meet for a second day in Paris to discuss imbalances that pose a risk to the global economy. The Philippine peso had its best week in five months after a central bank report showed citizens living overseas sent record funds home last year.
“Inflation pressure is forcing Asian central banks to tighten monetary policy,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “Higher interest rates are driving inflows and Asian currencies higher. The yuan is another factor ahead of the G-20 meeting.”
The won strengthened 1.5 percent this week to 1,112.10 per dollar in Seoul, according to data compiled by Bloomberg. The peso rose 1.4 percent to 43.33, Indonesia’s rupiah climbed 1 percent to 8,860 and India’s rupee appreciated 1.1 percent to 45.21. The Singapore dollar advanced 0.8 percent to S$1.2748.
China, India, Indonesia, South Korea and Thailand have all boosted borrowing costs this year, widening the gap with the Federal Reserve’s near-zero benchmark rate, as Asia leads a global economic recovery. Developing economies in the region will expand 8.4 percent this year and next, double the average 4.2 percent pace of Latin America and more than triple the 2.5 percent annual growth in industrialized nations, the International Monetary Fund estimated last month.
Stronger Yuan
China’s central bank raised its reference rate for the yuan to 6.5781 per dollar yesterday, the strongest level since a dollar peg ended in July 2005. The currency, which is allowed to trade up to 0.5 percent on either side of the daily fixing, yesterday touched 6.5721, the highest since official and market exchange rates were unified at the end of 1993.
Data this week showed inflation accelerated to 4.9 percent in January from 4.6 percent the previous month, exceeding the government’s goal of keeping the rate within 4 percent this year. U.S. Treasury Secretary Timothy F. Geithner reiterated on Feb. 11 that China needs to allow the yuan to strengthen to manage inflation, a week after refraining from labeling the nation a currency manipulator in a report to Congress.
Korea Rates
The won had its biggest weekly gain this year on speculation the central bank will boost interest rates next month to curb inflation. The Bank of Korea unexpectedly kept its benchmark rate at 2.75 percent at a policy meeting this month, even after inflation breached the central bank’s 4 percent ceiling to reach 4.1 percent in January. It raised borrowing costs in January for the third time since June and the next monthly review is scheduled for March 10.
“Inflation is a hot topic and one of the reasons for the won gains is that Bank of Korea may raise rates next month as they didn’t do it in February,” said Ko Yun Jin, a currency trader at Kookmin Bank in Seoul.
Finance Minister Yoon Jeung Hyun said on Feb. 9 that the government needs to act “preemptively” to curb inflation as price gains can weaken the foundation of a stable economy.
The peso hit a three-month high of 43.27 per dollar yesterday. Remittances increased 8.1 percent from a year earlier to $1.69 billion in December and totaled $18.8 billion in 2010, the central bank said Feb. 15.
Elsewhere, Thailand’s baht advanced 0.9 percent this week to 30.59 against its U.S. counterpart and Malaysia’s ringgit advanced 0.8 percent to 3.034, according to data compiled by Bloomberg. Taiwan’s dollar fell 0.6 percent to NT$29.408.
The yuan had its biggest weekly advance in a month on speculation China’s inflation fight will lead to faster appreciation sought by major trading partners including the U.S., Brazil and India. Finance chiefs from the Group of 20 nations will today meet for a second day in Paris to discuss imbalances that pose a risk to the global economy. The Philippine peso had its best week in five months after a central bank report showed citizens living overseas sent record funds home last year.
“Inflation pressure is forcing Asian central banks to tighten monetary policy,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “Higher interest rates are driving inflows and Asian currencies higher. The yuan is another factor ahead of the G-20 meeting.”
The won strengthened 1.5 percent this week to 1,112.10 per dollar in Seoul, according to data compiled by Bloomberg. The peso rose 1.4 percent to 43.33, Indonesia’s rupiah climbed 1 percent to 8,860 and India’s rupee appreciated 1.1 percent to 45.21. The Singapore dollar advanced 0.8 percent to S$1.2748.
China, India, Indonesia, South Korea and Thailand have all boosted borrowing costs this year, widening the gap with the Federal Reserve’s near-zero benchmark rate, as Asia leads a global economic recovery. Developing economies in the region will expand 8.4 percent this year and next, double the average 4.2 percent pace of Latin America and more than triple the 2.5 percent annual growth in industrialized nations, the International Monetary Fund estimated last month.
Stronger Yuan
China’s central bank raised its reference rate for the yuan to 6.5781 per dollar yesterday, the strongest level since a dollar peg ended in July 2005. The currency, which is allowed to trade up to 0.5 percent on either side of the daily fixing, yesterday touched 6.5721, the highest since official and market exchange rates were unified at the end of 1993.
Data this week showed inflation accelerated to 4.9 percent in January from 4.6 percent the previous month, exceeding the government’s goal of keeping the rate within 4 percent this year. U.S. Treasury Secretary Timothy F. Geithner reiterated on Feb. 11 that China needs to allow the yuan to strengthen to manage inflation, a week after refraining from labeling the nation a currency manipulator in a report to Congress.
Korea Rates
The won had its biggest weekly gain this year on speculation the central bank will boost interest rates next month to curb inflation. The Bank of Korea unexpectedly kept its benchmark rate at 2.75 percent at a policy meeting this month, even after inflation breached the central bank’s 4 percent ceiling to reach 4.1 percent in January. It raised borrowing costs in January for the third time since June and the next monthly review is scheduled for March 10.
“Inflation is a hot topic and one of the reasons for the won gains is that Bank of Korea may raise rates next month as they didn’t do it in February,” said Ko Yun Jin, a currency trader at Kookmin Bank in Seoul.
Finance Minister Yoon Jeung Hyun said on Feb. 9 that the government needs to act “preemptively” to curb inflation as price gains can weaken the foundation of a stable economy.
The peso hit a three-month high of 43.27 per dollar yesterday. Remittances increased 8.1 percent from a year earlier to $1.69 billion in December and totaled $18.8 billion in 2010, the central bank said Feb. 15.
Elsewhere, Thailand’s baht advanced 0.9 percent this week to 30.59 against its U.S. counterpart and Malaysia’s ringgit advanced 0.8 percent to 3.034, according to data compiled by Bloomberg. Taiwan’s dollar fell 0.6 percent to NT$29.408.
Friday, February 18, 2011
Hyundai’s Swift Growth Lifts Alabama’s Economy
MONTGOMERY, Ala. — Few people in this city 800 miles south of Detroit cared much about the auto industry until Hyundai announced it would build cars here nine years ago.
These days, Montgomery cannot stop talking about it.
Hyundai and its sister company, Kia, which opened a plant last year just across the Georgia state line, have brought thousands of well-paying jobs to the region and even helped nurture a little Korean culture in Montgomery, the first capital of the old Confederacy. Hyundai is running its Montgomery plant almost nonstop. Rarely do more than a few weeks pass without word that another parts supplier has dozens of new positions to fill, typically offering good benefits and double the pay that the average Alabaman earns.
Hyundai, which will observe its 25th anniversary selling vehicles to American drivers on Sunday, was little more than an ambitious, second-tier brand when it chose to build its first United States car factory just south of Montgomery. But during the recent recession, the South Korean company thrived as Americans sought out cheap cars just as Hyundais were improving in quality.
In 2010, Hyundai and Kia each posted their highest sales in the United States and, taken together, surged ahead of Ford Motor to become fourth-largest automaker worldwide. Hyundai built 300,000 cars in Montgomery last year and sold most of them in the United States.
“If folks looked deeply at how far we’ve gone so quickly, from having no U.S. production five years ago to where we are today, it’s amazing,” John Krafcik, chief executive of Hyundai Motor America, said. “I don’t know that any company has gotten to such a high level of local assembly as Hyundai that fast.”
While Michigan’s dependence on the auto industry caused it to have one of the nation highest unemployment rates in recent years, the presence of Hyundai and Kia has helped Alabama keep its jobless rate among the lowest in the Southeast even as textile mills continue to close.
“As far as the pay, nobody else around here can compete with them,” said Richard Watson, a former auto mechanic who was out of work for a year and a half before getting a temporary job at the Kia plant in West Point, Ga., last fall. He said some of his co-workers drove two hours each way because the plant’s jobs were in such demand.
Hyundai is running its Montgomery plant, which employs 2,650, around the clock on weekdays and occasional Saturdays to keep up with demand. Last summer, it moved production of its Santa Fe sport utility vehicle 95 miles northeast to the Kia plant to free capacity in Montgomery. Kia recently hired 600 additional workers to operate a second shift for the Santa Fe and plans a third, with 1,000 more jobs.
Both carmakers expect to easily top their 2010 sales in the United States this year. Hyundai’s sales were up 22 percent in January; Kia’s rose 25.6 percent, the highest among the industry’s larger players. Together, the two sold more than 65,000 vehicles, about 5,000 short of surpassing Chrysler.
Hyundai makes its own engines in Montgomery, and transmissions for its cars come from a Hyundai-owned company, Powertech, which is attached to the Kia plant. Alabama lists 138 suppliers that support the Hyundai plant, directly or indirectly. (Some also do business with the Honda and Mercedes plants near Birmingham and the Toyota engine plant in Huntsville.)
“These jobs have good salaries and good fringe benefits, and are more self-fulfilling” than the ones that have left the area, said Seth Hammett, director of the Alabama Development Office. “The automobile business has really been good for Alabama.”
More than 50 companies have followed Hyundai to the Montgomery area from Korea, with executives and their families in tow. The city’s Korean population has jumped from about 100 before Hyundai to more than 3,000 today, said Su Yong Sim, president of the Korean-American Association of Greater Montgomery and a contractor who moved from Houston to help build part of the Hyundai plant.
About 10 Korean restaurants, a dozen Korean churches and a few small grocery stores like the Seoul Market, which stocks items as diverse as dried anchovies and toothpaste from Korea, have sprouted around town.
Jeannie Park, who opened a hair salon after moving here from Atlanta two years ago, sees a steady stream of female customers during the week, and men jam the shop on the weekends. She admitted that Montgomery lacked some of the excitement she was used to, but that the more Koreans move to town, the more she feels at home.
“It’s more of a community here,” she said.
In West Point, Ga., where the Kia plant sits on a former cow pasture, a sushi restaurant has opened among the 19th century storefronts downtown, and a former Pizza Hut across the Chattahoochee River is now the Korean BBQ House.
Kia arrived in West Point as the area was reeling from the closure of 12 textile mills that had formed the economic base for decades. After the mills sent their work to India and China, Kia moved in, offering better pay and benefits.
These days, Montgomery cannot stop talking about it.
Hyundai and its sister company, Kia, which opened a plant last year just across the Georgia state line, have brought thousands of well-paying jobs to the region and even helped nurture a little Korean culture in Montgomery, the first capital of the old Confederacy. Hyundai is running its Montgomery plant almost nonstop. Rarely do more than a few weeks pass without word that another parts supplier has dozens of new positions to fill, typically offering good benefits and double the pay that the average Alabaman earns.
Hyundai, which will observe its 25th anniversary selling vehicles to American drivers on Sunday, was little more than an ambitious, second-tier brand when it chose to build its first United States car factory just south of Montgomery. But during the recent recession, the South Korean company thrived as Americans sought out cheap cars just as Hyundais were improving in quality.
In 2010, Hyundai and Kia each posted their highest sales in the United States and, taken together, surged ahead of Ford Motor to become fourth-largest automaker worldwide. Hyundai built 300,000 cars in Montgomery last year and sold most of them in the United States.
“If folks looked deeply at how far we’ve gone so quickly, from having no U.S. production five years ago to where we are today, it’s amazing,” John Krafcik, chief executive of Hyundai Motor America, said. “I don’t know that any company has gotten to such a high level of local assembly as Hyundai that fast.”
While Michigan’s dependence on the auto industry caused it to have one of the nation highest unemployment rates in recent years, the presence of Hyundai and Kia has helped Alabama keep its jobless rate among the lowest in the Southeast even as textile mills continue to close.
“As far as the pay, nobody else around here can compete with them,” said Richard Watson, a former auto mechanic who was out of work for a year and a half before getting a temporary job at the Kia plant in West Point, Ga., last fall. He said some of his co-workers drove two hours each way because the plant’s jobs were in such demand.
Hyundai is running its Montgomery plant, which employs 2,650, around the clock on weekdays and occasional Saturdays to keep up with demand. Last summer, it moved production of its Santa Fe sport utility vehicle 95 miles northeast to the Kia plant to free capacity in Montgomery. Kia recently hired 600 additional workers to operate a second shift for the Santa Fe and plans a third, with 1,000 more jobs.
Both carmakers expect to easily top their 2010 sales in the United States this year. Hyundai’s sales were up 22 percent in January; Kia’s rose 25.6 percent, the highest among the industry’s larger players. Together, the two sold more than 65,000 vehicles, about 5,000 short of surpassing Chrysler.
Hyundai makes its own engines in Montgomery, and transmissions for its cars come from a Hyundai-owned company, Powertech, which is attached to the Kia plant. Alabama lists 138 suppliers that support the Hyundai plant, directly or indirectly. (Some also do business with the Honda and Mercedes plants near Birmingham and the Toyota engine plant in Huntsville.)
“These jobs have good salaries and good fringe benefits, and are more self-fulfilling” than the ones that have left the area, said Seth Hammett, director of the Alabama Development Office. “The automobile business has really been good for Alabama.”
More than 50 companies have followed Hyundai to the Montgomery area from Korea, with executives and their families in tow. The city’s Korean population has jumped from about 100 before Hyundai to more than 3,000 today, said Su Yong Sim, president of the Korean-American Association of Greater Montgomery and a contractor who moved from Houston to help build part of the Hyundai plant.
About 10 Korean restaurants, a dozen Korean churches and a few small grocery stores like the Seoul Market, which stocks items as diverse as dried anchovies and toothpaste from Korea, have sprouted around town.
Jeannie Park, who opened a hair salon after moving here from Atlanta two years ago, sees a steady stream of female customers during the week, and men jam the shop on the weekends. She admitted that Montgomery lacked some of the excitement she was used to, but that the more Koreans move to town, the more she feels at home.
“It’s more of a community here,” she said.
In West Point, Ga., where the Kia plant sits on a former cow pasture, a sushi restaurant has opened among the 19th century storefronts downtown, and a former Pizza Hut across the Chattahoochee River is now the Korean BBQ House.
Kia arrived in West Point as the area was reeling from the closure of 12 textile mills that had formed the economic base for decades. After the mills sent their work to India and China, Kia moved in, offering better pay and benefits.
Reliance Cuts Exports to Cash In on Demand in India
Reliance Industries Ltd., India’s largest company by market value, cut fuel exports by 50 percent in the first half of this month, selling domestically to profit from shortages during plant maintenance by rivals.
The refiner, controlled by billionaire Mukesh Ambani, reduced overseas shipments of diesel and gasoline from its facility in western India to about 385,000 metric tons from 730,000 tons in the same period a month earlier, according to data compiled from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.
The company is increasing sales to India’s government- controlled refiners such as Indian Oil Corp. and Bharat Petroleum Corp., which in turn market the products to consumers. State refiners have to sell most fuels at capped prices because of rules aimed at curbing inflation.
“There are no freight costs involved if Reliance sells within the country,” said Alok Deshpande, an oil and gas analyst at Mumbai-based Elara Securities. “That’s a price advantage for the refiner.”
Increased demand in India as vehicle sales gain is pushing Reliance to focus on the domestic market, he said. Gasoline consumption in Asia’s second-fastest growing major economy may grow 7 percent to 350,000 barrels a day in February and March 2011, industry consultant JBC Energy said in a note on Jan. 24.
Manoj Warrier, a spokesman for Reliance in Mumbai, didn’t respond to an e-mail seeking comment.
Reliance shares dropped 1.9 percent to 935.55 rupees in Mumbai today. The benchmark Sensitive Index fell 1.6 percent.
Market Window
Reliance, owner of the world’s largest refining facility, reduced overseas gasoline shipments by 25 percent to at least 185,000 tons from its refineries in Jamnagar in western India, the data show. Diesel shipments fell 75 percent to 70,000 tons during the first half of this month.
State refiners have historically scheduled shutdowns at their facilities during the first and second quarter of the year. None of them has disclosed scheduled maintenance for 2011 though some may be preparing by stocking up.
Indian Oil, the country’s biggest refiner by capacity, is seeking two cargoes of gasoil, or diesel, for loading in March to western India, three people who received the tender document said on Feb. 17.
“There’s a window in the market for Reliance when domestic refiners go into some maintenance come April,” Praveen Kumar, the Singapore-based head of South Asia oil and gas at consultancy FACTS Global Energy, said by telephone on Feb. 16.
All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t compelled to report charters so data capture can vary from month to month.
FCC Shutdown
Reliance operates two refineries that can process a combined 1.24 million barrels a day of oil, or about 1.6 percent of global refining capacity, according to the company’s website. It exports mainly to the Middle East, Africa and Singapore, according to the data from Clarkson.
Exports from its plants have also declined because of its maintenance. Reliance planned to shut a fluid catalytic cracker at one of its refineries for about five weeks, starting Feb. 7, the company said on Feb. 3. The unit is part of Reliance’s older, 660,000 barrel-a-day refinery in western Gujarat state. The Mumbai-based company also has a newer, 580,000 barrel-a-day plant adjacent to the older refinery.
The maintenance will reduce exports and may help drive up gasoline prices, Vienna-based JBC Energy said in a note Jan. 31.
“The FCC shutdown may also be having an effect on exports, but its impact will be felt more only in March,” FACTS Global’s Kumar said.
Diesel Demand
Reliance in January doubled shipments to the highest in five months, driven by diesel.
The refiner exported products from its refineries, capable of processing heavy grades of crude oil, to destinations including Europe, Africa and the United Arab Emirates during the first half of this month, the data show.
Royal Dutch Shell Plc chartered the Pioneer Express to transport 35,000 tons of gasoline from Sikka to South Africa in mid February, according to the data. The vessel was last seen off the coast of Gujarat near Jamnagar, according to ship transmissions captured by AISLive on Bloomberg.
BP Plc hired Gulf Cobalt to ship 65,000 tons of jet fuel from Sikka to Europe during the first half of this month, the data show. The ship was last seen heading to the port of Sikka, according to the vessel-tracking data on Bloomberg.
West-Coast Shipments
At least 1.6 million tons of fuel products left India’s west coast for overseas in the first 15 days of February, compared with 1.2 million tons in the same period last month. Indian refiners exported at least 390,000 tons of naphtha in the period, up from 215,000 tons last month, the data show.
State-run refiners export mainly naphtha, used to make chemicals and gasoline, because they sell most of their other products in the domestic market.
The International Energy Agency raised its 2011 forecast for global crude oil demand for a fifth month on Feb. 10, driven by developing nations in Asia and signs of recovery in North America.
The refiner, controlled by billionaire Mukesh Ambani, reduced overseas shipments of diesel and gasoline from its facility in western India to about 385,000 metric tons from 730,000 tons in the same period a month earlier, according to data compiled from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.
The company is increasing sales to India’s government- controlled refiners such as Indian Oil Corp. and Bharat Petroleum Corp., which in turn market the products to consumers. State refiners have to sell most fuels at capped prices because of rules aimed at curbing inflation.
“There are no freight costs involved if Reliance sells within the country,” said Alok Deshpande, an oil and gas analyst at Mumbai-based Elara Securities. “That’s a price advantage for the refiner.”
Increased demand in India as vehicle sales gain is pushing Reliance to focus on the domestic market, he said. Gasoline consumption in Asia’s second-fastest growing major economy may grow 7 percent to 350,000 barrels a day in February and March 2011, industry consultant JBC Energy said in a note on Jan. 24.
Manoj Warrier, a spokesman for Reliance in Mumbai, didn’t respond to an e-mail seeking comment.
Reliance shares dropped 1.9 percent to 935.55 rupees in Mumbai today. The benchmark Sensitive Index fell 1.6 percent.
Market Window
Reliance, owner of the world’s largest refining facility, reduced overseas gasoline shipments by 25 percent to at least 185,000 tons from its refineries in Jamnagar in western India, the data show. Diesel shipments fell 75 percent to 70,000 tons during the first half of this month.
State refiners have historically scheduled shutdowns at their facilities during the first and second quarter of the year. None of them has disclosed scheduled maintenance for 2011 though some may be preparing by stocking up.
Indian Oil, the country’s biggest refiner by capacity, is seeking two cargoes of gasoil, or diesel, for loading in March to western India, three people who received the tender document said on Feb. 17.
“There’s a window in the market for Reliance when domestic refiners go into some maintenance come April,” Praveen Kumar, the Singapore-based head of South Asia oil and gas at consultancy FACTS Global Energy, said by telephone on Feb. 16.
All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t compelled to report charters so data capture can vary from month to month.
FCC Shutdown
Reliance operates two refineries that can process a combined 1.24 million barrels a day of oil, or about 1.6 percent of global refining capacity, according to the company’s website. It exports mainly to the Middle East, Africa and Singapore, according to the data from Clarkson.
Exports from its plants have also declined because of its maintenance. Reliance planned to shut a fluid catalytic cracker at one of its refineries for about five weeks, starting Feb. 7, the company said on Feb. 3. The unit is part of Reliance’s older, 660,000 barrel-a-day refinery in western Gujarat state. The Mumbai-based company also has a newer, 580,000 barrel-a-day plant adjacent to the older refinery.
The maintenance will reduce exports and may help drive up gasoline prices, Vienna-based JBC Energy said in a note Jan. 31.
“The FCC shutdown may also be having an effect on exports, but its impact will be felt more only in March,” FACTS Global’s Kumar said.
Diesel Demand
Reliance in January doubled shipments to the highest in five months, driven by diesel.
The refiner exported products from its refineries, capable of processing heavy grades of crude oil, to destinations including Europe, Africa and the United Arab Emirates during the first half of this month, the data show.
Royal Dutch Shell Plc chartered the Pioneer Express to transport 35,000 tons of gasoline from Sikka to South Africa in mid February, according to the data. The vessel was last seen off the coast of Gujarat near Jamnagar, according to ship transmissions captured by AISLive on Bloomberg.
BP Plc hired Gulf Cobalt to ship 65,000 tons of jet fuel from Sikka to Europe during the first half of this month, the data show. The ship was last seen heading to the port of Sikka, according to the vessel-tracking data on Bloomberg.
West-Coast Shipments
At least 1.6 million tons of fuel products left India’s west coast for overseas in the first 15 days of February, compared with 1.2 million tons in the same period last month. Indian refiners exported at least 390,000 tons of naphtha in the period, up from 215,000 tons last month, the data show.
State-run refiners export mainly naphtha, used to make chemicals and gasoline, because they sell most of their other products in the domestic market.
The International Energy Agency raised its 2011 forecast for global crude oil demand for a fifth month on Feb. 10, driven by developing nations in Asia and signs of recovery in North America.
Thursday, February 17, 2011
Apple Is Weighing a Cheaper iPhone
SAN FRANCISCO — Apple has been exploring ways to broaden the appeal of the iPhone by making the popular device less expensive and allowing users to control it with voice commands.
But contrary to published reports, Apple is not currently developing a smaller iPhone, according to people briefed on Apple’s plans who requested anonymity because the plans are confidential.
Apple’s engineers are currently focused on finishing the next version of the iPhone, which is likely to be similar in size to the current iPhone 4, said one of the people. The person said Apple was not planning to introduce a smaller iPhone any time soon. Analysts expect the new iPhone to be ready this summer.
Another person who is in direct contact with Apple also said that the company would not make a smaller iPhone at this time, in part because a smaller device would not necessarily be much cheaper to manufacture and because it would be more difficult to operate.
More important, a phone with a smaller screen would force many developers to rewrite their apps, which Apple wants to avoid, the person said.
Steven P. Jobs, Apple’s chief executive, appeared to reinforce that last point recently when he praised the iPhone’s uniformity, contrasting it with phones based on Google’s Android software, which come in many formats.
“We think Android is very, very fragmented and getting more fragmented by the day,” Mr. Jobs told financial analysts in October. “We think this is a huge strength of our approach compared to Google’s.”
Another senior Apple executive said during a private meeting recently that it did not make sense for the company to make multiple iPhone models, noting that Apple would stick with its practice of dropping the price of older models when it introduced a new one.
The iPhone 3GS is now available for $49 with a two-year contract that helps subsidize the price of the device in the United States.
As part of its effort to find new customers for the iPhone, Apple plans to make it easier to operate the device through voice commands, removing an obstacle for people who do not like using a virtual keyboard, said another person with knowledge of Apple’s plans.
Apple is also considering changing internal components of the device to bring costs down. “Although the innards of the phone, including memory size or camera quality, could change to offer a less expensive model, the size of the device would not vary,” said the person, who has worked on multiple versions of the device.
Another person with knowledge of Apple’s plans said that the company was actively building a more versatile version of its MobileMe service, which allows users to store music, photos and files online and have them accessible on all their devices.
The current version of MobileMe, which costs $100 a year, has failed to catch on with consumers. Rivals like Google and others offer similar services free.
The new version of MobileMe is expected to be free and would allow users to synch their files without using a cable.
“The goal is that your photos and other media content will eventually just sync across all your Apple devices without people having to do anything,” the person said. If more iPhone users stored files online, Apple could make cheaper devices with less storage. Flash storage is one of the iPhone’s most expensive components.
Apple has dominated the high end of the smartphone market, but the company is facing increasing competition from devices running Google’s Android, which collectively outsell the iPhone. Analysts said it would make sense for Apple to introduce a cheaper iPhone, especially in overseas markets where carriers do not subsidize handsets. Unsubsidized handsets are often called “prepaid.”
“If they are going to be a player in the global market they have to have a prepaid option,” said Gene Munster, an analyst with Piper Jaffray. But Mr. Munster said that to be successful, a prepaid iPhone would have to be able to run the more than 300,000 apps available in the App Store.
A. M. Sacconaghi Jr., an analyst with Sanford C. Bernstein & Company, said that a low-priced iPhone could help Apple expand its unit sales of the device sixfold.
In recent days, some published reports, citing anonymous sources, said that Apple was building a smaller iPhone. One report gave the code name of the project as N97. Several people with knowledge of Apple’s plans said that N97 was the code name for the Verizon iPhone 4, which was introduced this month.
But contrary to published reports, Apple is not currently developing a smaller iPhone, according to people briefed on Apple’s plans who requested anonymity because the plans are confidential.
Apple’s engineers are currently focused on finishing the next version of the iPhone, which is likely to be similar in size to the current iPhone 4, said one of the people. The person said Apple was not planning to introduce a smaller iPhone any time soon. Analysts expect the new iPhone to be ready this summer.
Another person who is in direct contact with Apple also said that the company would not make a smaller iPhone at this time, in part because a smaller device would not necessarily be much cheaper to manufacture and because it would be more difficult to operate.
More important, a phone with a smaller screen would force many developers to rewrite their apps, which Apple wants to avoid, the person said.
Steven P. Jobs, Apple’s chief executive, appeared to reinforce that last point recently when he praised the iPhone’s uniformity, contrasting it with phones based on Google’s Android software, which come in many formats.
“We think Android is very, very fragmented and getting more fragmented by the day,” Mr. Jobs told financial analysts in October. “We think this is a huge strength of our approach compared to Google’s.”
Another senior Apple executive said during a private meeting recently that it did not make sense for the company to make multiple iPhone models, noting that Apple would stick with its practice of dropping the price of older models when it introduced a new one.
The iPhone 3GS is now available for $49 with a two-year contract that helps subsidize the price of the device in the United States.
As part of its effort to find new customers for the iPhone, Apple plans to make it easier to operate the device through voice commands, removing an obstacle for people who do not like using a virtual keyboard, said another person with knowledge of Apple’s plans.
Apple is also considering changing internal components of the device to bring costs down. “Although the innards of the phone, including memory size or camera quality, could change to offer a less expensive model, the size of the device would not vary,” said the person, who has worked on multiple versions of the device.
Another person with knowledge of Apple’s plans said that the company was actively building a more versatile version of its MobileMe service, which allows users to store music, photos and files online and have them accessible on all their devices.
The current version of MobileMe, which costs $100 a year, has failed to catch on with consumers. Rivals like Google and others offer similar services free.
The new version of MobileMe is expected to be free and would allow users to synch their files without using a cable.
“The goal is that your photos and other media content will eventually just sync across all your Apple devices without people having to do anything,” the person said. If more iPhone users stored files online, Apple could make cheaper devices with less storage. Flash storage is one of the iPhone’s most expensive components.
Apple has dominated the high end of the smartphone market, but the company is facing increasing competition from devices running Google’s Android, which collectively outsell the iPhone. Analysts said it would make sense for Apple to introduce a cheaper iPhone, especially in overseas markets where carriers do not subsidize handsets. Unsubsidized handsets are often called “prepaid.”
“If they are going to be a player in the global market they have to have a prepaid option,” said Gene Munster, an analyst with Piper Jaffray. But Mr. Munster said that to be successful, a prepaid iPhone would have to be able to run the more than 300,000 apps available in the App Store.
A. M. Sacconaghi Jr., an analyst with Sanford C. Bernstein & Company, said that a low-priced iPhone could help Apple expand its unit sales of the device sixfold.
In recent days, some published reports, citing anonymous sources, said that Apple was building a smaller iPhone. One report gave the code name of the project as N97. Several people with knowledge of Apple’s plans said that N97 was the code name for the Verizon iPhone 4, which was introduced this month.
Gas Producer Hedging Gains as Rally Chances Dim: Energy Markets
Natural gas producers are increasing forward sales of their U.S. output for a second year, a sign they see little prospect that prices will rebound from their lowest level for any winter in the past nine years.
Energy companies have sold about 54 percent of their 2011 oil and gas production, up from 49 percent last year and 47 percent in 2009, according to a Barclays Capital analysis of 37 producers. By selling output now, companies ensure they get paid today’s prices for future production, a so-called hedge that protects them from declines.
Natural gas, which accounts for about 23 percent of U.S. power generation, has fallen 12 percent in New York during 2011, extending a three-year drop, as improved technology for drilling in shale formations boosted production to the highest in almost four decades. Prices haven’t been so low in any winter since 2002, according to data compiled by Bloomberg. They may slide a further 12 percent in “coming weeks,” a Bank of America- Merrill Lynch report on Feb. 16 showed.
“Most gas producers are not really expecting the market to turn around in 2011,” said Biliana Pehlivanova, a New York- based analyst at Barclays Capital, the securities unit of Barclays Plc, the U.K.’s third-largest bank. “Prices have remained depressed, and they want to be protected.”
Gas for March delivery on the New York Mercantile Exchange fell 5.3 cents, or 1.4 percent, to settle at $3.868 per million British thermal units yesterday.
Average Prices
Futures may average $4.37 per million Btu in 2011, according to the median of 12 analyst estimates compiled by Bloomberg since Nov. 15. That compares with $7.118 per Btu in 2007, the last year the fuel posted an annual gain. The average so far this year is $4.338.
Prices will probably fail to reach $6 in 2011, said Mark Hanson, an analyst with Morningstar Inc. in Chicago. Gas last traded above $6 about 13 months ago and hasn’t traded below that price for an entire year since 2002. Bank of America-Merrill Lynch predicts it will drop to $3.40 in the weeks ahead.
Chesapeake Energy Corp., the most active U.S. driller, has hedged 96 percent of its gas production for 2011, compared with 5 percent for its oil, it said in an investor presentation this month. That compares with 61 percent of its gas and 59 percent of its oil last year. The Oklahoma City-based company had an average 75 percent of its gas hedged at this time of year from 2006 through 2008, its annual reports show.
‘Strong Growth’
Selling gas forward at about $6 may allow Chesapeake to realize $1 billion in hedging gains in 2011, helping it drill more wells and boost earnings by about 40 percent, Jeff Mobley, senior vice president for investor relations and research, said during the Credit Suisse Group Energy Summit in Vail, Colorado, on Feb. 10. The company has the most oil and gas rigs operating in the U.S., according to date published by Baker Hughes Inc.
“Despite lower commodity prices, we’ve hedged fairly well and can maintain our drilling activity to provide pretty strong growth over the next few years,” Mobley said at a Bank of America Merrill Lynch credit conference on Nov. 17.
Range Resources Corp., which holds the second-most drilling permits in Pennsylvania’s Marcellus shale-gas formation after Chesapeake, has hedged 84 percent of its 2011 gas production at an average floor price of $5.56 and an average ceiling price of $6.48 per million Btu. The Fort Worth, Texas-based company hedged 69 percent of last year’s gas at an average floor price of $5.53, it said in a January 2010 financial update.
No Benefit
The discrepancy in gas hedging levels versus oil underscores how traders are betting that economic growth will buoy prices for crude while near-record supplies limit gains for gas, according to Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut energy-advisory company.
“It seems that as the economy strengthens, or there’s a little bit of bullish news, crude oil, heating oil and gasoline jump,” Beutel said. “Natural gas doesn’t get any benefit.”
The U.S. natural-gas market is oversupplied by between 1 billion and 1.5 billion cubic feet per day, David Pursell, a managing director at Houston-based Tudor Pickering Holt & Co. LLC, said in an e-mail Feb. 15.
U.S. gas production averaged about 61.8 billion cubic feet a day in 2010, the highest since 62 billion a day in 1973, according to the Energy Department in Washington. Production this year will average 62.32 billion, department estimates show.
“Our view is that 2012 is probably when you’ll see a turnaround in natural-gas prices,” Hanson said.
Surplus Erased
Natural gas in storage fell to 6.3 percent below the five- year average in the week ended Feb. 11 as below-normal temperatures boosted demand and disrupted drilling operations, Energy Department data show. The frigid weather hasn’t been enough to correct a supply-demand imbalance, according to Barclays Capital.
“Demand has staged only a modest recovery, and in our view, demand growth is slower this year than at this point last year,” Barclays’s Pehlivanova said in a Feb. 1 note to clients written with James R. Crandell and Michael Zenker “As a result, supply levels now greatly outstrip demand levels, and we do not see a turning point in the near future for supply, demand, or inventory levels.”
Gas consumption in November by industrial users, which account for about 28 percent of U.S. demand, was 1.9 percent below the levels of the same month in 2007, before the start of the global financial crisis, according to Energy Department data.
Energy companies have sold about 54 percent of their 2011 oil and gas production, up from 49 percent last year and 47 percent in 2009, according to a Barclays Capital analysis of 37 producers. By selling output now, companies ensure they get paid today’s prices for future production, a so-called hedge that protects them from declines.
Natural gas, which accounts for about 23 percent of U.S. power generation, has fallen 12 percent in New York during 2011, extending a three-year drop, as improved technology for drilling in shale formations boosted production to the highest in almost four decades. Prices haven’t been so low in any winter since 2002, according to data compiled by Bloomberg. They may slide a further 12 percent in “coming weeks,” a Bank of America- Merrill Lynch report on Feb. 16 showed.
“Most gas producers are not really expecting the market to turn around in 2011,” said Biliana Pehlivanova, a New York- based analyst at Barclays Capital, the securities unit of Barclays Plc, the U.K.’s third-largest bank. “Prices have remained depressed, and they want to be protected.”
Gas for March delivery on the New York Mercantile Exchange fell 5.3 cents, or 1.4 percent, to settle at $3.868 per million British thermal units yesterday.
Average Prices
Futures may average $4.37 per million Btu in 2011, according to the median of 12 analyst estimates compiled by Bloomberg since Nov. 15. That compares with $7.118 per Btu in 2007, the last year the fuel posted an annual gain. The average so far this year is $4.338.
Prices will probably fail to reach $6 in 2011, said Mark Hanson, an analyst with Morningstar Inc. in Chicago. Gas last traded above $6 about 13 months ago and hasn’t traded below that price for an entire year since 2002. Bank of America-Merrill Lynch predicts it will drop to $3.40 in the weeks ahead.
Chesapeake Energy Corp., the most active U.S. driller, has hedged 96 percent of its gas production for 2011, compared with 5 percent for its oil, it said in an investor presentation this month. That compares with 61 percent of its gas and 59 percent of its oil last year. The Oklahoma City-based company had an average 75 percent of its gas hedged at this time of year from 2006 through 2008, its annual reports show.
‘Strong Growth’
Selling gas forward at about $6 may allow Chesapeake to realize $1 billion in hedging gains in 2011, helping it drill more wells and boost earnings by about 40 percent, Jeff Mobley, senior vice president for investor relations and research, said during the Credit Suisse Group Energy Summit in Vail, Colorado, on Feb. 10. The company has the most oil and gas rigs operating in the U.S., according to date published by Baker Hughes Inc.
“Despite lower commodity prices, we’ve hedged fairly well and can maintain our drilling activity to provide pretty strong growth over the next few years,” Mobley said at a Bank of America Merrill Lynch credit conference on Nov. 17.
Range Resources Corp., which holds the second-most drilling permits in Pennsylvania’s Marcellus shale-gas formation after Chesapeake, has hedged 84 percent of its 2011 gas production at an average floor price of $5.56 and an average ceiling price of $6.48 per million Btu. The Fort Worth, Texas-based company hedged 69 percent of last year’s gas at an average floor price of $5.53, it said in a January 2010 financial update.
No Benefit
The discrepancy in gas hedging levels versus oil underscores how traders are betting that economic growth will buoy prices for crude while near-record supplies limit gains for gas, according to Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut energy-advisory company.
“It seems that as the economy strengthens, or there’s a little bit of bullish news, crude oil, heating oil and gasoline jump,” Beutel said. “Natural gas doesn’t get any benefit.”
The U.S. natural-gas market is oversupplied by between 1 billion and 1.5 billion cubic feet per day, David Pursell, a managing director at Houston-based Tudor Pickering Holt & Co. LLC, said in an e-mail Feb. 15.
U.S. gas production averaged about 61.8 billion cubic feet a day in 2010, the highest since 62 billion a day in 1973, according to the Energy Department in Washington. Production this year will average 62.32 billion, department estimates show.
“Our view is that 2012 is probably when you’ll see a turnaround in natural-gas prices,” Hanson said.
Surplus Erased
Natural gas in storage fell to 6.3 percent below the five- year average in the week ended Feb. 11 as below-normal temperatures boosted demand and disrupted drilling operations, Energy Department data show. The frigid weather hasn’t been enough to correct a supply-demand imbalance, according to Barclays Capital.
“Demand has staged only a modest recovery, and in our view, demand growth is slower this year than at this point last year,” Barclays’s Pehlivanova said in a Feb. 1 note to clients written with James R. Crandell and Michael Zenker “As a result, supply levels now greatly outstrip demand levels, and we do not see a turning point in the near future for supply, demand, or inventory levels.”
Gas consumption in November by industrial users, which account for about 28 percent of U.S. demand, was 1.9 percent below the levels of the same month in 2007, before the start of the global financial crisis, according to Energy Department data.
Reliance Cuts Exports to Cash In on Demand in Indian Market
Reliance Industries Ltd., India’s largest company by market value, cut fuel exports by 50 percent in the first half of this month, selling domestically to profit from shortages during rivals’ plant maintenance.
The refiner, controlled by billionaire Mukesh Ambani, reduced overseas shipments of diesel and gasoline from its facility in western India to about 385,000 metric tons from 730,000 tons in the same period a month earlier, according to data compiled from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.
The company is increasing sales to India’s government- controlled refiners such as Indian Oil Corp. and Bharat Petroleum Corp., which in turn market the oil products to consumers. State refiners have to sell most fuels at capped prices because of rules aimed at preventing inflation from soaring.
“There are no freight costs involved if Reliance sells within the country,” Alok Deshpande, an oil and gas analyst at Mumbai-based Elara Securities, said in a telephone interview yesterday. “That’s a price advantage for the refiner.”
Increased demand in India as vehicle sales gain is pushing Reliance to focus on the domestic market, he said. Gasoline consumption in Asia’s second-fastest growing major economy may grow 7 percent to 350,000 barrels a day in February and March 2011, industry consultant JBC Energy said in a note on Jan. 24.
Manoj Warrier, a spokesman for Reliance, didn’t respond to an e-mail seeking comment.
Market Window
Reliance, owner of the world’s largest refining facility, reduced overseas gasoline shipments by 25 percent to at least 185,000 tons from its refineries in Jamnagar in western India, the data show. Diesel shipments fell 75 percent to 70,000 tons during the first half of this month.
State refiners have historically scheduled shutdowns at their facilities during the first and second quarter of the year. None of them has disclosed scheduled maintenance for 2011 though some may be preparing by stocking up.
Indian Oil, the country’s biggest refiner by capacity, is seeking two cargoes of gasoil, or diesel, for loading in March to western India, three people who received the tender document said on Feb. 17.
“There’s a window in the market for Reliance when domestic refiners go into some maintenance come April,” Praveen Kumar, the Singapore-based head of South Asia oil and gas at consultancy FACTS Global Energy, said by telephone on Feb. 16.
All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t compelled to report charters so data capture can vary from month to month.
FCC Shutdown
Reliance operates two refineries that can process a combined 1.24 million barrels a day of oil, or about 1.6 percent of global refining capacity, according to the company’s website. It exports mainly to the Middle East, Africa and Singapore, according to the data from Clarkson.
Reliance’s exports have also declined because of its plant maintenance. It planned to shut a fluid catalytic cracker at one of its refineries for about five weeks, starting Feb. 7, the company said on Feb. 3. The unit is part of Reliance’s older, 660,000 barrel-a-day refinery in western Gujarat state. The Mumbai-based company also has a newer, 580,000 barrel-a-day plant adjacent to the older refinery.
The maintenance will reduce exports and may help drive up gasoline prices, Vienna-based JBC Energy said in a note Jan. 31.
“The FCC shutdown may also be having an effect on exports, but its impact will be felt more only in March,” FACTS Global’s Kumar said.
Reliance in January doubled shipments from its refineries to the highest in five months, driven by diesel.
Gulf Cobalt
Reliance exported refined fuel products from its refineries, capable of processing heavy grades of crude oil, to destinations including Europe, Africa and the United Arab Emirates during the first half of this month, the data show.
Royal Dutch Shell Plc chartered the Pioneer Express to transport 35,000 tons of gasoline from Sikka to South Africa in mid February, according to the data. The vessel was last seen off the coast of Gujarat near Jamnagar, according to ship transmissions captured by AISLive on Bloomberg.
BP Plc hired Gulf Cobalt to ship 65,000 tons of jet fuel from Sikka to Europe during the first half of this month, the data show. The ship was last seen heading to the port of Sikka, according to the vessel-tracking data on Bloomberg.
At least 1.6 million tons of fuel products left India’s west coast for overseas in the first 15 days of February, compared with 1.2 million tons in the same period last month. Indian refiners exported at least 390,000 tons of naphtha in the period, up from 215,000 tons last month, the data show.
State-run refiners export mainly naphtha, used to make chemicals and gasoline, because they sell most of their other products in the domestic market.
The International Energy Agency raised its 2011 forecast for global crude oil demand for a fifth month on Feb. 10, driven by developing nations in Asia and signs of recovery in North America
The refiner, controlled by billionaire Mukesh Ambani, reduced overseas shipments of diesel and gasoline from its facility in western India to about 385,000 metric tons from 730,000 tons in the same period a month earlier, according to data compiled from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.
The company is increasing sales to India’s government- controlled refiners such as Indian Oil Corp. and Bharat Petroleum Corp., which in turn market the oil products to consumers. State refiners have to sell most fuels at capped prices because of rules aimed at preventing inflation from soaring.
“There are no freight costs involved if Reliance sells within the country,” Alok Deshpande, an oil and gas analyst at Mumbai-based Elara Securities, said in a telephone interview yesterday. “That’s a price advantage for the refiner.”
Increased demand in India as vehicle sales gain is pushing Reliance to focus on the domestic market, he said. Gasoline consumption in Asia’s second-fastest growing major economy may grow 7 percent to 350,000 barrels a day in February and March 2011, industry consultant JBC Energy said in a note on Jan. 24.
Manoj Warrier, a spokesman for Reliance, didn’t respond to an e-mail seeking comment.
Market Window
Reliance, owner of the world’s largest refining facility, reduced overseas gasoline shipments by 25 percent to at least 185,000 tons from its refineries in Jamnagar in western India, the data show. Diesel shipments fell 75 percent to 70,000 tons during the first half of this month.
State refiners have historically scheduled shutdowns at their facilities during the first and second quarter of the year. None of them has disclosed scheduled maintenance for 2011 though some may be preparing by stocking up.
Indian Oil, the country’s biggest refiner by capacity, is seeking two cargoes of gasoil, or diesel, for loading in March to western India, three people who received the tender document said on Feb. 17.
“There’s a window in the market for Reliance when domestic refiners go into some maintenance come April,” Praveen Kumar, the Singapore-based head of South Asia oil and gas at consultancy FACTS Global Energy, said by telephone on Feb. 16.
All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t compelled to report charters so data capture can vary from month to month.
FCC Shutdown
Reliance operates two refineries that can process a combined 1.24 million barrels a day of oil, or about 1.6 percent of global refining capacity, according to the company’s website. It exports mainly to the Middle East, Africa and Singapore, according to the data from Clarkson.
Reliance’s exports have also declined because of its plant maintenance. It planned to shut a fluid catalytic cracker at one of its refineries for about five weeks, starting Feb. 7, the company said on Feb. 3. The unit is part of Reliance’s older, 660,000 barrel-a-day refinery in western Gujarat state. The Mumbai-based company also has a newer, 580,000 barrel-a-day plant adjacent to the older refinery.
The maintenance will reduce exports and may help drive up gasoline prices, Vienna-based JBC Energy said in a note Jan. 31.
“The FCC shutdown may also be having an effect on exports, but its impact will be felt more only in March,” FACTS Global’s Kumar said.
Reliance in January doubled shipments from its refineries to the highest in five months, driven by diesel.
Gulf Cobalt
Reliance exported refined fuel products from its refineries, capable of processing heavy grades of crude oil, to destinations including Europe, Africa and the United Arab Emirates during the first half of this month, the data show.
Royal Dutch Shell Plc chartered the Pioneer Express to transport 35,000 tons of gasoline from Sikka to South Africa in mid February, according to the data. The vessel was last seen off the coast of Gujarat near Jamnagar, according to ship transmissions captured by AISLive on Bloomberg.
BP Plc hired Gulf Cobalt to ship 65,000 tons of jet fuel from Sikka to Europe during the first half of this month, the data show. The ship was last seen heading to the port of Sikka, according to the vessel-tracking data on Bloomberg.
At least 1.6 million tons of fuel products left India’s west coast for overseas in the first 15 days of February, compared with 1.2 million tons in the same period last month. Indian refiners exported at least 390,000 tons of naphtha in the period, up from 215,000 tons last month, the data show.
State-run refiners export mainly naphtha, used to make chemicals and gasoline, because they sell most of their other products in the domestic market.
The International Energy Agency raised its 2011 forecast for global crude oil demand for a fifth month on Feb. 10, driven by developing nations in Asia and signs of recovery in North America
An American detained for shooting two Pakistanis is shielded by diplomatic immunity, a Pakistani official has said, but local courts are likely have the final say in a case that has ignited a bruising dispute between two strategic allies.
After more than two weeks of resistance to US calls for conferring diplomatic immunity on Raymond Davis, the government on Wednesday decided to recognise him as a diplomat, paving the way for his return to the US. “This is a policy shift but one that we believe is in Pakistan’s best interest,” the official told the Financial Times.
Mr Davis shot dead two Pakistanis last month in what he said was self-defence during an armed robbery. The Lahore high court was to hold another hearing in the case on Thursday, during which the US is expected to present a petition to certify that Mr Davis has diplomatic immunity and should be released.
News of a likely end to what has become a serious strain on Pakistan’s relations with the US, came as Senator John Kerry, the chairman of the US Senate’s foreign relations committee, ended a trip to the country.
Though US officials portrayed Mr Kerry’s trip as a broader exercise to strengthen one of Washington’s most critical relationships in support of its campaign on terror, Pakistani officials said the visit was mainly about the issue of Mr Davis’s arrest.
Yusuf Raza Gilani, the prime minister, is today expected to meet his cabinet following the policy reversal on Mr Davis. Pakistan’s Islamic hardliners have promised to resist any step to allow Mr Davis to leave the country.
The fragile government in Islamabad, mired in a battle against militants, struggling with a stagnant economy and fearful of a backlash from its people, appeared willing to go only so far to placate the US.
“We are facing difficult decisions. There is a political price,” Mr Gilani said. “If we make one decision, the people won’t support it. If we make another decision, the world doesn’t support it. We’re caught between the devil and the deep blue sea.”
The first signs of the ability of Islamist politicians to mount resistance on the streets may come on Friday after weekly prayers.
“We will not sit back idly. We will do everything possible to stop Raymond Davis from leaving Pakistan. The cause of justice must be served,” said Liaquat Baloch, a senior leader of the Jamaat-e-Islami, the main Islamic political party.
After more than two weeks of resistance to US calls for conferring diplomatic immunity on Raymond Davis, the government on Wednesday decided to recognise him as a diplomat, paving the way for his return to the US. “This is a policy shift but one that we believe is in Pakistan’s best interest,” the official told the Financial Times.
Mr Davis shot dead two Pakistanis last month in what he said was self-defence during an armed robbery. The Lahore high court was to hold another hearing in the case on Thursday, during which the US is expected to present a petition to certify that Mr Davis has diplomatic immunity and should be released.
News of a likely end to what has become a serious strain on Pakistan’s relations with the US, came as Senator John Kerry, the chairman of the US Senate’s foreign relations committee, ended a trip to the country.
Though US officials portrayed Mr Kerry’s trip as a broader exercise to strengthen one of Washington’s most critical relationships in support of its campaign on terror, Pakistani officials said the visit was mainly about the issue of Mr Davis’s arrest.
Yusuf Raza Gilani, the prime minister, is today expected to meet his cabinet following the policy reversal on Mr Davis. Pakistan’s Islamic hardliners have promised to resist any step to allow Mr Davis to leave the country.
The fragile government in Islamabad, mired in a battle against militants, struggling with a stagnant economy and fearful of a backlash from its people, appeared willing to go only so far to placate the US.
“We are facing difficult decisions. There is a political price,” Mr Gilani said. “If we make one decision, the people won’t support it. If we make another decision, the world doesn’t support it. We’re caught between the devil and the deep blue sea.”
The first signs of the ability of Islamist politicians to mount resistance on the streets may come on Friday after weekly prayers.
“We will not sit back idly. We will do everything possible to stop Raymond Davis from leaving Pakistan. The cause of justice must be served,” said Liaquat Baloch, a senior leader of the Jamaat-e-Islami, the main Islamic political party.
Wednesday, February 16, 2011
A Life’s Value May Depend on Agency
WASHINGTON — As the players here remake the nation’s vast regulatory system, they have been grappling with a subject that is more the province of poets and philosophers than bureaucrats: what is the value of a human life?
The answer determines how much spending the government should require to prevent a single death.
To protests from business and praise from unions, environmentalists and consumer groups, one agency after another has ratcheted up the price of life, justifying tougher — and more costly — standards.
The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.
The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.
The Transportation Department has used values of around $6 million to justify recent decisions to impose regulations that the Bush administration had rejected as too expensive, like requiring stronger roofs on cars.
And the numbers may keep climbing. In December, the E.P.A. said it might set the value of preventing cancer deaths 50 percent higher than other deaths, because cancer kills slowly. A report last year financed by the Department of Homeland Security suggested that the value of preventing deaths from terrorism might be 100 percent higher than other deaths.
The trend is a sensitive subject for an administration that is trying to improve its relationship with the business community, much of which has bitterly opposed the expansion of regulation. The White House said the decisions on the value of life were made by the agencies. The agencies, for their part, referred any questions to the White House.
“This administration utilizes the best available science in assessing the benefits and costs of any potential regulation, drawing on widely accepted methodologies that have been in use for years,” Meg Reilly, a spokeswoman for the Office of Management and Budget, which oversees the rule-making process, said in an e-mail.
Several independent experts, however, said that the increases were long overdue, noting that some agencies had been using the same values for more than a decade without adjusting for inflation. One office at the E.P.A. cut the value of life in 2004.
“Agencies have been using numbers that I thought were just too low,” said W. Kip Viscusi, a professor of economics at Vanderbilt University whose research is cited by most of the federal agencies as the basis for their calculations.
Businesses would prefer to discuss the consequences of the increases — new regulations and higher costs, which they say are hampering economic growth — rather than suggest that the government has overstated the value of life.
But some industry representatives said assigning a value to life was inherently subjective, and that the recent changes were driven by the administration’s pursuit of its regulatory agenda rather than scientific considerations.
“It looks like they just cooked the books — they just doubled the numbers,” said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, a trade group for the trucking industry, which faces higher costs under some of the Transportation Department’s new rules. The Bush administration rejected a plan in 2005 to make car companies double the roof strength of new vehicles, which it estimated might prevent 135 deaths in rollover accidents each year.
At the time, Transportation officials figured that the cost of the roofs would exceed the value of lives saved by almost $800 million. So the agency proposed a smaller increase in roof strength that might save 44 lives a year.
Last year, the Obama administration imposed the stricter and more expensive roof-strength standard, and it published a new set of calculations showing that the benefits outstripped the costs.
Most of the difference came from the increased value of human life. By raising that number to $6.1 million from a figure of $3.5 million in the original study, the Obama administration rendered those 135 lives — and hundreds of averted injuries — more valuable than the roofs.
The pattern of increases is scrambling a long-standing political dynamic. The business community historically has pushed for regulators to put a dollar value on life, part of a broader campaign to make agencies prove that the benefits of proposed regulations exceed the costs.
But some business groups are reconsidering the effectiveness of cost-benefit analysis as a check on regulations. The United States Chamber of Commerce is now campaigning for Congress to assert greater control over the rule-making process, reflecting a judgment that formulas may offer less reliable protection than politicians.
Some consumer groups, meanwhile, find themselves cheering the government’s results but reluctant to embrace the method. Advocates for increased regulation have long argued that cost-benefit analysis understates both the value of life and the benefits of government oversight.
“If analysis is going to be imposed on the rule-making process, we want higher values for injury and for fatalities,” said Robert Weissman, president of Public Citizen, which pushed the Transportation Department to reconsider the roof-strength regulation.
But Mr. Weissman said he still believed that such analysis was an impediment to necessary regulation.
“The bigger picture is absent,” he said. “How do you do cost-benefit analysis on global warming? It constrains the imagination. It really is a constraint in terms of bounding what is given serious consideration.”
The answer determines how much spending the government should require to prevent a single death.
To protests from business and praise from unions, environmentalists and consumer groups, one agency after another has ratcheted up the price of life, justifying tougher — and more costly — standards.
The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.
The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.
The Transportation Department has used values of around $6 million to justify recent decisions to impose regulations that the Bush administration had rejected as too expensive, like requiring stronger roofs on cars.
And the numbers may keep climbing. In December, the E.P.A. said it might set the value of preventing cancer deaths 50 percent higher than other deaths, because cancer kills slowly. A report last year financed by the Department of Homeland Security suggested that the value of preventing deaths from terrorism might be 100 percent higher than other deaths.
The trend is a sensitive subject for an administration that is trying to improve its relationship with the business community, much of which has bitterly opposed the expansion of regulation. The White House said the decisions on the value of life were made by the agencies. The agencies, for their part, referred any questions to the White House.
“This administration utilizes the best available science in assessing the benefits and costs of any potential regulation, drawing on widely accepted methodologies that have been in use for years,” Meg Reilly, a spokeswoman for the Office of Management and Budget, which oversees the rule-making process, said in an e-mail.
Several independent experts, however, said that the increases were long overdue, noting that some agencies had been using the same values for more than a decade without adjusting for inflation. One office at the E.P.A. cut the value of life in 2004.
“Agencies have been using numbers that I thought were just too low,” said W. Kip Viscusi, a professor of economics at Vanderbilt University whose research is cited by most of the federal agencies as the basis for their calculations.
Businesses would prefer to discuss the consequences of the increases — new regulations and higher costs, which they say are hampering economic growth — rather than suggest that the government has overstated the value of life.
But some industry representatives said assigning a value to life was inherently subjective, and that the recent changes were driven by the administration’s pursuit of its regulatory agenda rather than scientific considerations.
“It looks like they just cooked the books — they just doubled the numbers,” said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, a trade group for the trucking industry, which faces higher costs under some of the Transportation Department’s new rules. The Bush administration rejected a plan in 2005 to make car companies double the roof strength of new vehicles, which it estimated might prevent 135 deaths in rollover accidents each year.
At the time, Transportation officials figured that the cost of the roofs would exceed the value of lives saved by almost $800 million. So the agency proposed a smaller increase in roof strength that might save 44 lives a year.
Last year, the Obama administration imposed the stricter and more expensive roof-strength standard, and it published a new set of calculations showing that the benefits outstripped the costs.
Most of the difference came from the increased value of human life. By raising that number to $6.1 million from a figure of $3.5 million in the original study, the Obama administration rendered those 135 lives — and hundreds of averted injuries — more valuable than the roofs.
The pattern of increases is scrambling a long-standing political dynamic. The business community historically has pushed for regulators to put a dollar value on life, part of a broader campaign to make agencies prove that the benefits of proposed regulations exceed the costs.
But some business groups are reconsidering the effectiveness of cost-benefit analysis as a check on regulations. The United States Chamber of Commerce is now campaigning for Congress to assert greater control over the rule-making process, reflecting a judgment that formulas may offer less reliable protection than politicians.
Some consumer groups, meanwhile, find themselves cheering the government’s results but reluctant to embrace the method. Advocates for increased regulation have long argued that cost-benefit analysis understates both the value of life and the benefits of government oversight.
“If analysis is going to be imposed on the rule-making process, we want higher values for injury and for fatalities,” said Robert Weissman, president of Public Citizen, which pushed the Transportation Department to reconsider the roof-strength regulation.
But Mr. Weissman said he still believed that such analysis was an impediment to necessary regulation.
“The bigger picture is absent,” he said. “How do you do cost-benefit analysis on global warming? It constrains the imagination. It really is a constraint in terms of bounding what is given serious consideration.”
Asian Stocks Rise on U.S. Economic Outlook, Earnings; Honda, Qantas Gain
Asian stocks rose, sending the regional benchmark index to a one-week high, as a higher forecast for U.S. economic growth from the Federal Reserve and improving earnings bolstered confidence in an economic recovery.
Honda Motor Co., which counts North America as its biggest market and is Japan’s second-largest carmaker, climbed 2.1 percent in Tokyo. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, rose 1.1 percent in Seoul. Qantas Airways Ltd., Australia’s biggest airline, jumped 4.2 percent in Sydney after reporting profit that more than quadrupled.
“Economic sentiment is improving and that is supporting the stock market,” said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “Investors expecting stocks to rise further are increasing” because of positive economic data and strong corporate earnings.
The MSCI Asia Pacific Index rose 0.7 percent to 138.94 as of 9:49 a.m. in Tokyo, heading for its highest close since Feb. 8. The gauge last week sank 2.7 percent after China raised borrowing costs and anti-government protests intensified in Egypt, eventually forcing President Hosni Mubarak to resign.
Of the 453 companies in the MSCI Asia Pacific Index that have reported results since Jan. 1 for the latest quarter, 177 have exceeded analysts’ estimates, while 138 have missed them, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average increased 0.7 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index both gained 0.2 percent. South Korea’s Kospi Index was little changed.
Fed Minutes
Futures on the Standard & Poor’s 500 Index were little changed today. The index rose 0.6 percent yesterday in New York to a 32-month high following the Fed’s forecast for economic growth, improving earnings and takeovers.
Officials “continued to express disappointment in both the pace and the unevenness of the improvements in labor markets,” while also judging the recovery to be on a “firmer footing,” the Federal Open Market Committee said in minutes of its Jan. 25-26 meeting, released today in Washington. Policy makers raised projections for economic growth this year and made little change to forecasts after 2011 or for unemployment and inflation.
Commerce Department figures showed that housing starts climbed 15 percent to a 596,000 annual rate. The median forecast in a Bloomberg News survey called for a 539,000 rate. Work started on 78 percent more dwellings with two or more units, overshadowing a drop in single-family houses that indicates the housing market continues to struggle.
“An improvement in the housing market and consumer spending is a first step to a self-sustaining recovery,” Ichiyoshi Investment Management’s Akino said.
The MSCI Asia Pacific Index increased 0.2 percent this year to yesterday, compared with gains of 6.3 percent by the S&P 500 and 5.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 14.1 times estimated earnings on average, compared with 13.9 times for the S&P 500 and 11.5 times for the Stoxx 600.
Crude oil for March delivery rose 0.8 percent to settle at $84.99 a barrel in New York yesterday.
Honda Motor Co., which counts North America as its biggest market and is Japan’s second-largest carmaker, climbed 2.1 percent in Tokyo. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, rose 1.1 percent in Seoul. Qantas Airways Ltd., Australia’s biggest airline, jumped 4.2 percent in Sydney after reporting profit that more than quadrupled.
“Economic sentiment is improving and that is supporting the stock market,” said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “Investors expecting stocks to rise further are increasing” because of positive economic data and strong corporate earnings.
The MSCI Asia Pacific Index rose 0.7 percent to 138.94 as of 9:49 a.m. in Tokyo, heading for its highest close since Feb. 8. The gauge last week sank 2.7 percent after China raised borrowing costs and anti-government protests intensified in Egypt, eventually forcing President Hosni Mubarak to resign.
Of the 453 companies in the MSCI Asia Pacific Index that have reported results since Jan. 1 for the latest quarter, 177 have exceeded analysts’ estimates, while 138 have missed them, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average increased 0.7 percent. Australia’s S&P/ASX 200 Index and New Zealand’s NZX 50 Index both gained 0.2 percent. South Korea’s Kospi Index was little changed.
Fed Minutes
Futures on the Standard & Poor’s 500 Index were little changed today. The index rose 0.6 percent yesterday in New York to a 32-month high following the Fed’s forecast for economic growth, improving earnings and takeovers.
Officials “continued to express disappointment in both the pace and the unevenness of the improvements in labor markets,” while also judging the recovery to be on a “firmer footing,” the Federal Open Market Committee said in minutes of its Jan. 25-26 meeting, released today in Washington. Policy makers raised projections for economic growth this year and made little change to forecasts after 2011 or for unemployment and inflation.
Commerce Department figures showed that housing starts climbed 15 percent to a 596,000 annual rate. The median forecast in a Bloomberg News survey called for a 539,000 rate. Work started on 78 percent more dwellings with two or more units, overshadowing a drop in single-family houses that indicates the housing market continues to struggle.
“An improvement in the housing market and consumer spending is a first step to a self-sustaining recovery,” Ichiyoshi Investment Management’s Akino said.
The MSCI Asia Pacific Index increased 0.2 percent this year to yesterday, compared with gains of 6.3 percent by the S&P 500 and 5.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 14.1 times estimated earnings on average, compared with 13.9 times for the S&P 500 and 11.5 times for the Stoxx 600.
Crude oil for March delivery rose 0.8 percent to settle at $84.99 a barrel in New York yesterday.
Billionaire Ambani Questioned by Investigators in Phone Probe
India’s federal investigators questioned Anil Ambani, the billionaire chairman of Reliance Communications Ltd., for about two hours yesterday amid a widening probe into the award of mobile-phone licenses in 2008.
Ambani “met Central Bureau of Investigation officials to clarify ongoing issues, relating to telecom matters for the years 2001 to 2010,” an e-mailed statement from his group spokesman Gaurav Wahi said. “No summons of any kind have been issued by CBI” to Ambani.
The move by federal officials follows the arrests this month of former telecommunications minister Andimuthu Raja, his personal secretary and an ex-bureaucrat after the nation’s chief auditor said the sale of permits at below-market prices may have potentially cost the exchequer $31 billion. The questioning may further undermine investor confidence in Ambani, 51, who presides over the two worst performing stocks of the past year.
“Reliance Communications sends a lot of letters to shareholders to say everything is fine, but my feeling is that everything is not alright,” said Vienna-based Juergen Maier, who manages a 250 million euro ($337 million) India equity fund at Raiffeisen Capital Management. “It’s not the first time it’s been questioned and this confirms the image investors have.”
Reliance Communications, the worst performer in the 30-stock Sensitive Index in the past year with a 40 percent slide, fell 1.9 percent to 99.6 rupees in Mumbai yesterday.
Cooperating Fully
Ambani is the second executive to be quizzed by the CBI in as many days after Sanjay Chandra, managing director of Unitech Ltd., India’s second-biggest developer, said Feb. 15 his company is fully cooperating with the investigation.
The bureau has argued in court that Raja conspired to benefit companies including Swan Telecom Ltd., now known as Etisalat DB Telecom India Ltd., and Unitech by violating guidelines in the license sale. India’s chief auditor said in November second-generation airwaves were sold for an “unbelievably low” $2.7 billion when they may have been worth at least 10 times more.
“All the nine telecom companies that received the licenses are being questioned,” Chandra said in an e-mailed statement on Feb. 15.
The CBI sought information from Ambani amid allegations that his group received favors from Raja and over the role of Reliance Telecom Ltd., a unit of Reliance Communications, in Swan Telecom, the Press Trust of India reported yesterday, citing investigators it didn’t identify.
No Benefit
The statement from Ambani’s group said no official or affiliate held shares in Swan Telecom at the time it won a phone license and no employee benefitted from the award.
Reliance Telecom “held only 9.9 percent of the equity share capital of Swan Telecom at the time of filing the relevant license application in March 2007,” Reliance Communications said in an e-mailed statement on Feb. 13.
“There would be a significant impact on the group only if something concrete is unearthed,” said D.K. Aggarwal, who manages about $100 million as chairman of SMC Wealth Management Services Ltd. in New Delhi. “The group has taken a hit as far as sentiment is concerned though the developments aren’t going to have a material impact.”
The CBI arrested Shahid Balwa, vice chairman of Etisalat DB Telecom Pvt., formerly Swan, on Feb. 8, a week after detaining Raja in the phone probe.
‘Wrongly Implicated’
Balwa, who is also the managing director of DB Realty Ltd. was “wrongly implicated,” according to a company statement on Feb. 9. Raja’s lawyer, Ramesh Gupta, said the former minister was cooperating with investigators and shouldn’t be kept in custody.
Ambani is also chairman of Reliance Capital Ltd., which owns an 18 percent stake in Bloomberg UTV, an Indian television channel. Bloomberg LP, the parent of Bloomberg News, owns part of the Indian venture.
Prime Minister Manmohan Singh, whose government has been buffeted by a string of corruption scandals, vowed to punish those guilty of fraud, in a meeting with a group of television editors in New Delhi yesterday.
“I wish to assure you and I wish to assure the country as a whole that our government is dead serious in bringing to book all the wrongdoers, regardless of the positions they may occupy,” Singh said.
Image Hurt
An atmosphere dominated by claims of wrongdoing by his ministers had hurt the image of India overseas, he acknowledged, adding the compulsions of coalition played a role in how he allocated cabinet portfolios. Raja is a leading member of the ruling party from the southern state of Tamil Nadu, a key partner in Singh’s ruling alliance.
“The scam is huge and tarnishing the image of India,” said Taina Erajuuri, who helps manage the equivalent of $1.2 billion of emerging-market stocks, including Indian shares, at Helsinki-based FIM Asset Management Ltd. “The government is trying to show the world they are doing something, and they are going after the top guys.” Erajuuri’s funds own no shares in Ambani’s companies.
Ambani “met Central Bureau of Investigation officials to clarify ongoing issues, relating to telecom matters for the years 2001 to 2010,” an e-mailed statement from his group spokesman Gaurav Wahi said. “No summons of any kind have been issued by CBI” to Ambani.
The move by federal officials follows the arrests this month of former telecommunications minister Andimuthu Raja, his personal secretary and an ex-bureaucrat after the nation’s chief auditor said the sale of permits at below-market prices may have potentially cost the exchequer $31 billion. The questioning may further undermine investor confidence in Ambani, 51, who presides over the two worst performing stocks of the past year.
“Reliance Communications sends a lot of letters to shareholders to say everything is fine, but my feeling is that everything is not alright,” said Vienna-based Juergen Maier, who manages a 250 million euro ($337 million) India equity fund at Raiffeisen Capital Management. “It’s not the first time it’s been questioned and this confirms the image investors have.”
Reliance Communications, the worst performer in the 30-stock Sensitive Index in the past year with a 40 percent slide, fell 1.9 percent to 99.6 rupees in Mumbai yesterday.
Cooperating Fully
Ambani is the second executive to be quizzed by the CBI in as many days after Sanjay Chandra, managing director of Unitech Ltd., India’s second-biggest developer, said Feb. 15 his company is fully cooperating with the investigation.
The bureau has argued in court that Raja conspired to benefit companies including Swan Telecom Ltd., now known as Etisalat DB Telecom India Ltd., and Unitech by violating guidelines in the license sale. India’s chief auditor said in November second-generation airwaves were sold for an “unbelievably low” $2.7 billion when they may have been worth at least 10 times more.
“All the nine telecom companies that received the licenses are being questioned,” Chandra said in an e-mailed statement on Feb. 15.
The CBI sought information from Ambani amid allegations that his group received favors from Raja and over the role of Reliance Telecom Ltd., a unit of Reliance Communications, in Swan Telecom, the Press Trust of India reported yesterday, citing investigators it didn’t identify.
No Benefit
The statement from Ambani’s group said no official or affiliate held shares in Swan Telecom at the time it won a phone license and no employee benefitted from the award.
Reliance Telecom “held only 9.9 percent of the equity share capital of Swan Telecom at the time of filing the relevant license application in March 2007,” Reliance Communications said in an e-mailed statement on Feb. 13.
“There would be a significant impact on the group only if something concrete is unearthed,” said D.K. Aggarwal, who manages about $100 million as chairman of SMC Wealth Management Services Ltd. in New Delhi. “The group has taken a hit as far as sentiment is concerned though the developments aren’t going to have a material impact.”
The CBI arrested Shahid Balwa, vice chairman of Etisalat DB Telecom Pvt., formerly Swan, on Feb. 8, a week after detaining Raja in the phone probe.
‘Wrongly Implicated’
Balwa, who is also the managing director of DB Realty Ltd. was “wrongly implicated,” according to a company statement on Feb. 9. Raja’s lawyer, Ramesh Gupta, said the former minister was cooperating with investigators and shouldn’t be kept in custody.
Ambani is also chairman of Reliance Capital Ltd., which owns an 18 percent stake in Bloomberg UTV, an Indian television channel. Bloomberg LP, the parent of Bloomberg News, owns part of the Indian venture.
Prime Minister Manmohan Singh, whose government has been buffeted by a string of corruption scandals, vowed to punish those guilty of fraud, in a meeting with a group of television editors in New Delhi yesterday.
“I wish to assure you and I wish to assure the country as a whole that our government is dead serious in bringing to book all the wrongdoers, regardless of the positions they may occupy,” Singh said.
Image Hurt
An atmosphere dominated by claims of wrongdoing by his ministers had hurt the image of India overseas, he acknowledged, adding the compulsions of coalition played a role in how he allocated cabinet portfolios. Raja is a leading member of the ruling party from the southern state of Tamil Nadu, a key partner in Singh’s ruling alliance.
“The scam is huge and tarnishing the image of India,” said Taina Erajuuri, who helps manage the equivalent of $1.2 billion of emerging-market stocks, including Indian shares, at Helsinki-based FIM Asset Management Ltd. “The government is trying to show the world they are doing something, and they are going after the top guys.” Erajuuri’s funds own no shares in Ambani’s companies.
Singh agrees to telecoms probe
Manmohan Singh, India’s prime minister, has agreed to face a parliamentary investigation into a spiralling corruption scandal that has paralysed the world’s largest democracy.
Mr Singh said on Wednesday that he was prepared to answer questions from legislators about alleged irregularities in the award of 2G telecoms licences.
An official audit, claiming the scandal cost the national exchequer $39bn, has rocked a fast-growing sector that attracted investments from some of the country’s most powerful business magnates.
A spokesman for Anil Ambani, the Indian billionaire who controls Reliance Communications, said that the tycoon met with federal police on Wednesday “to clarify ongoing issues relating to telecoms matters for the years 2001 to 2010”.
The ruling Congress party had previously resisted opposition demands for a parliamentary investigation. The dispute has stalled the government’s legislative agenda. “I’m quite happy to appear before any committee,” Mr Singh said.
Opposition leaders on the right and left leapt to the offensive minutes after the prime minister expressed disappointment that his second term in office had become mired in corruption scandals.
Nitin Gadkari, president of the Hindu nationalist Bharatiya Janata party, has attempted to paint Mr Singh as a weak leader presiding over a rotten cabinet. He said that the telecoms scandal demonstrated that the prime minister was “not capable of controlling the country’s bureaucrats”.
Mr Singh criticised the BJP, saying that the opposition’s disruptive politics reflected its concerns about the outcome of an investigation into riots that led to the killing of an estimated 2,000 Muslims in 2002.
However, he also acknowledged that a series of corruption scandals, which have also embroiled India’s hosting of the Commonwealth Games last year and the military top brass, had sapped the confidence of Indians in their country’s governance.
“I’m not saying that I have never made a mistake, but I’m not at fault to the extent everyone thinks I am,” Mr Singh said.
Amid speculation that Mr Singh’s travails might hasten a political transition, he emphasised his determination not to resign before serving a full five-year term. “Whatever some people may say – that we are a lame-duck government, that I am a lame duck prime minister – we take our job very seriously. We are here to govern, and to govern effectively.”
Swapan Dasgupta, a leading columnist, applauded Mr Singh’s honest approach to address concerns that were undermining India’s governance and international image.
But he said that such honesty was dangerous in a political environment where the “political distance” between the prime minister’s office and the swirling corruption allegations had narrowed.
Mr Singh said on Wednesday that he was prepared to answer questions from legislators about alleged irregularities in the award of 2G telecoms licences.
An official audit, claiming the scandal cost the national exchequer $39bn, has rocked a fast-growing sector that attracted investments from some of the country’s most powerful business magnates.
A spokesman for Anil Ambani, the Indian billionaire who controls Reliance Communications, said that the tycoon met with federal police on Wednesday “to clarify ongoing issues relating to telecoms matters for the years 2001 to 2010”.
The ruling Congress party had previously resisted opposition demands for a parliamentary investigation. The dispute has stalled the government’s legislative agenda. “I’m quite happy to appear before any committee,” Mr Singh said.
Opposition leaders on the right and left leapt to the offensive minutes after the prime minister expressed disappointment that his second term in office had become mired in corruption scandals.
Nitin Gadkari, president of the Hindu nationalist Bharatiya Janata party, has attempted to paint Mr Singh as a weak leader presiding over a rotten cabinet. He said that the telecoms scandal demonstrated that the prime minister was “not capable of controlling the country’s bureaucrats”.
Mr Singh criticised the BJP, saying that the opposition’s disruptive politics reflected its concerns about the outcome of an investigation into riots that led to the killing of an estimated 2,000 Muslims in 2002.
However, he also acknowledged that a series of corruption scandals, which have also embroiled India’s hosting of the Commonwealth Games last year and the military top brass, had sapped the confidence of Indians in their country’s governance.
“I’m not saying that I have never made a mistake, but I’m not at fault to the extent everyone thinks I am,” Mr Singh said.
Amid speculation that Mr Singh’s travails might hasten a political transition, he emphasised his determination not to resign before serving a full five-year term. “Whatever some people may say – that we are a lame-duck government, that I am a lame duck prime minister – we take our job very seriously. We are here to govern, and to govern effectively.”
Swapan Dasgupta, a leading columnist, applauded Mr Singh’s honest approach to address concerns that were undermining India’s governance and international image.
But he said that such honesty was dangerous in a political environment where the “political distance” between the prime minister’s office and the swirling corruption allegations had narrowed.
Tuesday, February 15, 2011
Egypt Leaders Found ‘Off’ Switch for Internet
Epitaphs for the Mubarak government all note that the mobilizing power of the Internet was one of the Egyptian opposition’s most potent weapons. But quickly lost in the swirl of revolution was the government’s ferocious counterattack, a dark achievement that many had thought impossible in the age of global connectedness. In a span of minutes just after midnight on Jan. 28, a technologically advanced, densely wired country with more than 20 million people online was essentially severed from the global Internet.
The blackout was lifted after just five days, and it did not save President Hosni Mubarak. But it has mesmerized the worldwide technical community and raised concerns that with unrest coursing through the Middle East, other autocratic governments — many of them already known to interfere with and filter specific Web sites and e-mails — may also possess what is essentially a kill switch for the Internet.
Because the Internet’s legendary robustness and ability to route around blockages are part of its basic design, even the world’s most renowned network and telecommunications engineers have been perplexed that the Mubarak government succeeded in pulling the maneuver off.
But now, as Egyptian engineers begin to assess fragmentary evidence and their own knowledge of the Egyptian Internet’s construction, they are beginning to understand what, in effect, hit them. Interviews with many of those engineers, as well as an examination of data collected around the world during the blackout, indicate that the government exploited a devastating combination of vulnerabilities in the national infrastructure.
For all the Internet’s vaunted connectivity, the Egyptian government commanded powerful instruments of control: it owns the pipelines that carry information across the country and out into the world.
Internet experts say similar arrangements are more common in authoritarian countries than is generally recognized. In Syria, for example, the Syrian Telecommunications Establishment dominates the infrastructure, and the bulk of the international traffic flows through a single pipeline to Cyprus. Jordan, Qatar, Oman, Saudi Arabia and other Middle Eastern countries have the same sort of dominant, state-controlled carrier.
Over the past several days, activists in Bahrain and Iran say they have seen strong evidence of severe Internet slowdowns amid protests there. Concerns over the potential for a government shutdown are particularly high in North African countries, most of which rely on a just a small number of fiber-optic lines for most of their international Internet traffic.
A Double Knockout
The attack in Egypt relied on a double knockout, the engineers say. As in many authoritarian countries, Egypt’s Internet must connect to the outside world through a tiny number of international portals that are tightly in the grip of the government. In a lightning strike, technicians first cut off nearly all international traffic through those portals.
In theory, the domestic Internet should have survived that strike. But the cutoff also revealed how dependent Egypt’s internal networks are on moment-to-moment information from systems that exist only outside the country — including e-mail servers at companies like Google, Microsoft and Yahoo; data centers in the United States; and the Internet directories called domain name servers, which can be physically located anywhere from Australia to Germany.
The government’s attack left Egypt not only cut off from the outside world, but also with its internal systems in a sort of comatose state: servers, cables and fiber-optic lines were largely up and running, but too confused or crippled to carry information save a dribble of local e-mail traffic and domestic Web sites whose Internet circuitry somehow remained accessible.
“They drilled unexpectedly all the way down to the bottom layer of the Internet and stopped all traffic flowing,” said Jim Cowie, chief technology officer of Renesys, a network management company based in New Hampshire that has closely monitored Internet traffic from Egypt. “With the scope of their shutdown and the size of their online population, it is an unprecedented event.”
The engineers say that a focal point of the attack was an imposing building at 26 Ramses Street in Cairo, just two and a half miles from the epicenter of the protests, Tahrir Square. At one time purely a telephone network switching center, the building now houses the crucial Internet exchange that serves as the connection point for fiber-optic links provided by five major network companies that provide the bulk of the Internet connectivity going into and out of the country.
“In Egypt the actual physical and logical connections to the rest of the world are few, and they are licensed by the government and they are tightly controlled,” said Wael Amin, president of ITWorx, a large software development company based in Cairo.
One of the government’s strongest levers is Telecom Egypt, a state-owned company that engineers say owns virtually all the country’s fiber-optic cables; other Internet service providers are forced to lease bandwidth on those cables in order to do business.
The blackout was lifted after just five days, and it did not save President Hosni Mubarak. But it has mesmerized the worldwide technical community and raised concerns that with unrest coursing through the Middle East, other autocratic governments — many of them already known to interfere with and filter specific Web sites and e-mails — may also possess what is essentially a kill switch for the Internet.
Because the Internet’s legendary robustness and ability to route around blockages are part of its basic design, even the world’s most renowned network and telecommunications engineers have been perplexed that the Mubarak government succeeded in pulling the maneuver off.
But now, as Egyptian engineers begin to assess fragmentary evidence and their own knowledge of the Egyptian Internet’s construction, they are beginning to understand what, in effect, hit them. Interviews with many of those engineers, as well as an examination of data collected around the world during the blackout, indicate that the government exploited a devastating combination of vulnerabilities in the national infrastructure.
For all the Internet’s vaunted connectivity, the Egyptian government commanded powerful instruments of control: it owns the pipelines that carry information across the country and out into the world.
Internet experts say similar arrangements are more common in authoritarian countries than is generally recognized. In Syria, for example, the Syrian Telecommunications Establishment dominates the infrastructure, and the bulk of the international traffic flows through a single pipeline to Cyprus. Jordan, Qatar, Oman, Saudi Arabia and other Middle Eastern countries have the same sort of dominant, state-controlled carrier.
Over the past several days, activists in Bahrain and Iran say they have seen strong evidence of severe Internet slowdowns amid protests there. Concerns over the potential for a government shutdown are particularly high in North African countries, most of which rely on a just a small number of fiber-optic lines for most of their international Internet traffic.
A Double Knockout
The attack in Egypt relied on a double knockout, the engineers say. As in many authoritarian countries, Egypt’s Internet must connect to the outside world through a tiny number of international portals that are tightly in the grip of the government. In a lightning strike, technicians first cut off nearly all international traffic through those portals.
In theory, the domestic Internet should have survived that strike. But the cutoff also revealed how dependent Egypt’s internal networks are on moment-to-moment information from systems that exist only outside the country — including e-mail servers at companies like Google, Microsoft and Yahoo; data centers in the United States; and the Internet directories called domain name servers, which can be physically located anywhere from Australia to Germany.
The government’s attack left Egypt not only cut off from the outside world, but also with its internal systems in a sort of comatose state: servers, cables and fiber-optic lines were largely up and running, but too confused or crippled to carry information save a dribble of local e-mail traffic and domestic Web sites whose Internet circuitry somehow remained accessible.
“They drilled unexpectedly all the way down to the bottom layer of the Internet and stopped all traffic flowing,” said Jim Cowie, chief technology officer of Renesys, a network management company based in New Hampshire that has closely monitored Internet traffic from Egypt. “With the scope of their shutdown and the size of their online population, it is an unprecedented event.”
The engineers say that a focal point of the attack was an imposing building at 26 Ramses Street in Cairo, just two and a half miles from the epicenter of the protests, Tahrir Square. At one time purely a telephone network switching center, the building now houses the crucial Internet exchange that serves as the connection point for fiber-optic links provided by five major network companies that provide the bulk of the Internet connectivity going into and out of the country.
“In Egypt the actual physical and logical connections to the rest of the world are few, and they are licensed by the government and they are tightly controlled,” said Wael Amin, president of ITWorx, a large software development company based in Cairo.
One of the government’s strongest levers is Telecom Egypt, a state-owned company that engineers say owns virtually all the country’s fiber-optic cables; other Internet service providers are forced to lease bandwidth on those cables in order to do business.
Asian Stocks Climb to One-Week High as Analysts Upgrade Shares
Asian stocks advanced, sending the regional benchmark index to a one-week high, as analysts recommended companies from Toshiba Corp. to Westpac Banking Corp.
Toshiba, the world’s second biggest maker of flash memory, rose 2.8 percent and Westpac climbed 0.8 percent. Iluka Resources Ltd. and Kobe Steel Ltd. also climbed with analysts upgrades. BHP Billiton Ltd., which reported a 72 percent jump in first-half profit today, dropped in Sydney trading.
The MSCI Asia Pacific Index gained 0.2 percent to 137.94 as of 10:30 a.m. in Sydney, recouping yesterday’s retreat. The benchmark gauge last week sank 2.7 percent after China raised borrowing costs and anti-government protests intensified in Egypt, eventually forcing President Hosni Mubarak to resign.
Japan’s Nikkei Stock Average gained 0.3 percent as real estate developers and banks extended gains after the Bank of Japan yesterday raised its economic assessment for the first time in nine months.
Nomura Research Institute said in a report dated Feb. 14 that Japan will “break out of its current lull” in the first half of 2011, instead of its earlier prediction of the second half.
Elsewhere, South Korea’s Kospi Index was little changed while Australia’s S&P/ASX 200 Index fell 0.2 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.1 percent after the benchmark for U.S. equities yesterday fell from a 32-month higher as retail sales missed economists’ forecasts and Exxon Mobil Corp. led oil companies lower.
Toshiba jumped 2.8 percent to 547 yen in Tokyo after Nikko Cordial Securities Inc. raised its recommendation for the shares to “outperform” from “neutral.”
Westpac gained 1.2 percent to A$24.61 after Deutsche Bank G upgraded Australia’s second-largest lender to “buy” from “hold.”
Iluka Resources gained 3.4 percent to A$9.97 as Royal Bank of Scotland Group upgraded the world’s biggest zircon producer to “buy” while Kobe Steel increased 1.3 percent to 238 yen. Both Citigroup Inc. and Nomura Holdings also raised their recommendation for the steelmaker to “buy.”
Toshiba, the world’s second biggest maker of flash memory, rose 2.8 percent and Westpac climbed 0.8 percent. Iluka Resources Ltd. and Kobe Steel Ltd. also climbed with analysts upgrades. BHP Billiton Ltd., which reported a 72 percent jump in first-half profit today, dropped in Sydney trading.
The MSCI Asia Pacific Index gained 0.2 percent to 137.94 as of 10:30 a.m. in Sydney, recouping yesterday’s retreat. The benchmark gauge last week sank 2.7 percent after China raised borrowing costs and anti-government protests intensified in Egypt, eventually forcing President Hosni Mubarak to resign.
Japan’s Nikkei Stock Average gained 0.3 percent as real estate developers and banks extended gains after the Bank of Japan yesterday raised its economic assessment for the first time in nine months.
Nomura Research Institute said in a report dated Feb. 14 that Japan will “break out of its current lull” in the first half of 2011, instead of its earlier prediction of the second half.
Elsewhere, South Korea’s Kospi Index was little changed while Australia’s S&P/ASX 200 Index fell 0.2 percent.
Futures on the Standard & Poor’s 500 Index climbed 0.1 percent after the benchmark for U.S. equities yesterday fell from a 32-month higher as retail sales missed economists’ forecasts and Exxon Mobil Corp. led oil companies lower.
Toshiba jumped 2.8 percent to 547 yen in Tokyo after Nikko Cordial Securities Inc. raised its recommendation for the shares to “outperform” from “neutral.”
Westpac gained 1.2 percent to A$24.61 after Deutsche Bank G upgraded Australia’s second-largest lender to “buy” from “hold.”
Iluka Resources gained 3.4 percent to A$9.97 as Royal Bank of Scotland Group upgraded the world’s biggest zircon producer to “buy” while Kobe Steel increased 1.3 percent to 238 yen. Both Citigroup Inc. and Nomura Holdings also raised their recommendation for the steelmaker to “buy.”
Metals Demand in India May Double on Transport, Power Projects
Metals demand in India, Asia’s second-fastest growing major economy, may double in five years and remain robust for a decade, fueled by rising car sales and higher spending on infrastructure projects, analysts said.
Growth in demand for base metals may jump 10 percent to 15 percent this year, said Sumit Verma, an analyst at broker Geojit Comtrade Ltd. That compares with an average annual increase of 6 percent for aluminum and copper, and 4.3 percent for zinc between 1972 and 2009, Barclays Capital said in November, predicting demand to jump 80 percent by 2015.
“Steel demand may double in the next five years and I will not be surprised if demand for non-ferrous metals such as copper and aluminum grow at twice the pace,” said Kunal Shah, head of commodity research with Nirmal Bang Securities Pvt. in Mumbai.
Prime Minister Manmohan Singh has proposed $1 trillion of spending in the five years through 2017 to upgrade the nation’s road, railway and power networks, which the finance ministry says shaves 2 percentage points from growth. Commodity demand in India has reached a “tipping point” and the nation may surpass the U.S. as the second-largest consumer of copper, aluminum and zinc in the early 2020’s, Barclays said.
“The drivers will be growth and development of key sectors of the economy like infrastructure, power, construction, energy and transportation,” Geojit’s Verma said in an e-mailed reply to questions. “The outlook for next five to 10 years is bullish.”
India’s economy will probably grow 8.6 percent in the year to March, the most in three years, the government’s statistics office said on Feb. 7. The nation expanded at 8.9 percent in the quarter ended Sept. 30, compared with the 9.8 percent growth in the three months ended Dec. 31 in China, the largest consumer of everything from copper to zinc and iron ore.
Record Sales
Rising salaries and economic expansion pushed car sales in India to a record last month. Deliveries climbed 26 percent to 184,332 vehicles in January, the 24th consecutive monthly year- on-year increase, according to figures released by the Society of Indian Automobile Manufacturers on Feb. 9.
Aluminum demand in India may climb an average 8 percent a year between 2009 and 2030, Barclays said, predicting growth in copper and zinc usage at 8.6 percent and 8.5 percent each. In absolute terms, the country’s aluminum demand growth from 2009 and 2015 will be equal to Korea’s current consumption or twice Canada’s, the report said.
Hindalco Industries Ltd., India’s largest aluminum maker, on Feb. 12 reported a 7.7 percent gain in third-quarter profit because of higher base metal prices and said global demand for the metal is expected to be “robust” for the rest of the year. Sterlite Industries Ltd., the nation’s top copper producer, last month reported a 60 percent jump in earnings.
China Spending
Commodities beat gains in stocks, bonds and the dollar in 2010 as China led the recovery from the first global recession since World War II. The rally in raw materials may be extended this year as the global economy recovers and infrastructure spending in China boosts demand for copper and other base metals, Jing Ulrich, chairwoman of China equities and commodities at JP Morgan Chase & Co. said yesterday in Singapore.
Copper on the London Metal Exchange reached a record $10,190 a metric ton yesterday, boosted by manufacturing growth in China and the U.S., the top two users.
“We are holding bullish for base metals prices,” said Sundeep Jain, an analyst at Karvy Comtrade Ltd. “Demand on the one side is robust from emerging markets, be it India or China, and on the other, supply is not able to catch up with demand.”
Growth in demand for base metals may jump 10 percent to 15 percent this year, said Sumit Verma, an analyst at broker Geojit Comtrade Ltd. That compares with an average annual increase of 6 percent for aluminum and copper, and 4.3 percent for zinc between 1972 and 2009, Barclays Capital said in November, predicting demand to jump 80 percent by 2015.
“Steel demand may double in the next five years and I will not be surprised if demand for non-ferrous metals such as copper and aluminum grow at twice the pace,” said Kunal Shah, head of commodity research with Nirmal Bang Securities Pvt. in Mumbai.
Prime Minister Manmohan Singh has proposed $1 trillion of spending in the five years through 2017 to upgrade the nation’s road, railway and power networks, which the finance ministry says shaves 2 percentage points from growth. Commodity demand in India has reached a “tipping point” and the nation may surpass the U.S. as the second-largest consumer of copper, aluminum and zinc in the early 2020’s, Barclays said.
“The drivers will be growth and development of key sectors of the economy like infrastructure, power, construction, energy and transportation,” Geojit’s Verma said in an e-mailed reply to questions. “The outlook for next five to 10 years is bullish.”
India’s economy will probably grow 8.6 percent in the year to March, the most in three years, the government’s statistics office said on Feb. 7. The nation expanded at 8.9 percent in the quarter ended Sept. 30, compared with the 9.8 percent growth in the three months ended Dec. 31 in China, the largest consumer of everything from copper to zinc and iron ore.
Record Sales
Rising salaries and economic expansion pushed car sales in India to a record last month. Deliveries climbed 26 percent to 184,332 vehicles in January, the 24th consecutive monthly year- on-year increase, according to figures released by the Society of Indian Automobile Manufacturers on Feb. 9.
Aluminum demand in India may climb an average 8 percent a year between 2009 and 2030, Barclays said, predicting growth in copper and zinc usage at 8.6 percent and 8.5 percent each. In absolute terms, the country’s aluminum demand growth from 2009 and 2015 will be equal to Korea’s current consumption or twice Canada’s, the report said.
Hindalco Industries Ltd., India’s largest aluminum maker, on Feb. 12 reported a 7.7 percent gain in third-quarter profit because of higher base metal prices and said global demand for the metal is expected to be “robust” for the rest of the year. Sterlite Industries Ltd., the nation’s top copper producer, last month reported a 60 percent jump in earnings.
China Spending
Commodities beat gains in stocks, bonds and the dollar in 2010 as China led the recovery from the first global recession since World War II. The rally in raw materials may be extended this year as the global economy recovers and infrastructure spending in China boosts demand for copper and other base metals, Jing Ulrich, chairwoman of China equities and commodities at JP Morgan Chase & Co. said yesterday in Singapore.
Copper on the London Metal Exchange reached a record $10,190 a metric ton yesterday, boosted by manufacturing growth in China and the U.S., the top two users.
“We are holding bullish for base metals prices,” said Sundeep Jain, an analyst at Karvy Comtrade Ltd. “Demand on the one side is robust from emerging markets, be it India or China, and on the other, supply is not able to catch up with demand.”
Monday, February 14, 2011
Headline inflation comes down to 8.23% in Jan, but pressure remains
NEW DELHI: Headline inflation eased in January marginally from the previous month but economists said it still remains sticky and is likely to remain above the Reserve Bank of India's (RBI) comfort level until March-end. Data released by the commerce and industry ministry on Monday showed inflation, as measured by the wholesale price index, stood at 8.23%, moderating marginally from December's 8.43%. It stood at 8.53% in the same month last year.
Finance minister Pranab Mukherjee said the problem of inflation continued to be challenging and added that the moderation was too small for him to be comfortable. He said even though overall food inflation was a matter of worry, it had come a long way from the peak. Food inflation rose to 20.21% in December 2009 and peaked in February 2010 at 20.22%. The FM said he expected overall inflation to come down close to 7% by March-end but cautioned that the target was still not good enough and the government would continue its fight against inflation.
Economists said with crude prices rising and upward pressure on food prices globally, inflationary expectations were likely to intensify. They said the RBI would continue its vigil against inflation and would raise interest rates to calm price pressures. The government also revised November's inflation to 8.08% from the previous estimate of 7.48%. "We think it may be around 7.30% by end-March. Next financial year, inflation is likely to decline very gradually," A Prasanna, chief economist at ICICI Primary Dealership, said. Rising prices have remained a headache for the government and RBI. RBI has raised interest rates seven times since March 2010 to tame inflation. Food prices have moderated in recent weeks due to better supplies. The index for primary articles group in Jan rose by 2.4% to 193.4 from 188.9 for the previous month. The index for food articles group rose by 2% to 190.7 from 186.9 for the previous month due to higher prices of fruits and vegetables and jowar (7% each), arhar and coffee (4% each), condiments and spices (3%), moong, barley, masur and mutton (2% each) and bajra, rice, egg, maize, beef & buffalo meat and wheat (1% each). However, the prices of poultry chicken (7%), fish-inland (6%) and tea and milk (1% each) declined.
Finance minister Pranab Mukherjee said the problem of inflation continued to be challenging and added that the moderation was too small for him to be comfortable. He said even though overall food inflation was a matter of worry, it had come a long way from the peak. Food inflation rose to 20.21% in December 2009 and peaked in February 2010 at 20.22%. The FM said he expected overall inflation to come down close to 7% by March-end but cautioned that the target was still not good enough and the government would continue its fight against inflation.
Economists said with crude prices rising and upward pressure on food prices globally, inflationary expectations were likely to intensify. They said the RBI would continue its vigil against inflation and would raise interest rates to calm price pressures. The government also revised November's inflation to 8.08% from the previous estimate of 7.48%. "We think it may be around 7.30% by end-March. Next financial year, inflation is likely to decline very gradually," A Prasanna, chief economist at ICICI Primary Dealership, said. Rising prices have remained a headache for the government and RBI. RBI has raised interest rates seven times since March 2010 to tame inflation. Food prices have moderated in recent weeks due to better supplies. The index for primary articles group in Jan rose by 2.4% to 193.4 from 188.9 for the previous month. The index for food articles group rose by 2% to 190.7 from 186.9 for the previous month due to higher prices of fruits and vegetables and jowar (7% each), arhar and coffee (4% each), condiments and spices (3%), moong, barley, masur and mutton (2% each) and bajra, rice, egg, maize, beef & buffalo meat and wheat (1% each). However, the prices of poultry chicken (7%), fish-inland (6%) and tea and milk (1% each) declined.
Henkel to divest Indian assets
MUMBAI/CHENNAI: Germany's Henkel AG has kick-started a process to sell its portfolio of Indian detergent and personal care brands, along with the manufacturing facility at Karaikal in Tamil Nadu. HSBC is advising the Dusseldorf-based FMCG giant to sell Henkel India's locally acquired brands such as Margo soap, Neem Active toothpaste and Chek detergent.
Henkel is also offering long-term licensing of international brands Henko, Pril and Fa to potential suitors, as it works towards exiting the laundry and personal care segments in India. Wipro and Godrej Consumer Products are the most likely suitors while Jyothy Laboratories could also join the race. HSBC is involved with restructuring of the India unit ahead of the sale, as the $17-billion German conglomerate wants to continue with hair colour (Schwarzkopf) and industrial business in the country. An HSBC spokesperson declined to comment. Email to Henkel India remained unanswered.
TOI first reported about Henkel AG and Spic planning to part ways to restructure the Indian business in its edition dated June 8, 2010. On January 20, TOI reported that the German parent was reviewing Henkel India, which could lead to a partial or full sale of the domestic operations. Henkel AG holds 50.97% stake in the India unit, which is listed on the local bourses. The domestic ally, AC Muthiah's Spic, has around 16% residual holding in the company.
Spic chairman AC Muthiah could not be reached for immediate comments. Muthiah is expected to go along with Henkel AG's decision to divest the assets and exit a nearly 25-year-old joint venture. Henkel India stock closed 4.98% up at Rs 31.60 on BSE on Monday.
Sources said investment bankers have had initial parleys with some of the obvious suitors in recent weeks. A detailed information memorandum will be pushed to the suitors for taking the sale process forward. Henkel India reported a Rs 483 crore revenue in fiscal year 2009 as per the filings with the stock exchanges.
Margo soap, Neem toothpaste and Chek detergent are brands that Henkel acquired from the erstwhile Calcutta Chemical Company almost a decade back. Margo is the biggest brand in its portfolio with an annual revenue of around Rs 95 crore. Sources said Godrej and Wipro could be more inclined to buy Henkel India's personal care brands as the latter's detergent and cleaning products portfolio has lagged behind global peers Unilever and Procter & Gamble significantly in the domestic market.
Initially, Henkel and Spic joined hands under a joint venture Spic Fine Chemicals, which was renamed as Henkel Spic India in the mid-90s. Subsequently, HSIL was merged with Henkel India (formerly Calcutta Chemical Co).
Henkel is also offering long-term licensing of international brands Henko, Pril and Fa to potential suitors, as it works towards exiting the laundry and personal care segments in India. Wipro and Godrej Consumer Products are the most likely suitors while Jyothy Laboratories could also join the race. HSBC is involved with restructuring of the India unit ahead of the sale, as the $17-billion German conglomerate wants to continue with hair colour (Schwarzkopf) and industrial business in the country. An HSBC spokesperson declined to comment. Email to Henkel India remained unanswered.
TOI first reported about Henkel AG and Spic planning to part ways to restructure the Indian business in its edition dated June 8, 2010. On January 20, TOI reported that the German parent was reviewing Henkel India, which could lead to a partial or full sale of the domestic operations. Henkel AG holds 50.97% stake in the India unit, which is listed on the local bourses. The domestic ally, AC Muthiah's Spic, has around 16% residual holding in the company.
Spic chairman AC Muthiah could not be reached for immediate comments. Muthiah is expected to go along with Henkel AG's decision to divest the assets and exit a nearly 25-year-old joint venture. Henkel India stock closed 4.98% up at Rs 31.60 on BSE on Monday.
Sources said investment bankers have had initial parleys with some of the obvious suitors in recent weeks. A detailed information memorandum will be pushed to the suitors for taking the sale process forward. Henkel India reported a Rs 483 crore revenue in fiscal year 2009 as per the filings with the stock exchanges.
Margo soap, Neem toothpaste and Chek detergent are brands that Henkel acquired from the erstwhile Calcutta Chemical Company almost a decade back. Margo is the biggest brand in its portfolio with an annual revenue of around Rs 95 crore. Sources said Godrej and Wipro could be more inclined to buy Henkel India's personal care brands as the latter's detergent and cleaning products portfolio has lagged behind global peers Unilever and Procter & Gamble significantly in the domestic market.
Initially, Henkel and Spic joined hands under a joint venture Spic Fine Chemicals, which was renamed as Henkel Spic India in the mid-90s. Subsequently, HSIL was merged with Henkel India (formerly Calcutta Chemical Co).
Nifty may test 5630 level in short term
Nifty finally managed to close above the 5400 mark on Monday with increased Nifty put call ratio. On Friday, Nifty put call ratio stood at 1.02, which has increased towards 1.14, showing a moderately firm outlook for the market.
The out-of-the-money call option writers got trapped on Monday, and their short covering helped the market to gain further momentum. The short-term target for the Nifty will be 5560 and 5630 (200 DMA), which could be the major hurdle later. Investors can buy 5500 February call options for a holding period of 2 days.
Aggressive traders can create synthetic long split strike price on Nifty by buying 5500 call option and selling 5400 put options.
China and India are the fastest growing economies in the world and both are facing the heat of inflation. The Chinese index has fallen below its 200-DMA at 2737 and tested a low of 2661.44 on 25th January 2011. Later it recovered and moved up on January 28, 2011. It is showing signs of upward journey.
It is interesting to note that the 6-months correlation of both Nifty and Shanghai Composite Index is positive (0.794), and is an early indication of reversal in our market trend.
On Monday, stoplosses of short positions got triggered on the back of frenzied buying in the banking, auto and capital goods sector. The Bank Nifty itself looks very strong and is likely to test 11147 in the short term, which can lift sentiment in the banking space.
CNXIT index is also firm with minor resistance at 6944. If it crosses this, then it may even test 7052 and 7470 in the short term. Infosys and TCS are looking extremely positive on the futures segment.
Risk-averse traders can buy SBI , L&T, RIL and BoI in the futures markets and buy at-the-money put options of the respective stocks for a safe hedging purpose.
(Alex Mathews, Head-research, Geojit BNP Paribas Fin Services)
The out-of-the-money call option writers got trapped on Monday, and their short covering helped the market to gain further momentum. The short-term target for the Nifty will be 5560 and 5630 (200 DMA), which could be the major hurdle later. Investors can buy 5500 February call options for a holding period of 2 days.
Aggressive traders can create synthetic long split strike price on Nifty by buying 5500 call option and selling 5400 put options.
China and India are the fastest growing economies in the world and both are facing the heat of inflation. The Chinese index has fallen below its 200-DMA at 2737 and tested a low of 2661.44 on 25th January 2011. Later it recovered and moved up on January 28, 2011. It is showing signs of upward journey.
It is interesting to note that the 6-months correlation of both Nifty and Shanghai Composite Index is positive (0.794), and is an early indication of reversal in our market trend.
On Monday, stoplosses of short positions got triggered on the back of frenzied buying in the banking, auto and capital goods sector. The Bank Nifty itself looks very strong and is likely to test 11147 in the short term, which can lift sentiment in the banking space.
CNXIT index is also firm with minor resistance at 6944. If it crosses this, then it may even test 7052 and 7470 in the short term. Infosys and TCS are looking extremely positive on the futures segment.
Risk-averse traders can buy SBI , L&T, RIL and BoI in the futures markets and buy at-the-money put options of the respective stocks for a safe hedging purpose.
(Alex Mathews, Head-research, Geojit BNP Paribas Fin Services)
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