News Archive

FMG cuts costs as low-grade discount widens

Fortescue Metals Group (AU:FMG) has, again, beat its own quarterly cash cost record, but the discount for its lower-grade product continued to widen.

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Volkswagen CEO says diesel fume tests on monkeys were ‘repulsive’

FRANKFURT (Reuters) – The chief executive of Volkswagen said tests in which monkeys were exposed to toxic diesel fumes were “unethical and repulsive”, apologizing for the misconduct of those who were responsible for the study.

Volkswagen has come under fire after the New York Times reported last week that German carmakers had used an organization called European Research Group on Environment and Health in the Transport Sector (EUGT) to commission the tests.

The study, conducted in 2014, was designed to defend diesel following revelations that the fuel’s exhaust fumes were carcinogenic, the newspaper reported.

The revelation is the latest aftershock from the VW emissions-rigging scandal, which continues to rock the auto industry.

“The methods used by EUGT in the United States were wrong, they were unethical and repulsive,” Volkswagen CEO Matthias Mueller said at a New Year’s Reception in Brussels late on Monday, in his first public remarks on the report.

“I am sorry that Volkswagen was involved in the matter as one of the sponsors of EUGT,” he added.

Reuters could not confirm the details and purpose of the study and EUGT, which was dissolved last year, could not be reached for comment.

  • Bosch warns that tests on monkeys further damage trust in diesel

EUGT received all of its funding from VW and fellow German carmakers Daimler and BMW, the New York Times said.

Mueller said Volkswagen was investigating EUGT’s work and would take necessary action based on its findings.

Reporting by Maria Sheahan, editing by Louise Heavens

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Uber sells vehicle lease portfolio of unit to startup firm Fair

(Reuters) – Ride-hailing firm Uber on Tuesday said it would sell vehicles and the existing lease portfolio of its auto-leasing business Xchange Leasing to startup digital car marketplace Fair.

The companies did not disclose financial terms.

“We bought every car in the portfolio that is subject to an active lease agreement,” a Fair spokesperson said.

Fair said it formed a partnership in which it will be the exclusive long-term vehicle leasing partner to Uber in the United States for drivers wanting vehicles for 30 days or longer.

Fair, based in Southern California, said it was buying the lease portfolio through equity and debt secured during its recent funding round.

We have raised capital from a number of investment banks and from strategic investors such as Germany’s BMW and Daimler, Fair Chief Executive Officer Scott Painter told Reuters.

According to a Wall Street Journal report in December, the net book value of Xchange Leasing’s more than 30,000 vehicles was roughly $400 million.

Uber said in September it was closing the auto-leasing business, which had heavy losses. Xchange Leasing started to unwind over the last few months of 2017.

Fair, founded in 2016, matches customers with cars based on what they are able to pay each month. Customers get approved and pay for their car through Fair, which owns the vehicle, and pick up the car at a dealership.

Reporting by Munsif Vengattil in Bengaluru

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SAP talks up cloud business, buys $2.4 billion U.S. sales software firm

WALLDORF, Germany (Reuters) – SAP posted 2017 results on the lower side of market expectations after Chief Executive Bill McDermott had promised a “dynamite” final quarter in its cloud business, as Europe’s top technology company announced a $2.4 billion U.S. acquisition.

Fourth-quarter non-IFRS operating profit rose by 6 percent in constant currency terms to 2.37 billion euros ($2.93 billion), compared to average analyst expectations of 2.41 billion euros, according to a poll of 16 analysts by Thomson Reuters.

But executives of the German software giant said the company had turned the corner during the quarter and expected to begin to see sustained margin improvements during 2018.

“I‘m happy to tell you that new cloud bookings surged 31 percent in Q4,” CEO Bill McDermott told journalists on a conference call, adding that SAP was gaining market share against rivals purely focused on cloud-based software.

“This paves the way for the strong growth and margin expansion we expect in 2018 and beyond,” Chief Financial Officer Luka Mucic said in a company statement.

The $140 billion business software company, which accounts for a quarter of the Stoxx Europe 600 Technology Index, has invested heavily in cloud services and hopes to see a payoff in the form of improving margins from this year on.

SAP said it expected total non-IFRS revenue of 24.6 to 25.1 billion euros ($30.43-$31.05 billion) for 2018, in line with the forecasts of analysts polled by Thomson Reuters.

But the outlook also highlighted that it expects margins to increase faster in 2018. Revenue is set to grow around 5 to 7 percent, excluding currency translation effects, it said, while operating profit is poised to grow by 8 to 11 percent.

It forecast 2018 non-IFRS operating profit of 7.3 to 7.5 billion euros, adding that the implementation of IFRS 15, a new accounting rule on revenue recognition, would add 200 million euros to profits.

Looking ahead to 2020, the final year of a five-year strategic transition to wean customers off software installed at offices and factories, SAP reiterated a forecast for non-IFRS operating profit of 8.5 to 9.0 billion euros and revenues of 28 to 29 billion.


In the fourth quarter, cloud subscriptions and support revenues rose by 28 percent to 997 million euros, compared to market expectations of a 22 percent increase.

Revenues from SAP’s mainstay software licenses and support operations rose 2 percent to 4.81 billion euros. Analysts had on average expected a decline of 1.1 percent.

  • SAP CEO targets margins, bullish on world economy

SAP said it would buy cloud-based, sales management software company Callidus Software Inc for a modest premium to its $2.23 billion market capitalization on Nasdaq on Monday, ahead of the deal’s announcement.

This was the first sizable acquisition in 3-1/2 years, McDermott said, adding that SAP did not plan further major mergers and acquisitions but would continue to count for most of its growth from organically generated business.

“We are in no way looking to be in the MA business at scale,” McDermott said. “This is a tuck-in.”

Reporting by Douglas Busvine and Eric Auchard; Editing by Maria Sheahan and Muralikumar Anantharaman

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Macau regulator says met with Wynn executives over sexual harassment claims

HONG KONG (Reuters) – Macau’s gaming regulator met with representatives of U.S. mogul Steve Wynn in the Chinese controlled territory over claims in a newspaper report that he routinely subjected women who worked for him to unwanted sexual advances.

The Gaming and Coordination Bureau (DICJ), which overseas Macau’s casino sector, told Reuters on Tuesday it had met with top executives from Wynn Macau on Jan 29 to “understand the situation.”

Wynn has denied the accusations published by the Wall Street Journal as “preposterous” and said they were instigated by his ex-wife to seek advantage in their divorce lawsuit. He resigned as the finance chairman of the U.S. Republican Party’s fundraising arm, the Republican National Committee, on Saturday.

Shares of Wynn Macau continued to fall on Tuesday, sliding 7 percent. Shares of the U.S. parent, Wynn Resorts, fell 9.3 percent on Monday.

Wynn Macau generates more than 75 percent of Wynn Resorts revenues.

The boards of Wynn Resorts and Wynn Macau announced on Tuesday they had formed a special committee to investigate the allegations of sexual harassment.

Regulators in Massachusetts, where Wynn is building a casino, have also said they are looking into the allegations.

Reporting by Farah Master; Editing by Neil Fullick

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Coal firms plead to courts, Trump for West Coast export terminals

WASHINGTON (Reuters) – The ailing U.S. coal industry is ramping up its political and legal offensive to win approval for West Coast export terminals that could provide a lifeline to lucrative Asia markets.

Coal producers filed two recent lawsuits against governments in Washington state and California challenging local decisions to block port projects on environmental grounds. The industry is also lobbying the Trump administration to override the local bans.

The fight reflects the sector’s desperation to boost exports as U.S. utilities continue their shift away from coal-fired power – despite Trump policies aimed at helping miners.

The proposed port projects are crucial to industry growth, said Hal Quinn, president of the National Mining Association.

“It’s worth fighting these battles,” he said.

The strategy could be a long-shot. Courts have tended in the past to side with local authorities in similar cases, and the administration’s policy options for forcing coal infrastructure on unwilling local governments remain unclear.

Officials at the White House and Department of Energy did not respond to requests for comment.

The coal industry has eyed the West Coast as a gateway to the global market for years, with plans for as many as seven terminals on the books a decade ago. But five of those projects were canceled amid volatile Asian demand and bitter opposition in left-leaning California, Washington, and Oregon.


Coal producers are fighting for the remaining two proposed projects – in Oakland, California and Longview, Washington – and have filed two recent lawsuits, including one this month, amid rising coal demand in Japan, China and Korea.

“There are 45 new coal plants planned or under construction in Japan alone,” said Rick Curtsinger, a spokesman for Colorado-based Cloud Peak, which mines in Montana and Wyoming.

(For a graphic showing U.S. coal exports to North Asia, see:

Earlier this month, the company announced a deal to export coal from a Montana mine to two new coal gasification power plants in Fukushima, Japan, site of the 2011 nuclear accident.

But growth from such deals is constrained because the only West Coast coal export facility in North America – in British Columbia, Canada – is near full capacity.

Coal buyers in Japan and South Korea confirmed they would welcome more U.S. shipments. Japan’s JERA utility sees the U.S. as a key to diversifying its fuel sources, said spokesman Tsuyoshi Shiraishi.

An official with a South Korean power utility, who spoke on condition of anonymity, said: “The popularity of U.S. coal is rising among utilities in South Korea” because of relatively low prices.

Even with the bottlenecks, coal exports rose more than 60 percent in the first five months of 2017, driven by temporary supply disruptions from Australia and depressed prices for U.S. coal.

Shipments to Europe rose about a third, to 16 million tons, compared to the same period in 2016, according to U.S. Department of Energy data. Exports to Asia doubled, to 12.3 million tons, over the same period.


This month in Oakland, attorneys for coal export terminal developer Phil Tagami and leading Utah coal producer Bowie Resources kicked off hearings in federal court over their proposed project. They argued the city council had used flawed scientific data to justify its unanimous 2016 decision to ban coal exports from the city.

That study concluded that dust emissions from coal transport would threaten local health. The U.S. Centers for Disease Control says excessive exposure to coal dust can cause black lung and other respiratory problems.

The coal industry’s lawyers countered that the study examined the wrong kind of coal and ignored state-of-the-art anti-dust technologies.

The city has so far spent more than a million dollars in legal fees to keep Utah coal out of Oakland ports, said Oakland Council Member Dan Kalb.

“I am saddened they are continuing to fight,” he said.

A decision in the suit could come within weeks.

Meanwhile, Lighthouse Resources, the developer of the proposed Millennium coal export terminal in Washington state, filed another federal lawsuit earlier this month against the governor and state regulators.

Washington had denied a permit for the project last year citing worries about rail safety, air pollution and noise pollution.

The company argues the state is obstructing the commerce of other states where the coal is mined and that only the federal government can regulate such interstate commerce.

Michael Greve, a law professor at George Mason University, said the plaintiffs would have to prove that Washington is favoring its own economic interests over those of other states – a tough standard to meet, particularly in a case involving an environmental ban.

In 2011, a Colorado court rejected a similar legal argument made by the Energy and Environment Legal Institute, which advocates for fossil fuels. The institute had challenged a state law requiring investor-owned utilities to obtain 30 percent of their generation from renewable sources.

The coal industry, meanwhile, is pushing the White House and Congress for policy solutions – potentially through an infrastructure spending package – to make it easier to open export terminals over local objections, said Quinn, of the National Mining Association.

Others want the administration to weigh in on the interstate commerce argument.

“The administration can have some influence if the opposition drifts into an area where it is treading on federal authority,” said Bud Clinch, director of the Montana Coal Council.

Last fall, Energy Department Deputy Secretary Dan Brouillette floated the idea of using the U.S. Federal Power Act to supersede state efforts to block gas pipelines.

“We can’t stop a state legislature and a governor from doing what they think is in their self-interest,” he said during an event at the National Petroleum Council. “But these are interstate industries.”

Additional reporting by Henning Gloystein in Singapore, Yuka Obayashi in Tokyo, and Yuna Park in Seoul; Editing by Richard Valdmanis and Brian Thevenot

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U.S. washer tariffs put Samsung, LG supply chains through the wringer

SEOUL (Reuters) – When South Korea’s Samsung Electronics and LG Electronics last year announced plans to build home appliance factories in the United States, they hoped to sidestep any fallout from President Donald Trump’s “America First” manufacturing and jobs mantra.

Last week’s decision by the U.S. government to impose tariffs of up to 50 percent on imports of washing machines and key components showed that wasn’t to be.

The inclusion of hefty tariffs on components in particular had moved the goal posts in a long-running trade dispute, upending supply chains and threatening investment across other industries, officials from the companies and the South Korean government said.

“It’s unprecedented and excessive, and will set alarm bells ringing for other companies doing businesses in the United States,” said one Samsung official, declined to be named as he was not authorized to speak to media.

After committing hundreds of millions of dollars to build the plants and bring jobs to South Carolina and Tennessee, the ruling caught the companies by surprise and was a “worst case” scenario, according to one executive.

Samsung says it will use imported parts until its factory runs at full capacity and becomes ready to produce key parts, expected to be by the end of the year.

Samsung, which relies on a sprawling manufacturing base in low-cost countries such as Vietnam has argued that a tight quota on overseas-made parts could deny it the supply chain flexibility it may need as its new U.S. production lines set up.

The ruling on a quota for foreign components is also making other manufacturers and suppliers jittery.

“Even if you bring your tier-1 supplier with you to … the U.S. manufacturing facilities, your tier-1 suppliers will have tier 2 and 3 suppliers which would source components from abroad. It makes it very complicated to calculate,” a senior executive at Korean automaker Hyundai Motor told Reuters.

“You’ve got to find a way to adapt or circumvent somehow.”

An executive at South Korean battery-to-chemicals conglomerate SK Group said the news was also bad news for producers of intermediary goods such as SK, which supplies big manufacturers with thousands of components that will now be caught up in the spat.

Privately owned Dongjin Techwin, which supplies LG Electronics Inc, is already bracing for contract losses, as LG moves to produce components in-house.

“There’d be little point on trying to figure out how to export components from Korea to the United States, and then build a washing machine there,” Jung Hyun-mo, a senior executive at Dongjin, told Reuters. “There just isn’t the export-import supply chain in place for that.”


The decision by Trump in the “Section 201” safeguard case came after the U.S. International Trade Commission found last year imports were “a substantial cause of serious injury to domestic manufacturers” including Whirlpool Corp.

The tariffs exceeded the harshest recommendations from ITC members, with a 20 percent tariff set on the first 1.2 million imported large residential washers in the first year, and a 50 percent tariff on additional imports.

Washington also imposed a 50 percent tariff on imported key parts in excess of 50,000 units in the first year, a move Samsung’s South Carolina plant manager fears could “cut us off at the knees”.

“Although we are installing production equipment and we are committed to producing the major parts in-house, there will be a transition period during which importing parts will be necessary to successfully launch this facility,” Tony Fraley, Samsung’s plant manager, told the commission in October.

When asked if there were any plan for price hikes to counter the tariffs, Samsung said it would discuss any changes with its business partners.

Consultancy firm Euromonitor estimates South Korean washing machine makers would need to raise prices by $50 to $400 to cushion the impact of tariffs.

LG was set to start production at its new plant in the third quarter at the earliest and is now working to accelerate its launch with officials in Clarksville, Tennessee who are eager for the jobs the new factory will bring.

“We had several scenarios… this safeguard measure turned out to be the worst case one,” Kim Gun-tai, head of LG’s home appliance division told a conference call last week.

LG, which announced a plan to raise prices on its washing machines sold in the United States last week, said in a separate statement to Reuters it was absorbing a significant portion of the tariff on parts. Once its U.S. plant’s operation began it would produce key parts on site, it added.

The safeguard issue is set to top the agenda when government officials from the two countries meet later this week to discuss trade issues.

South Korea has already filed challenges and demands for compensation at the World Trade Organisation under the Safeguard Agreement.

Reporting by Ju-min Park; Additional reporting by Haejin Choi, Joyce Lee, Hyunjoo Jin and Soyoung Kim; Editing by Miyoung Kim and Lincoln Feast

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Renault-Nissan group pips VW to become top-selling carmaker in 2017

TOKYO (Reuters) – The Renault-Nissan automaking alliance emerged as the world’s biggest seller of light vehicles in 2017, bumping Volkswagen AG off the top spot, after the inclusion of Mitsubishi Motors’ numbers boosted its final tally.

Nissan Motor Co’s sales hit a record high of 5.82 million, while French automaker Renault SA has reported sales of 3.76 million. Mitsubishi’s sales came in at 1.03 million, bringing total 2017 sales for the group to around 10.61 million light vehicles.

Together, the three automakers beat record sales of around 10.53 million light vehicles at Volkswagen, 2016’s top seller which also includes the Audi, Skoda, Seat and Porsche brands.

Toyota Motor Corp, which held the No.2 spot in 2016, posted group sales of 10.2 million units last year, excluding its Hino Motors heavy trucks.

Many automakers are trying to boost sales volumes to achieve economies of scale and cut costs amid soaring investments needed to develop next-generation automotive technologies – including self-driving cars, electric vehicles and new mobility services.

This has been a focus of the Renault-Nissan group, and was a key motivation for Nissan when it acquired a controlling stake in smaller rival Mitsubishi Motors in 2016.

Renault-Nissan Chairman Carlos Ghosn has pledged to make scale an advantage and use it to double savings to 10 billion euros ($12 billion) by 2022, based on a rise in annual sales volumes to 14 million units.

Renault, Nissan and some other automakers are looking to share more vehicle parts and consolidate production platforms to trim RD and manufacturing costs and raise profitability.

Toyota is taking a similar approach, while it is also partnering with Mazda Motor Corp and Suzuki Motor Corp to reign in the costs of developing and marketing electric cars and other new technologies.

But not all automakers consider scale as a way to increased efficiency and profitability.

General Motors Co has concluded that size does not matter as much, selling its struggling European operation Opel to PSA last year to focus capital on more profitable ventures.

The strategy seems to have worked for the U.S. automaker, which posted a profit margin of 6.8 percent in January-September. That was higher than a 5.0 percent margin at Nissan and 4.3 percent at Mitsubishi Motors in the six months through October, and a 4.8 percent margin at Renault over January-June.

Earlier this month, GM pointed to new trucks and SUVs, a new, low-cost car for international markets, and the Cadillac luxury brand as possible future earnings drivers.

Reporting by Naomi Tajitsu; Editing by Himani Sarkar

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Zinc, Glencore gain

Rising zinc prices have prompted Glencore to move to restart its Lady Loretta zinc mine in Queensland, Australia, this year, and the zinc price reached a fresh 10.5 year high on the London Metal Exchange yesterday above US$3,600 per tonne.

The zinc positivity didn’t extend to benefit Australian zinc stocks today.

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Gold-lead-zinc miner Aurelia Metals (AU:AMI) closed down almost 1.6%, while gold, nickel, copper, zinc and silver producer Independence Group (AU:IGO) closed 2.5% lower and new producer Red River Resources (AU:RVR) was down 1.3%, albeit remaining close to a 52-week high.

The gold price edged lower to US$1,334 per ounce on the spot market earlier ahead of the US Federal Reserve’s two-day policy meeting this week which is widely expected to leave interest rates unchanged.

Markets are also looking out for manufacturing and unemployment data this week.

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