Daewoo in Myanmar gas deal

Daewoo in Myanmar gas deal

A consortium led by South Korea’s Daewoo International will invest about $5.6 billion to develop Myanmar gas fields as part of a 30-year natural gas supply deal with China, a group member said yesterday.
The investment comes just a week after China signed a $41 billion liquefied natural gas import deal with Australia.
The Myanmar gas development plan will allow the consortium to supply natural gas to China’s top oil and gas firm, China National Petroleum Corp (CNPC), with a peak daily production of 152.4 million cu m, or about 3.8 million tons annually.
A CNPC spokesman yesterday said he is not aware of the deal.
The supply, due to be available from 2013 from the Shwe and ShwePhyu fields in Myanmar’s A-1 offshore block and Mya field in A-3 offshore block, amounts to about 7 percent of China’s current gas consumption of about 2.225 billion cu m per day.
Currently meeting only 3 percent of China’s total energy needs, gas use is set to grow at a 10 percent compound annual rate to about 5.49 billion cu m per day by 2020, according to Bernstein Research.
Daewoo has a 51 percent stake in the consortium. The other shareholders are India’s Oil and Natural Gas Corp with 17 percent, Myanmar Oil & Gas Enterprise with 15 percent, India’s GAIL with 8.5 percent and Korea Gas Corp with 8.5 percent.
Daewoo will spend $1.68 billion in initial investments for five years until 2014, and KOGAS will spend $299 million, the two firms said in separate statements.
A KOGAS official said the total investment by the consortium would amount to about $5.6 billion, including $4.6 billion in initial spending.
The consortium will undertake production and offshore pipeline transportation, while land transportation to China will be jointly managed with China National United Oil Corp (CNUOC).
The investment still needs approval from the Myanmar government, and CNUOC has yet to decide details of its investment for land transportation to China.

LG Display to build plant in Guangzhou

LG Display to build plant in Guangzhou

The South Korean electronics giant LG Display plans to build an advanced liquid-crystal display (LCD) factory in Guangzhou to capitalize on the China’s fast-growing flat-screen television market, the company reported yesterday.
The world’s second-largest liquid-crystal display maker said in a statement that the company signed a preliminary agreement on Friday with the Guangzhou city government to build the new plant, which is expected to be the biggest in China.
The deal, which is still awaiting approval by the South Korean government and the board of Seoul-based LG Display, is estimated to cost as much as $4 billion, according to Maeil Business Newspaper.
LG Display did not disclose details about the new plant, except that it would be an eighth-generation facility capable of making large-size television panels.
That is three generations ahead of China’s most advanced display manufacturing plant, which is owned by domestic LCD maker BOE Technology Group.

Global LCD television shipments increased 27 percent to 30 million in the second quarter, led by demand from China and North America, the research firm DisplaySearch reported last week.
The research firm estimated that the number of LCD TVs sold in China will likely jump 76 percent to 23.6 million this year.
The government’s recent effort to offer subsidies to television buyers in rural areas is expected to further stimulate the market.
Analysts said the current financial crisis might encourage domestic electronics goods makers to reconsider their traditional way of importing expensive LCD displays from overseas providers.
In June, China’s largest LCD panel maker, BOE Technology Group, raised $1.76 billion through share placement to expand its LCD production capacity.
The company is building a sixth-generation factory in Hefei in Anhui province. BOE also plans to build a new LCD production line in Beijing next year the company reported.
The world’s largest LCD maker, Samsung Electronics, and Japan’s largest LCD TV maker, Sharp Corp, also have expressed interest in building factories in China.

Chery to expand overseas

Chery to expand overseas

Chinese automaker Chery Automobile Co is ambitious to speed up its global network expansion after stabilizing its foothold in the domestic market.

The company exported about 15,000 vehicles in the first seven months. [CFP]
The Wuhu, Anhui-based auto manufacturer is on track to add six assembly plants outside the mainland this year, boosting its global production network to 15 countries and regions, said Jin Yibo, a spokesman for Chery.
The six destinations will include Taiwan and Thailand in Asia, Syria in Africa and Venezuela in South America, an unnamed executive at Chery told China Daily. The executive did not disclose the other two locations.
“Construction of the assembling facilities in Taiwan, Syria and Thailand have been finished, while the plant in Venezuela is still waiting for local government approval,” the executive said.
Chery’s A3 compact car recently rolled off the production line in Taiwan, and the company will officially launch the model in a few days on the island, the executive said.

Production also started recently in Thailand on Chery’s QQ mini-car, the source said.

The company will bring more models to Syria for local production, including its Tiggo sports utility vehicle (SUV) and A3 compact, targeting African markets.
As the most successful Chinese carmaker in the international market, Chery has introduced its vehicles to more than 60 countries and regions in Asia, Europe, Africa and South America.
Last week, the company officially announced the debut of its business operations in Brazil, with plan to establish 55 dealerships across the country this year.
Luis Curi, president of Chery’s Brazil operation, said that Chery hopes to sell as many as 2,500 Tiggo SUVs in Brazil by the end of this year.

Chery spokesman Jin told China Daily that the company will build an assembly plant in Brazil, the world’s ninth-largest auto market, in the next three years.
The China Association of Automobile Manufacturers reported that in the first seven months of this year, exports of China-made vehicles slumped 60.3 percent over a year ago to 164,800 units as the financial crisis shrank auto demand in markets outside China.
However, Chery still retained its leading position among Chinese automakers with the export of 15,000 units.
Statistics show that in the past three years, Chery contributed more than half of China’s exports of homegrown passenger cars.
Analysts said domestic automakers have been smart to begin shifting their focus from product exports to capital outflows, as overseas production might reduce costs, avoid trade barriers and promote Chinese brands in the international market.
Last month, China’s Chang’an Auto reported it would invest more than $80 million in South Africa to establish a production plant and a financing company in the next five years.
JAC Motors also said in July that it would establish a manufacturing base in Brazil.

Decline slows in profits of central SOEs

Decline slows in profits of central SOEs

Profits of companies controlled by China’s central government continued to fall in the first seven months, but at a slower pace, the state-owned enterprise (SOE) watchdog said Tuesday.
The 136 SOEs directly controlled by the central government generated total profits of 398.35 billion yuan (58.31 billion U.S. dollars) from January to July, down 20.9 percent year on year.
The decline was 5.3 percentage points lower than the January-June figure, according to the State-owned Assets Supervision and Administration Commission (SASAC).
The profits for July alone were 80.98 billion yuan, a rise of 7.7 percent from June.
Sales revenue in the first seven months fell 6.2 percent from the same period a year ago to 6.39 trillion yuan. The decrease was0.1 percentage points lower than the first half.

Iraq may blacklist Sinopec after Addax deal

Iraq may blacklist Sinopec after Addax deal

Iraq’s Oil Ministry will blacklist China’s Sinopec Corp. and prohibit it from competing in a second bidding round for oilfield tenders if it confirms its purchase of Swiss oil explorer Addax Petroleum Corp., a senior Iraqi oil official said on Monday.
Deputy Oil Minister Abdul Karim Louaibi told Reuters the ministry had sent Sinopec a letter asking it about Addax, which is among foreign oil firms that have signed independent oil deals with semi-autonomous Kurdish authorities in northern Iraq.

“The Oil Ministry is committed to not dealing with any oil company that signs oil contracts (with the Kurdish Regional Government) without the approval of the central government and Iraqi Oil Ministry,” Louaibi said in Istanbul. “The reaction of the ministry will be clear, Sinopec will be blacklisted.”

Tensions ease as miners make up

Tensions ease as miners make up

Aluminum Corporation of China (Chinalco), the world’s second largest producer of alumina, says it is willing to further discuss cooperation over bauxite and alumina production with global miner Rio Tinto.
The move indicates an easing of tensions between the two companies.
“Chinalco is still willing to explore the possibility of cooperation with Rio Tinto,” said Zhao Zhengang, director of Chinalco’s Overseas Exploration Department, in response to comments by Rio Tinto’s chief financial officer Guy Elliott.
Elliott said the miner is at the very early stages of talks with Chinalco over a possible bauxite and alumina deal, the Australian Financial Review reported yesterday.
Rio’s relations with Chinalco reached an impasse in June after it abandoned Chinalco’s $19.5 billion capital injection deal that was announced on Feb 12.
Cooperation in bauxite and alumina production was also part of the framework in the previous strategic partnership announced on Feb 12.
“Cooperation was suspended because Rio scrapped the contract, but if there is future cooperation with Rio, the deal will not be set along the same terms as in February. Further cooperation will be based on mutual business demands,” Zhao said.
Lu Yongqing, Chinalco’s vice-president and spokesman, also said the company had indicated its willingness to talk but declined to further comment, Dow Jones reported.
Rio’s Elliott said the talks have only just started and have a long way to go before agreement is reached.
Zhao said he was not willing to comment on Elliott’s statement, but said the possible cooperation was in line with Chinalco’s president Xiong Weiping’s earlier speech regarding Rio.
Xiong said the company was still willing to raise the possibility of further cooperation with Rio Tinto on July 23 when he attended a Sino-Australian investment forum.
Chinalco’s strategic objectives of going international and entering into markets for multiple metals remained unchanged, he said.

Rio Tinto’s relations with China became rocky after it ended talks with Chinalco and turned instead to an iron ore joint venture with rival BHP Billiton on June 5. Xiong said at the time he was extremely disappointed with the move.
Rio Tinto is also locked in protracted iron ore price talks with Chinese steel mills. Relations with China grew more strained when four of Rio’s Shanghai-based employees were accused of bribery and commercial espionage in annual iron ore price talks.
However, analysts believe the restart talks indicate a sign that tensions are beginning to ease. They say negotiations between the two companies are economically sensible.
“Rio has abundant poly-metal resources and most of the poly-metal business is dependent on the Chinese market. If Rio is out of the Chinese market, the business will be seriously affected, which is also against its long term development strategy,” said Yu Liangui, research center director at Mysteel.
Rio and Chinalco have adjacent bauxite deposits in the Australian state of Queensland and have held talks on possible cooperation in recent years.
Rio posted a 65 percent profit drop in the first half of this year, its worst ever.
A deal with FMG indicates China is supporting the development of Australia’s third largest miner into a competitor to Rio within a few years. That means it is sensible for Rio to act in a friendly way towards Chinalco, Yu said.
The large debt incurred by Rio’s 2007 purchase of Alcan at the peak of the commodities boom is causing it problems.
Xu Xiangchun, steel industry director of Mysteel, said Chinalco, as Rio’s largest single shareholder, wouldn’t like to see Rio’s share price plummet. If Rio’s business operates well, it would mean Chinalco would receive a good return on its investment, so further cooperation with Rio would seem economically reasonable.

Hummer purchase deal not yet approved

Hummer purchase deal not yet approved

The Chinese government has not yet given approval to Sichuan Tengzhong Heavy Industrial Machinery Co. to purchase Hummer, government officials said Monday.
The officials, who refused to be named, were commenting on recent media reports saying the Ministry of Commerce (MOC) had approved the Chinese machinery maker’s acquiring Hummer.

Sichuan Tengzhong did not say in its application to the National Development and Reform Commission that it would produce Hummer in China, or acquire Hummer’s assets or stake in parent company General Motors (GM).
An MOC official also denied media reports the ministry had given a green light to the deal, saying Tengzhong had only said it would purchase the Hummer brand in its application.
The ministry has asked Tengzhong to make clear whether it intended to buy the Hummer’s patent or its technology.
The Chengdu-based company signed a memorandum of understanding with GM in early June to buy Hummer.

China BlueStar starts coinstruction of largest RO membrane project

China BlueStar starts coinstruction of largest RO membrane project

China National BlueStar (Group) Co., Ltd. began construction of China’s largest reverse-osmosis (RO) membrane project in Beijing Monday.
China BlueStar holds 49.9-percent and Toray a 50.1-percent stake in the project. The investment totals 530 million yuan (77.60 million U.S. dollars), according to BlueStar Co..
The plant is scheduled to go into production in October 2010 with an annual production capacity of 6.18 million square meters of RO membrane and 130,000 RO membrane elements, according to BlueStar Monday.
Reverse osmosis is a filtration process typically used for water purification. An RO membrane filters water by only allowing oxygen and hydrogen atoms through and filters out all solid matter.
RO membrane products are also applied in the pharmaceutical, sewage treatment, petrochemical, metallurgical and electronics industries. China’s production of such membranes has lagged behind its huge demand.
Xi Yuxin, spokesperson of BlueStar, said Monday China would need much more RO membrane than it could currently produce. Around90 percent of the membranes used by domestic companies were imported.
As a subsidiary of the state-owned ChemChina Group Corporation, BlueStar Co. focuses on chemical products and new materials. Toray Industries, based in Tokyo, is a world leader in chemical manufacturing.

Toyota makes largest China recall

Toyota makes largest China recall

Toyota Yaris.(Xinhuanet File Photo)
Toyota will recall 688,314 sedans made by its two Chinese joint ventures because of a flaw in their electric window controllers. This is the largest auto recall in China since 2004, the Beijing Times reported Monday.
The recall includes 384,736 Camry models and 22,767 Yaris models made by Guangzhou Toyota between May 15 and Dec 31 of 2008, the General Administration of Quality Supervision, Inspection and Quarantine said in an announcement on its website posted on Aug 23.
The recall also includes 35,523 Vios cars made by Tianjin FAW-Toyota Motor between Feb 18 and Dec 25 of 2008, and 245,288 Corolla models made between May 17, 2007 and Dec 25 of 2008.

Whirlpool goes rural

Whirlpool goes rural

To Whirlpool, a major US home appliance manufacturer, the road to China’s rural marketplace has never looked more attractive, thanks to the central government’s massive subsidy program to help promote the sales of consumer durables outside large cities.

After struggling in the Chinese market for years, the Michigan-based appliance giant hopes to capitalize on the opportunity provided by the government initiative to make inroads into the rural Chinese market.
The company, along with Japan’s Panasonic and Sanyo and South Korea’s Samsung, were among the first foreign brands to win government approval to join a rebate program offered for eight types of washing machines and other products in the countryside.
“The subsidy program, which will help us to expand our distribution channel, is one of Whirlpool’s key focuses,” said Zhong Min, commercial general manager for Whirlpool China.
“At present, we already have been making products specifically for third-tier and fourth-tier cities,” Zhong said.
Zhong said Whirlpool China has identified several types of washing machines and microwaves that are suitable for rural consumers.
“The subsidy program serves as a catalyst for international electronics makers to accelerate their pace to tap into the second- and third-tier cities,” said Charlie Jiang, consulting director of the automation and electronics division at business consulting firm Frost & Sullivan.
Rural sales
Figures from the Ministry of Commerce showed that more than 9.61 million home appliances have been sold in the rural areas, totaling 16.2 billion yuan in sales, in the first half of this year.
The government’s four-year plan is expected to boost the growth of retail sales of consumer goods by 2.5 percent in rural places and generate sales of 480 million units for home appliances across the country.
But Jiang, who once worked at Whirlpool, cautioned that foreign brands might have to adjust partnerships with local distributors to guarantee the quality of after-sales service.
Indeed, the battle on the rural field probably will be much fiercer than that in first-tier cities like Beijing and Shanghai, since brand recognition of domestic makers apparently is much higher among farmers and others in the countryside.
Apart from the reallocation of distribution channels to meet different requirements in rural areas, the major obstacles for foreign players in joining the appliance rebate program are how to promote their brands and reduce product prices, Jiang said.
Whirlpool, the maker of Maytag and KitchenAid, has had difficulty promoting names familiar in Western countries to Chinese markets.
The company has had a series of joint cooperation agreements with traditional Chinese brands such as Beijing Snowflake Fridge Factory, Shanghai Shuixian Electric Appliance Manufacturing and Shenzhen Lanbo Airconditioner Corp since its foray into China in 1994. But every partnership ended in failure.
In April, the US home appliance maker closed its 10-year-old washing machine plant in Shanghai, eliminating 600 jobs.
Production will be transferred to its joint venture factory with domestic electronics firm Hisense in Zhejiang province.
Market outlook
Worldwide, Whirlpool posted sales of $4.2 billion in the second quarter, down 18 percent from the same period last year, due to lackluster global sales in this economic downturn.
Asia, including China, was the best performer for Whirlpool. The company grew sales by 5 percent in Asia, even as sales in Europe and North America posted double-digit slumps in the second quarter.
It’s still a bumpy road for Whirlpool in China because of barriers established by growing domestic brands and also because of the high-end refrigerator market dominance by earlier entrants such as Germany’s BHS Bosch & Siemens and South Korea’s Samsung, said Liu Buchen, an industry expert.
Whirlpool North Asia President Li Yan was quoted by local media earlier as saying that the company had suffered more than $100 million in losses since entering the Chinese market.
According to figures from the research firm Euromonitor International, Whirlpool’s market share in domestic electrical appliances and home laundry appliances flattened to 0.4 percent and 4.5 percent by retail value, respectively, in 2008, from a year earlier. Its large kitchen appliances sector posted a drop of 0.1 percent to 1.4 percent during the period.
“White goods is an area that has to make profits through volume,” Jiang of Frost & Sullivan said.
“The potential in the countryside will provide foreign players like Whirlpool the momentum to boost sales,” Jiang said.
But, he added, the higher costs of foreign-made products will remain a challenge.
Whirlpool’s Zhong said the company is actively developing products to meet the price range limitations established by the subsidy program.