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Nippon Steel to cut capex spending as U.S.-China trade war crimps demand

FILE PHOTO – A production line of Nippon Steel & Sumitomo Metal Corp.’s Kimitsu steel plant is pictured in Kimitsu, Chiba Prefecture, Japan, May 31, 2018. REUTERS/Kim Kyung-HoonTOKYO (Reuters) – Nippon Steel Corp will cut its planned capital expenditures for the three-year period to March 2021 by between 10% and 20% as weaker steel demand amid the U.S.-China trade war has eroded its profits, a company official said on Friday. With a planned capital expenditure budget of 1.7 trillion yen ($16 billion) during the period, the company could cut between 170 billion to 340 billion yen ($1.6 billion to $3.2 billion) in spending. Slowing global steel demand for automobiles and machinery because of the trade row and higher materials costs have battered Japanese steelmakers’ quarterly earnings, forcing them to cut their annual forecasts or give bleak guidance. Earlier this month, Nippon Steel, Japan’s top steelmaker, reported a 33% drop in business profit for the April to June quarter and predicted a 56% plunge in profit for the year through March 2020. The world’s third-biggest steelmaker said at the time that it would reduce planned capital expenditure and sell assets worth 200 billion yen in light of the slumping earnings and to maintain financial health. “We have already largely picked targets worth about a 10 percent cut,” Yuichiro Kaneko, head of the investor relations department at Nippon Steel, told Reuters by phone. Some planned spending on regular maintenance or upgrades for its domestic plants will be delayed, while spending to bolster the efficiency of some production facilities may be delayed as it prioritizes repairs and upgrades on the facilities with higher efficiency, he said. Nippon Steel Executive Vice President Katsuhiro Miyamoto told Reuters earlier this week that it aims to raise product prices and boost productivity by streamlining its manufacturing structure to help shore up faltering earnings. Demand for flat steel used in automobiles and machinery is slowing in China, prompting fears of an increase in regional exports at a time when the broader Asian economy is stumbling due to trade war, he told Reuters in an interview. Reporting by Yuka Obayashi; editing by Christian SchmollingerOur Standards:The Thomson Reuters Trust Principles.

Japan's curbs on high-tech materials exports to South Korea could backfire

TOKYO/SEOUL (Reuters) – Japan’s curbs on exports of high-tech materials to South Korea could backfire in the long run, eroding its dominance over a key link in the global chip supply chain, suppliers and experts say. FILE PHOTO: Mobile memory chips made by chipmaker SK Hynix are seen in this picture illustration taken in Seoul May 10, 2013. REUTERS/Lee Jae-Won/Illustration/File Photo/File PhotoJapan tightened restrictions last month on exports of three chipmaking materials to South Korea, home to memory chip titans Samsung (005930.KS) and SK Hynix (000660.KS), threatening to disrupt the global tech supply chain as it provides about 70% or more of the restricted products to the world. While the move highlights Japan Inc’s firm place in the industry even after its once mighty giants like Sony (6753.T) lost out to nimble Chinese and Korean rivals, it has fueled concerns that its grip on the niche market for fluorinated polyimides, photoresists and hydrogen fluoride could loosen. “South Korean companies cite quality and stable supply as reasons for choosing Japanese materials. But this has made them aware of the need for change and they are already taking action,” a source at a Japanese materials supplier said. “This will hit us like a body blow.” Samsung, for instance, has stepped up testing of non-Japanese photoresists and hydrogen fluoride, several sources familiar with the chip supply chain said. Soulbrain (036830.KQ), a supplier of hydrogen fluoride to the Samsung and Hynix – the world’s No.1 and No.3 chip vendor, is aiming to match the purity of Japanese hydrogen fluoride at a plant that is still under construction. Industry experts, however, note it would take time for South Korean firms to move up the value chain as the three high-tech materials are not easy to replicate. Japanese suppliers “have built up their capabilities through decades-long experience of developing products”, Atsushi Ikeda, Citigroup analyst, said. “The accumulation is just too big for new players.” Top photoresist supplier Tokyo Ohka Kogyo (4186.T) says it takes up to two years to develop new resists. ‘RARE EARTH SHOCK’ From South Korea, the curbs are likely to elicit a response similar to Japan’s during the “rare earth shock” nearly a decade ago, when China’s restriction on exports of rare-earth minerals used in electronic devices forced Japan Inc to find alternate supplies, industry participants said. “Under the circumstances, anyone would do that,” said the source at the Japanese supplier that has been hit by the curbs. Seoul has already pledged to subsidizes the domestic chip supply chain to accelerate the buildup of knowledge needed for firms to catch up in more advanced fields. A senior executive at Soulbrain said the government had expedited paperwork so its new plant could be completed faster. Soulbrain is looking to complete the construction by end-September and run tests to see if it can mass produce high-purity hydrogen fluoride, the executive said. In photoresists, Samsung is trying to curb its reliance on Japan for advanced material, although sources say it faces high hurdles. The company, however, uses material from local supplier Dongjin Semichem (005290.KQ) for photoresists used in chips with less finer circuit patterns, Japanese supply chain sources said. Only three Japanese firms, Tokyo Ohka, JSR (4185.T) and Shin-Etsu Chemical (4063.T), currently supply high-quality materials used in advanced chip production technology known as extreme ultraviolet lithography globally. REPERCUSSIONS Tokyo Ohka and other materials makers grew hand in hand with electronics conglomerates NEC (6701.T), Toshiba (6502.T) and Hitachi (6501.T), the world’s top chipmakers in the late 1980s. Even after Japanese chipmakers lost ground to South Korea, the suppliers continued to thrive, thanks to early inroads in overseas markets and the strength of their local supply chains. But in the wake of the latest curbs, prompted by a decades-old row between the Asian nations over compensations for forced South Korean laborers at Japanese firms during World War Two, suppliers in Japan are having to deal with repercussions beyond the three restricted materials, industry sources said. Korean chipmakers are now asking Japanese suppliers to front-load shipments of materials Japan has large market shares of, from silicon wafers to polishing slurries, for fear of further restrictions, the sources said. Japanese suppliers have so far refrained from directly commenting on how the curb will impact their business, claiming they had no inkling of the government’s decisions beforehand. “We have very good relations with our Korean clients,” said Hideo Ohhashi, a spokesman for Tokyo Ohka. “But this is up to politics.” Reporting by Makiko Yamazaki and Heekyong Yang; Additional reporting by Linda Sieg in TOKYO and Ju-min Park in SEOUL; Writing by David Dolan; Editing by Miyoung Kim and Himani SarkarOur Standards:The Thomson Reuters Trust Principles.

Billionaire Fredriksen seeks investors for shipping-to-fish empire: media reports

OSLO (Reuters) – Industrialist John Fredriksen is seeking investors to take larger stakes in his companies and could relinquish control of operations as part of a plan to reduce his workload, the Norwegian-born 75-year-old told two newspapers on Friday. Norwegian-born shipping tycoon John Fredriksen speaks in Oslo, Norway, June 1, 2017. REUTERS/Ints KalninsIt was the clearest sign to date of a succession plan for Fredriksen, whose net worth has been estimated at more than $12 billion. His self-made business empire includes oil-tanker firm Frontline (FRO.OL), dry bulk shipper Golden Ocean (GOGL.O) (GOGLT.OL) and rig owner Seadrill SDRL.OLSDRL.N, as well as fish farmer Mowi (MOWI.OL) and other companies. “There are several ways this could be done,” he told business daily Finansavisen, while adding he did not plan to leave day-to-day operations to his twin daughters. “They should not have to live with the work load I’ve had,” he added. Instead, Fredriksen could seek to build even larger firms via mergers, and thus allow other industrial players to become the top owners of individual companies in his portfolio, he told TradeWinds, a shipping industry newspaper. Another way to transfer power would be to bring outside investors with sufficient resources and skill into the companies as they are today, he added. Frontline, one of the companies in the group, recently bought a fleet of oil tankers from Trafigura, making the Geneva-based trading house the second-largest owner of that firm with a stake of 8.5%, while Fredriksen holds 42%. Frontline is also seeking further vessel acquisitions, he added. The group was not immediately available for comment when contacted by Reuters. Reporting by Terje Solsvik; Editing by Stephen CoatesOur Standards:The Thomson Reuters Trust Principles.

Factbox: Month of bond market milestones – How low can you go?

LONDON (Reuters) – August has turned out to be another month of milestones for bond markets as an escalating trade conflict fans recession fears, pushing borrowing costs deeper and deeper into negative territory. Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., August 12, 2019. REUTERS/Eduardo MunozSome $16 trillion of global debt, including corporate and sovereign bonds, now yield less than 0%, up from almost $13 trillion in early July. Investors, desperate to grab any yield, have rushed into longer-dated bonds: U.S. 30-year borrowing costs are down 60 basis points in August, set for their biggest monthly decline since the 2011 euro debt crisis. Long-dated Japanese bond yields have also hit three-year lows JP30YTN=JBTC JP10YTN=JBTC and are set for their biggest monthly declines in more than three years. “The bond market is sending a clear message that it expects low economic growth and low inflation,” said Neil MacKinnon, global macro strategist at VTB Capital in London. “It is saying: secular stagnation, here we come.” Biggest monthly fall in 30-year USTs since 2011 – here Here are a few milestones charted by bond markets as the great yield collapse of 2019 unfolds: 1/INVERTED! A key part of the U.S. Treasury yield curve, a closely tracked recession indicator, inverted in mid-August for the first time in 12 years and further still in recent days. The curve, measured by the gap between two- and 10-year U.S. bond yields, has inverted before every recession in the past 50 years and sent a false signal just once. No wonder that the warning signal from the world’s most important bond market has rippled out. Britain’s bond yield curve briefly inverted this month. The German curve is at its flattest since the global financial crisis. “Given there hasn’t been a single lead indicator as good as the yield curve at predicting U.S. downturns in the past 70 years, the inversion has to be taken very seriously,” said Deutsche Bank strategist Jim Reid. U.S. yield curve inverts for first time since 2007 – here 2/THE NEGATIVE CURVE CLUB Sovereign bond yield heatmap – here In early August, 30-year German and Dutch borrowing costs fell below 0% DE30YT=RR NL30YT=RR, bringing the two countries into a club of developed countries, whose entire sovereign bond yield curves pay negative yields. Finland now joined them. The group already included Denmark and Switzerland. It was briefly joined in mid-August by Sweden, which saw yields on its longest-dated bond, a 20-year maturity, drop below 0% for the first time. Japan could be the next to join, with bond yields out to 15 years below 0%. With investors willing to pay governments to hold their debt, pressure is rising on the likes of fiscally prudent Germany to use unprecedented market funding conditions to ramp up spending and fight weak growth. 3/ AND THE U.S. TOO? Technically speaking, the United States also now has negative-yielding bonds. Of late, yields on 10-year Treasury Inflation Protected Securities (TIPS) US10YTIP=TWEB, securities offering protection against inflation, have pushed into negative territory. The yield on a TIPS security essentially is the yield on a plain-vanilla Treasury bond, minus expected inflation. Given 10-year TIPs now yield minus 0.07%, it means the equivalent Treasury bond is paying less than the expected inflation rate. U.S. TIPS yield – here 4/PAID TO TAKE A MORTGAGE Jyske Bank this month became the first in Denmark to offer a negative rate on a mortgage, in effect paying customers 0.5% to borrow money for 10 years. The borrowers would still make monthly payments towards the initial amount they borrow, but they would eventually pay back less than the original amount. While rare, the move in Denmark is part of a broader trend in tumbling mortgage rates globally. Borrowing costs on U.S. 30-year and 15-year fixed-rate mortgages have fallen to their lowest since November 2016. 5/FIRST SIGN OF TROUBLE? There are some signs that investors’ willingness to hold negative-yielding debt is being sorely tested. Last week, Germany auctioned a 30-year government bond at negative yields. But the euro zone’s benchmark bond issuer sold just 824 million euros, versus a 2 billion-euro target. That’s a sign some private investors are being driven out of the higher-rated euro debt markets by negative yields. The new 30-year Bund had a 0% coupon, which means investors who hold the bond to maturity get nothing back. Germany sells first negative-yielding 30-year bond – here 6/ NOT ALL BONDS ARE EQUAL Not all bonds are partaking in the rally. Since President Mauricio Macri lost an Aug 11 primary election round to populist-leaning opposition candidate Alberto Fernandez, the tumble on Argentine dollar bonds has hit many investors, including some big-name asset managers such as Franklin Templeton. Argentina’s 100-year dollar bond, issued in 2017 at par, has been hard hit, too, falling more than a third in five days. The price, which lurched even lower after the government said on Aug. 28 it would launch a debt reprofiling plan, currently trades at 43 cents in the dollar. Tale of two centuries – here Reporting by Dhara Ranasinghe and Tom Arnold in London; additional reporting by Richard Leong in New York; graphics by Ritvik Carvalho; editing by Sujata Rao and Larry KingOur Standards:The Thomson Reuters Trust Principles.

SK Innovation fuels LG Chem feud with EV battery patent lawsuit

SEOUL (Reuters) – A feud between two South Korean battery makers escalated on Friday as SK Innovation Co Ltd (096770.KS) said it plans to sue bigger rival LG Chem Ltd (051910.KS) in the United States over alleged patent infringement related to electric vehicles (EV). FILE PHOTO: The logo of SK Innovation is seen in front of its headquarters in Seoul, South Korea, February 3, 2017. REUTERS/Kim Hong-Ji/File PhotoThe proposed new lawsuit by SK Innovation drew a swift denunciation from LG Chem, which called the action “groundless” and said it would seek compensation. The two companies have been at loggerheads since LG Chem sued SK in the United States in April for alleged theft of trade secrets by hiring former LG Chem employees. SK Innovation denied wrongdoing and the litigation is ongoing. Firing the latest round, SK Innovation said it was preparing to file lawsuits against LG Chem and LG Chem Michigan Inc through the U.S. International Trade Commission alleging patent breaches. SK Innovation declined to provide further detail, including specifics of when the case would be filed but said the action was imminent. The company said a substantial amount of LG Chem’s battery products were likely to be affected and a win would prohibit LG Chem from selling those products. “These lawsuits are not relevant to LG Chem’s lawsuit against us accusing misappropriation of trade secrets, but they are rightful lawsuits to protect our intellectual property,” said YS Yoon, president of SK Innovation’s battery business, downplaying any suggestion of a tit-for-tat move. In reply, LG Chem said the planned lawsuit was “groundless”, “very regrettable” and “unnecessary”. “If the competitor admits its fault, and promises to prevent the recurrence with a sincere apology, we will agree to dialogue when they are willing to seriously talk about compensation,” LG Chem said in a statement. SK Innovation stock was up 6.4% at 0510 GMT. LG Chem gained 1.5%, trailing the market’s .KS11 1.8% rise. GOVERNMENT INTERVENTION? The South Korean government is nurturing the domestic EV battery sector to make the industry as big an export item for the country as memory chips and display panels. A source with direct knowledge of the matter said there was concern the lawsuits could weaken local battery makers at a time of heightened global competition. Those worries meant the government may act as mediator to secure a swift resolution, the source said, requesting anonymity due to the sensitivity of the matter. SK Innovation also said it plans to file a separate U.S. lawsuit against LG Electronics Inc (066570.KS), another affiliate of LG Group, claiming unauthorized patent use in EV battery production. LG Chem makes battery cells in the U.S. state of Michigan, which LG Electronics uses to make finished batteries nearby. SK Innovation, South Korea’s biggest oil refiner, is a latecomer to an EV battery market led by LG Chem and Samsung SDI Co Ltd (006400.KS) as well as Japan’s Panasonic Corp (6752.T). It started mass production in 2012 with customers including Germany’s Daimler AG (DAIGn.DE) and Volkswagen AG (VOWG_p.DE). Reporting by Heekyong Yang and Ju-min Park; Editing by Christopher Cushing and Jane WardellOur Standards:The Thomson Reuters Trust Principles.

With racing and music events, Tesla gets over marketing allergy in China

SHANGHAI/SAN FRANCISCO (Reuters) – Tesla Inc (TSLA.O) has always shown disdain for marketing, with CEO Elon Musk boasting his company does not advertise, instead using the money it would have spent to develop products. People attend a Tesla performance driving school event at Shanghai International Circuit in Shanghai, China, August 22, 2019. REUTERS/Aly SongBut in China, the world’s biggest electric vehicle market where Tesla is gearing up for a major sales push, that tune has started to change as the automaker promotes racing events, showroom parties with DJs and a line of Chinese Tesla stickers for chat apps. Case in point: Wang Yubo, a 30-year-old marketing executive and Tesla car owner, was invited by the company to burnish his driving skills at a Shanghai racing track this month. “I learned how to push my Model 3 to its limits,” said Wang, who writes both enthusiastic and critical blogs about Tesla and occasionally races his car with friends. Tesla is expanding its focus beyond products to service, says Leo Liu, head of the company’s China driving school which aims to teach people “to make full use of their cars”. It held three such events for auto reporters, social media influencers and a handful of owners in August – one in Beijing and two in Shanghai and plans to expand to other big cities such as Guangzhou and Chengdu. “We are also thinking of having more difficult ones on ice tracks in winter this year,” Liu said, adding that more owners will be invited in the future. While Tesla hasn’t embarked on conventional TV or billboard advertising, the U.S. firm’s China Chief Tom Zhu has been working on strategies this year to boost the brand’s appeal, frequently seeking ideas and opinions from marketing and sales experts, sources familiar with the discussions said. The sources were not authorized to speak to the media and declined to be identified. Tesla declined to comment. BIG FACTORY, BIG PLANS Helping raise his profile in China, Musk is currently visiting the country and on Thursday held a discussion with Alibaba’s (BABA.N) Jack Ma at an AI industry event, although they avoided controversial issues like the U.S.-China trade war. Tesla’s new efforts to reach customers in China come as the Silicon Valley automaker is preparing to open a big vehicle assembly factory in Shanghai and confront fierce competition in the luxury electric vehicle market it invented. The firm’s first overseas factory is due to start production by the end of the year and Tesla has said it should be able to build 3,000 Model 3 vehicles a week in its initial phases. That would translate to nearly four times the number of imported Model 3 vehicles sold in China per month this year, according to figures from research firm LMC Automotive. The plant is slated to have annual output capacity of 250,000 vehicles after production of the Model Y is added. “We have to learn how to manage a larger sales and after-sales system as production is growing to a completely different level,” said one source. “That’s why we are doing these events now.” The sources added, however, that Tesla is spending far less than what a conventional carmaker in China would be spending on marketing. In Tesla’s favor, it has been exporting cars to China since 2014 and remains the benchmark that other automakers in China often compare their electric vehicles to when they advertise. The launch of the Model 3 for the Chinese market in late February has also gone well, sending Tesla’s China revenue jumping 42% to $1.5 billion in the first half – equivalent to 13.5% of total revenue. But Tesla in China doesn’t have the headstart in all-electric vehicles that it had in the U.S. market when it debuted the Model S in 2012. Chinese startup Nio Inc (NIO.N) sells two premium all-electric SUVs, Jaguar has launched is I-PACE SUV and BMW (BMWG.DE) has its i3 hatchback and i8 sportscar. By the end of the year, Audi will have two all-electric SUVs on the market while Daimler’s (DAIGn.DE) Mercedes will have one. The U.S firm also doesn’t expect Musk’s cult status to propel sales to the same extent it does elsewhere, the sources said. Most Chinese do not have easy access to his Twitter feed followed by nearly 28 million, although Tesla translates some of his less controversial tweets on its Weibo account. In addition to chat app stickers that express various emotions – a market strategy also used by other automakers – Tesla is partnering with Tencent’s (0700.HK) QQ Music streaming service in organizing parties with DJs at showrooms. Both marketing tactics are China-only developments, the sources said. Social media users have noticed much more activity on Tesla’s Weibo account in recent months while company has also held several roundtables with reporters and internet influencers throughout China since July. Slideshow (5 Images)According to sources, executives explained pricing strategy and expansion plans for its charging network and said they wanted to improve communication with the public. By contrast, in the United States Tesla rarely grants media access to its executives beyond earnings calls and product launches. “Tesla has finally realized the importance of adjusting to China,” said Wang. “Given time, it will become more mature.” Reporting by Yilei Sun in Shanghai and Alexandria Sage in San Francisco; Editing by Edwina GibbsOur Standards:The Thomson Reuters Trust Principles.

Tesla hikes prices for Model 3, other cars in China amid weaker yuan

FILE PHOTO: The Tesla logo is pictured on a car during the electric car E-Rallye Baltica 2019 in Bauska, Latvia, July 23, 2019. REUTERS/Ints Kalnins/File PhotoSHANGHAI (Reuters) – U.S. electric vehicle maker Tesla Inc (TSLA.O) had raised prices for some vehicles in China as the yuan trades at its weakest levels in more than a decade. The starting price for the Model X sport utility vehicle (SUV) is now 809,900 yuan ($114,186), versus 790,900 yuan previously, according to Tesla’s China website on Friday. Its long-range dual-motor variants of mass-market Model 3 cars are now 439,900 yuan, up from 429,900 yuan previously. The U.S.-China trade frictions and a tit-for-tat tariff war between the countries has prompted Tesla, which currently imports all the cars it sells in China, to adjust its prices multiple times over the past year. The latest hike comes as China allowed the yuan to weaken against the U.S. dollar earlier this month, raising the cost of imports and prompting Washington to label China a currency manipulator. Beijing has strongly opposed the label. People familiar with the matter told Reuters earlier this week that Tesla would hike prices due to the currency uncertainty and could do so again in December should Chinese tariffs on U.S.-made cars take effect. Tesla is currently building its first overseas factory in Shanghai, which is expected to help the firm minimize the impact of the trade war. It is due to start production by the end of the year and Tesla has said it should be able to build 3,000 Model 3 vehicles a week in its initial phases. While Tesla does not disclose sales by country, consultancy LMC Automotive estimates it sold 23,678 vehicles in China in the first seven months this year, including 17,451 Model 3 cars. Reporting by Yilei Sun in SHANGHAI and Se Young Lee in BEIJING; Additional Reporting by Brenda Goh in SHANGHAI; Editing by Stephen Coates and Himani SarkarOur Standards:The Thomson Reuters Trust Principles.

Oil set for biggest weekly gain since July on trade dispute hopes

TOKYO (Reuters) – Oil prices on Friday were set for their biggest weekly gains since early July, boosted by a decline in U.S inventories and a looming hurricane in Florida, while new signs of trade talks between the United States and China emerged. FILE PHOTO: A pump jack operates at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick OxfordBrent crude LCOc1 was up 8 cents, or 0.1%, at $61.16 a barrel, by 0420 GMT after adding 1% on Thursday. Brent is heading for a gain of 3% this week. U.S. West Texas Intermediate (WTI) crude futures CLc1 fell 7 cents, or 0.1%, to $56.64 a barrel. The contract is set for a gain of more than 4% this week. “The frothy price action emphasizes the store that energy markets place on trade progress to support further gains in prices going forward,” said Jeffrey Halley, senior market analyst at OANDA. “What is given, can be taken away though, and the rally looks more like it’s running on vapors than petrol,” he said. Worries about a slowdown in economic growth due to the trade war between the United States and China and the impact on oil demand, the countries are world’s two biggest oil consumers, kept a lid on price gains, even as falling inventories indicate a balancing market. However, on Thursday, the United States and China gave signs that they will resume trade talks, discussing the next round of in-person negotiations in September ahead of a looming deadline for additional U.S. tariffs. The approach of Hurricane Dorian toward Florida raised fears that offshore U.S. crude producers may shutter output if the storm passes into the Gulf of Mexico over the weekend. Dorian is heading toward landfall on the Atlantic coast of Florida over the weekend and may enter into the eastern Gulf of Mexico next week. It is forecast to strengthen and become a highly dangerous Category 4 hurricane on Sunday, the National Hurricane Center said. Chevron Corp’s (CVX.N) 356,440 barrel-per-day Pascagoula, Mississippi, oil refinery is closely monitoring the progress of Hurricane Dorian, a company spokesman said on Thursday. Last month, Hurricane Barry prompted offshore oil companies to shut as much as 74% of production, lifting U.S. crude prices, before it weakened to a tropical storm. Government data on Wednesday showed U.S. crude stocks dropped last week by 10 million barrels to their lowest since October as imports slowed, while gasoline and distillate stocks each fell by over 2 million barrels. Inventories at the nation’s main delivery hub in Cushing, Oklahoma, the delivery point for WTI futures, slumped last week by nearly 2 million barrels to their lowest since December, the data showed. Cushing stocks have dropped by over 300,000 barrels since the government report, traders said, citing market intelligence firm Genscape’s midweek report. But the EIA data also showed that U.S. production rebounded to a weekly record of 12.5 million barrels per day, suggesting there is still plenty of supply available. U.S., Russian, Saudi crude oil production – here Reporting by Aaron Sheldrick; editing by Richard Pullin and Christian SchmollingerOur Standards:The Thomson Reuters Trust Principles.

Tesla raises prices for some vehicles in China

FILE PHOTO: The Tesla logo is pictured on a car during the electric car E-Rallye Baltica 2019 in Bauska, Latvia, July 23, 2019. REUTERS/Ints Kalnins/File PhotoSHANGHAI (Reuters) – U.S. electric vehicles maker Tesla Inc (TSLA.O) said on Friday it had raised prices for some vehicles in China, a decision that comes as the Chinese yuan trades at its weakest levels in more than 10 years. The starting price for the Model X sport utility vehicle (SUV) was now 809,900 yuan ($114,186) compared with 790,900 yuan previously, Tesla said on its China website. Its long-range dual-motor variants of mass-market Model 3 vehicles were now priced at 439,900 yuan, up from 429,900 yuan previously. People familiar with the matter told Reuters earlier this week that Tesla would hike prices on Friday and could do so again in December should Chinese tariffs on U.S.-made cars take effect. Reporting by Yilei Sun in SHANGHAI and Se Young Lee in BEIJING; Editing by Stephen CoatesOur Standards:The Thomson Reuters Trust Principles.

S&P slashes Argentina's long-term debt three notches on maturity extension plan

BUENOS AIRES (Reuters) – Standard & Poors announced on Thursday that it was slashing Argentina’s long-term credit rating another three notches into the deepest area of junk debt, saying the government’s plan to “unilaterally” extend maturities had triggered a brief default. FILE PHOTO: A man shows Argentine pesos outside a bank in Buenos Aires’ financial district, Argentina August 30, 2018. REUTERS/Marcos BrindicciThe ratings agency said it would consider Argentina’s long-term foreign and local currency issue ratings as CCC- “vulnerable to nonpayment” – starting on Friday following the government’s Wednesday announcement that it wants to “re-profile” some $100 billion in debt. The plan, which requires congressional approval, has stoked fears of a full-blown financial crisis in Latin America’s third largest economy, two months before business-friendly President Mauricio Macri’s handling of the economy is tested in a general election against a leftist rival. Argentina’s bonds sunk on Thursday and country risk soared to levels unseen since 2015. The latest round of volatility to buffet the recession- and inflation-racked country began when Macri suffered a harsh defeat in an Aug. 11 primary election at the hands of populist-leaning Alberto Fernandez. “We see the most likely scenario as an extension of maturities, which will not be compensated by the issuer,” S&P said. “Alternatively, there are risks associated with failure to advance, and prospects for ongoing stressed market dynamics post the national elections.” The agency added Argentina’s long-term sovereign credit rating would sink to SD, or selective default, overnight, and the short term was cut to D, before the “upgrades” to CCC- and C respectively take effect on Friday. Effectively, investors holding long term Argentine debt will wake up holding CCC- rated debt that on Thursday was rated B-. Some off them may be forced to sell due to the downgrade. “The extension of the maturities of the short-term debt with no compensation constitutes a default,” it said. “As the new terms became effective immediately, the default has also been cured.” Investors in Argentina fear a return of the left to power could herald a new era of heavy government intervention in Latin America’s third-largest economy. By the time Treasury Minister Hernan Lacunza said on Wednesday that the government wanted to extend maturities of short-term debt, and would negotiate new time periods for loans to be paid back to the International Monetary Fund, a debt revamp was already widely expected. Argentine spreads over safe-haven U.S. Treasury bonds, a measure of the perceived risk of default, nonetheless shot 204 basis points higher to 2,276 on Thursday, according to JP Morgan’s Emerging Markets Bond Index Plus. Developing markets investment house Tellimer calculates that $7 billion of short-term debt, $50 billion in long-term debt and $44 billion of IMF debt may be earmarked for an overhaul. Lacunza labeled the debt-extension operation a “re-profiling” of obligations that will affect institutional rather than individual investors. The bond market gave the plan a collective thumbs down. Argentina’s century bond traded at a record low of 40.222 cents on the dollar before inching up a couple of cents according to MarketAxess data. The January 2028 benchmark briefly dropped under 40 cents for the first time ever before edging up to trade at 40.3. Closer on the maturity curve, the April 2021 issue dropped under 50 cents for the first time, while the January 2022 issue also hit a record low price. Lacunza said he would send a bill to Congress to approve changes to bonds governed by local law. Talks with holders were expected to start soon, but would likely be concluded by the government that wins the October general election and takes office in December. Fernandez, whose running mate is former President Cristina Fernandez de Kirchner, is now the clear front-runner. Populist icon Kirchner is loved by millions of Argentines who remember generous welfare spending during her 2007-2015 administration. “We remain cautious,” Citi said in a note. “While we think the short-term funding needs have been addressed, political uncertainty remains high: any proposal on global bonds could be unwound by the potential new administration.” GHOSTS OF 2001 DEFAULT Restructurings are a traumatic subject for voters who remember the country’s 2001 default, part of an economic meltdown that tossed millions of middle-class Argentines into poverty. Subsequent mini-defaults kept the country locked out of global capital markets for years. Macri prided himself on getting the country out of default early in his administration and promised to reintegrate Argentina with the global markets. But he overestimated his ability to attract the foreign direct investment needed to provide Argentina with sustained economic growth. The central bank spent $367 million of its reserves in foreign exchange market interventions on Wednesday and $223 million on Thursday in its effort to defend the local peso. The peso reacted positively, recovering from steep early-day losses to close 0.35% higher at 57.9 per U.S. dollar. But the currency is down 21.7% since Macri’s primary vote debacle all but erased his chances of being re-elected in October. Among key players going forward will be the IMF, which has a $57 billion standby loan deal with Argentina. Fernandez has said he wants to renegotiate the IMF pact, which has imposed unpopular austerity measures that damaged Macri’s popularity and set him up for the drubbing he took in the primary vote. FILE PHOTO: Newly appointed Argentina’s Economy Minister Hernan Lacunza attends a news conference at the Casa Rosada Presidential Palace in Buenos Aires, Argentina August 20, 2019. REUTERS/Agustin Marcarian -/File PhotoMacri-allied lawmaker Eduardo Amadeo told Reuters that Congress will decide on whether to support the plan by how long the government will seek to extend maturities. “It’s something that has not been decided yet,” he said. The Macri administration would need support from Fernandez and opposition lawmakers to get the reprofiling through the legislature. Reporting by Karin Strohecker, Marc Jones and Tom Arnold in London; Hugh Bronstein, Gabriel Burin, Walter Bianchi, Eliana Raszewski and Cassandra Garrison in Buenos Aires and Rodrigo Campos and Dan Burns in New York; Editing by Bernadette Baum, Tom Brown & Simon Cameron-MooreOur Standards:The Thomson Reuters Trust Principles.