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U.S. Coal Companies Scale Back Export Goals

September 13, 2013 by

HOUSTON — The ailing American coal industry, which has pinned its hopes on exports to counter a declining market at home, is scaling back its ambitions as demand from abroad starts to ebb as well.

Just south of here, New Elk Coal terminated its lease late last month at the Port of Corpus Christi, where it had hoped to export coal to Brazil, Europe and Asia. Two days later, when the federal government tried to auction off a two-square-mile tract of land in Wyoming’s Powder River basin, a region once poised to grow with exports to Asia, not a single coal company made a bid.

They were the latest signs that a global coal glut and price slump, along with persistent environmental opposition, are reducing the likelihood that additional exports could shield the industry from slipping domestic demand caused by cheap natural gas and mounting regulations.

United States coal exports this year are expected to decline by roughly 5 percent from last year’s record exports of 125 million tons, and many experts predict the decline will quicken next year.

At the beginning of 2012, the coal industry had plans to expand port capacity by an additional 185 million tons. But those hopes have faded this year.

“Global coal prices right now are not supportive of large-scale U.S. coal exports,” said Anthony Yuen, a Citigroup energy analyst.

European demand is soft, and the economies of the developing world are slowing. But the main reason for the slumping prices is China’s softening demand growth, experts say.

For most of the last decade, China’s soaring thirst for energy accounted for more than 50 percent of world coal demand, driving up international coal prices and stimulating mining activity across Australia, Indonesia and as far away as Colombia and South Africa. With Australia and Indonesia straining to produce for China, South Korea and Japan increasingly looked to the United States for future supplies, stimulating interest in the building of several export terminals in Oregon and Washington State and on the coast of the Gulf of Mexico.

But over the last few months those hopes appear to be receding with a reshaping of global coal markets. After years of mounting imports of coal to fuel its growing economy, China has taken a number of steps to slow those imports. It has modernized domestic mines, made coal-fired electricity plants more efficient and stepped up development of nuclear and renewable power.

On Thursday, China announced a ban on construction of new coal-fired plants around Beijing, Shanghai and Guangzhou to control air pollution. The plan will shift new power plant construction to natural gas, nuclear and solar power. Those initiatives, along with slowing Chinese economic growth, have undercut expectations for rising imports and helped produce an overabundance that has sent world coal prices plummeting by more than 30 percent from last year. In response, international coal companies are scaling back mining and shelving export projects from Australia to the Gulf of Mexico, especially for thermal coal used to produce electricity.

“We’re seeing the beginnings of a big structural shift, particularly in the Chinese energy sector,” said Richard Morse, managing director at SuperCritical Capital, an energy consultancy. “For global markets, this is a significant bearish signal for coal.”

In the United States, a half-dozen planned export terminals in the Pacific Northwest and in the Gulf of Mexico have already been canceled over the last year because of poor economics and political opposition. Shipping experts said that if weak coal prices endured for a few more years, financing could be jeopardized for a handful of the remaining ones.

International coal prices have been slumping for about a year. The Newcastle coal benchmark spot price, which early last year rose to as high as $120 per metric ton, declined through much of 2012 to below $90, and finally fell below $80 this summer.

American coal prices are also down, but they have revived somewhat in recent months along with natural gas prices. Some utilities have switched from gas back to coal. Still, coal now constitutes less than 40 percent of United States electrical generation, down from 50 percent a decade ago, and East Coast producers are struggling.

Article source: http://www.nytimes.com/2013/09/14/business/energy-environment/us-coal-companies-scale-back-export-goals.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

After Taking a Beating Overseas, Tesco Seeks Comfort at Home

September 11, 2013 by

“I come here every day,” said Ms. Goodwin, 84. Her favorite spot was the Harris and Hoole coffee shop — inside a Tesco Extra hypermarket in Watford, a town just north of London. “It’s incredible what they’ve done. They must have spent an awful lot of money.”

Yes, they have. Tesco, the British supermarket giant that has stumbled in recent years by venturing overseas, is investing £1 billion ($1.6 billion) in hopes of turning its biggest stores in Britain into shopping destinations.

Under pressure to revive sales and win customers, Tesco is using lures like gourmet coffee bars, restaurants and even nail salons and yoga studios to bring people back to its stores and reverse a declining market share.

“There’s no doubt that the heartbeat of Tesco is in the U.K., and if the core doesn’t perform it doesn’t matter what the rest does,” Clive Black, an analyst at Shore Capital, said. “For a company the size of Tesco, fixing this is a time-consuming and painful exercise.”

Tesco, the third-largest supermarket chain, after the American global giant Wal-Mart Stores and the French multinational Carrefour, had hoped that expanding abroad would elevate earnings and lift its share price. The outreach included starting the Fresh and Easy grocery chain in the United States. But Fresh and Easy flopped, and Tesco struck a deal on Tuesday to sell most of those stores to an affiliate of the money-management firm run by the American billionaire Ronald W. Burkle.

Even in Britain, Tesco’s larger stores have increasingly become a burden as more people shop online and price promotions alone are not enough to keep customers.

Tesco’s pretax profit was down by more than half for the financial year that ended in February after it took £2.4 billion ($3.8 billion) in write-downs, including for its Fresh and Easy venture. Pretax profit fell to £1.96 billion, from £4 billion a year earlier. Net income for the period was £120 million.

The company remains Britain’s largest grocer, but its market share slipped below 30 percent in March, with customers straying either to less expensive stores or to more upscale food emporiums.

And though the share prices of its main rivals, Sainsbury’s and Morrisons, gained at least 9 percent since 2010, Tesco’s share price fell. More recently, though, Tesco’s stock has started to revive, as investors evidently see potential in the refocused effort on its home turf.

Tesco’s retreat from the United States market through the sale of Fresh and Easy is part of its plan not only to concentrate once more on Britain but also to seek opportunities in faster growing places like South Korea, Malaysia and Thailand.

“The sale leaves management to refocus on its existing territories, including its home market,” Keith Bowman, an analyst at Hargreaves Lansdown, said Wednesday.

As part of its British revamping, it opened three refurbished hypermarkets under the Tesco Extra brand last month, including the one in Watford, and is planning at least six more. The stores will vary slightly, depending on their location, but many will include Giraffe, a child-friendly restaurant chain Tesco acquired for £49 million in March, or Decks, a meat-menu carvery restaurant chain that Tesco recently created.

The Watford store covers 80,000 square feet, including the Harris and Hoole coffee shop that is part of a chain partly owned by Tesco, and Euphorium Bakery, an artisan bread and pastry shop that has a partnership with Tesco. Separate sections are reserved for F+F, Tesco’s own clothing brand, and consumer goods like bicycles, children’s car seats, vacuum cleaners and fresh flowers.

“Today’s customers have more leisure time and they’ve told us that they want a real experience,” Philip Clarke, Tesco’s chief executive, said by e-mail. “They want space to browse, places to eat and great food. And they want big stores to be more welcoming.”

Article source: http://www.nytimes.com/2013/09/12/business/global/after-taking-a-beating-overseas-tesco-seeks-comfort-at-home.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

From Nokia, an Executive Who Knows the Difficulties at Hand

September 3, 2013 by

What Mr. Elop’s Nokia experience doesn’t show is a history of engineering turnarounds that could be translated to Microsoft. Before Microsoft’s $7.2 billion purchase of Nokia’s devices and services business was announced late Monday, Nokia’s stock was off about 60 percent since Mr. Elop joined the company in September 2010.

Mr. Elop made many tough choices, including major layoffs, selling office space and shedding pet technologies like an aging operating system for mobile devices. Those calls prevented an even worse outcome, and gave the Finnish company a badly needed sense of urgency, analysts said. But he failed to stop the company’s declining market share and he leaves — at best — a work in progress at Nokia.

As part of the Microsoft deal, Mr. Elop agreed to step down as Nokia’s chief executive and rejoin Microsoft when the deal closes, which is expected to happen in early 2014. He will lead an expanded devices team inside Microsoft, responsible for both hardware and Microsoft’s business in things like games and music.

He also puts himself in the running to succeed Steven A. Ballmer, Microsoft’s chief executive, who last month announced he would be leaving within 12 months. “His hat is firmly in the ring, running a very important division for Microsoft’s future,” said Crawford Del Prete, an analyst at IDC who has known Mr. Elop for many years. “He could have just exited Nokia, but the fact that he’s there shows he is a very ambitious guy.”

Mr. Elop, a 49 year-old Canadian, came to Nokia from Microsoft, where he ran the business division, a senior leadership job that includes Microsoft’s lucrative Office software. Before Microsoft, he ran the information systems of Juniper Networks, a computer networking company, and ran field operations for Adobe, which makes tools for digital content. He came into Adobe from another acquisition, when Adobe purchased a company he ran called Macromedia.

He is a father of five, including triplet girls and a daughter he adopted from China. He is close to his family, uprooting them for his first Microsoft job only at his son’s urging. But then Mr. Elop left his family in Washington while he relocated to Espoo, Finland, where Nokia is based.

“It’s a beautiful place, but it’s very hard to be that far away from your family,” said Leslie Nakajima, a former Nokia executive who now runs communications for the Mozilla Foundation, makers of the Firefox browser. Through a spokeswoman, Mr. Elop declined to be interviewed.

When Mr. Elop arrived at Nokia, it was still the world’s leading maker of mobile phones. But it had been struggling for years to match smartphone competitors. First, BlackBerry wooed business customers with phones that had an easy-to-use keyboard for typing out e-mails. Apple’s iPhone, which came out in June 2007, and Google’s Android operating system in October 2008, represented an even bigger challenge with smartphones that closely tied hardware, software and a wide variety of customer-pleasing applications.

Nokia had turned down an early chance to be Google’s partner in Android, partly because its purchase of a mapping company could have presented a conflict with Google Maps. That relationship went to Samsung, now the world’s biggest smartphone maker. Instead, Nokia’s strategy involved managing five different operating systems, and making scores of different phones for markets across the world.

“A kind of arrogance had crept into the company, a feeling that they really understood exactly what consumers wanted,” said Mr. Del Prete. “That was a real problem when they were assaulted by BlackBerry and Apple.”

Early in his tenure, Mr. Elop wrote an internal memo that compared Nokia to a man on a burning oil platform who is forced to jump into icy waters. Mr. Elop’s point: If the company didn’t make some drastic, risky decisions, it was doomed to fail. Mr. Elop’s “burning platform” memo recalls a similar missive written a few months earlier by Ray Ozzie, Microsoft’s chief software architect, as he left Microsoft. Mr. Ozzie wrote about a company in thrall to its past success, troubled by internal complexity and unable to react to fast-moving competitors, particularly in a world dominated by new mobile devices and services.

Mr. Elop could see that Nokia faced similar issues, but he may not have been prepared for the firestorm when he announced in February 2011 that the company would drop development on multiple operating systems, switch to Microsoft’s Windows Mobile operating system and lay off thousands of employees. Older-model Nokia phones were orphaned, and newer phones with Microsoft software did not arrive on the market for months.

“People were already sore, because they felt like there would be a deal with Microsoft as soon as he came on,” said a former Nokia executive, who requested anonymity to maintain professional ties. “There was uncertainty, there was infighting, and the market share plummeted.”

Mr. Elop was making a risky decision that still hasn’t paid off.

“He had to do something,” said Mr. Del Prete. “Smartphones change so fast, and this was a company where workers expected to stay their whole lives.”

While the first models of Nokia phones running Microsoft software were expensive and failed to excite consumers, Mr. Del Prete added, “they are making progress. They are adding developers. It will take longer than people envision, and it will take the coffers of Microsoft.”

Article source: http://www.nytimes.com/2013/09/04/technology/from-nokia-an-executive-who-knows-all-too-well-the-difficulties-at-hand.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Investors Wary of Alliance Talk for Peugeot

June 28, 2013 by Leave a Comment

It would not, investors seemed to have decided Friday, as a rally in the shares of the French carmaker PSA Peugeot Citroën fizzled along with speculation about a stronger alliance with General Motors and its Opel unit.

According to such speculation, based on a report Thursday by Reuters, the Peugeot family was ready to cede control of the ailing French carmaker that bears its name. The family, which holds a 25.2 percent stake and about 38 percent of the voting rights in Peugeot, was prepared to give up control y if General Motors raised its stake from the 7 percent it already owned, Reuters reported.

Peugeot shares rose as much as 5.5 percent in Paris trading on Thursday based on the report, which also said that the Peugeot family had held talks with Dongfeng, a Chinese automaker. But Peugeot shares retreated on Friday after analysts said neither option was plausible. The shares were down about 3 percent Friday afternoon.

Neither Peugeot nor Opel, which uses the Vauxhall brand name in Britain, is selling enough cars to keep their factories busy. The plants, which cost money even when they are not being used, have contributed to large losses at both companies. In addition, Opel and Peugeot have suffered declining market share and are focused on the depressed European market, without enough sales in healthier regions like China to compensate.

“The business rationale doesn’t stack up,” said Paul Newton, an analyst at IHS Automotive, a market research firm. “They compete in all the same segments in the same markets.”

In both France, where Peugeot has most of its factories, and Germany, Opel’s home base, closing plants and laying off workers is extremely difficult because of labor laws as well as stubborn resistance from unions and political leaders.

“You’d really have to get to work and cut a lot of capacity,” Mr. Newton said. “It would be ugly really. I don’t know why they would want to do it.”

“There is no urgency about a capital increase,’’ a person close to the Peugeot family said, dismissing the reports of a G.M. or Chinese deal as “rumors.” The person, who asked not to be identified by name because he was not authorized to speak publicly on the matter, said the automaker “is always talking with its American and Chinese partners” as part of its normal business.

“But,” the person said, “the Peugeot family is very attached to its history and its stake in the firm.”

General Motors, which reported a loss of $200 million in Europe for the first quarter of this year, said it had no interest in raising its investment.

“Our position remains unchanged: we have no intention of investing additional funds into PSA at this time,” G.M. said in a statement. “We will not comment on speculation.”

But the fact that such talk was taken seriously underscores the perilous situation Peugeot is facing in a European market that continues to shrink five years after the financial crisis hit.

Peugeot, which reported a 6.5 percent decline in sales in the first quarter after a loss of 1.5 billion euros in 2012, is not big enough to finance new products as well as its competitors can or enjoy the same volume discounts on parts.

The automaker also suffers from its dependence on the dismal European market. Car sales on the Continent fell in May to their lowest level in 20 years, and analysts say there is little hope for a turnaround in the foreseeable future.

In Europe, the French company trails only Volkswagen in unit sales. But a vast gulf separates the two companies globally, thanks largely to Volkswagen’s international footprint, including in China, which has become the German carmaker’s largest market.

Peugeot also continues to be outperformed by Renault, its smaller French rival, largely because of Renault’s global alliance with Nissan Motor. The alliance gives Renault international reach that Peugeot, despite big gains this year in China and Latin America, cannot match.

Jack Ewing reported from Frankfurt.

Article source: http://www.nytimes.com/2013/06/29/business/global/investors-wary-of-alliance-talk-for-peugeot.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,