‘Mild’ Recovery Seen in 2010: Morgan Stanley

DUBAI - The UAE economy may have bottomed out, but any recovery will probably be slow in coming. That’s the sobering message from investment bank Morgan Stanley, which announced its latest economic forecast for the UAE on Monday. 


In a research report, the bank revised downward its growth estimate for the fifth largest oil-exporting country.

It now expects the UAE’s gross domestic product to shrink by 1.9 per cent this year and then show a “mild recovery” of 2.9 per cent in 2010. In its previous forecast last November, the bank had predicted positive GDP growth in both years — 2.8 per cent in 2009 and 4.9 per cent in 2010.

Mohamed Jaber, Morgan Stanley’s lead economist and the report’s author, attributed his more negative outlook partly to a significant cut in oil exports as a result of reduced output from Opec member nations. Other key factors in the downward revision were a decline in domestic consumer spending, continued weakness in the construction industry and weak foreign demand.

“We had previously underestimated the magnitude of the downturn in both global and domestic demand and the degree to which both seem to have impacted the UAE economy,” Jaber said.

With its revised growth estimates, Morgan Stanley has joined a growing list of institutions that expect the UAE economy to shrink this year.

The International Monetary Fund has forecast the economy to shrink by 0.6 per cent in 2009, while another investment bank, EFG-Hermes, has estimated an annual decline of 1.7 per cent. Swiss bank Credit Suisse expects the economy to contract by 2.5 per cent.

However, Jaber argues that signs of improvement in the global economy together with high oil prices and a pause in the erosion of domestic asset values are helping the economy to form a bottom. “We believe that the economic environment may have begun to stabilise and that we may indeed see positive growth in 2010,” he said.

He cautioned that the strength of the recovery will depend on the momentum of global growth and a resolution of imbalances in the real estate and over-extended banking sectors. The Governor of the UAE’s Central Bank said on Sunday that the government is considering a law that would extend federal guarantees to bonds issued by individual banks, making it easier and cheaper for local lenders to raise funds on international markets.

Despite emergent signs of a stable real estate market in Dubai, analysts polled by Reuters said they expect a further price correction of about 20 per cent during the lean summer months. Deutsche Bank said earlier this month that it too expects real estate prices to fall further by 20 per cent.

Rents are expected to slide during the coming months as expatriates return home and housing held for speculative purposes may become available for rent, Jaber said. He expects the UAE population to decline this year by 3.8 per cent. “It is not unusual for a country with a large expatriate workforce to witness a decline in population during downturns.”

By way of comparison, Jaber said that during recessions in 1998 and 2001, the non-resident population of Singapore decreased by 2.4 per cent and 8 per cent, respectively.

A fall in housing costs would swing the consumer price index into deflation territory. Jaber estimates a deflation of 6.4 per cent in 2009 and 1.2 per cent in 2010. He estimates that housing costs, or rents, will decline this year by 15 per cent.

“Rent increases were responsible for close to 60 per cent of overall inflation during 2005-08,” he said.

“This will surely come as a welcome relief to consumers.”

quoted from: Khaleej Times

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Philippine Petron upbeat on Petchems, Mulls Expansion

SINGAPORE (ICIS news)--Philippine major oil refiner Petron Corp intends to boost its petrochemicals production, bullish on the segment's potential contribution to its overall profitability, a senior company executive said on Monday. 

“We are very optimistic about out petrochemicals business over the long term. We expect petrochemical prices to increase as the global economy recovers,” Petron president Eric Recto told ICIS news in an interview.

The company has plans to invest up to $1bn (€710m) to upgrade its 180,000 bbls/day Limay refinery, which would be partly funded by the P10bn ($208m) it recently raised through issuance of fixed rate corporate notes, he said.

“We are looking at supplementing this by issuing preferred shares, but we do not have a firm schedule,” said Recto.

The company is now majority owned by Philippine food and beverage giant San Miguel Corp, whose president - Ramon Ang now sits as the chairman of Petron.

Petron has a $300m petrochemical facility in Limay, Bataan, housing a Petro Fluidised Catalytic Cracking (FCC) unit with a conversion capacity of 19,000 bbls/day and a 140,000 tonne/year propylene recovery unit that was inaugurated in April 2008.

It also has an aromatics plant that can produce 150,000 tonnes/year of benzene, 22,800 tonnes/year of toluene and 220,000 tonnes/year of mixed xylene that was commissioned last month.

The planned upgrade will include a PetroFCC 2 that will enable Petron to fully convert residual products to higher-value gasoline, liquefied petroleum gas (LPG), diesel and propylene.

“We are doing some feasibility studies prior to finalising our plans,” the Petron executive said.

Petron intends to cater primarily to domestic needs for petrochemicals while keeping an eye out on international markets such as southeast Asia as well as China, Recto said.

“As for export volumes, these will depend on the level of domestic demand for these petrochemical feedstocks,” Recto said.

“We started exporting propylene in April 2008 and we will be exporting benzene and toluene by July. We continue to export isomer grade xylene under term contracts to maximize price potential,” he said.

He cited that mixed xylene enjoys significant premium over other white products such as gasoline and diesel.

Early this month, the company closed a 5,000 tonne isomer xylene tender when prices in Asia were at $760-775/tonne FOB (free on board) Korea, according to global chemical market intelligence service ICIS pricing.

Petron is upbeat about the financial contributions of its new petrochemicals business notwithstanding the difficult business environment.

“We expect our venture into petrochemicals to immediately contribute to our bottomline despite a weak regional market,” Recto said.

He considers the softness in its product prices this year as just “all part of the cyclical nature of the market”.

“We expect prices of petrochemicals to further strengthen as the world economy recovers and demand for plastics and other petrochemical-based products resume growth,” Recto said.

The collapse in demand hit the global petrochemicals sector hard in the fourth quarter of last year as the global economy was racked by the financial and economic crisis. While there was some recovery in prices in the first quarter, most companies registered weak financial results.

Petron posted profits of Philippine peso (Ps)874m in the first quarter but sales volumes in the three-month period were down 20% year-on-year.

The company recorded a heavy net loss of Ps3.9bn in 2008 primarily due to the sharp decline in crude prices in the second half of the year. Crude hit an all-time high of $147/bbl in July last year before plunging to around $30/bbl levels in December.

“Now that the oil market has stabilized, we anticipate a healthier performance in 2009. We have already seen improvement in our first-quarter margins,” Recto said.

“The main challenge right now is the weakness in local fuel demand caused by the economic slowdown, resulting in very tough competition among domestic market players,” he added.

quoted from: ICIS

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Japanese Industrial Output Rises for Third Month

TOKYO - Japan’s industrial output rose for a third straight month, matching the fastest pace in 56 years, as the world’s number two economy claws back from its worst recession on record, data showed on Monday. 


Japanese manufacturers moved swiftly to idle production lines after the global economic downturn sent their exports plunging. Having succeeded in reducing their bloated stockpiles, they are now ratcheting up output again. 

Production rose 5.9 percent in May from the previous month, matching April’s revised growth, which was the strongest since a record 7.9 percent increase in March 1953, according to the trade and industry ministry. 

Market expectations had been for a slightly bigger increase of 6.9 percent. Compared with a year earlier, production was down 29.5 percent, underscoring the drastic measures taken by firms since the economic crisis erupted. 

Output growth is expected to slow to 3.1 percent in June and to 0.9 percent in July, according to manufacturers’ forecasts, the ministry said. 

“Production has been rebounding sharply in response to earlier drastic cuts but the momentum is likely to slow in the months ahead,” said Hiroshi Watanabe, an economist at the Daiwa Institute of Research. 

“Exports are likely to rebound less sharply and so is production,” he said, noting that demand is cooling for Japanese exports of raw materials to China and other Asian nations. 

Production in May was largely boosted by higher output of automobiles, cellphones and electronic devices, which had seen a particularly sharp decline in demand due to the global economic slowdown. 

Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it highly vulnerable to the fallout from the global economic crisis. 

The Japanese economy suffered its worst contraction on record in the first quarter of 2009, shrinking at an annualised pace of 14.2 percent. 

Recent data have sparked hopes that the worst of the slump in exports and industrial production is now over, but analysts warn that any recovery is likely to be long and slow. 

“Production was rebounding in a V-shape until June but will settle at a gradual rise from July,” said Naoki Murakami, chief economist at Monex Securities. 

Investors are now turning their attention to a closely watched survey of Japanese business confidence due out on Wednesday. 

The Bank of Japan’s quarterly “Tankan” survey is expected to show an improvement in sentiment among Japan’s major manufacturers from a record low the previous quarter, helping to underpin improving investor confidence. 

“Things are improving at a dramatic pace in Japan,” Societe Generale’s chief Asia economist, Glenn Maguire, wrote in a note to clients. 

“In contrast to the general impression of Japanese manufacturers as lethargic conglomerates unable to respond quickly to an evolving economy due to consensus based decision making, the exact opposite is the case,” he added. 

“Japanese firms were amongst the first to cut production, wages, and working hours, and are now in a position to respond more flexibly to a rebound in external demand, even if it is soft.”

quoted from: Khaleej Times

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Oil Jumps Above $70 on Nigerian Platform Attack

SIOUX FALLS, South Dakota - Oil prices jumped back above the $70 a barrel threshold Monday as Nigerian militants damaged and partly shut down an offshore oil platform belonging to Royal Dutch Shell PLC. 


Benchmark crude for August delivery gained $1.74 at $70.90 a barrel on the New York Mercantile Exchange. On Friday, it fell $1.07 to settle at $69.16. 

Shell spokesman Precious Okolobo confirmed the attack and partial shutdown. Past militant attacks on infrastructure in Nigeria’s restive southern oil region have trimmed output in Africa’s biggest crude producer by about 25 percent. 

The jump in oil prices came despite a report from the International Energy Agency predicting a slower rebound in global energy demand. 

The Paris-based IEA said demand is likely to grow by an average of 0.6 percent annually over the 2008-2014 period. It would reach 89 million barrels a day by 2014 assuming the International Monetary Fund’s current forecast of a return to 5 percent annual economic growth by 2012, the agency said. 

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said there seemed to be little else driving oil prices, as both the dollar and stocks were relatively flat. 

Ritterbusch said a barrel of oil is sitting about where it started the month, and he expects the trend of sideways trading will likely continue. Volume is typically low in the days leading up to a holiday weekend. 

“Right now we’re showing some gains, but by the end of the day we could be right back down again,” he said. 

Meanwhile, retail gasoline prices, which fell for the first time in nearly two months a week ago, continued their pullback as the average price of a gallon of regular unleaded gas fell overnight by four-tenths of a cent to $2.639, according to AAA, Wright Express and Oil Price Information Service. 

That’s still about 15 cents a gallon higher than last month, but $1.44 cheaper than this time last summer. 

Oil prices, which yo-yoed near $70 a barrel last week, have doubled since March. 

Investors will watch economic data this week, including the Labor Department’s June unemployment report. The jobless rate hit a 25-year high of 9.4 percent in May, jumping from 8.9 percent in April. 

The latest indicators of consumer confidence and manufacturing activity will also be released. 

In other Nymex trading, gasoline for July delivery gained 6.58 cents at $1.9399 a gallon and heating oil rose 4.91 cents to $1.7794 a gallon. Natural gas for July delivery fell 10.4 cents to $4.001 per 1,000 cubic feet. The IEA report forecast natural gas demand this year will drop for the first time in 50 years. 

In London, Brent prices rose $1.55 to $70.47 a barrel on the ICE Futures exchange.

quoted from: Khaleej Times

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US Chemical Plants Still Targets of Interest for Terrorists

BALTIMORE, Maryland (ICIS news)--US chemical plants remain targets of interest to foreign and domestic terrorists seeking a dramatic attack that could cause mass casualties and major economic impact, a top US government analyst said on Monday.

Dan Cooler, a senior analyst in the office of intelligence and analysis at the Department of Homeland Security (DHS), told a chemical sector audience that the nation’s process industry “remains vulnerable to terrorist attacks, and that is an unacceptable level of risk”.

Speaking at the 2009 Chemical Security Summit (CSS), Cooler said that while the department and other US intelligence agencies know of no specific terrorist threat to chemical facilities, “we know that the chemical sector is of interest to Al Qaeda and other terrorist groups because we have seen those interests expressed in documents we have seized overseas”.

“Terrorists are interested in any potential target that could, if attacked, produce visually dramatic results, broad economic impact and mass casualties,” Cooler said.

“An attack on a major US chemical facility, especially one in a high-density population area, would meet all of those terrorist goals,” Cooler said.

He said his department is concerned that the type of attacks successfully conducted by Al Qaeda and others in Pakistan, Afghanistan, Iraq, Somalia, Ethiopia, Libya and Morocco might be employed by home-grown terrorist cells in the US and that foreign terrorists might successfully infiltrate the US.

The trend seen in terrorist attacks overseas would likely be repeated in any attempt on a US chemical facility, he said. Those recent overseas attacks typically have involved an initial blast created by a truck-borne bomb that has penetrated an outer perimeter, followed by an infantry attack by terrorists armed with assault rifles, hand grenades and other explosives.

Cooler lauded the US chemicals sector for the level of cooperation it has shown in working with his department to improve security at what are considered plants or facilities at high risk for terrorist attack.

However, he said more work remains to be done to further protect US chemical facilities from terrorist attack.

“While we have no known threat to the US chemicals sector, the potential consequences of such an attack are unacceptable,” Cooler said.

“There remains a level of vulnerability that represents an unacceptable level of risk,” he said.

He said the department also remains concerned about possible theft or diversion of bulk chemicals that could be weaponised by terrorists for an attack.

“We remain concerned about diversion threats,” Cooler said. “It has not happened yet, but it is something that keeps us up at night.”

The Department of Homeland Security is responsible for enforcing the existing Chemical Facility Anti-Terrorism Standards (CFATS), which give the department authority over security measures at some 7,000 US chemical sites deemed to be at high risk for terrorist attack. Congress is considering tougher site security legislation for 2010.

Cooler spoke at the opening session of the three-day Chemical Security Summit, which is co-sponsored by the department and the Society of Chemical Manufacturers and Affiliates (SOCMA).

quoted from: ICIS

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LANXESS: Production in Singapore to Start in 2014

Postponement made necessary by drop in demand / New technology for the large-scale project / Bulk order from tire manufacturer Hankook 

Due to the continuing global economic crisis, specialty chemicals group LANXESS AG is postponing the construction of its new butyl rubber facility in Singapore. Production is now scheduled to start in 2014. LANXESS will use the time to finish developing an innovative technology for butyl rubber production that will then be used at the new facility. The 100,000 tpa plant originally planned for Singapore, which would have cost up to EUR 400 million to build, had been due on stream in 2012.  

Independent of the project postponement, LANXESS will continue to expand its presence in Singapore. The company is currently negotiating with the Singapore Economic Development Board (EDB) with a view to managing the global business of the Butyl Rubber business unit from there in the future. Said Heitmann: “This dynamic city is the hub of our activities in Southeast Asia and continues to play a key role in our highly successful strategy for the Asian region.” The Group currently runs the Southeast Asian business of all its 13 business units from Singapore.

LANXESS is a technology leader in the global market for synthetic rubber and supplies all the leading tire manufacturers and other customers worldwide. The focus is on the premium segment, including numerous new grades of rubber for energy-saving tires with improved running properties such as braking characteristics. A five-year agreement recently signed with South Korean tire manufacturer Hankook underlines the growing importance of the Asian market. This new supply agreement for butyl rubber covers the period from 2010 through 2014. LANXESS already concluded a long-term supply agreement with Hankook, the world’s seventh-largest tire manufacturer, for styrene-butadiene rubber and polybutadiene rubber in 2007. Hankook has a workforce of 14,000 and had sales equivalent to about EUR 2.5 billion in 2008.

quoted from: New Kaznak

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Eurozone Rates on Hold as Banks Digest Loan Feast

FRANKFURT - While markets absorb last week’s record eurozone loan offer, interest rates will stay at an all-time low when European Central Bank governors meet on Thursday in Luxembourg, analysts say. 


“The ECB looks almost certain to leave interest rates on hold at 1.0 percent this month, where we expect them to remain until at least the end of 2010,” said Capital Economics economist Jennifer McKeown. 

Bank policymakers are focused on how to support bank lending and can point to a “particularly successful” 12-month loan offer on Wednesday that doled out 442 billion euros (619 billion dollars) at the reference rate, she added. 

It was the biggest single loan operation in the ECB’s 11-year history, its first offer of funds with a 12-month maturity, and attracted more than 1,100 banks which leapt at what was perhaps a unique chance to lock in the cash at a 1.0 percent interest rate. 

The dramatic move was aimed at boosting credit by commercial banks to the broader economy, though it was not certain that the full amount would find its way into strained corporate treasuries or tight household budgets. 

Having soaked up the equivalent of 1,300 euros for every eurozone resident, commercial banks might simply borrow less from the ECB when other refinancing operations come around. 

But the Frankfurt-based bank’s offer was a clear echo to a call by the Organisation for Economic Cooperation and Development (OECD) for authorities to support the financial sector until a sustained recovery takes hold. 

The ECB is now under less pressure to lower further its key rate — currently at a record low of 1.0 percent after a series of cuts — especially since economic indicators suggest the worst global recession in at least six decades is beginning to ease. 

“With the economic data improving in many places around the globe, the need for aggressive monetary easing becomes less compelling,” UBS analysts said. 

The central bank is to meet in Luxembourg for one of two yearly gatherings of policymakers in a eurozone member country, hosted by Jean-Claude Juncker, head of the Eurogroup of finance ministers from the 16-nation bloc. 

And the OECD’s recommendation that the bank lower its main rate further, to levels close to zero like those reached by the US Federal Reserve, Bank of Japan and Bank of England, is likely to fall on deaf ears. 

“We no longer expect further cuts in the (ECB) policy rate,” Goldman Sachs economist Erik Nielsen said. 

The ECB’s “easing by stealth” through its massive 12-month loans “is huge, whichever way you look at it,” he noted. 

It should allow the central bank to address concerns about tighter credit in the eurozone and the financial health of banks facing potentially large losses from loan defaults. 

The ECB has said commercial banks might have to take another 283 billion dollars (202 billion euros) in writedowns by the end of 2010 to account for risky loans. 

That would make a total of nearly 650 billion dollars since the financial crisis erupted two years ago. 

The central bank is nonetheless pressing banks to lend more to support the economy. 

In a reference to the ECB’s market-friendly credit policy, its executive board member Lorenzo Bini Smaghi said last week in Rome: “They must pass it along.” 

At the same time, the ECB and eurozone governments must prevent a flood of cheap credit from fueling another crisis, because public debt has soared as governments try to stimulate slumping economies. 

In 2008, eurozone public debt amounted to 69.3 percent of gross domestic product, or around 6.4 trillion euros — 19,900 per inhabitant. 

The EU Commission estimates that in 2010, the debt will reach 83.8 percent of GDP. 

That, the cost of an ageing population and potentially slower growth “raise concerns about public finance sustainability,” the commission warned last week.

quoted from: Khaleej Times

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China Finds 'World Scale' Oilfield

China's biggest oil producer says it has discovered a massive new offshore oil field that could become the country's largest domestic petroleum source in a decade. 
 
The field in the Bohai Bay, in eastern China, could hold reserves of up to 2.2 billion barrels, the official Xinhua news agency reported.
The estimated output is equivalent to 5.4 per cent of China's total crude production in 2006, the agency quoted sources with PetroChina as saying. 
 
The find comes amid intense exploration by China's oil companies, looking to reduce the country's rapidly growing dependence on foreign oil.
Such a field, if confirmed, would be a "world-scale discovery", Gavin Thompson, an oil consultant based in Beijing, told the Associated Press. 
 
"In terms of energy security, a 2 billion barrel discovery is going to be very welcome, not only to PetroChina but to China's energy planners." 
 
Jiang Jiemin, vice-chairman and president of PetroChina, said it was "the largest find in China in 10 years". 
 
The Nanpu block in Bohai Bay, partly offshore, covers an area of 1,300-1,500 sq km and is expected to produce high-value light crude, the company said. 
 
Leading importer
 
CNOOC, another leading energy company, announced this week that it had also discovered new oil and gas fields in Bohai Bay, yielding a test output of 1,600 barrels of oil and approximately 10 million cubic feet of gas per day. 
 
Zhu Weilin, vice-president of CNOOC, said of the discovery: "We hope to develop a large-scale cluster of oil and gas fields [there] in the future." 
 
China, which once met its energy needs from domestic oilfields, has turned into a leading importer of fuel since the 1990s amid surging economic growth. 
 
It is now the world's second largest energy consumer after the US. 
 
The country met almost half of its energy needs through imported fuel in 2006 with oil consumption rising by 9.3 per cent to 2.4 billion barrels. 
 
Easing the pressure 
 
Jim Brock, an industry consultant in Beijing, said while the Bohai discovery would help lessen the pressure for more imports, there would still be "significant pressure". 
 
China, he said, would continue to be a major player in the international market. 
 
Economists say Chinese oil demand, driven by economic growth that reached 10.7 per cent in 2006, has strained world supplies and pushed up prices. 
 
The government is trying to improve the energy efficiency of its economy, which consumes several times more units of energy per unit of output than Japan or the US. 
 
Although Chinese drillers have found several big gas fields, the Bohai discovery is the first major oil find since the mid-1990s

quoted from: Al-Jazeera.net

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China Firm Gains Iraq, Africa Oil

China's second-biggest oil company has gained reserves in Iraq and Africa after agreeing a record-breaking merger with a Swiss oil explorer.

Sinopec, a subsidiary of China Petrochemical Corporation -Asia's largest oil refiner -agreed to pay $7.2bn for Geneva-based Addax Petroleum Corp in its biggest overseas acquisition to date.

Sinopec said in a statement the deal was a "transformational transaction" which would "further enable it to achieve its strategic objective to build a stronger presence and operations" in West Africa and Iraq.

The purchase of Addax is part of China's efforts to secure energy reserves to fuel its growing economy.

'Acceleration of development'

Addax, which is listed in Toronto and London, is one of the largest independent oil producers in West Africa and the Middle East, with oil fields in Nigeria and the autonomous Kurdish region of northern Iraq.

The company said it produced an average of 134,700 barrels of crude oil a day in the first quarter of 2009.

"The efforts and accomplishments that Addax Petroleum has achieved thus far will be built on through increased investment in the business and acceleration of development and exploration plans," Jean Claude Gandur, the company's president, said in a statement.

"While Addax Petroleum will cease to be a publicly traded company, we look forward to continuing our business in the countries in which we operate for the benefit of all stakeholders."

One of Addax's key assets is its Kurdish fields which include Taq Taq, and which have the capacity to pump up output sharply in the coming months.

'Too risky'

The fields also have potential for further exploration.

The Addax deal comes amid a flurry of merger activity in recent weeks among oil exploration and production companies.

State-controlled Sinopec, PetroChina and CNOOC Ltd have been bidding for reserves and supplies against Indian and other Asian rivals in regions most western companies consider too risky to invest in.

Dan Barclay, the head of mergers and acquisitions, Canada, of the BMO Capital Markets, said very few parties were "interested in taking Africa risk at this stage".

"It's really the guys like the Chinese and the Indians that are naturally buyers for that."

Some analysts say Sinopec may sell off the Kurdish assets to another party because of the political risks attached.

quoted from: Al-Jazeera.net

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Major Oil Companies Take an Unusual Gamble in Iraq

HOUSTON — International oil companies poised for a return to Iraq find themselves in an unfamiliar spot, preparing to assist rather than lord over drilling operations and taking risks that at first glance don’t appear worth the effort. 


The bigger risk, however, might be failing to seize whatever opportunity presents itself in a country with the third-largest petroleum reserves in the world. 

Iraq desperately needs oil revenue for reconstruction, and it wants to double its daily crude output within four to five years. 

On Monday, the country’s Oil Ministry is set to auction off service contracts that in total may pay up to $16 billion over 20 years to the dozens of oil companies that have qualified to bid. 

To put the potential payout into context, Exxon Mobil Corp. on its own posted a $45.2 billion profit last year, earnings generated largely by extracting oil and gas, not taking fees to help others produce it. 

When international oil companies agree to work in a country, they’re typically awarded a portion of the oil that’s pulled from the ground. That’s how they produce profits and increase reserves, a vital asset. They don’t normally work for fees alone. 

In Iraq, however, the goal will be to get their foot in the door and eventually use their vast sums of capital and know-how to wrangle a greater stake in the developments — namely, a share of the production. 

“Right now, they’ll take whatever is available,” said Fadel Gheit, an energy analyst at Oppenheimer & Co. “But this is not their business. Their business is to be in charge. They’re not spectators. They’re players.” 

With an estimated 115 billion barrels of proven reserves — behind only Saudi Arabia and Iran — Iraq could provide a rare opportunity for international producers that are finding it harder and more expensive to gain access to new oil. 

“The bigger picture is this could lead to other things,” said Brian Youngberg, an analyst at Edward Jones. “I’d think that’s what their plans are: to get more of a piece of the action down the road.” 

The technical-service contracts that are likely to be sought by Exxon, Royal Dutch Shell PLC, Chevron Corp. and 30 other oil companies hardly seem worth the risk, at least for the largest producers. 

And the risks could be great, both political and physical. 

American troops are slated to pull out of cities in four days, and there are new questions about the ability of Iraqi troops to maintain stability. 

In the last week alone, a wave of violence has left more than 200 people dead. 

There are already warnings from some Iraqi lawmakers about the dangers of allowing oil companies back into Iraq. Some of the same companies expected to bid on contracts Monday were kicked out of the country more than 30 years ago, after holding a tight grip on the nation’s oil industry since the 1920s. 

There’s still no law governing oil revenue in Iraq. There’s also a serious rift between the semiautonomous Kurdish region, which has two of the six oil fields up for bid, and the central government in Baghdad. 

Each has accused the other of setting up illegal contracts with overseas oil companies. 

“How the security situation materializes is of great importance,” Ray Irani, the chairman of Occidental Petroleum Corp., said on a conference call in April.

quoted from: Khaleej Times

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Iraq to Open Up Oil Fields for First Time in Four Decades

BAGHDAD - Iraq will this week unveil which foreign firms have won contracts to develop its oil and gas fields, nearly four decades after Saddam Hussein nationalised the country’s energy infrastructure. 


The deals, likely to be announced live on television on June 29 and 30, will provide the government with much-needed revenue as it struggles to rebuild the country after three wars and 20 years of debilitating economic sanctions. 

Thirty-one companies have submitted bids to develop six giant oil fields and two gas fields. The oil deposits, holding known reserves of 43 billion barrels of crude, are in southern and northern Iraq while the gas concessions are west and northeast of Baghdad. 

“Our principal objective is to increase our oil production from 2.4 million barrels per day to more than four million in the next five years,” Oil Minister Hussein al-Shahristani said in an interview with Iraqi public television. 

Increasing production to that level will, according to him, pump an extra 1.7 trillion dollars into government coffers over the next 20 years. 

Shahristani has said that only 30 billion dollars of that sum will go to the companies that have extracted the oil. 

“This is a huge amount that would finance infrastructure projects across Iraq — schools, roads, airports, housing, hospitals,” he said, insisting that the country would retain control over its oil reserves. 

For energy firms, meanwhile, the appeal of the Iraqi contracts is the chance to plant a foot firmly in the country, the first time such an opportunity has been offered since Saddam nationalised the Iraq Petroleum Company in 1972. 

“Thanks to sanctions and war, no company has wanted or been able to invest,” Ruba Husari, an energy expert and the founder of the website iraqoilforum.com, explained. 

“Today, the country is stable, in both its security and its institutions.” 

A source involved in the bidding, who spoke on condition of anonymity, described Iraq as “one of the rare countries in the world where the coming decades will bring real growth in production.” 

“It’s a rare opportunity,” the source said. 

Not all energy companies are happy, though, with the terms of the contracts being offered by Baghdad. 

The foreign firms awarded deals to work here will have to partner with Iraqi government-owned firms, principally the South Oil Company (SOC), and share management of the fields despite fully financing their development. 

They will be paid a fixed fee per barrel, not a share of the profits, and the fee will only be paid once a production threshold set by the government is reached. 

“This raises the question of the profitability of the contract,” the source said. “The companies are the ones investing, but have a big problem with the fact that management will be shared.” 

But international energy giants cannot afford to ignore the contracts on offer. 

“For foreign companies, this is like a first step,” the source said. “They are saying, ‘Let’s accept these terms, even though they’re not our preferred model, just to stay in the game, and hope conditions improve’.” 

In effect, foreign energy executives may well be targeting the next round of contracts to be offered next year, when Iraq will grant licences for exploitation of 16 other undeveloped fields. 

Domestic firms, including SOC, are furious, however, that contracts are being awarded to their foreign counterparts. 

Along with the Shiite Fadhila party, which lost control of the Ministry of Oil in 2006, the companies have launched a campaign against Shahristani. 

SOC insists it can fulfil the same objectives set for international companies, and in less time. 

“The fields in question represent 85 percent of actual production and 50 percent of reserves,” SOC chief executive Fayad Hassan Nima said. “A loss of control would lead to the death of national companies.” 

Jaber Khalifa Jaber, head of the Iraqi parliament’s oil and gas committee and a Fadhila MP, said Iraq is under threat from an “economic occupation”. 

“The companies will just share the oil between the Americans, the French, the British and the Japanese ... just like the Sykes-Picot agreement,” he told AFP, referring to the Anglo-French accord that divided up influence in the Middle East in 1916.

quoted from: Khaleej Times

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CAS Announced Success of “Coal-to-MEG” Process

Chinese Academy of Sciences (CAS) held a news release on May 7th 2009 in Beijing on the successful commercial demonstration of the world first “Coal-to-MEG” process.

Fujian Institute of Research on the Structure of Matter, Chinese Academy of Sciences (FJIRSM, CAS), based on its technology accumulation of over two decades and jointly with Jiangsu Danhua (Danyang Chemical) Group Co Ltd and Shanghai Jinmei Chemical Novel Technology Co Ltd, has accomplished the development of a process package of CO gaseous catalytic synthesis to oxalate and oxalate catalytic hydrogenation to mono-ethylene glycol (coal-to-MEG), which recently passed through CAS organized expert panel appraisal. The achievement is an indication that China has realized the process development and commercial application of the Coal-to-MEG route as the first on the world.

According to the statistics from ASIACHEM Consulting, China consumed 5.64Mt of MEG in 2006, 6.68Mt in 2007, and the figure increased to 7.14Mt in 2008. On the other end, domestic MEG supply only grew modestly as the output of 2006 was 1.58Mt, which increased to 1.88 and 1.95Mt respectively in 2007 and 2008, accounting for less than 10% of the global total production.

It was also reported that a 200kt/a coal-to-MEG plant is now under construction in Tongliao City, Inner Mongolia and was expected to be complete by August or September of this year. Danhua Technology recently raised CNY1.1bn by non-public issuance of A-stock, in order to invest in the said Tongliao MEG plant construction and hold 51% shares the project. 

After completion of the said 200kt/a EG plant, called as Tongliao Jinmei Phase I, it will become one of the top 5 Chinese MEG producers. Tongliao Jinmei also plans to furnish 1.2Mt/a MEG capacity in next 5 years to become the No.1 MEG player in China.

quoted from: Asia Chemical Weekly

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Unipol PP process from Dow selected by Pertamina for Balongan PP Project in Indonesia

UNIPOL(TM) Polypropylene Process Technology from Dow Basic Plastics has been selected by PT PERTAMINA for its new 250 KTA polypropylene facility at its Balongan complex in West Java, Indonesia. A license agreement for the facility was signed earlier this month. 
When the project is completed in 2011, the facility will produce a mix of polypropylene products including homopolymer, random copolymer and impact copolymers. Products will be marketed primarily in the domestic market. 

"Pertamina chose the UNIPOL PP Process because the technology will enable them to build and operate the most competitive and advantaged facility capable of producing a full range of performance polypropylene products to serve the market's ever changing needs," said Karen Shepard Jackson, global commercial director, Dow Polypropylene Licensing and Catalyst business. "Producers like Pertamina appreciate proven technology with a strong track record of reliability, flexibility, safety and advantaged economics. UNIPOL(TM) Polypropylene Technology and the advanced SHAC(TM) Catalyst Systems give licensees the capability to achieve economies of scale and offer a full range of products to customers." 

When this plant and others currently in the execution stage enter service, the technology will be used to produce nearly 11 million metric tons of polypropylene per year, which will represent more than 17 percent of total global capacity. 

Polypropylene is a versatile plastic used in packaging, durable goods, automotive parts, non-wovens, fibers, and consumer applications. 

About Pertamina 

PT PERTAMINA is the state-owned oil and gas company (National Oil Company) of Indonesia, established in 1957. Pertamina's scope of business incorporates an upstream sector covering oil, gas and geothermal energy exploration and production both domestically and overseas, and a downstream sector that includes processing, marketing, trading and shipping. Pertamina owns seven oil refineries and is one of the world's largest producers of natural gas. Pertamina's products include a wide range of fuels, LPG, LNG, chemicals, additives and retail products.

quoted from: New Kaznak

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Oil, Copper Pause from Sharp Fall, Outlook Shaky

LONDON - Oil moved into positive territory after falling below $67 a barrel, while a weak dollar lifted copper and gold from their lows, but investor jitters on the global economic outlook left some prices on shaky ground. 


After showing some vulnerability to a broader sell-off in commodities during Asian trade earlier, gold prices were sustained as dollar weakness combined with its traditional role as a hedge against jittery sentiment in other asset classes. 

The picture on industrial metals and crude was less clear, as doubts crept in about how sustainable recent strong rallies were looking, with a reassessment of share price gains and the global economic outlook fanning worries about potential demand. 

“What people are concerned about now is was the rally a true growth story or was it a temporary re-stocking?” said Kona Haque, commodities strategist with Macquarie Group. 

The World Bank said on Monday prospects for the global economy remained “unusually uncertain” as it cut 2009 growth forecasts for most economies. 

“The World Bank report did not make it any easier...There’s a lot of doubt there and speculators have been a little bit less pro-risk,” Haque said. 

U.S. crude was last up 50 cents at $68.04 per barrel, having earlier fallen below $67. 

“The stock markets and global economic outlook pushed oil through key support levels but they (prices) now seem to be finding support,” said Christopher Bellew, a broker at Bache Commodities. 

The dollar fell 0.7 percent against a basket of major currencies ahead of the Federal Reserve’s policy meeting later in the day, with concerns about reserve diversification away from the U.S. currency also weighing. 
Shaky ground 

Copper prices firmed after falling more than 5 percent on Monday with three months metal trading at $4,845 a tonne, up from $4,761 on Monday. 

“Sentiment is a little bit fragile. People want to be sure economic growth is on the rebound but the data has not been uniformly strong,” said Citi base metals analyst David Thurtell. 

Copper prices have more than doubled on the year as a surge of buying from China and an improving economic outlook had helped the metal used in power and construction to recover from a slump in the second half of 2008. 

On the corporate front, South Africa’s mining minister said the government was opposed to a possible merger between Xstrata and Anglo American Plc, calling such a move unacceptable. 

Gold touched a six-week low before rallying, with spot metal moving into positive territory at $923.75, up from $921.90 quoted late in New York on Monday. It hit a six-week low of $912.90 in Asian trade. 

“All eyes are on whether the dollar is going to be subject to a fresh selling wave. The only source I see for that would be if the Fed gets more vocal in communicating on the next batch of Treasury buying,” said Ashraf Laidi, analyst with CMC Markets. 

“Anything short of that, will remain neutral or positive for gold.” 

Grains and oilseed prices also firmed. Chicago Board of Trade soybeans for July delivery rose 1.13 percent to $11.64-1/2 a bushel while July corn gained 0.1 percent $3.85-1/2 a bushel. Wheat for July delivery rose 0.7 percent to $5.49-3/4 a bushel. 

Major crop-growing regions in the United States are set for warm, dry weather in the week ahead, which would boost young spring plantings and help the harvesting of winter wheat.

quoted from: Khaleej Times

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Gold Extends Climb on Weaker Dollar

LONDON - Gold rallied from a six-week low hit earlier in the global session, rising above $923 per ounce with currency fundamentals proving the dominant factor as the dollar got stung by concerns over U.S. indebtedness. 


Spot gold stood at $923.40 per ounce by 1132 GMT, having earlier hit a six-week low at $912.90 in Asian trade. That compared with $921.90 quoted late in New York on Monday. 

Traders said that bullion prices, having hit three-month highs recently just shy of $1,000 an ounce, were ripe for the falls seen over the past few days with speculators looking to clear out stale long positions. 

But the metal’s traditional role as a hedge against jittery sentiment in other asset classes was also kicking in as investors, spooked by doubts about growth prospects for leading economies, shift into risk-averse gear. 

Concerns about reserve diversification away from U.S. assets caused the dollar to turn lower against the euro ahead of the Federal Reserve’s monthly meeting, after Moody’s said one risk to the U.S.’ triple-A rating is if the dollar is challenged as the main reserve currency.. 

“Gold is tracking the dollar closely today, but we’ll have to wait for the FOMC statement tomorrow night for the market to choose to move clearly in one direction or another,” said David Thurtell, analyst at Citigroup. 

A weaker dollar makes metals and other commodities priced in the U.S. unit cheaper for non-U.S. investors. 

Crude oil prices rallied to $68 a barrel on Tuesday ahead of data expected to show a fall in U.S. oil stocks, reversing losses and renewing the appeal of gold as a potential inflation hedge. “The key driver here is basically crude oil, the dollar and inflation expectations, and I think gold at the moment is pricing in a huge amount of inflation expectations,” said Jesper Dannesboe, an analyst at Societe Generale. 
Investor caution 

U.S. gold futures for August delivery rose nearly half a percent to $924.80 per ounce on Monday on the COMEX division of the New York Mercantile Exchange. 

Overall investor caution was stirred by the World Bank on Monday, which said prospects for the global economy remained “unusually uncertain” as it cut 2009 growth forecasts for most economies. 

“Investor risk appetite has lost forward momentum as the market begins to question the extent to which the green shoots of the financial risk rally have roots in the real economy,” Tullet Prebon said in a note to clients. 

“There is nothing like a 3.1 percent drop in the S&P on a day to get the bears out of the woods..., but the joke aside it is beginning to look like those who hoped for a V-shaped recovery will find that we are looking at the tail end of it.” 

The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings fell to 1,131.24 tonnes as of June 22, down 0.91 tonnes from the previous business day. 

It was the first change in the holdings since June 5. The holdings hit a record 1,134.03 tonnes earlier in the month. 

In other metals, silver firmed slightly to $13.83, up from $13.72 quoted late in New York on Monday. Platinum rose slightly to $1,167.50 from $1,159.50, while palladiumfirmed to $234.50 from $232.00.

quoted from: Khaleej Times

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Cocoa Futures Bounce From Lows

LONDON - Cocoa futures bounced higher on Tuesday, partly due to industry buying, and were seen well-supported after hitting lows in London and New York on Monday. 


Coffee futures traded lower, weighed by renewed uncertainty over the outlook for the global economy, while sugar remained rangebound supported by trade, fund and investor buying, dealers said. 

The euro rose against the dollar as equity markets stabilised after steep losses in Asia and the U.S., but investors remained cautious ahead of Wednesday’s U.S. Federal Reserve policy meeting. 

The slightly weaker dollar and pound make dollar and sterling-denominated futures better value in terms of other currencies. 

Cocoa dealers said the market was set for a recovery, having been on a downward trend since June 10. 

“I think the market was due a bit of a bounce,” a cocoa trader said. “There’s big support in London and quite a bit of industry around these levels.” 

London September cocoa was up 9 pounds at 1,592 pounds a tonne at 1251 GMT, after touching a low of 1,578 pounds a tonne on Monday, the lowest level for the second month since mid-December 2008. 

September cocoa on ICE was up $9 at $2,489 a tonne, having hit a session low of $2,472 a tonne earlier. 

“Technically we are on quite a key level of support and I think the longs will protect it and industry needs to buy, so I think the market will come up from here,” the trader said. 

“I think London’s leading the way,” he said, adding there is investor and fund interest in the market. 
Downward trend 

Coffee futures were pushed lower by renewed concerns about the outlook for the global economy. 

“It’s just a general economic picture, everything took a bit of a hammering yesterday,” a coffee trader said. “The bearish sentiment is generally there.” 

London robusta coffee futures for September were down $20 at $1,359 per tonne, having sunk to $1,330 on Friday, the lowest level for the benchmark second month since the contract was relaunched in January 2008. 

New York’s September arabica contract was down 0.85 cents at 1.11960 per lb. 

The London-based trader said coffee futures need to go through a period of consolidation. 

He said there was a bit of origin selling, and a lack of buying at present. 

However, coffee sales in Vietnam are expected to pick up this week after domestic prices, tracking gains in London, rose 2.5 percent on Tuesday from late last week, traders said. 

Sugar futures edged up slightly. 

“We’ve moved away a little bit from following the wider commodity picture,” a sugar trader said. “Recently the market has been caught in a slightly tight range.” 

ICE October raw sugar was up 0.41 cent at 16.65 cents per lb, while July was up 0.41 at 15.49 cents. London August white sugar was up $11.10 at $434.00 per tonne. 

“The bigger factor remains we still have a positive set of fundamentals underlying the market,” the trader said, referring to a buoyant South Asian appetite for the sweetener. 

“There’s good underlying trade buying and also support from some of the funds just looking to hold the market on the dips.” 

Dealers also said they were keeping an eye on the slow progress of the monsoon in India, which has swung to a net importer from a net exporter of sugar.

quoted from: Khaleej Times

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Selling More When Everyone Else is Selling Less

As American automakers struggle for survival, South Korea’s Hyundai Motor appears to be gaining on the pack with bold marketing and broad-based initiatives to improve quality 

The company made a splash earlier this year when it unveiled its Hyundai Assurance programme allowing customers to return a car if they lost a job. Competing automakers and other types of businesses soon followed with similar promises.

Years earlier, however, Hyundai had already begun to invest in new models and quality programmes that have put the company on solid footing to profit from the current chaos in the global auto industry, according to Wharton faculty. 

“There’s a sense that what Hyundai is doing on many fronts is working in terms of actually gaining some advantage during the crisis,” says Wharton management professor John Paul MacDuffie, who specialises in the automotive industry and is co-director of the International Motor Vehicle Programme.

In 2008 — a brutal year for the auto business — Hyundai’s global unit sales rose 2 per cent, lifting revenues by 5 per cent. In the first three months of this year, the company’s global market share rose to 4.7 per cent, compared to 4 per cent a year earlier.

MacDuffie says Hyundai first made a name for itself in the United States in the late 1980s when it exported the low-cost Excel to the American market. The car was popular at first, but soon earned a reputation for developing rust and other quality problems. “Sales dropped and it left reputational damage in consumers’ minds,” according to MacDuffie. In the 1990s, Hyundai attempted to introduce a range of high-priced vehicles into the US market, but MacDuffie says the company was “haunted” by its reputation: “Quality has always been Hyundai’s Achilles heel in... the US.”

It was another economic crisis — the 1997 Asian financial collapse — that sowed the seeds for Hyundai’s recent success, according to MacDuffie. He notes that during that global economic slump, the South Korean currency fell sharply. As a result, Hyundai’s competitor Daewoo went into bankruptcy and Hyundai was able to acquire another Korean automaker, Kia Motors. Surviving consolidation in its home market, Hyundai emerged from the crisis with new strength to address its problems.
Risky Moves

Beginning in 2001, MacDuffie says, Hyundai launched a major push to upgrade quality with a daily focus on improvement through new processes at its manufacturing plants, and from better design and engineering. At the same time, to help overcome its reputation for poor quality, the company announced a 10-year, 100,000-mile warranty. The Hyundai programme was far more comforting than the industry’s standard three-year, 30,000-mile warranty, and essentially guaranteed the car for its entire expected working life.

“It was risky, but a powerful impetus to improve quality,” says MacDuffie. “They pulled it off and it helped them make a major jump forward.” This year, Hyundai’s Genesis was named 2009 Car of the Year by independent automotive journalists at the North American International Auto Show in Detroit.

Meanwhile, as it was working to improve quality, the company also was expanding in Europe, the United States and in developing markets. MacDuffie notes that the Hyundai Sonata was selected to be the official taxicab during the Beijing Olympics and the company has been more successful than some of its Japanese competitors in gaining market share in India and China. “That’s another risky, big bet that has paid off well for them,” he says.

In January, Hyundai grabbed attention in the United States as consumers were reeling from the collapse in housing and stock market prices and growing fears of unemployment, by offering to take back a car that is financed or leased by a worker who subsequently loses a job. When it was introduced, the Hyundai Assurance programme was seen as more than just a marketing campaign, but also as psychological affirmation that the economy was not going to collapse entirely.

“What they are doing is empathising with the plight of people who are struggling,” says Wharton marketing professor David J. Reibstein. He observes that the Assurance programme is similar to the warranty that Hyundai used to build confidence among consumers. “There might be hesitancy to buy because people don’t know if they will be employed, but this provides the safety net which allows them to say, ‘I can still afford to be in the market.’ Clearly, the market needed some stimulation and Hyundai was able to provide that stimulation.”

Analysts proclaimed the programme a success when Hyundai reported US sales were up 14 per cent in January compared to the same month a year earlier, while the entire US auto market fell 37 per cent.

Reibstein says the offer was a groundbreaking concept, which was later adopted by other companies. The idea might be used successfully in other industries to inspire confidence among consumers, he adds. Big-ticket durables would likely benefit the most, although he says the idea might also succeed in real estate. Pfizer has a similar programme assuring the users of its products that they will be able to continue to receive medication if they lose their jobs. “It won’t work with every product,” explains Reibstein. “It’s got to be a product with greater risk. What this strategy does is reduce the risk to the customer.”

John Zhang, another Wharton marketing professor, agrees the programme was a good move by Hyundai. He adds that the company’s US customers, who tend to buy cars at lower price points, may be more affected by the recession than other carmakers’ customers. “Economic uncertainty and layoff threats will certainly make customers think twice before they purchase a new car,” he says. “Hyundai’s offer will convince those on the fence to jump over now.”

In addition, the programme is likely to generate strong goodwill toward the company. “Hyundai scores a huge publicity point, by being compassionate towards (those who are) down and beaten,” according to Zhang.

In another surprising marketing move, the company last month offered to send buyers of some Hyundai models up to $333 a month for six months. The catch: The deal applies only to cars on which Hyundai is offering rebates. Buyers may opt for either the rebate or the monthly check (not both), and the value of the two offers is about equal. But such programmes tend to generate consumer buzz.

Wharton management professor Lawrence G. Hrebiniak says Hyundai’s success is the result of a cohesive strategy clearly designed to differentiate the firm from its competitors, combined with a willingness to make substantial investments to carry out the plan.

Hrebiniak adds that the company is now taking a lead in endorsing new, tougher environmental standards for the industry: It has promised to meet new federal energy standards requiring that cars get 35 miles per gallon of gasoline five years ahead of the 2020 deadline. “Something like that is just one more part of differentiation strategy — to say, ‘We’re cool. We’re high quality people,’” says Hrebiniak. “It’s all on TV. They won Car of the Year. They are the first mover in helping people in trouble get over the hump and now they are a leader when it comes to the environment.”

Hyundai is not afraid to spend money to reap benefits down the line, Hrebiniak notes. “Here’s a company that no one really knew about other than it was a South Korean company that made cheap cars. They’re biting the bullet and investing a lot in research and development and advertising while also improving quality, and letting people know that they will be there for them if they need help.”
The Chairman: A Revered Convict

MacDuffie says the Hyundai’s ability to take bold actions may lie in its structure as a family-run company that is dominated by its chairman, Chung Mong-koo. Hyundai Corporation, the automaker’s former parent company, was founded by Chung’s father in 1947. By the time the automotive business, Hyundai Motor Company, was founded in 1967, the corporation had grown into a chaebol — or jaebeol, a conglomerate that benefits from government ties. “Chung is viewed as all powerful, and for him to drive top-down initiatives around quality would no doubt get the attention and responsiveness of everybody in the company,” says MacDuffie. Even after he was arrested in a corruption scandal in 2006, Chung remained in control of the company, according to press reports, using a telephone from his jail cell. He was serving a three-year suspended sentence when he was pardoned by South Korea’s president, Lee Myung-ba, in 2008.

“Within the company, he remained admired and revered,” says MacDuffie. “In the larger population, my sense is that many admire these larger-than-life figures who have driven so much of Korea’s economic growth, and some feel the government is overzealous in prosecuting them.”

He adds that Hyundai’s governance structure is geared toward innovation and improvement, even including members of its parts supply organisation, known as Hyundai Mobius, in the highest levels of the corporation. Many of Hyundai’s top leaders have come through the supplier network. “It seems clear that in an era when a lot more design is done by suppliers, the very close relationship between Mobius and Hyundai Motor has helped Hyundai to have effective designs and good quality,” says MacDuffie.

MacDuffie points out that Hyundai’s attitude was captured in a speech delivered by John Krafcik, CEO of Hyundai Motor America, at the Chicago Auto Show in February. Krafcik called out his peers for their grudging response to environmental and safety concerns, corrupt business practices, outlandish compensation and long-time reliance on government assistance. He compared the experience of a customer entering an auto showroom to going to the dentist.

“While no other industrial sector has a greater impact on the health of our economy, there is no other business with a bigger perception problem. Let’s face it — our reputation as an industry is horrible,” Krafcik said. “In the US, we are viewed for the most part as a slow, dim-witted industry that is typically unresponsive to consumer and environmental needs. If that weren’t bad enough, our executives are criticised for lavish compensation, abundant perks and unnecessary entitlements.

“We need to work more consistently as an industry to change those negative perceptions,” he continued. “By taking personal responsibility for our shortcomings, rather than ignoring them, we gain back our credibility.”

Hrebiniak notes that it is hard to say whether Hyundai’s current strategy will be profitable in the long run. “They may be spending more than they are reaping now, but that could be part of the strategy — to incur costs and hope it all comes together not only in sales and market share, but also in terms of profitability,” he says. “They are spending money to make money. I give them credit.”

Zhang agrees that Hyundai is steadily gaining approval in markets around the world. “This is an unassuming, late-coming company that is consciously trying harder to please customers than anyone else in the marketplace,” he says. “When you try harder, sooner or later, you get noticed. Hyundai will soon, if not already, become a force to be reckoned with for the US and Japanese manufacturers because it gives the most bang for customers’ money.”

quoted from: Khaleej Times

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Aramco, Conoco set Jan 31 Deadline for Yanbu Bids

KHOBAR, Saudi Arabia, - Saudi Aramco and U.S. company ConocoPhillips have asked contractors to submit bids for deals to build a joint venture refinery in the kingdom by Jan. 31, sources at contractors said on Tuesday. 


The two companies stopped the bidding process for the 400,000 barrels per day Yanbu refinery in November, one of several projects Aramco halted as it looked to cut costs. 

Cost estimates for Yanbu doubled last year to $12 billion, from $6 billion when the project was announced in 2006. 

Last week, Aramco and joint venture partner Total awarded contracts worth $9.6 billion for a similar-sized plant at Jubail. They saved more than $2 billion by asking contractors to revise bids to factor in falling costs for raw materials and a softer contract market due to the global economic downturn. 

Jubail, like Yanbu, had seen cost estimates rise to $12 billion at the peak of the commodities rally last year. 

Aramco and Conoco prequalified contractors to bid for six main process packages and to attend a meeting on the bidding to be held in Bahrain on July 14-15, contractors said. Tender documents would probably be issued in July or August. 

“We have a long bid preparation period, six months is a lot of time,” a source at one company interested in bidding told Reuters. “Usually Aramco gives a period of four months but they thought that bidders may request an extension.” 

The six packages are for crude, coking and gasoline units, a hydrocracker, tank farm and another facility to handle solids, sources said. 

A few more packages would also be tendered, and some smaller packages would be awarded to local firms, sources said. The Jubail refinery was broken down into 13 packages. 
More bidders 

More bidders have been invited to compete for Yanbu than Jubail, one source said, as Aramco and Conoco look for the most competitive prices. An average of 10 bidders would compete for each package, up from six or seven for Jubail deals, he said. 

“The number of bidders increased compared to Jubail,” he said. “They need more competition to get the best price.” 

The Yanbu refinery on the Red Sea coast was due to start operations in late 2014. Both it and Jubail would process heavy crude from Moneefa oilfield, Saudi Arabia’s largest-ever offshore oil project. 

South Korea’s Samsung Engineering Co is invited to bid for three process packages that include a coker unit, a crude facility and a gasoline unit. 

Japan’s Chiyoda Corp is interested in bidding for the coker unit, the crude facility and the hydrocraker. 

Italian contracting giant Saipem will be bidding for the hydrocracker, the gasoline unit, the crude facility and the coker unit. 

China’s Sinopec will be bidding for the coker unit, the crude facility and the gasoline unit. France’s Technip will be bidding for the coker unit, the crude facility, the gasoline unit and the hydrocracker. Spain’s Tecnicas Reunidas will be bidding for the coker unit and the gasoline unit. Japan’s JGC will bid for the gasoline unit, the coker unit and the hydrocraker. 

Among the 13 bidders that have been prequalified for the tank farm package are CB&I, Sinopec International Petroleum Service Corp, Punj Lloyd, Hyundai Heavy Industries, SK Engineering and Construction and others. 

Sources at contactors said bidders for the packages include companies listed below. =============================================================== COKER UNIT PACKAGE - Samsung Engineering Co (South Korea) 

· Chiyoda Corp (Japan) 

· Saipem (Italy) 

· Sinopec (China) 

· Technip (France) 

· Tecnicas Reunidas 

· JGC Corporation (Japan) CRUDE UNIT PACKAGE - Samsung Engineering Co 

· Chiyoda Corp 

· Saipem 

· Sinopec 

· Technip 

· Daelim 

· Hyundai GASOLINE UNIT PACKAGE - JGC Corp 

· Samsung Engineering Co 

· Saipem 

· Sinopec 

· Technip 

· Tecnicas Reunidas 

· Daelim HYDROCRACKER PACKAGE - Chiyoda Corp 

· Technip 

· JGC Corp 

· Saipem 

· CBI Lummus (US) and Petrofac (UK) 

· Daelim Industrial Company 

· GS Engineering and Construction 
TANK FARM PACKAGE - CB&I 

· Sinopec International Service Corp 

(China) 

· Punj Lloyd (India) 

· Hyundai Heavy Industries (S.Korea) 

· SK Engineering and Construction 

· Daewoo Engineering and Construction 

· Larsen & Toubro (India) 

· Petrosteel (joint venture between 

Rotary Engineering of Singapore 

and Saudi Arabia Rafid Group) SOLIDS HANDLING PACKAGE - Daelim Industrial 

- FLSmidth Koch (Germany) 

· GS Engineering and Construction Corp 

· Hyundai Engineering and Construction 

· JGC 

· Petrofac 

· Saipem 

· Techint (Argentina)

quoted from: Khaleej Times

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US Jobless Benefit Rolls Drop Sharply to Nearly 6.7M

WASHINGTON — The total number of people on the unemployment insurance rolls dropped for the first time since early January, the government said Thursday, while new claims for benefits rose slightly. 


The Labor Department said the total unemployment insurance rolls fell by 148,000 to 6.69 million in the week ending June 6, the largest drop in more than seven years. 

The drop also breaks a string of 21 straight increases in continuing claims, the last 19 of which were records. A dip in continuing claims several weeks ago was later revised higher. 

Initial claims rose by 3,000 to a seasonally adjusted 608,000 in the week ending June 13, above analysts’ expectations. The four-week average, which smooths fluctuations, fell by 7,000 to 615,750. Continuing claims data lags initial claims by one week. 

The four-week average is at its lowest level since mid-February, further evidence that the pace of job cuts is slowing. 

In another encouraging sign, the Conference Board on Tuesday said its index of leading economic indicators rose for the second consecutive month in May after seven straight declines. The index rose 1.2 percent last month and by the same in amount in the six-month period ending in May, the first time that measure has grown since April 2007. 

The employment report shows that job losses are easing after companies made deep cuts earlier this year. But it’s not clear whether recipients of unemployment insurance are finding new jobs or simply using up all their benefits, which typically last 26 weeks. 

“It is unlikely that new hiring has picked up in any meaningful fashion,” Joshua Shapiro, chief economist with MFR Inc., a consulting firm, wrote in a note to clients. “More probable is that long-term unemployed are starting to fall off the rolls.” 

On the leading indicators, Conference Board economist Ken Goldstein said if those trends continue, a “slow recovery” should start before the end of the year, but he cautioned that the job market will take longer to rebound. 

The drop in continuing jobless claims likely reflects the decline in first-time claims, meaning that fewer people are joining the rolls. 

“Continuing claims ... ought to be falling now given that initial claims peaked more than two months ago,” Ian Shepherdson, chief U.S. economist for High Frequency Economics, wrote in a note to clients. 

The drop could also signal a slowing in the rise of the unemployment rate, economists said, which reached a 25-year high of 9.4 percent in May. Many economists forecast the rate could reach 10 percent by the end of the year. 

Still, millions of Americans are receiving unemployment compensation under an emergency federal program authorized by Congress last summer and extended by the Obama administration’s stimulus package. 

About 2.4 million people received benefits under that program in the week ending May 30, an increase of more than 102,000 from the previous week. That’s in addition to the 6.7 million people receiving benefits under the 26-week program typically provided by states. 

Economists are closely watching the level of first-time claims for signs the economy will recover by mid-summer, as many analysts predict. 

Consumers and businesses have cut back on spending in response to the bursting of the housing bubble and the financial crisis, sending the economy into the longest recession since World War II. 

Companies have cut a net total of 6 million jobs since the downturn began in December 2007, in an effort to reduce costs. 

Still, job cuts are slowing. The Labor Department said employers eliminated 345,000 positions in May, about half the monthly average of jobs lost in the first quarter.

quoted from: Khaleej Times

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Traders Say Price Decline Should Soon Bottom Out at B14,500

Gold prices are expected to come under pressure in the short term in keeping with the global trend, but industry veterans predict prices are unlikely to fall much below 14,500 baht per one-baht weight (15.16 grammes).

Local gold prices remain largely reliant on global price movements and foreign exchange, said Jitti Tangsithpakdi, the president of the Gold Traders Association.

Global gold prices based on the London market fell to US$933.75 an ounce on Tuesday - compared with $937.25 on Friday last week and $975.50 early in the month - as the dollar rose on optimism about its improved world reserve currency status and emerging signs that the US economy has started to recover.

Local prices moved with buying prices on Monday, with gold bars down to 15,100 and ornaments down to 14,887.12 baht, from 15,350 and 15,129.68 baht, respectively, on Friday.

Local buying prices held steady yesterday at 15,100 baht for gold bars and 14,932.6 baht for ornaments, as world gold prices moved up to about $936 an ounce from New York's close of $934.60 on Tuesday.

In Mr Jitti's view, gold still has ample room to rise in the longer term, as the world economic outlook remains unclear and the US economy has yet to recover, despite improving figures for its unemployment rate, consumer confidence and retail sales.

Gold demand remains strong, especially from China and India for their national reserves. Major emerging markets are also considered likely to diversify their reserves away from the greenback, boosting demand for bullion as a hedge against the US dollar.

Kritcharat Hirunyasiri, the president of MTS Gold, a leading wholesaler and retailer of gold ornaments under the Mae Thongsuk brand, said bullion currently made up only 1.6% of India and China's national reserves, a low percentage compared with 20-30% in developed countries and a global average of 10%.

"China, for instance, has secretly bought about 500 tonnes of the precious metal to boost its gold reserves over the last eight months," said Dr Kritcharat.

"China, which currently has about 1,000 tonnes in its reserves, is expected to buy more gold in the near future."

Despite the baht's rise, it is unlikely to increase greatly, as the central bank and the government are closely monitoring its movements to curb their impact on exports, he said.

"I'm feeling upbeat about bullion's prospects as a long-term investment vehicle," said Dr Kritcharat.

"The prices are expected to move at about 15,000 baht or slightly down over the next three months."

By: CHAROEN KITTIKANYA 
Published: 18/06/2009 at 12:00 AM
Quoted from: Bangkok Post

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Emerging Economies Want More Say

The world's biggest emerging markets have called for a bigger say in the global financial system at their first summit.

The leaders of Brazil, Russia, India and China (Bric) called for a "more diversified" currency system, but backed away from Russian calls for a new "supra-national" currency to replace the dollar.

Dmitry Medvedev, the Russian president, said the "historic" meeting in the Russian city of Yekaterinburg "must create the conditions for a fairer world order".

Medvedev read out a final statement alongside presidents Hu Jintao of China and Luiz Inacio Lula da Silva of Brazil, as well as Manmohan Singh, the Indian prime minister.

"The emerging and developing economies must have a greater voice and representation in international financial institutions," a joint communique said.

"We also believe that there is a strong need for a stable, predictable and more diversified international monetary system," it said.

Dollar pressure

Medvedev's comments that "the existing set of reserve currencies, including the US dollar, have failed to perform their functions" contributed to the dollar's slide across the board on Tuesday.

China, which holds nearly $2 trillion in foreign currency reserves, suggested in March that the dollar could be replaced as the world's main reserve currency, but it was silent on Tuesday, suggesting that there is little unity on any potential challenge to the dollar.

And Medvedev's chief economic aide, Arkady Dvorkovich, emphasised that Moscow did not want to see a sudden plunge in the dollar's value.

"There is an understanding that the last thing we need now is turmoil on financial markets," Dvorkovich said. 

"No one wants to ruin the dollar, including us."

The Bric term was coined by Goldman Sachs economist Jim O'Neill in 2001 to describe the growing power of emerging market economies.

Tuesday's summit was an attempt to give the grouping a bigger political voice. The four nations account for 15 per cent of the $60.7 trillion global economy.

Goldman Sachs has predicted that in 20 years time they could together dwarf the G7 group of industrial nations and that China will overtake the US as world's largest economy.

quoted from: Al-Jazeera.net

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Oil Falls to Below $70 Before Inventory Report

LONDON - Oil fell below $70 a barrel on Wednesday, pressured by weaker stock markets, as investors awaited a U.S. inventory report expected to show supplies declined in the world’s top consumer. 


European shares slid for a fourth day as some investors unwound trades that had bet on a speedy economic recovery. That added to pressure on oil coming from bearish U.S. American Petroleum Institute data late on Tuesday. 

“The stock market being down is a good reason for oil falling,” said Christopher Bellew, a broker at Bache Commodities. “Essentially, we are still in the same range between $69.50 and $72.50.” 

U.S. crude for July lost 67 cents to $69.80 a barrel by 1326 GMT, having earlier fallen as low as $69.28. Brent crude for August slipped 61 cents to $69.63. 

The U.S. Energy Information Administration releases its weekly oil supply report at 1430 GMT. 

Analysts polled by Reuters expect crude supplies to fall 1.7 million barrels and gasoline inventories to decline by 100,000 barrels. The API reported crude stocks fell 1.3 million barrels and gasoline rose by 2.1 million barrels. 

Oil traders consider the EIA report to provide a more complete snapshot of supplies because companies are required to respond to its weekly survey. 

Some support for oil came from a weak dollar earlier in the session, although the greenback later rose. A weaker dollar can boost investor demand for oil and commodities. 

Oil hit a 2009 high above $73 last week, lifted by expectations of economic recovery that would increase fuel demand. Prices are still far below the record high above $147 reached last year. 

President Barack Obama will unveil on Wednesday plans for sweeping reform of U.S. financial regulation, aimed at averting future crises such as the banking meltdown that has hit the global economy.

quoted from: Khaleej Times

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Dow Dips Back Into the Red

The stock market's three-month rally stumbled yesterday as prices fell for raw materials such as precious metals, soybeans and even pigs. 

The major indicators were each down more than 2 percent. The blue-chip Dow Jones industrial average -- which just last week had erased its losses for the year -- fell back into negative territory, closing down 2.1 percent, or 187.13 points, to 8612.13. The broader Standard & Poor's 500-stock index dipped 2.4 percent, or 22.49 points, to 923.72, and the tech-heavy Nasdaq declined 2.3 percent, or 42.42 points, to 1816.38. 

The dollar gained against most major currencies yesterday after Russia's finance minister expressed confidence that it would remain the world's reserve currency at a Group of Eight meeting in Italy over the weekend. The dollar has strengthened significantly since hitting a year-to-date low against the euro earlier this month, which was good news for investors concerned about inflation. 

But the stronger dollar also resulted in a broad decline in commodities, which are priced in dollars. The UBS Bloomberg constant maturity commodities index fell 27 percent yesterday. Gold futures for August delivery were down 1.4 percent, or $13.20, to $926.90 on the New York Mercantile Exchange. Soybean futures fell 5 percent and lean hogs lost nearly 3 percent. Crude oil prices for July fell 2 percent, or $1.42, to $70.62. 

That in turn put pressure on commodity-producing companies in the equity markets, sending them down nearly 4 percent. Freeport-McMoRan, a producer of gold, silver and copper, fell 5.8 percent, or $3.37, to $55.14. Alcoa dropped 6.5 percent, or 78 cents, to $11.21. 

But David Chalupnik, head of equities at Minneapolis-based First American Funds, said the day's losses were unlikely to hamper the rally of the past three months, which has sent stocks up more than 30 percent. 

"Every time this market wants to pull back, there's a lot of cash sitting on the sidelines and the pullback is very shallow," he said. 

U.S. investors' pessimism extended the declines in European and Asian markets. London's FTSE 100 dropped about 2.6 percent, to 4326.01, while Germany's Dax fell 3.5 percent, to 4889.94. In Hong Kong, the Hang Seng index decreased 2 percent, to 18,498.96. 

Investors are anticipating a big week of economic news, with the producer price index and data on housing starts scheduled to be released today. Federal Reserve Chairman Ben S. Bernanke is expected to release details of the Obama administration's plans for financial regulation reform tomorrow. And Friday marks so-called quadruple witching, when contracts for several types of stock futures and options expire and investors recalibrate their portfolios, contributing to volatility in the markets. 

"The market does not go up every day," said James Cox, managing partner at Harris Financial Group. "If it did, we would all be out of a job."

By Ylan Q. Mui
Washington Post Staff Writer 
Tuesday, June 16, 2009
Quoted from: The Washington Post

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High-End Swedish Carmaker to Buy GM's Saab

General Motors announced yesterday that it is selling Saab to the Swedish sports car manufacturer Koenigsegg -- the fourth brand to split from the firm and wind up in the arms of a company with little experience as a mass-market automaker. 

The sale, scheduled to close in the third quarter of this year, is contingent on a $600 million funding commitment from the European Investment Bank guaranteed by the Swedish government. GM and Koenigsegg, which is leading a group of investors, did not release any other financial details. But Saab has said it needs $1 billion to get through the economic downturn. 

"This is yet another significant step in the reinvention of GM and its European operations," GM Europe president Carl-Peter Forster said in a statement. "Closing this deal represents the best chance for Saab to emerge a stronger company." 

The deal comes as the automotive industry suffers one of its biggest slumps. It is not just giants such as GM that are struggling; so are the suppliers that depend on them. The Obama administration pushed GM and Chrysler in bankruptcy to help the companies shed debt and cut costs, but government officials have made it increasingly clear that there are limits to its assistance. Yesterday the Treasury Department rejected a request from auto parts suppliers for up to $10 billion in additional federal loans and said it would continue to monitor the situation. 

The downturn has forced GM, Ford and others to shed poor-performing brands to focus on ones that might be more profitable. The castoffs are being snatched up by new entrants, who see opportunities in the automakers' stumbles. 

Early this month, GM agreed to sell Saturn to the Penske Automotive Group, which operates 310 automobile dealerships. GM also made a deal to turn over its other European operations, British Vauxhall and German Opel, to Canadian parts maker Magna International and the Russian state-owned bank Sberbank. And the automaker has a memorandum of understanding with Sichuan Tengzhong Heavy Industrial Machinery, a Chinese engineering company, to buy Hummer. 

Economies of scale are critical to the auto industry, and some of the upstarts hope to form ties with existing manufacturers who will take over production duties, said Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide. 

 

For instance, Penske is already seeking a foreign manufacturer to build new cars for the Saturn distribution network. 

"We're going to see some very innovative business solutions to get product to customers in different forms and different methods," Robinet said. "This is not your grandfather's automotive industry any longer." 

In the past, this failure to achieve mass production mired small auto start-ups. While the DeLorean DMC-12, with its stainless steel gull-wing doors, was immortalized in the blockbuster "Back to the Future" trilogy, the DeLorean Motor Co. was short-lived. Preston Tucker's 1948 Tucker Sedan, a torpedo-like futuristic "car of tomorrow," was met with wild acclaim, but he only made 51 cars before his company folded. 

Even Chrysler, which also entered bankruptcy protection, suffered from not expanding outside North America, Robinet said. 

"To be just dependent on one market, one segment, is very dangerous, as we've seen with our friends in Auburn Hills," where Chrysler is headquartered, he said.

Saab faces the same problem. The brand has a loyal customer base, but it sold only about 93,000 cars last year. 

Similarly Koenigsegg, a private company based in Angelholm, Sweden, is a small operation. With just 45 employees, it produces a limited number of luxury, high-performance "super sports cars" -- priced around $1 million -- a year. 

Saab plans to manufacture the next generation of 9-5 models at its plant in Trollhattan, Sweden. GM will continue to provide Saab with "architecture and powertrain technology during a defined period of time," the company said. GM and Koenigsegg will provide "additional support" to fund Saab's operations and products, some of which are in the final stages of development. 

GM bought a 50 percent stake in Saab for $600 million in 1990. In 2000, it purchased the remaining shares for $125 million. 

But the Detroit automaker hasn't been the best steward, analysts said. GM had grown too big to watch over its multiple brands. The character that had made Saab such a popular niche was replaced with "warmed-over Opel products," said Ed Kim, director of industry analysis at AutoPacific. 

"It's always been a brand that had potential, but was really continually ignored by General Motors," Kim said. 

Looking to sell Saab, GM filed to reorganize the brand under Swedish law in February. Recently it was given an extension until August to restructure and find a new owner. 

In a statement, Jan Ake Jonsson, Saab's managing director, said the agreement was "great news for Saab's current and future customers, dealers, suppliers and employees around the globe." 



By Kendra Marr
Washington Post Staff Writer 
Wednesday, June 17, 2009
Quoted from: Washington Post

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U.S. Soy, Corn Up 1 pct as Dollar Rally Fades

PARIS/SINGAPORE - Chicago soybean and corn futures rose about 1 percent on Tuesday, recovering some of their biggest single-day losses in months in the previous session, as a weaker dollar prompted renewed buying. 


Wheat futures in Chicago similarly bounced, pulling Euronext wheat in their wake, after losing ground on Monday on the dollar and ample global supplies of the grain. 

The dollar fell broadly after traders took comments from Russia that the world needs new reserve currencies as a signal it may be looking to cut the share of U.S. assets in its currency portfolio. 

The easing dollar also supported gains for crude oil, which influences grains because of their use in making biofuels. 

A weak dollar makes U.S. commodities cheaper for operators holding other currencies and is often taken as a buying signal, while a dollar rise tends to trigger selling of commodities. 

“It’s still the dollar that’s setting the tone,” one European trader said. 

A surge in the dollar, coupled with better weather prospects in the U.S. Midwest, sent front-month soybeans tumbling 3.9 percent on Monday, the biggest one-day drop in four months, and corn down 4.6 percent, the largest fall in five months. 

The heavy losses on the Chicago Board of Trade followed big gains in recent weeks that took grains to multi-month highs. 

“We paid for an excessive rise with an exaggerated fall,” another European trader said. 
Weather still a factor in n. hemisphere 

Chicago Board of Trade July soybeans were up 1.42 percent to $12.14 a bushel by 1116 GMT, with operators pointing to continuing support from tight old-crop supplies. July corn rose 0.99 percent to $4.10 a bushel. 

On wheat markets, CBOT July wheat rose 1.09 percent to $5.81-1/2, while benchmark November wheat on Euronext added 1.03 percent to 147.50 euros a tonne, pulling away from a support zone at 143-144 euros tested on Monday. 

While exchange rates have dominated commodities this week, operators said weather conditions remained a focus for the grain markets as northern hemisphere crops approach harvest time. 

Forecasts that the heart of the U.S. crop belt will warm up this week, giving young plants a much-needed boost after a wet spring, contributed to Monday’s slide in corn and soybeans. 

Some traders said weather would remain a wild card right up until the harvests, whereas others argued the risk of a major weather incident was falling as the season advanced. 

In the southern hemisphere, major wheat exporter Australia is on track to produce the biggest crop in five years. 

The Australian Bureau of Agricultural and Resource Economics (ABARE) said output may rise 2.7 percent to 21.97 million tonnes this year as improved yields offset marginally lower planting.

quoted from: Khaleej Times

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Industrial Activity Dips More Than Expected in May

WASHINGTON — Industrial production tumbled a larger-than-expected 1.1 percent in May as the recession crimped demand for a wide range of manufactured goods including cars, machinery and household appliances. 


The Federal Reserve’s report on Tuesday showed production at the nation’s factories, mines and utilities has fallen for seven straight months. Output also turned out to be a bit weaker — a 0.7 percent decline— in April than the Fed initially reported. 

The 1.1 percent drop registered in May was the deepest since a 1.8 percent plunge in March. 

The recession has crimped demand in the U.S. for all kinds of manufactured goods, especially those related to the housing sector. Builders have cut back on new projects as they try to winnow swollen inventories of unsold homes and deal with a glut of foreclosed properties. 

Factories also are coping with less demand from foreign buyers struggling with their own economic problems. 

Plant shutdowns at Chrysler LLC and General Motors Corp., which recently filed for bankruptcy protection, also weighed on industrial production last month and probably will continue to do so through part of the summer, economists say. 

Against that backdrop, industrial companies idled more of their plants and equipment. The overall operating rate fell to 68.3 percent in May, a record low dating to 1967. The previous low was set in April, when operating capacity dropped to a revised reading of 69, slightly weaker than first reported. 

Production in the manufacturing sector fell 1 percent in May. That was down from a revised drop of 0.6 percent in April, double what the Fed initially estimated. Output in mining fell 2.1 percent in May, down from a 3.2 percent decline the previous month. Production at utilities fell 1.4 percent in May, erasing a 0.7 percent increase in April. 

Production of autos and parts plunged 7.9 percent, following a 1.2 percent decline in April. Machinery production dropped 3.4 percent, after a 2.5 percent decline. Those categories figured prominently in manufacturing’s weakness in May. 

The pullbacks factored into a drop in the operating rate at factories, which fell to 65 percent in May, the lowest on records dating to 1948. The previous low was set in April. 

Production of appliances, furniture and carpeting fell 1.1 percent, partly reversing a 1.5 percent increase in April. Production of home electronics declined 1.9 percent, following a 1.4 percent decline in the previous month.

quoted from: Khaleej Times

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PC Shipments Will Bounce Back in 2010

While PC shipments will drop about 3% in 2009, PC demand will increase in 2010 as more portable PCs ship.
By Jim Carbone -- Purchasing, 6/12/2009 9:57:00 AM

Worldwide PC shipments will decline 3.2% for the year, but then post four consecutive years of unit volume growth, according to researcher IDC.

Computer shipments will fall from about 287.3 million in 2008 to 278.2 million in 2009. However, shipments will recover in 2010, growing about 7% to 298.8 million. Then there will be three years of double-digit PC growth as computer shipments reach nearly 420 million by 2013, according to the researcher.

During that time period, portable computers including laptops, notebooks and min-notebooks will grow at a faster rate than desktop PCs. For instance, in 2009, desktop shipments will decline 13.2% while portable PC shipments will rise 7% in 2009. In 2010, desktop shipments will fall 7%, while portables will increase 14.9%. From 2011, desktop shipments will rise 1-2% each year while portable growth will range 15-21% per year.

Bob O'Donnell, IDC's vice president, clients and displays, says “the worst is over” in terms of declining PC shipments and there will be growth toward the end of 2009.

quoted from: Purchasing.com

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