Shanghai Daily Business
Updated: 1 min 15 sec ago
A model poses with a 37.30-carat “The Raj Pink,” the world’s largest known fancy intense pink diamond expected to fetch up to US$30 million in an upcoming Geneva auction, during a Sotheby’s preview in Hong Kong yesterday.
European Union antitrust regulators raided German car manufacturers yesterday, days after a similar swoop on the offices of BMW, in a fresh blow to the country’s beleaguered auto industry.“The inspections are related to commission concerns that several German car manufacturers may have violated EU antitrust rules that prohibit cartels and restrictive business practices,” the commission, the bloc’s executive arm, said in a statement.It did not say which car companies were targeted, which is customary in EU anti-trust proceedings.However, Volkswagen and Daimler both revealed separately they are under investigation.Volkswagen said it was also a target of “ongoing antitrust investigations by the EU commission” while Mercedes-Benz maker Daimler confirmed an inspection and said it had “filed a leniency application.”The raids are linked to a report in Der Spiegel that Volkswagen, Daimler and carmakers Audi, Porsche and BMW secretly worked together from the 1990s on car development, construction and logistics — including how to meet increasingly tough diesel emissions standards.Both buyers and suppliers of the auto giants suffered from the under-the-table deals, the magazine alleged.The allegations of antitrust violations are the latest cloud over Germany’s auto industry.In 2015, Volkswagen admitted it had installed software in millions of its diesel vehicles to cheat emissions tests.
BITCOIN is booming, digital currency hedge funds are sprouting at the rate of two a week and the value of all cryptocurrencies has surged tenfold this year to more than US$170 billion.
Yet for all the hype, mainstream institutional investors are steering clear of the nascent market, taking the view that it is too lightly regulated, too volatile and too illiquid to risk investing other people’s money in.
Bitcoin, the biggest and most well-known cryptocurrency, has outperformed all the world’s traditional currencies each year since 2011, except for 2014. But many investors still view it as an opaque, esoteric instrument used by gun-runners and drug-dealers on the Dark Web that should be avoided.
This year, though, a flood of new hedge funds focused on cryptocurrencies has offered institutional investors who might be unfamiliar with the market a potential route into the world of digital currencies.
According to Autonomous NEXT, a financial technology research house, 84 so-called crypto hedge funds have been launched this year, taking the total to 110 with about US$2.2 billion in assets altogether.
But the fact most of the funds are relatively small with a limited track record — and that cryptocurrency price swings have been so pronounced — means the world’s pension funds, insurance companies and large mutual funds are staying away.
“While cryptocurrencies are probably here to stay, they are difficult to analyze, wildly volatile and some may be prone to fraud,” said Trevor Greetham at Royal London Asset Management, part of the Royal London life insurance company.
“Diversification is a good thing but that doesn’t mean investing in everything just because it’s there. We favor assets with a long track record in producing returns or reducing risks,” said Greetham, who heads RLAM’s multi asset team.
Autonomous NEXT partner Lex Sokolin said there were probably only a couple of funds worth several hundred million dollars with most in the US$5 million to US$20 million range — well below the threshold most institutional investors would consider.
“For many institutional, discretionary fund managers, those funds wouldn’t get cleared because the big question would be around liquidity,” said James Butterfill, head of investment strategy at ETF Securities in London.
One way mainstream money managers could get exposure is by investing in a basket of hedge funds that includes a crypto fund. But the head of hedge funds at a major European bank that invests in more than 100 hedge funds said there were no crypto funds in his portfolio.
“It’s a very controversial proposition,” said the banker, who declined to be named. “It’s unlikely that the most established hedge funds will make big bets on this because you could put your core business at risk.”
Determining the value of bitcoin and other cryptocurrencies is tricky. There are almost 17 million bitcoins in existence now but the total supply is limited to 21 million, and that won’t be reached until the next century.
Bitcoin’s total value, or market capitalization, is close to US$100 billion, bigger than US investment bank Morgan Stanley . At the start of the year it was just US$15 billion. Ethereum, the second-biggest cryptocurrency, is now worth almost US$30 billion.
“If the supply is truly fixed then the price of these securities is determined purely by demand which, in turn, is determined largely by sentiment,” said Ken Dickson, investment director, money markets and FX at Aberdeen Standard Investments.
“This means huge price swings with bubbles, booms and busts. Unless the supply processes of these instruments are reformed then it is unlikely that they will play any part of an investment portfolio,” he said.
Bitcoin has been on a rollercoaster ride this year. After hitting what was then a record high just below US$5,000 in early September it lost about a third of its value in under two weeks. It has since almost doubled in price again, to new highs near US$6,000.
Ethereum’s price surged almost 50 times from the start of the year to June, before falling back by about a fifth, said industry website CoinDesk.
That kind of volatility means institutional investment firms looking at the relative risks of asset classes are likely to rule out cryptocurrencies, asset managers said.
CISCO Systems Inc will buy US telecommunications software company BroadSoft Inc in a deal valued at US$1.9 billion, as the world’s largest networking gear producer shifts from its stagnating legacy business of switches and routers.
Cisco said yesterday it offered US$55 per share, which represents a premium of 2 percent to BroadSoft’s last close.
The deal, which comes after Reuters reported on Sunday that the companies were in talks, will give Cisco a stronger foothold in selling unified communications software to big telecommunications firms.
The equity value of the deal is US$1.71 billion, based on 31 million shares outstanding, according to Thomson Reuters data.
The deal is expected to close during the first quarter of 2018, the companies said in a statement.
Upon completion of the deal, BroadSoft employees will join Cisco’s unified communications technology group.
BroadSoft provides software and services that enable mobile, fixed-line and cable service providers to offer unified communications over their Internet protocol networks.
Cisco, like other legacy technology firms, has been focusing on high-growth areas such as security, the Internet of Things and cloud computing.
BroadSoft has historically sold its products to large telecommunications companies such as Verizon Communications Inc and AT&T Inc, which then resell the software to their business customers.
BRITAIN’S financial watchdog said yesterday it had fined Merrill Lynch International a little over 34.5 million pounds (US$45.4 million) for failing to report tens of millions of trades.
The Financial Conduct Authority said in a statement that the fine relates to 68.5 million unreported transactions over two years to February 2016 — and follows previous warnings and fines for similar offences.
The FCA added that this time around, it was “the first enforcement action against a firm for failing to report details of trading in exchange traded derivatives, under the European Markets Infrastructure Regulation” that was introduced following the global financial crisis to provide greater transparency on deals.
Merrill Lynch International, part of US giant Bank of America Merrill Lynch, would have been required to pay 49.32 million pounds had it not settled at an early stage of the investigation, the FCA said.
“Reporting exchange traded derivative transactions helps authorities assess and address the risk inherent in financial systems caused by a lack of transparency,” the watchdog said.
SHANGHAI stocks edged up yesterday as market sentiment was lifted by Shanghai’s plan to build a free trade port and the Chinese central bank efforts to boost liquidity in the financial market.
The Shanghai Composite Index edged up 0.06 percent to close at 3380.70 points.
Investors were optimistic on news that Shanghai is planning a free trade port which is awaiting approval from the central government.
“Shanghai’s listed port operators and trading firms, including Shanghai Material Trading Co, Shanghai International Port and CTS International Logistics Co, all jumped on news Shanghai was considering developing a free port to boost international trade,” Reuters reported.
Sinolink Securities said in a note the development of a free trade port will act as a catalyst to the city’s shipping and logistics enterprises.
Sentiment also rose after the People’s Bank of China injected 200 billion yuan (US$30.1 billion) into the financial market through reverse repurchase agreements yesterday, according to a statement published on its official website.
THE National Development and Reform Commission will conduct a nationwide inspection on prices of water, gas, heating and telecommunications from November 1, China's top planning agency said yesterday.
The eight-month inspection, to end on June 30 next year, will overhaul rules on the pricing of water, gas and heating supply as well as sales and services of telecommunication companies, and monitor how they are implemented nationwide, the NDRC said.
Companies should not price water, gas and heating above the government's regulations. Telecom companies should mark prices clearly and are not allowed to show deceptive advertising to attract customers.
The inspection will cover cases that were mainly reported through the national 12358 price monitoring platform since 2016.
The inspection aimed to lower costs and ease the burden of the Chinese. The NDRC has saved 250 billion yuan (US$38 billion) of electricity expenses for Chinese since 2015 by imposing measures such as cutting the income of power distribution companies.
The NDRC has helped cut 120 billion yuan of companies’ gas expenses since 2013 by letting the market play a bigger role in natural gas trading.
AFTER years of dismantling discarded televisions and laptops, a Shanghai recycling plant is readying itself for a new wave of waste: piles of exhausted batteries from the surge of electric vehicles hitting China’s streets.
The plant has secured licences and is undergoing upgrades to handle a fast-growing mountain of battery waste, said Li Yingzhe, a manager at the facility, run by the state-owned Shanghai Jinqiao Group.
“We believe there will be so much growth in the number of electric vehicles in the future,” he said.
Shanghai Jinqiao will be entering a market that includes Chinese companies like Jiangxi Ganfeng Lithium and GEM Co Ltd, whose share prices have risen as they invest in battery recycling facilities of their own. That confidence comes even as companies face considerable hurdles launching battery recycling businesses, including high operating costs.
The growth of China’s electric vehicle industry — and the ambitions of recycling companies — is underpinned by a government drive to eventually phase out gasoline-burning cars, part of a broader effort to improve urban air quality and ease a reliance on overseas oil.
Led by companies like BYD and Geely, sales of electric vehicles in China reached 507,000 in 2016, up 53 percent over the previous year. The government is targeting sales of 2 million a year by 2020 and 7 million five years later, amounting to a fifth of total car production by 2025.
According to the International Energy Agency, China accounted for above 40 percent of global electric car sales in 2016, followed by the European Union and the United States. It also overtook the United States as the market with the greatest number of electric vehicles.
Production in China of the lithium batteries that power those cars has also soared. In the first eight months of 2017, Chinese manufacturers produced 6.7 billion batteries, up 51 percent from the year-earlier period, according to industry ministry data.
All that activity could put China in pole position for dominating the global electric car industry, as well as related businesses like batteries and recycling.
China began promoting electric vehicles in 2009, and as the first of those cars reach the end of their lifespan, lithium battery waste could be as much as 170,000 tons next year, industry experts estimate. The figure is likely to keep multiplying in tandem with car sales.
Dealing with all that waste poses huge problems for China. Lithium batteries are not yet classified as hazardous waste and are therefore not subject to stringent disposal controls. Battery waste includes heavy metals like cobalt and nickel, as well as toxic residues that could end up in waterways and the soil if not handled properly.
Despite the challenges, battery waste also represents a significant opportunity for the country’s growing recycling industry.
The China Automobile Innovation Centre, an industry think tank, estimates the recycling market could be worth 31 billion yuan (US$4.68 billion) by 2023.
Wang Chuanfu, president of BYD Co Ltd, China’s leading electric carmaker, last month described the lithium, copper and cobalt extracted from spent batteries as “treasures.”
Larger companies with high-tech recycling operations are already reaping the benefits, including Jiangxi Ganfeng Lithium , Sinolink Securities, a local brokerage, said in a note to investors. The company’s share price has surged more than 200 percent this year.
Sinolink also cited GEM , a self-proclaimed “urban miner” that runs China’s largest automated battery dismantling facility in Shenzhen. GEM’s shares have risen more than 60 percent since January.
Still, the industry faces numerous obstacles.
Recycling lithium batteries can be prohibitively expensive for many companies. And the industry has yet to agree on the standardisation necessary to handle spent batteries more profitably and in big numbers.
Some executives also say China is not doing enough to encourage the industry with subsidies and enforce existing environmental regulations.
“Speeding up the recycling of lithium batteries is a matter of urgency, and has become a major issue for the development of the new energy vehicle industry,” Zhang Tianren, chairman of battery maker Tianneng Power, wrote in a proposal submitted to China’s parliament in March.
The commercial viability of the sector has been undermined by soaring waste treatment costs, as well as high taxes, Zhang said.
In his paper, Zhang cited one recycling company as saying that the value of materials extracted from one ton of lithium-iron-phospate battery waste stood at 8,110 yuan, but the cost of recycling them would be 8,540 yuan.
Automating the recycling process in China was another major challenge due to a lack of standardized product designs, said Zhang.
Automation was also being held back by poor equipment and technology, especially among smaller producers, Xiao Hai, chief engineer with the Shenzhen-based Clou Electronics, a company that develops new energy products, said at an energy conference in August.
The government, meanwhile, is trying to transform the country’s recycling system into a high-tech regulated industry.
Large-scale battery makers are being pressed to establish their own recycling facilities, and polluting backyard recyclers have been forced to close.
China’s industry ministry last year urged the sector to introduce standardized designs and raise technology to “international” levels by 2020. It plans to publish comprehensive new battery recycling rules before the end of the year.
Battery companies have for the moment been bearing much of the cost of recycling. While carmakers are technically liable for recycling batteries, in practice they sign deals with suppliers to recycle batteries on their behalf.
Green Cheng, chief executive of Shenzhen Cham Battery Technology Co Ltd, said that recycling was a strain on the resources of battery makers.
Shenzhen Cham churns out 300,000 lithium batteries a day at its factory in Dongguan, in southern China, and lists Geely , the automaker, among its partners. The company has to pay a recycling firm to dispose of batteries.
“If manufacturers like us are going to be responsible, then the government definitely needs to provide funds to support us,” he said.
SHANGHAI’S new housing market continued to be plagued by zero supply for the third straight week as momentum among real estate developers and home buyers remained sluggish.
The area of new residential properties sold, excluding government-subsidized affordable housing, fell 5.1 percent to 86,000 square meters last week, Shanghai Centaline Property Consultants Co said yesterday.
Citywide, only three districts managed to register weekly sales of more than 10,000 square meters, compared with five a week earlier.
These homes sold for an average 47,721 yuan (US$7,245) per square meter, a weekly gain of 5.8 percent mainly due to a structural shift, Centaline data showed.
A residential project in Nanhui in the Pudong New Area became the most popular project after selling 37 apartments for an average price of 33,747 yuan per square meter. It was followed by a high-end development in Zhabei, which sold seven units during the same period for 80,471 yuan per square meter on average.
“Not a single new home was released in the local market for sale for the third consecutive week, indicating extremely lackluster momentum among developers as most of them would achieve their annual sales target without any difficulty by the end of this month,” said Lu Wenxi, senior research manager at Centaline.
NEW home prices in China’s 15 hottest markets stopped rising for the second consecutive month in September as policies designed to curb speculation continued to work.
Tianjin, Nanjing, Shenzhen and Chengdu were the cities where the price of new homes remained unchanged from August while the other 11 all registered decreases ranging from 0.1 percent to 0.6 percent, according to the National Bureau of Statistics, which tracks property prices in 70 major cities.
On a yearly basis, signs of cooling continued with all 15 cities recording slower growth or larger decreases.
New home prices in Beijing and Guangzhou rose 0.5 percent and 9.4 percent, respectively, from the same period a year ago, compared with the increases of 5.6 percent and 13.3 percent registered in August.
In Shanghai and Shenzhen, property prices fell 0.1 percent and 3.8 percent in September from a year earlier, compared with a gain of 3.2 percent and a decline of 2 percent in August.
“Across the country, first-tier cities continued to record month-on-month price decreases in both new and pre-occupied markets while either unchanged or slower growth was registered in second and third-tier cities, as rein-in measures remained effective,” the bureau’s statistician Liu Jianwei said yesterday.
Nationwide, 18 out of the 70 cities witnessed month-on-month price drops in their new home markets, unchanged from August.
In the pre-occupied housing market, 13 cities suffered price setbacks from a month ago, an increase of two from August, according to the bureau.
On a monthly basis, new home prices in the 70 monitored cities rose 0.19 percent on average in September, down 0.05 percentage points from August. On a yearly basis, new home prices rose 6.53 percent on average, a slowdown of 1.7 percentage points from August.
“On both a monthly or yearly basis, third-tier cities posted the fastest price growth while first-tier cities showed the most obvious signs of cooling, indicating differentiated tightening policies implemented in different areas of the country,” Xia Dan, a senior researcher at the Bank of Communications, wrote in a report.
“Since late September, a number of second-tier cities, including Chongqing, Nanchang, Changsha, Xi’an and Guiyang, as well as some third-tier ones such as Guilin and Beihai have rolled out further control measures — mainly by introducing a lockup period for home sales — as amendment to earlier policies.”
Chinese authorities have constantly reiterated that “houses are built to be inhabited, not for speculation.”
At a press conference on the sidelines of the 19th National Congress of the Communist Party of China, Minister of Housing and Urban-Rural Development Wang Menghui said the property market would see stabilizing prices and slower growth in transaction volume in the fourth quarter.
The government will not waver in its efforts to achieve the goals of property market regulation and will maintain continuity and stability of policies, Wang said.
Authorities are studying a “long-term mechanism” for real estate regulation and advancing legislative work on the development of the home rental market, Wang said.
He pledged to move faster to implement a housing system that ensures supply through multiple sources, provides housing support through multiple channels, and encourages both purchases and renting.
New home sales in China expanded by a slower pace in the first nine months, according to data released last week by the bureau.
About 7.6 trillion yuan (US$1.2 trillion) of new homes, excluding government-subsidized affordable housing, were sold from January to September, a year-on-year increase of 11.4 percent. That compared with a 14.2 percent increase in the first eight months.
The area of new homes sold in the nine-month period rose 7.6 percent from a year earlier to 1 billion square meters, also down from a 10.3 percent increase in the first eight months, bureau data showed.
The property market was also cooled by relatively tight liquidity conditions as the government moved to contain leverage and risk in the financial system.
Data from the People’s Bank of China showed that loans to China’s real estate sector continued to grow at a slower pace, with outstanding loans up 22.8 percent year on year to 31.1 trillion yuan at the end of September, 1.4 percentage points lower than the rate at the end of June.
Despite the cooling measures, China’s economy expanded a robust 6.9 percent year on year in the first three quarters of the year, well above the government’s target of 6.5 percent for this year.
TURKEY’S investment and promotion agency said the number of Chinese companies operating in Turkey is set to more than double in the next three years boosted by China’s Belt and Road Initiative.
Arda Ermut, president of Invest in Turkey, said Chinese companies are keen to invest in the country after China rolled out the Belt and Road Initiative in the past several years.
He said Turkey welcomes Chinese investment in automobile, infrastructure, information technology, energy, and chemicals industries.
Turkey could cut costs for Chinese firms and help connect them to European, North African, and Middle East markets.
The agency has signed a Memorandum of Understanding with Shanghai Foreign Investment Development Board to boost communications and events between companies in Turkey and Shanghai.
By the end of 2016, there were 872 Chinese companies and total investment of US$2.2 billion from China in Turkey, and about 70 percent of the investment came in the past three years, Ermut said.
HONG Kong’s last remaining stock market floor traders are taking their final orders as the exchange prepares to shut its trading hall.
The bourse’s operator, Hong Kong Exchanges & Clearing, says it will close the trading hall by the end of the month and turn the space into a showcase for the city’s financial markets.
Yip Wing-keung, a trading manager at brokerage Christfund Securities, donned his red trading jacket for the last time on Friday, his final day on the floor. He and the other few floor traders left have been moving out ahead of the closure.
The shutdown marks the end of an era for the stock market, which symbolized the city’s ascent as an Asian finance hub. Activity on the floor, one of a few such venues left worldwide, dwindled as stock dealing became fully computerized.
“I feel sadness and regret,” said Yip, who has been a floor trader since the hall was opened in 1986 after four previous exchanges were merged. “Hong Kong is one of the world’s financial centers, but if we don’t have the stock market trading hall, it will be a little sorrowful. This is my own individual reflection.”
Yip said the floor traders resisted the closure. They sent a protest letter to the government but it was in vain.
“We wrote it but were overruled,” he said. “We can’t stop the times from changing.”
Hong Kong’s stock exchange, Asia’s third-biggest by volume, follows Tokyo, Singapore and London in eliminating their trading floors.
In the US, floor traders at the New York Stock Exchange still provide the backdrop for financial TV news reports and bell-ringing ceremonies. But Chicago and New York commodity futures trading pits, where traders used old-fashioned “open outcry” techniques, have shut in recent years as volume fell to 1 percent of the total.
Hong Kong Exchanges stopped updating statistics for floor trading in 2014, when it accounted for less than 1 percent of monthly turnover.
In the 1980s and 1990s the hall housed more than 900 trading desks. The exchange’s most recent count showed only 62 dealing desks were leased, with about 30 traders showing up on an average day. On a visit to the hall last week, just seven traders could be seen.
In its heyday, floor trading was computer-assisted but dealers still needed to talk to each other to complete transactions, either by phone or in person, depending on how far they sat from each other, Yip said.
“If they were too far you had to use the internal phone line, but if you couldn’t get through, you had to run over to them,” he said. “So you saw lots of people running back and forth.”
These days, Yip just punches orders into his computer.
“Now it’s more comfortable” but relationships with other traders are not as good as they used to be, said Yip.
He doesn’t look forward to returning to his head office.
“It won’t be so free,” he said.
Tesla Model 3 cars are seen at the company’s Fremont facility in California in this file photo. Tesla has reached a deal on a wholly-owned manufacturing facility in Shanghai, the Wall Street Journal said yesterday citing people briefed on the plan, which could help it move in China’s fast-growing EV market. Neither Tesla nor the Shanghai government commented on the report.
AIRBUS’S coup in buying a US$6 billion Canadian jetliner project for a dollar stunned investors and took the spotlight off a growing ethics row last week, but internal disarray has raised questions over how smoothly it can implement the deal.
The European planemaker secured the deal for Bombardier’s CSeries program by pledging to throw its marketing might behind the loss-making jets, just as the Airbus sales machine reels from falling sales and internal and external corruption investigations.
Chief Executive Tom Enders has urged staff to keep calm in the face of French reports describing payments to intermediaries and growing concern over fallout from the investigations.
But the mood at the group’s Toulouse offices remains grim.
“Bombardier asked for an ambulance and Airbus sent a hearse,” said one person with close ties to the company.
French media attention on the growing scandal helped to camouflage talks to buy the CSeries. Rumors circulated in late August that Enders and a colleague were visiting Paris to meet investigators. In fact, they were holding the first of several secret dinner meetings with Bombardier.
But the same affair, which first came to light in 2016, has begun to cloud sales momentum. In the first nine months of the year Airbus accounted for only 35 percent of global jet sales in its head-to-head battle with US rival Boeing.
The Airbus sales operation is demoralized and in disarray, multiple aerospace and airline industry sources said, with some blaming Enders for turning the company against itself.
Two people said the situation is so tense that some employees have begun to shy away from selling in problematic countries, rather than risk being drawn into the investigation.
Soon-to-retire sales chief John Leahy has been asked to stay until the end of the year to help steady the operation, but his successor has not been officially confirmed, adding a sense of vacuum that has also sapped morale.
Leahy designated his deputy Kiran Rao as his successor earlier this year but the chaos engulfing Airbus means now is not considered the right time for major new announcements.
A spokesman for Airbus, which has long predicted a slower year after an order boom, dismissed reports of instability.
“We have a great sales team ... but it is fully understood that they cannot repeat records every year; and the year is not over,” he said.
Enders has strongly defended his decision in 2016 to report flawed paperwork to UK authorities, which prompted UK and French investigations focusing on a system of sales agents run by a separate Paris department that has since been disbanded.
Airbus says no evidence of corruption has been uncovered, but Enders has pledged to continue the overhaul of sales practices historically shared between Toulouse and Paris.
A source close to Bombardier acknowledged disruption at Airbus but predicted things would settle down by the time the deal for Airbus to sell the CSeries closes next year.
At that point Airbus will face a second challenge in marketing the CSeries, which for years it dismissed as a weak upstart. Now it must offer the aircraft side by side with the older A320.
EUROPEAN Union anti-trust regulators have raided the offices of BMW in Munich, the company said, in a fresh blow to the German car industry already hit by the Dieselgate scandal.
The European Commission, which refused to confirm the company targeted, said it “can confirm that as of October 16, 2017 its officials carried out an unannounced inspection at the premises of a car manufacturer in Germany.”
The inspection was related to “concerns that several German car manufacturers may have violated EU anti-trust rules that prohibit cartels and restrictive business practices,” a statement said.
Daimler was cooperating, said the commission which could accordingly offer the firm leniency in the case.
“The inspection is linked to complaints against five auto companies that were reported in the media last July,” BMW said in a statement that confirmed the raids.
News weekly Der Spiegel reported in July that German carmakers Volkswagen, Audi, Porsche, BMW and Daimler secretly worked together from the 1990s on car development, construction and logistics — including how to meet increasingly tough diesel emissions criteria.
Both buyers and suppliers of the auto giants suffered from the under-the-table deals, the magazine alleged.
Wolfsburg-based VW, along with Mercedes-Benz parent Daimler, was among the first to hand over details of the alleged broader collusion between the five firms to competition authorities, reported Spiegel, saying it had seen a relevant VW document.
For the world’s largest carmaker Volkswagen, the diesel emissions scandal alone has already cost tens of billions of euros since 2015.
In a separate cartel case, Daimler suffered a billion-euro fine from Brussels last summer for fixing truck prices with competitors.
In theory, the commission or Germany’s federal competition authority could fine firms 10 percent of annual revenue — or close to 50 billion euros (US$59 billion) across all five car companies, based on 2016 sales.
CHINA’S Ministry of Commerce said Saturday that it will extend anti-dumping duties on imports of caprolactam, a synthetic polymer widely used in textiles, from the European Union and the US for another five years.
China imposed anti-dumping duties on caprolactam in 2011 on the grounds that the products were being dumped on the Chinese market at below market prices.
The latest decision follows a review that found the domestic industry would be harmed if anti-dumping duties were discontinued.
The ministry said China will continue to levy anti-dumping duties on such imports according to the rates set in 2011.
According to a previous ministry statement, DSM Fibre Intermediates B.V. and six other European companies were subject to anti-dumping duties of between 2.3 and 4.9 percent, while rates for other EU companies were set at 25.5 percent.
As for US caprolactam, DSM Chemicals North America Inc, Honeywell Resins & Chemicals LLC and BASF Corporation will face an anti-dumping tax of 2.2 percent, 3.6 percent and 2.5 percent, respectively.
All other US firms will be levied a uniform anti-dumping tax of 24.2 percent.
Producers of processed lithium — an essential element for batteries used in electric cars — are agreeing long-term contracts with their customers to fund the investments needed to address a looming shortfall.Demand for battery-grade lithium compounds is expected to skyrocket in the next decades in tandem with soaring demand for electric cars as governments and individual consumers try to reduce their carbon footprint. Although there’s plenty of lithium around, the problem is ensuring there is enough capacity to process it.Battery makers and other end-users such as car manufacturers will need to sign multi-year deals that encourage large producers to invest more, and faster, industry sources say.Some of that is already happening.“We’ve established the timeline for our own expansion based on the commitments our customers are making with us,” said Tom Schneberger, global business director at US-listed FMC Lithium, one of the world’s top four producers.“Our first priority will be to provide the adequate supply of the high quality products upon which (our strategic customers) rely,” he said.Expansion plans by Chile’s Sociedad Quimica Y Minera (SQM), another of the top four, for next year are also based on long-term agreements, according to the company.The production and use of electric cars is projected by Morgan Stanley analysts to rise to 2.9 percent of 99 million new vehicles in 2020 and to 9.4 percent of 102 million new vehicles in 2025, from 1.1 percent of 86.5 million this year. By 2050, 81 percent of 132 million new auto sales will be electric, Morgan Stanley says.Limited visibilityThe lithium-ion batteries needed to power electric cars use lithium carbonate or lithium hydroxide, but the industry typically talks in terms of lithium carbonate equivalent which contains both.Two types of lithium deposits dominate.One is hard rock as found in Australia, for which ready-to-go capacity to produce battery grade lithium can take up to three years. The other is brine, mostly found in Chile and Argentina, which can take seven years or more.China has reserves of both. Consultants Roskill estimate 785,000 tons of lithium carbonate equivalent a year will be needed by 2025, amounting to a 26,000-ton shortfall from anticipated supply, compared to 217,000 tons of demand versus 227,000 tons of supply this year.Others expect an even larger deficit.“There’s limited visibility into where we’re going to get the last 200,000 tons of lithium if we hit the numbers Roskill is expecting for 2025,” said Seth Ginns, a managing director at Jennison Associates.Jennison manages more than US$164 billion of investment and is a top 10 investor in both FMC and US-listed Albemarle, another of the top four producers.“We estimate the lithium industry is going to need between US$4-US$5 billion of investment out to 2025,” said Simon Moores, managing director at Benchmark Minerals Intelligence.Price projections out to 2025 are not available, but Benchmark estimates prices of lithium carbonate will average US$13,000 a ton over the 2017-2020 period from around US$9,000 a ton in 2015-2016.Demand for lithium hydroxide, preferred over carbonate as it allows greater battery capacity and longer life, is expected to grow at a faster pace. Benchmark predicts the price to average US$18,000 a ton between 2017-2020 against US$14,000 in 2015-2016.Four companies dominateTop producers are looking at a bonanza if they can ramp up investment fast enough with end-user commitments in hand.“There are four names that dominate and that is likely to be the case for the next five years,” said Jeremy Kent, a portfolio manager at Allianz Global Investors.Roskill managing director Robert Baylis estimates FMC, Albemarle, SQM and China’s Tianqi Lithium Corporation together accounted for 66 percent of the world’s lithium carbonate equivalent last year. Wood Mackenzie consultant James Whiteside puts the figure at 78 percent.FMC’s lithium hydroxide capacity rose 80 percent in 2017 to 18,000 tons a year, and it has plans to boost that to 30,000 tons by the end of 2019. After that, capacity will be expanded as required by demand, FMC’s Schneberger said.Albemarle is planning to expand its lithium carbonate equivalent capacity to 165,000 tons by 2021 from 89,000 tons this year, a spokesperson said. “We anticipate spending US$700 million and US$1 billion over the next 5 years.”SQM said in an email it was planning to invest US$50 million to expand its lithium carbonate capacity in Chile to 63,000 tons by 2018 from 48,000 tons currently. It also has joint ventures in Argentina and Australia to develop deposits.Tianqi Lithium declined to comment on its investment plans.Another company actively investing is Australia’s Orocobre, which planned to produce 17,500 tons a year of lithium carbonate at its Olaroz facility in Argentina.Severe weather cut this year’s production to 11,700-11,800 tons, however.Whiteside said Orocobre’s difficulties were typical of many smaller players, noting that the Olaroz facility was the first new major brine operation started in 20 years.“Because the number of brine operations has been so few historically, there are very few technically experienced chemical engineers to assist these junior companies,” he said.“There are people out there promoting brine projects with plans that are not as robust as they should be.”
China’s push to become the world leader in clean-energy vehicles is spawning new industries to supply growing production of electric cars and plug-in hybrids. In meeting the call for green auto motion, traditional auto-parts supplies are adjusting their strategies for the future to shift from internal combustion engines. The key word is flexibility in face of a changing market.“Electric vehicles are a big challenge for everybody, from manufacturers to auto-parts makers,” said Ferit Küçükay, managing director of the Institute of Automotive Engineering of Technical University Braunschweig and chairman of CTI (Car Training Institute) Symposium China. “We will see more electric, hybrid powertrains and more electric systems in the coming future in China.” Xu Qian, China head of automotive at consulting firm AlixPartners, pointed out that “the biggest benefactors will be suppliers of electrical systems, given the increase of electronic content. Suppliers of traditional chassis systems will face the biggest challenge from the change to powertrain system.”Those in the industry are well aware of what is happening in China and how they need to adapt.German auto-parts supplier Continental has said it plans to introduce a new electric drive in the China market in 2019. It’s designed for electric vehicles and plug-in hybrids, consisting of an electric motor, transmission and power electronics. It is an integrated electrical powertrain module that can be installed in compact and luxury vehicles.According to the company’s plans, the electric drive will be not only light but also more powerful. Power is an important factor in consumer acceptance of electric vehicles. The company said it will achieve a high specific power output of 150 kilowatts, with a mass of only 75 kilograms.German auto-parts company Bosch said that it will start mass production of a new powertrain designed for electric cars in China in 2020.The new powertrain, called eAxle, can be installed in electric or hybrid vehicles, including compacts, sport-utility vehicles and even light trucks. It combines the components of motor, power electronics and transmission into one unit. “The new powertrain is a potentially huge business opportunity for Bosch,” said Rolf Bulander, chairman of mobility solutions at the company. “It allows automakers to save valuable development time and to get their electric vehicles to market considerably faster. Car manufacturers will no longer have the time-consuming task of developing new components.”The electrical powertrain is playing a key role in the company’s drive to be the global leader in electric mobility systems, the company said.Analysts note that clean energy vehicles present new requirements to traditional auto-parts suppliers. “Combustion engines and traditional transmission systems are no longer needed for electric vehicles,” said David Zhang, an independent automotive consultant. “Electric vehicles will bring increasing needs for batteries and electric motors that convert electrical energy into mechanical energy and electronic controls.”He added, “Auto-parts makers need to think about developing new products, but it costs a lot of development money.” Hou Yankun, head of Asia Autos Research at UBS Securities, said the new era in the auto industry in China will have a big impact.“Electric vehicles are powered by batteries instead of transmission system and combustion engines,” Hou said. “Electric vehicles have fewer moving and wearing parts compared with gasoline vehicles.”According to a UBS report that compared an internal combustion Volkswagen Golf with an electric Chevrolet Bolt, 56 percent of the electric vehicle content comes from outside the traditional auto-supply chain. For example, the entire electric powertrain and infotainment modules of the Chevrolet Bolt are supplied by electronics company LG, the report said.
China’s determination to lead the world in clean-energy vehicles is not just talk. The government is actively adopting regulations that push the campaign forward. Several weeks ago, China’s top ministries issued a regulation requiring 10 percent of automakers’ sales to be electric or plug-in hybrid vehicles in 2019, rising to 12 percent in 2020.The regulation includes targets for average fuel economy and a credit-trading system aimed at saving energy and promoting green cars. That followed an April edict stipulating that 20 percent of car sales by 2025 must be electric and plug-in hybrid vehicles.“The new policy shows the government’s determination to push new energy vehicles and reduce dependence on fossil fuels,” said Xu Qian, China head of automotive practice at AlixPartners. “Car manufacturers need to put more focus on the development of new energy vehicles.” Government’s regulation and development plans are something automakers cannot ignore. So many of them are actively working out corporate strategies to meet the requirements.Arthur Wang, a partner at McKinsey & Co, said in an email to Shanghai Daily that the 2019 target date in the newest regulation has some leeway.“Car manufacturers will be allowed to use new-energy vehicle sales quotas generated in 2020 to compensate new-energy vehicles credits in 2019,” he wrote. “It gives major car makers two years to prepare for the new regulation, which is good news for them.”He added, “Those two years are key to manufacturers’ getting prepared. Auto makers need to improve and complete a series of steps, including research and development of vehicles, testing, selection of suppliers, retooling of production lines, dealership training, after-sales service and charging facilities.”The strategies carmakers adopt may differ from company to company.Some foreign manufacturers are stepping up alliances with domestic partners, such as green car pacts between Volkswagen AG and Anhui Jianghuai Automobile Group, and Ford Motor Co and Anhui Zotye Automobile Co. “Companies can ascertain the government’s direction for new-energy vehicles even before regulations are issued,” said Jeff Cai, general manager of Auto Product Practice at J.D. Power China. “In order to address regulations quickly, foreign companies are finding it advantageous to link up with domestic carmakers.”Foreign carmakers are also planning to introduce models from the US or Europe market into China market in order to shorten the development process.“The traditional development process is relatively long for car manufacturers,” Cai said. “It takes three to five years to develop a car model. US firms already have new-energy vehicle models in their home market, and they can introduce those products to China very quickly. It takes one year to 18 months for a car manufacturer to introduce models from abroad. They need to be aware of the importance of localization of those models.” It’s even more difficult for Japanese motor giants, he noted.“They are focusing on developing mild hybrid vehicles, which are not included in the recommendation list of the Ministry of Industry and Information Technology,” he said.China’s regulations on new-energy vehicles are expected to have a positive impact on Chinese car buyers, giving them more choices in electric vehicles and plug-in hybrids.“Consumers like me want choices,” said Tong Xiaoli, a student at Tongji University. “I want to be able to choose an electric model that exactly fits my needs. And with more models available, prices should be more affordable.”Choice is becoming more obvious by the month.Volvo Car Group has just unveiled its new brand Polestar, which focuses on high-performance electric vehicles in China. The company will build a manufacturing site in Chengdu, Sichuan Province, with plans for its first model, the Polestar 1, to roll off the assembly line in 2019.“All future cars from Polestar will feature a fully electric drivetrain, delivering on our brand vision of being the new stand-alone electric performance brand,” said Thomas Ingenlath, chief executive officer of Polestar. “We aim to provide electric models of high-performance, digital connectivity and good road performance.”Shanghai-based electric car startup NIO is going to introduce a high-performance electric sports-utility vehicle called the NIO ES8 by the end of this year. BAIC Group’s electric-carmaking arm, Beijing Electric Vehicle Co, launched its electric model, called the EU400, this month in Shanghai.“Consumers will benefit from a wider array of new-energy vehicles and competition between carmakers,” Cai said. “Manufacturers will improve quality in order to attract consumers and boost sales. The prices of the vehicles also come down.”Makers of clean-energy cars will be targeting all consumer groups, from those on a tight budget to those willing to splash out big money.
It’s no secret. China wants to lead the world in the manufacture and use of clean-energy cars. But that won’t happen easily if the nation doesn’t also lead the world in battery research, development and production.Small wonder then that batteries have become a vital industry.China plans to further accelerate the development of battery-related technologies to boost industrial upgrade of new-energy vehicle sector, according to an industry development plan published in April this year. The government will actively promote research and development of key battery cell parts and improve management structures in the industry in order to achieve a “revolutionary” breakthrough in the industry, the plan said. “China is the biggest market for electric mobility, and China ranks first in industrialization of electric vehicles,” said Ferit Küçükay, managing director of the Institute of Automotive Engineering at Technical University Braunschweig and chairman of CTI (Car Training Institute) Symposium China. “This means that car production on one side and cell production on the other are making China a very innovative country.” No one doubts the government’s commitment to go full throttle toward a future where clean energy vehicles dominate the roadways, reducing air pollution and dependence on fossil fuels. Batteries sit at the heart of that ambition because the better they are at providing long-distance trips at cheaper costs, the more a somewhat dubious public will embrace the new age in automotives.“China has more than 100 electric vehicle battery suppliers now, with about four or five leading companies,” said David Zhang, an independent automotive consultant. In the future, the development of new-energy vehicles will drive up demand for batteries. Competition is expected to become fiercer.” He added, “Batteries play such an important role in electric vehicles. At present, the battery accounts for 30 percent to 50 percent of the entire electric car cost. In some cases, nearly half the cost.” In most cases, battery suppliers provide those key parts to car manufacturers, but some electric automakers, like BYD Co, are producing their own batteries out of a realization that owning the allied technology will give them a boost in the electric car business in China.Some car manufacturers are choosing to open their own battery assembly plants, while others are forging closer relationship with battery suppliers.General Motors, in tandem with Chinese partner SAIC Motor Co, is opening a battery plant in Shanghai later this year, according to Mary Barra, chairman and chief executive officer of GM during a press conference in September in Shanghai.“SAIC-GM’s battery plant has begun pilot assembly production of batteries that will be used in our growing new energy vehicle fleet planned for China,” said Barra.GM said it is rolling out at least 10 new energy vehicles in China between 2016 and 2020 and almost all its models under Buick, Cadillac and Chevrolet in China, will offer options that range from mild hybrid cars to fully electric vehicles by 2025.“China is a key market for General Motors’ electrification solutions,” said Barra, “We are going to improve battery technology in order to make electrified vehicles more desirable and affordable.”Earlier this year, SAIC Motor established two joint-venture companies with the Chinese lithium battery manufacturer Contemporary Amperex Technology Co, based in Ningde, Fujian Province.The partnership will establish a battery production center in Changzhou in Jiangsu Province. The first-phase of investment will be about 10 billion yuan, with production scheduled to begin sometime next year.The venture is an example of an ideal partnership in the new age of automobiles. SAIC brings strength in clean energy car production, while Contemporary Amperex has advantages in battery cells, modules and related technologies.The aim is to create cars with longer battery life and easier charging, SAIC said.Such collaboration can reduce costs and accelerate development. BYD has collaborated with Hefei Guoxuan High-Tech Power Energy Co on lithium batteries. And in May, Hyundai Motor said it has selected Contemporary Amperex as its first battery supplier in China.A report from credit rating agency Fitch Ratings said some car manufacturers have announced plans to consolidate their positions in the battery supply chain, citing cooperation between Volkswagen and Contemporary Amperex. Fitch Ratings said such collaboration will expand in the car industry.Increasing battery demand is a boon to Chinese battery suppliers.“China is a large market for battery suppliers and is very attractive for both international and domestic suppliers,” said Arthur Wang, a partner at McKinsey & Co. “Domestic battery suppliers have a distinct advantage in the power battery market at present because of subsidies available to them.” According to the new-energy vehicle list released by the Ministry of Industry and Information Technology, we see that most new-energy vehicle models use batteries from domestic suppliers.” Indeed, locally made lithium-ion cells are used in more than 90 percent of the vehicles produced by Chinese manufacturers, according to German consulting firm Roland Berger.The largest battery producers in China include BYD Co, Contemporary Amperex, Tianjin Lishen Battery Joint-Stock Co and Wanxiang Group, the report said.Hand-in-hand with battery production is battery recycling. “China now has about one million electric vehicles, a relatively small scale,” Wang noted. “But the number of vehicles will increase with time. By 2020, there are expected to be five million electric cars. The importance of recycling batteries is also going to increase.” He said a recycling system needs to be regulated and sustainable in order for the clean energy car industry to show robust development.