March 22, 2019

Brexit uncertainty forces European company to stockpile toilet paper

Wepa has also opted to charter ship deliveries for importing raw materials into Britain instead of using trucks, according to the company’s managing director Mike Docker, as quoted by the BBC.

The tissue-maker reportedly owns production facilities in Bridgend, in South Wales. Wepa is said to lease extra premises of nearly 20,000 kilometers to store finished product and raw material. The firm also shipped in extra cardboard and tissue.

© Global Look Press Exorbitant toilet paper use by Americans wiping out Canadian forests

Wepa is one of major suppliers of toilet paper and kitchen rolls that are used by the biggest retailers, including Lidl, Morrisons, Sainsbury’s and Tesco, for their own-brand products.

Earlier this month, David Potts, CEO of Morrisons, the country’s fourth largest chain of supermarkets, said the retailer had seen an increasing demand for toilet paper over recent months. According to Potts, the high demand may be caused by rising uncertainties over the UK quitting the European Union by the end of March.

The UK, which is expected to withdraw the bloc on March 29, is currently trying to negotiate a deferral of the deadline to June 30.
Last week, the House of Commons voted to allow Prime Minister Theresa May to ask the EU for an extension. The European Commission said that the extension must be backed by all the members of the bloc.

In a situation where there is no negotiated plan to allow the EU and the UK to continue trading smoothly, British businesses may face delays to goods moving in and out of the country due to probable customs checks and changes to border rules.

The UK’s annual consumption of toilet paper totals some 1.3 million tons with 1.1 million of which are imported either in finished form or as components, according to the Confederation of Paper Industries.

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Volkswagen CEO Diess’ future in doubt over Nazi-era blunder

The CEO reportedly told the company’s managers that the high margins of VW Group’s Porsche brand gave it more freedom than its other marques, such as Audi. “Ebit macht frei,” Diess told his managers, which translates as “Profits will set you free.”

The phrase has echoes of “Arbeit macht frei” or “Work sets you free,” the slogan which hung on the gates of concentration camps during the Holocaust where millions perished.

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“I think he is going to be fired,” said one long-term US institutional investor as cited by the Irish Times. “I’m torn about it. On the one hand, he’s one of the few managers that could probably move the company in the right direction. On the other hand, it’s so offensive I don’t think it’s really excusable.”

Another Volkswagen investor in the US said that, “Any shareholder would know that whatever his utterances, Diess is the best thing to happen to the company in the last 50 years.”

Ulrich Hocker, a director at DSW, a group representing small shareholders in Germany, called Diess’s statement “ridiculous,” adding: “It’s not a sentence you can say in Germany.”

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Hocker said he planned to demand another apology at Volkswagen’s upcoming shareholders’ meeting, but was not sure it warranted the CEO’s removal.

“[Shareholders were] very upset and shocked by the comments. We had high hopes for him — for his ambitious strategy and focus on costs. But what changed last week is now there are big question marks over his judgment.”

Diess has issued an apology for what he described as “definitely an unfortunate choice of words.”

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He denied referencing the Nazi phrase and explained that he was referring to the freedom afforded to VW brands in strong financial health. “At no time was it my intention for this statement to be placed in a false context. At the time, I simply did not think of this possibility,” he said.

Experts say Diess who took the reins of the world’s largest carmaker has been making progress. He is the second CEO to run VW since the ouster of Martin Winterkorn in 2015 over the diesel scandal at the automaker. The company reported profit of €12 billion for 2018 despite paying out heavy settlements related to the Dieselgate emissions scandal.

Founding member of Germany’s corporate governance commission Christian Strenger said removing Diess after his full apology “would be quite a mistake” given the progress he has made getting the Porsche-Piëch families on board with reforms. “He’s been pretty successful in getting them moving.”

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Building bridges: Last steel beam linking Russia-China railway bridge connected

The 2,209-meter-long (1.4 miles) structure links Russia’s Far East with China’s northernmost Heilongjiang province. The full completion of the cross-border bridge (railway and highway parts) is scheduled for July.

“On the morning of March 20, the last steel beam was built in, with Russia completing construction works from its part. This means the first railway bridge between the two countries is generally successfully connected,” Heilongjiang province’s administration said in a statement.

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The completion of the bridge will end the history when the Chinese and Russian borders did not have a cross-river railway bridge, said Li Huachao, a chief engineer of China Railway Major Bridge Engineering Group.

According to him, the project aims to develop an international corridor connecting China’s northeastern railway networks with Russia’s Siberian railway networks.

“The shipping capacities between the two sides will be greatly enhanced as they will no longer be affected by seasonal weather conditions, which often have an impact on river shipping,” said Li, as cited by

According to Song Kui, a researcher of the Heilongjiang Provincial Academy of Social Sciences, the bridge will play a significant part in promoting trade globally and in northeast Asia.

Song said that in 2018 trade between Heilongjiang province and Russia amounted to 122 billion yuan ($18.2 billion). The figure represents 69.8 percent of the province’s total export and import value and 17.3 percent of China’s exports and imports to Russia.

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Construction of the cross-border bridge officially started in 2016, following 28 years of negotiations between the two countries. Russia plans to export iron ore, coal, mineral fertilizers, lumber, and other goods via the link to China.

The highway section of the bridge will be ready for traffic this year. Traffic capacity is expected to exceed three million tons of cargo and be used by 1.48 million people a year by 2020. It will greatly facilitate trade between the two countries, since the route will be roughly 3,500km (2,175 miles) shorter.

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US ‘oil weapon’ could change geopolitics forever

In a dynamic that shows just how far US oil production has come in recent years, the US Energy Information Administration (EIA) said on Monday that in the last two months of 2018, the US Gulf Coast exported more crude oil than it imported.

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Monthly net trade of crude oil in the Gulf Coast region (the difference between gross exports and gross imports) fell from a high in early 2007 of 6.6 million barrels per day (bpd) of net imports to 0.4 million bpd of net exports in December 2018. As gross exports of crude oil from the Gulf Coast hit a record 2.3 million bpd, gross imports of crude oil to the Gulf Coast in December—at slightly less than 2.0 million bpd—were the lowest level since March 1986.

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US oil production hit a staggering 12.1 million bpd in February, while that amount has been projected to stay around that production mark in the mid-term then increase in the coming years. The US is the new global oil production leader, followed by Russia and Saudi Arabia, while Saudi Arabia is still the world’s largest oil exporter – a factor that still gives Riyadh considerable leverage, particularly as it works with Russia, and other partners as part of the so-called OPEC+ group of producers. However, Saudi Arabia’s decades-long role of market swing producers has now been replaced by this coalition of producers, reducing Riyadh’s power both geopolitically and in global oil markets. In short, what Saudi Arabia could once do on its own, it has to do with several partners.

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Meanwhile, US crude oil production, particularly in the Gulf Coast region, is still increasing. In November 2018, US Gulf Coast crude oil production set a new record of 7.7 million bpd, the IEA report added. However, since most of the oil produced in the US is light sweet crude, the US still has to rely on heavier crude blends from Saudi Arabia, Venezuela and others since most American refineries are configured to process heavy crude. On the other hand, a surplus of light sweet crude allows the US to export more oil thus giving the country growing energy geopolitical power once enjoyed almost exclusively by Saudi Arabia and Russia. The increasing amount of US crude being exporter, along with the increasing amount of US LNG being imported (with exports of both fuels projected to increase) is changing energy geopolitics.

US oil weapon possibilities

Evidence of growing American energy clout was evident last week when Secretary of State Mike Pompeo urged the oil industry  to work with the Trump administration to promote US foreign policy interests, especially in Asia and in Europe, and to punish what he called “bad actors” on the world stage. Pompeo made his remarks at IHS Markit’s CERAWeek conference in Houston, where US oil and gas executives, energy players and OPEC officials usually gather annually to discuss global energy development. Pompeo’s added that America’s new-found shale oil and natural gas abundance would “strengthen our hand in foreign policy.” He added that the US oil-and-gas export boom had given the US the ability to meet energy demand once satisfied by its geopolitical rivals.

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This is the first time, in at least recent history, that American officials have considered using oil production and exports for geopolitical advantage. One of the last times the country had such oil production clout dates back to the years just before World War II when the US held back oil exports to Japan. Consequently, this was one of the mitigating factors that provoked Japan to attack Pearl Harbor in 1941. Moreover, Pompeo’s comments can be viewed as a reversal from the so-called oil weapon that Arab producers have used on the US and its western allies for decades, including both the unsuccessful 1967 Arab oil embargo and the 1973 Arab oil embargo that brought the US and its allies to their knees, driving up the price of oil four-fold and contributing to severe economic headwinds for the West and a geopolitical and economic shift that still persists to the current.

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Escalation of US-China bilateral tariffs to shave off $1 trillion from America’s GDP

“Escalation of bilateral tariffs results in lower GDP, lower employment, lower investment, and lower trade flows for the United States,” said the study, which was conducted jointly by the commerce chamber and research firm Rhodium Group.

It found that tariff measures would cost the US GDP from $45 billion to $60 billion in the first year following the imposition. The figure will grow to $89 – $125 billion annually, five years later.

The US economy stands to lose $1 trillion of its baseline potential within ten years of tariff implementation, the report concluded.

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Tariffs are also expected to “shave up to one-third of a percentage point” in total factor productivity from real US GDP growth, “threatening a key channel for transmission of the benefits of an open ICT (information and communications technology) sector to the economy.”

Industries like ICT manufacturing are built on globalized trade and production networks, and “are most exposed to negative impacts,” according to the report.

Due to the tariffs, US ICT goods exports will decrease by between 14.2 percent and 20 percent in the five years ahead. The country’s ICT imports will drop by nine percent to ten percent during the same period.

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“Because both the United States and China are highly integrated into global value chains – and are the most integrated in ICT industries – they stand to lose the most in investment, trade, and welfare from the imposition of bilateral tariffs,” said the report.

The research also predicted global growth to be $151.4 billion, or 0.2 percent, lower than projected in 2025 if Washington’s tariffs on Chinese exports are increased to 25 percent and Beijing retaliates.

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EU keeps piling on fines on Google, slapping tech giant $1.7bn for blocking rivals’ ads

The European Commission (EC) accused the California-based company of abusing its dominant position by banning third-party rivals from displaying search ads and favoring its own shopping comparison service, according to EC Commissioner for Competition Margrethe Vestager.

“Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites. This is illegal under EU antitrust rules,” Vestager said, speaking in Brussels Wednesday.

 © Reuters / Chris Helgren Google may be blocked in Russia country is ready to change laws to do it – watchdog

The decision to fine Google reportedly came after a seven-year investigation into its search algorithms. The fine accounts for 1.29 percent of Google’s turnover in 2018.

“The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate,” the official said.

Google has defended the use of the technology, saying that it has been in place since 2006 and is now superseded, being a minor product.

Last year, the EU anti-monopoly watchdog imposed a record-breaking fine of €4.34 billion (some $5 billion) on Google over the breaking of antitrust laws.

The corporation was charged with bundling its search engine and Chrome apps into the operating system, blocking phone makers from creating devices that run forked versions of Android, and making payments to large manufacturers and mobile network operators to exclusively bundle the Google search app on handsets.

In June 2017, the corporation was slapped with a €2.42 billion ($2.7 billion) EU antitrust fine, after it was found to have abused its dominant position by “systematically favoring its own shopping comparison service.”

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‘Perfect storm’ of tight supply & global demand drives oil prices higher

“The latest Brent rally has brought prices to our peak forecast of $67.5/bbl, three months early,” Goldman Sachs wrote in a note. The investment bank said that “resilient demand growth” and supply outages could push prices up to $70 per barrel in the near future. It’s a perfect storm: “supply loses are exceeding our expectations, demand growth is beating low consensus expectations with technicals supportive and net long positioning still depressed,” the bank said.

The outages in Venezuela could swamp the rebound in supply from Libya, Goldman noted. But the real surprise has been demand. At the end of 2018 and the start of this year, oil prices hit a bottom and concerns about global economic stability dominated the narrative. But, for now at least, demand has been solid. In January, demand grew by 1.55 million barrels per day (mb/d) year-on-year. “Gasoline in particular is surprising to the upside, helped by low prices, confirming our view that the weakness in cracks at the turn of the year was supply driven,” Goldman noted. “This comforts us in our above consensus 1.45 mb/d [year-on-year] demand growth forecast.”

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Demand in China is growing at a stronger rate than expected, while other emerging markets are set to shake off a rough 2018 that saw a strong dollar, rising interest rates and high oil prices.

Meanwhile, other analysts are also similarly bullish. “As risky assets focused on macro concerns, oil markets have largely overlooked supply-side tightness in 1Q19 that has helped global oil markets to rebalance since the end of 2018,” JPMorgan Chase said in a report. “With a potential for a US-China trade talk resolution emerging, oil prices should finally break out of the narrow trading range and should be supported in the very near-term due to policy-driven supply-side tightness.”

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A supply deficit could become rather significant, the bank said, with total oil products demand growth at 1.03 mb/d against supply growth of only 0.3mbd. The second quarter is particularly tight. “As OPEC+ cuts begin to bite and non-OPEC supply tightens in 1H19, due to Canadian curtailments, a temporary US production growth slowdown, and maintenance in some of the key global oil fields (Kashagan particularly), we expect 2Q19 to have a theoretical tightness of over 1.2mbd in global balances.” A supply deficit of 1.2 mb/d is rather notable given the roughly 1.5 mb/d surplus in the fourth quarter of last year, the bank said.

Both Goldman Sachs and JPMorgan see the supply deficit fading in the second half of the year unless OPEC+ continues to over-comply with the production cuts. US shale could rebound from the current lull, while the fate of OPEC+ compliance is up in the air. “Hence, we think OPEC+ cuts will need to be extended not just to the end of 2019 but also into 2020 if they want to avoid another oil price crash,” JPMorgan wrote.

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Of course, there is no shortage of uncertainty to these – or any other – price scenarios. In particular, the Trump administration will have a lot of influence over what unfolds this year in the oil market. Trump has helped exacerbate the crisis in Venezuela, where the output declines had somewhat stabilized late last year. Venezuela’s production fell by 142,000 bpd in February, while the losses this month have the potential to be even worse.

The US is also weighing the expiration of sanctions waivers on Iran, and the tight oil market could force Trump to extend some of them. The Department of Energy could also release oil from the strategic petroleum reserve, while the US Congress is working on NOPEC legislation, which could threaten OPEC coordination. Moreover, it is unclear how OPEC+ might respond to any of those actions. For instance, Saudi Arabia could ramp up supply to crash prices in response to NOPEC being signed into law. Or, they could continue to over-comply with production cuts after making the mistake of abandoning them too early last year. The permutations are endless, so take each price forecast with a grain of salt.

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Bayer stock sinks after court rules weed killer it bought from Monsanto caused cancer

The stock drop during Wednesday morning trading on the Frankfurt exchange wiped out almost $8 billion from Bayer’s market value.

The unanimous decision by a jury in San Francisco federal court followed another ruling made in August in California. Back then, the biotechnology corporation was ordered to pay $289 million in compensatory and punitive damages over the case of a school groundskeeper, Dewayne Johnson, whose cancer was allegedly caused due to years of using glyphosate-based Roundup.

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The latest verdict was not a finding of Bayer’s liability for the cancer of plaintiff Edwin Hardeman. The trial is expected to proceed to the next phase, beginning on Wednesday, with the jury to determine the liability and damages in the case.

Bayer, which specializes in producing pharmaceuticals, consumer healthcare products, agricultural chemicals and biotechnology products, inherited the legal battles with its $63 billion acquisition of Monsanto, the US’ leading producer of genetically engineered crops. Bayer may potentially face thousands of similar lawsuits in the US alone.

However, the German company has denied claims that glyphosate or Roundup causes cancer and said it was disappointed with the jury’s decision.

“We are confident the evidence in phase two will show that Monsanto’s conduct has been appropriate and the company should not be liable for Mr. Hardeman’s cancer,” Bayer said in a statement.

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Russian airlines halt purchases of Boeing 737 MAX jets indefinitely

He told TASS, with a reference to Deputy Transport Minister Aleksandr Yurchik, that these were contracts for the supply of several dozen aircraft to UTair, Ural Airlines, Pobeda Airlines and S7.

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The indefinite suspension will last “until the circumstances of this situation [the two recent crashes of the Boeing 737 MAX planes] were ascertained,” Afonsky said.

Ural Airlines had ordered 14 MAX aircraft from Boeing, with the first jet expected to arrive in October. Pobeda Airlines (part of the Aeroflot Group) was planning to buy 30 planes. It has not sealed a firm contract yet but had already made an advance payment for the aircraft.

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Aeroflot CEO Vitaly Savelyev said earlier that the company could refuse operating twenty MAX planes ordered for Pobeda.

Earlier this month, Boeing 737 MAX planes were grounded worldwide after two similar crashes just months apart. Last October, a Lion Air jet crashed in Indonesia, killing all 189 people on board. On March 10, another crash killed 157 people in Ethiopia.

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Qatar to launch Islamic banking giant focused on energy

With targeted capital of around $10 billion, the new lender will be focused on financing both domestic and global energy-related projects, Mohammed al-Marri, chairman of Energy Bank’s media committee, told journalists at an Islamic finance conference in Doha.

© Reuters / Fadi Al-Assaad Life after OPEC: Qatar to invest $20 billion into US energy in major expansion

Energy Bank, which is projected to be the largest Islamic energy-focused lender in the world, will target both private and government-led energy projects, according to the top official.

“With paid-up capital of $2.5 billion, the establishment of Energy Bank in Qatar comes in light of the incredible growth projected for Qatar’s energy sector,” Marri said.

The executive declined to provide details of how or when the new lender would raise its capital to the $10 billion target, stressing that the bank would provide finance not just for projects in the oil and gas sector, but for petrochemical and renewable energy enterprises as well. Marri didn’t specify how much would be allocated for lending outside the country.

Energy Bank will be opened under the umbrella of Qatar Financial Center, according to its chairman, Khaled Al Suwaidi.

In late 2018, Qatar, the world’s second largest exporter of liquefied natural gas, announced that it was quitting the Organization of the Petroleum Exporting Countries (OPEC), putting an end to its nearly 60-year membership of the world’s biggest oil cartel. The step was reportedly driven by the country’s broader plans to concentrate on its natural gas sector.

Later, Qatar’s Energy Minister Saad al-Kaabi announced that the country’s state-run oil giant Qatar Petroleum would invest around $20 billion in various projects in the US over the next five years.

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