EU loses WTO case, China could seek trade sanctions

China could demand trade sanctions against the European Union after winning an appeal on Monday in a dispute at the World Trade Organization over EU tariffs imposed on Chinese imports of screws, nuts and bolts made of iron or steel. 

PHOTO: REUTERS

JAN 19, 20162:02 PM

[GENEVA] China could demand trade sanctions against the European Union after winning an appeal on Monday in a dispute at the World Trade Organization over EU tariffs imposed on Chinese imports of screws, nuts and bolts made of iron or steel.

China has never before asked the WTO to impose trade sanctions since it joined the organisation in 2001, but the end of the seven-year battle leaves the way open to a claim for compensation. "The measures have negative effect on exports from China around US$1 billion and more than 100,000 jobs from thousands of fastener producers in China," China's Ministry of Commerce said in a statement. "It has resulted in huge economic losses to the Chinese industry, which has expressed strong dissatisfaction and firm opposition to the measures." The EU must now comply with the ruling and remove its illegal tariffs or China would take "further steps", the statement said.

The value of China's exports of the products to the EU peaked at over US$1 billion in 2008, but averaged about US$200 million after the EU imposed punitive tariffs on the Chinese exports in 2009, according to a Reuters analysis of data from the International Trade Centre, a UN-WTO joint venture.

Under WTO rules, countries are allowed to punish "dumping" - or exports priced at an unfairly cheap level - to stop one country deliberately undermining its foreign rivals by artificially undercutting their prices.

But the use of anti-dumping tariffs is subject to strict rules and, in this case, China complained that the EU had not applied the rules correctly. WTO arbitrators agreed.

The EU appealed and lost, and said it had reduced the tariffs. But China complained that the EU had not done enough to comply with the ruling, and again it won.

The EU's final appeal appears to have backfired, with the WTO judges reversing points that previously went in the EU's favour and toughening the ruling against it.

An EU trade official declined to comment.

A key part of the EU argument was the use of an Indian proxy for Chinese prices, since China is not considered to be a"market economy" under WTO rules and therefore its prices do not need to be taken at face value.

But China says that it will have the right to "market economy status" from December 2016, 15 years after it joined the WTO, which will force the EU to take Chinese export prices at face value, or risk more WTO disputes from China.

Though Beijing says the designation should be automatic, a debate is brewing in the EU over whether to grant it.

Fu Donghui, managing partner at Allbright Law Offices, told reporters at a briefing by Chinese business chambers in Beijing that the ruling announced Monday would be a boon for China's position. "Actually, this is a decision that overturns the EU's substitute country system. I think it will be a major boost for Chinese market economy status at the end of the year," Fu said.

REUTERS

    
 

China requires some banks to tightens grip on capital outflows: sources

Chinese regulators are imposing limits on cross-border flows from yuan-denominated capital pools and requiring intensified checks on related transactions, people with direct knowledge told Reuters, as Beijing moves to restrict capital outflows fleeing a falling currency.

PHOTO: REUTERS

JAN 19, 20162:20 PM

[HONG KONG] Chinese regulators are imposing limits on cross-border flows from yuan-denominated capital pools and requiring intensified checks on related transactions, people with direct knowledge told Reuters, as Beijing moves to restrict capital outflows fleeing a falling currency.

Financial regulators have asked banks in coastal cities to strictly abide by regulations on cross-border outflows from their yuan-denominated capital pools, they said, and imposed the requirement that at no time can outflows exceed the size of those pools, resulting in a negative position.

The regulators also ordered banks to conduct strict checks on corporate business and transactions affecting those yuan capital pools, the people said.

It is unclear whether the policy will be implemented nationwide or will remain selective.

The people declined to be identified because they are not allowed to speak to the media.

The State Administration of Foreign Exchange declined to comment and the People's Bank of China did not respond to Reuters' request for comment. Repeated calls to the central bank were unanswered.

The step is among a series of measures taken by Chinese regulators to tighten regulations to repress speculation on yuan depreciation and to reduce the risk that rapid capital outflows could destabilise the country's money supply.

REUTER
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Petronas to slash spending by US$11.41 billion over four years: WSJ

Malaysia's Petroliam Nasional Bhd (Petronas) is planning to slash as much as 50 billion ringgit (US$11.41 billion) in capital and operating expenses over the next four years, the Wall Street Journal reported on Tuesday. 

PHOTO: BLOOMBERG

JAN 19, 20161:50 PM

[KUALA LUMPUR] Malaysia's Petroliam Nasional Bhd (Petronas) is planning to slash as much as 50 billion ringgit (US$11.41 billion) in capital and operating expenses over the next four years, the Wall Street Journal reported on Tuesday.

The state-owned oil and gas firm, which brings in nearly half of Malaysia's oil revenue, will defer some of its projects, the Journal report said, citing an internal memo by chief executive Wan Zulkiflee Wan Ariffin.

Petronas was not immediately available for comment.

The firm has been hit by a slump in oil prices, which fell to their lowest since 2003 on Monday. Prices have fallen over 70 per cent in the past 18 months as exporters around the world pump out over a million barrels of crude every day in excess of demand.

In February last year, Petronas said it planned to cut capital expenditure by 10 per cent and operating expenses by up to 30 percent in 2015. It also said at the time that it would cut 2016 capital spending by 15 per cent.

REUTERS

    
 

Oil stabilises on strong China demand data, but looming Iran exports still weigh

Oil prices stabilised on Tuesday, supported by strong Chinese fuel consumption and halting a slide to 2003 levels earlier in the week after the full return of Iran to markets added to an already huge supply overhang. 

PHOTO: REUTERS

JAN 19, 20161:33 PM

[SINGAPORE] Oil prices stabilised on Tuesday, supported by strong Chinese fuel consumption and halting a slide to 2003 levels earlier in the week after the full return of Iran to markets added to an already huge supply overhang.

Front-month Brent crude futures were trading at US$28.94 per barrel at 0439 GMT, up 39 cents from their last settlement.

Traders said prices were supported by strong oil data from China, where preliminary oil demand for 2015 was at a record 10.32 million barrels per day, up 2.5 per cent from a year ago, despite a slowing economy.

But Brent struggled to break back above US$29 a barrel as Iran's return to world oil markets weighed.

US crude futures were at US$29.31 a barrel, down 11 cents but defending its premium over Brent.

The US premium over Brent hit its highest level since 2010 on Monday as Iran's oil will be exported to Brent-priced Europe and Asia while regulations still restrict it from going to the United States.

The US government has also revoked a 40-year-old ban on its crude reserves, resulting in oil flows out of the US crude price zone and into Brent.

Overall, prices fell to their lowest since 2003 on Monday as western sanctions against Iran were lifted. Tehran then ordered a sharp increase in output to take immediate advantage.

Despite Tuesday's firmer prices, most analysts remained bearish. "It is clear that investor sentiment is driving oil prices... Bearish bets are at their highest level since 1983, indicating heightened concerns around Iran oil flooding the market," ANZ bank analysts said in a note on Tuesday.

Oil prices have fallen over 70 per cent in the past 18 months as exporters around the world pump out over a million barrels of crude every day in excess of demand. Since January, the prospect of the lifting of sanctions on Iran accelerated the rout.

Most analysts expect Iran's full return to oil markets to be relatively slow due to the need to overhaul its infrastructure following years of under-investment, but Iran is also estimated to have stored 12-14 million barrels of crude and 24 million barrels of condensates for immediate sale.

Goldman Sachs said that Iran's production would rise by 285,000 barrels per day (bpd) year-on-year in 2016 while BMI Research said the rise would be by 400,000 bpd.

In Opec-member Venezuela, state-owned producer PDVSA requested partners to pay for naphtha imports, which it is contractually obliged to provide itself, to produce exportable crudes.

REUTERS

    
 

Oil stumbles again as lifting of Iran sanctions adds to market woes

Brent crude falls below US$28; analysts say market yet to hit bottom and Iran will take time to return to market in a big way

By

Andrea Sohsandrea@sph.com.sg@AndreaSohBT

Oil markets panicked again on Monday as sanctions against Iran were lifted over the weekend, sending the Brent oil benchmark to below US$28 a barrel - its lowest since 2003. 

PHOTO: EPA

 More supply on the way?

JAN 19, 20165:50 AM

Singapore

OIL markets panicked again on Monday as sanctions against Iran were lifted over the weekend, sending the Brent oil benchmark to below US$28 a barrel - its lowest since 2003.

And while many are sceptical over Iran's ability to return to the market in a big way in the near term, with bearish sentiments overwhelming the oil market, a bottom to the oil price has yet to emerge, analysts said.

The US and Europe over the weekend lifted sanctions against Iran after the United Nations' International Atomic Energy Agency confirmed that Tehran had fulfilled its obligations to limit its nuclear programme.

Iran, eager to reclaim its position as the second largest producer in the Organisation of the Petroleum Exporting Countries (Opec), has declared it will raise its exports by 500,000 barrels per day (bpd) as soon as sanctions are lifted; it plans to add another 500,000 bpd in a few months.

The western sanctions had halved its oil exports to between 1.1 million and 1.2 million bpd, and frozen its oil revenue in overseas markets.

Early on Monday, Brent, the international crude benchmark, sank to as low as US$27.72 a barrel, and then recovered to about US$29.04 a barrel by 8.30pm Singapore time. US crude oil futures West Texas Intermediate (WTI) fell to US$28.40 a barrel before climbing again to US$29.33.

Mark Keenan, Societe Generale head of commodity research in the Asia-Pacific, said: "The lifting of sanctions has come earlier than the market was generally been anticipating."

The fall in the oil price was seen as a knee-jerk reaction, as the oil market has generally priced in a rise in Iran's production, analysts say.

What remains uncertain, however, is how much and how fast Iran can ramp up its output; many believe that the country's oil production projections are overly ambitious.

Mr Keenan is expecting the country to lift production by 200,000 bpd each quarter, making up a total of 800,000 bpd, but JBC Energy, a consultancy, estimates that output will go up by only 255,000 bpd over the year to 3.2 million bpd.

In the short term, though, analysts agree that exports will rise as Iran ships out the crude it has been holding in floating storage, estimated to be between 47 and 49 million barrels. But about two thirds of the oil in storage is said to be condensates, an ultralight type of oil, which would not affect the crude oil price.

As the country seeks to regain its position on the oil market, it could do so either by pricing its oil lower, or by finding new customers. A senior executive at the National Iranian Oil Company (NIOC) has told reporters that the country is open to both options.

ANZ commodity strategist Daniel Hynes said: "Iran's likely strategy in offering discounts to entice customers could see further downward pressure on prices in the near term."

However, a price war could risk further straining the already-tense relations between Iran and Saudi Arabia, the other dominant oil producer in Opec.

Victor Shum, vice-president of IHS Energy Insight, said: "An aggressive re-entry strategy could really rile Saudi Arabia further, considering the recent diplomatic spat between the two.

"If that happens we could see a market-share battle out in the open between Saudi Arabia and Iran. That would really be a bearish situation for oil markets."

Iran's deputy oil minister Amir Hossein Zamaninia said on Sunday that the country will boost production and exports in a "managed way to minimise the negative impact" on prices.

NIOC's director-general for international affairs Mohsen Qamsari has also said that the firm will be "more subtle" in its approach and may gradually increase output.

"We don't want to start a sort of a price war," he told Reuters two weeks ago.

Saudi Arabia oil minister Ali al-Naimi said on Monday that he foresees market forces and cooperation among producing nations to lead to more stable markets.

"I am optimistic about the future, the return of stability to the global oil markets, the improvement of prices and the cooperation among the major producing countries," he was quoted by Bloomberg as having said.

"Market forces as well as the cooperation among producing nations always lead to the restoration of stability. This, however, takes some time."

In the long term, if Iran is able to secure the investments necessary to get its oil fields flowing again, it would once again become a large player in the oil-and-gas market.

JBC Energy director Richard Gorry said: "Once the investment is put in place, Iran's potential in the mid- to long-term is huge."

He estimates the country's cost of production to range between US$5 and U$15 a barrel.

Iran has the third-largest reserves of oil and gas in the world, with three quarters of total recoverable reserves yet to be produced, said energy consultancy Wood Mackenzie.

In the near term, however, analysts are expecting more turmoil in the oil market.

ANZ's Mr Hynes said: "The bottom in prices is not expected to be reached until investors decided enough is enough."

He added that this is unlikely to occur until a variety of macro and fundamental indicators turn positive.

"And with Chinese equity markets and the renminbi still vulnerable to further weakness, this doesn't look likely in the short term.
"

China Q4 GDP grows 6.8% year on year, matches expectations

JAN 19, 201610:20 AM

[BEIJING] China's economy grew 6.8 per cent in the fourth quarter from a year earlier, matching expectations and the slowest since the global financial crisis, putting pressure on Beijing to roll out more support measures as fears of a sharper slowdown panic investors.

Analysts polled by Reuters had predicted gross domestic product (GDP) in the world's second-largest economy would grow 6.8 per cent in the fourth quarter, easing from 6.9 per cent in the third quarter.

Quarter-on-quarter growth was slightly below expectations at 1.6 per cent, the National Bureau of Statistics said at a news conference on Tuesday.

Economists had expected growth of 1.7 per cent on a quarterly basis, compared with a revised reading of 1.8 per cent in the prior quarter.

 

Full-year growth was 6.9 per cent, roughly in line with the government's target of around 7 per cent but the slowest pace of expansion in a quarter of a century. Economists had expected 6.9 per cent.

After being a major locomotive of global growth in recent years, China is now in the midst of a protracted slowdown, weighed down by weak exports, factory overcapacity, a soft property market, high debt levels, slowing investment and a government anti-corruption campaign.

Some market watchers believe real growth levels may be much weaker than official data suggest.

REUTERS

    
 

Hyflux unit clinches contract in Saudi Arabia

By

Lynette Khoolynkhoo@sph.com.sg@LynetteKhooBT

Hyflux Group said its wholly owned unit Hydrochem Saudi Ltd has been awarded a contract by Snamprogetti Saudi Arabia Co Ltd, a subsidiary of Saipem SpA, to design, manufacture and supply a seawater reverse osmosis and sulphate removal facilities package in Khurais, Saudi Arabia. 

PHOTO: SPH

JAN 19, 20167:51 AM

HYFLUX Group said its wholly owned unit Hydrochem Saudi Ltd has been awarded a contract by Snamprogetti Saudi Arabia Co Ltd, a subsidiary of Saipem SpA, to design, manufacture and supply a seawater reverse osmosis and sulphate removal facilities package in Khurais, Saudi Arabia.

The project value is about US$50.4 million. The contract is to be fulfilled over one year, and is expected to contribute to the financials of Hyflux for the financial year ending Dec 31, 2016.

"This win underscores Hyflux's growing presence in the Middle East region and our expertise in designing high specification plants for industrial customers," said Olivia Lum, executive chairman and group CEO of Hyflux.

The Khurais oil field is located approximately 150km north-east of Riyadh. Italian group Saipem is the engineering and construction contractor for the project to expand the daily production capacity at the Khurais central processing facility by 300,000 barrels of oil from the current 1.2 million barrels.

 

    
 

Canada PM says weak C$, oil hurt large parts of the economy

Canadian Prime Minister Justin Trudeau on Monday struck a more downbeat note than typical on the weak Canadian dollar as well as low oil prices, saying they hurt large parts of the economy. 

PHOTO: BLOOMBERG

JAN 19, 20168:21 AM

[NEW BRUNSWICK] Canadian Prime Minister Justin Trudeau on Monday struck a more downbeat note than typical on the weak Canadian dollar as well as low oil prices, saying they hurt large parts of the economy.

Mr Trudeau, pressed about the currency's new 12-year low against the US greenback on Monday, told reporters at a cabinet retreat in Atlantic Canada: "Obviously the dollar and falling oil prices have a negative impact on parts of our economy, on broad swathes of our economy in many cases." The Canadian dollar's speedy plunge to a 12-year low has fueled calls from some market and industry players for the country's central bank to hold interest rates steady, even as traders increase bets on a cut this week.

The Bank of Canada is due to announce its latest interest rate announcement on Wednesday.

BMO Capital Markets chief economist Doug Porter said Trudeau's comments "certainly thicken the plot" for the rate decision. "The inclusion of the currency in (his) sentence is notable - obviously there is now official concern in Ottawa about the seeming one-way move in the Canadian dollar," he said in a note to clients.

 

A senior government official, asked later about Mr Trudeau's comment, said the weak dollar brought both challenges and opportunities - a phrase the prime minister usually employs when asked about the currency.

Mr Trudeau came to power vowing his Liberal government would boost the economy by running budget deficits of C$10 billion (US$6.9 billion) a year for three years to fund infrastructure spending, Pressed on Monday as to whether Ottawa might run deficits much larger than promised, he said his party was fiscally responsible.

Privately, Liberals concede the deficits will be bigger than C$10 billion, but say no final decision has been taken.

Mr Trudeau made his comments when asked whether Ottawa might run annual deficits as big as C$30 billion.

REUTERS

    
 

PBOC to inject 75b yuan via 28-day reverse repos, 80b yuan via 7-day reverse repos

China's central bank will inject 75 billion yuan (US$11.40 billion) into the money markets through 28-day reverse bond repurchase agreements, and will inject 80 billion yuan via seven-day reverse repos on Tuesday, traders said. 

PHOTO: BLOOMBERG

JAN 19, 20169:39 AM

[SHANGHAI] China's central bank will inject 75 billion yuan (US$11.40 billion) into the money markets through 28-day reverse bond repurchase agreements, and will inject 80 billion yuan via seven-day reverse repos on Tuesday, traders said.

This is the first issue of 28-day tenor since February 2015.

Maturing reverse repos will drain a net 240 billion yuan from the banking system this week.

The People's Bank of China (PBOC) conducted a net injection of 40 billion yuan into the banking system last week.

REUTERS