Wednesday, April 23, 2014

Toyota wants to use more hybrid system parts made in China

(Reuters) - Toyota Motor Corp (7203.T) wants locally procured parts to make up at least half the components in the gasoline-electric hybrid propulsion systems for the Corolla and Levin cars it plans to start making in China next year.

Shinichi Matsumoto, Vice President for Toyota Motor Engineering & Manufacturing inChina, said Toyota needs that level of local content in order to bring down prices of hybrids and to generate more sales in the world's biggest auto market.
Toyota, which currently pays costly tariffs and transport fees for bringing key components from Japan to assemble hybrid vehicles in China, aims to slash costs by using many locally procured materials and parts, Matsumoto told reporters on Tuesday.

"My feeling is that unless the local procurement ratio reaches 50 percent, we can't call it 'localized'," he said at a research and development centre in Changshu, about 80 kilometers (50 miles) west of Shanghai. He was referring to number of parts procured specifically for the hybrid system.
"Ultimately, our goal is to localize 100 percent."
Matsumoto also said that using parts procured in China for its new hybrid cars does not mean it is lowering quality to pursue higher sales. Toyota plans to keep the system's quality equal to that achieved in Japan, he said.
The world's biggest auto maker said this week that it will start manufacturing and selling Corolla and Levin sedans for China in 2015 with a locally made hybrid system including the battery and the motor, the first time it will make hybrids outside of Japan using key components procured locally.
But made-in-China components does not necessarily mean made-by-Chinese companies. While localizing parts is going more smoothly than Toyota had expected, much of that output currently comes from Chinese units of Japanese parts makers with manufacturing operations in China, Matsumoto said.
Toyota is also procuring from several Chinese companies, he said.
In a gasoline-electric hybrid like Toyota's Prius, a battery captures energy from the brakes to provide a supplement to the combustion engine, boosting overall mileage, particularly in stop-and-go city traffic.
Toyota, which already assembles the Prius and Camry hybrids in China with component and system kits brought in from Japan, said it is trying to educate Chinese customers about hybrid technology. For instance, some people think they must be re-charged like electric vehicles, which is not the case.
While Toyota is not the only firm trying to localize production of the hybrid system, it is the furthest ahead.
Honda Motor Co (7267.T) is also trying to start procuring key components in China, including motors and lithium-ion batteries, Takahiro Hachigo, an executive at Honda's Chinese operations, said in a news conference in Beijing on Sunday. The firm plans to start making hybrid cars in China by 2016.
"As corporate average fuel emission standards get stricter, we believe that hybrids will become the mainstream among green cars," Seiji Kuraishi, Honda's Operating Officer and COO for the China region, told the same news conference.
In Japan, the Prius' starting price is around $20,500 before subsidies. In China, the car starts selling at $36,900 and most buyers do not receive subsidies except in certain cities.
Toyota said on Tuesday that it sold 26,800 hybrid vehicles in China in 2013, up 55 percent from a year earlier. It has not said how many hybrids it aims to sell in China in the future. ($1 = 102.5700 Japanese Yen, 6.2274 Chinese Yuan)

Cnooc Quarterly Sales Climb on Full Nexen Contribution

Cnooc Ltd. (883), China’s biggest offshore energy explorer, posted gains in first quarter output and sales as production rose at its Canadian unit Nexen.
The state-owned company, which has failed to hit its average production growth targets since 2011, is banking on its Nexen acquisition and further spending to boost output, to fulfill a government mandate of securing supplies to meet burgeoning energy demand in China.
Sales rose 7.7 percent to 60.5 billion yuan ($9.7 billion) in the three months ended March 31, from 56.2 billion yuan a year earlier, the company said in a statement to the Hong Kong stock exchange yesterday. Output rose 15 percent to 108.1 million barrels of oil equivalent. Cnooc, which gets most of its income from oil and gas production, didn’t report profit for the period.
The Beijing-based explorer will produce 422 million to 435 million barrels of oil equivalent over the year, or a 5.6 percent increase from 2013, Cnooc said in January. The production level in the first quarter has laid a foundation for it to achieve that target, Hong Kong-based Barclays Plc analysts including Somshankar Sinha and Ying Lou said in an-emailed report today.
“With project startups gathering pace, Cnooc is well on track to meet the upper end of its output growth guidance for 2014,” they said.

Nexen Contribution

Cnooc shares fell 1.7 percent to HK$12.72 as of 10:46 a.m. in Hong Kong. The stock declined 7.7 percent in the past year, compared with a 3.9 percent gain in the city’s benchmark Hang Seng Index. Cnooc’s first quarter statement came after market hours yesterday.
The explorer set an average annual production growth target of 6 percent to 10 percent from 2011 to 2015, which it has failed to meet since 2011. Chief Executive Officer Li Fanrong said in March Cnooc can still meet the target by significantly increasing output in 2015.
Production in the quarter rose mostly because the company accounted for a full quarter of Nexen’s output, compared with one month in the same period a year earlier. At $15.1 billion, the acquisition is the biggest overseas purchase by a Chinese company and was completed in February 2013.
On a like-for-like basis, Cnooc’s production climbed about 2 percent, said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC.

Output Growth

Capital spending in the quarter rose to 19.3 billion yuan from 14.9 billion yuan a year ago, Cnooc said.
“We are still committed to the 120 billion yuan capital spending” target for 2014 announced earlier this year, Chief Financial Officer Zhong Hua said on a conference yesterday.
The prospect of additional spending signals further output growth, said Yu.
“Considering what they have promised to spend this year, I’m positive that Cnooc’s production may get better in the coming quarters with new projects kicking in,” he said.
Cnooc made five new discoveries in the first quarter and completed appraisals of eight offshore wells in China, according to the statement. Sales from oil and gas, excluding marketing revenue and income other than its core business, rose 6.9 percent to 59.2 billion yuan from a year ago. Realized oil prices dropped 5.1 percent to $104.6 per barrel from the previous period.


China’s Gasoline, Kerosene Stockpiles Rise to Highest Since 2010

Gasoline and kerosene stockpiles in China, the world’s second-largest oil consumer, rose to the highest levels in at least four years even as exports of the fuels surged last month.
Gasoline inventories increased by 1.8 percent in March from a month earlier while kerosene supplies gained 4.5 percent, China Oil, Gas & Petrochemicals, a newsletter published by the official Xinhua News Agency, said today. Stockpiles expanded to an estimated 7.48 million metric tons and 1.87 million, respectively, the highest since January 2010 when Bloomberg started compiling the data.
Fuel supplies climbed as refiners boosted operating rates, according to OGP. Companies including China Petrochemical & Chemical Corp. and PetroChina Co. processed 41.9 million tons of crude last month, or about 9.9 million barrels a day, up 2.6 percent from a year ago, data from the National Bureau of Statistics in Beijing showed on April 16. China exported the most gasoline in more than three years in March and shipped the second-highest volume of jet fuel, the General Administration of Customs reported this week.
Diesel stockpiles dropped 5.7 percent last month while commercially held crude inventories fell 2.9 percent, according to OGP. The newsletter stopped reporting volumes in July 2010.

Tuesday, April 22, 2014

PLN to Be Allowed to Import LNG for Power Generation, Government Says

Jakarta. The Energy and Mineral Resources Ministry will allow state electricity company Perusahaan Listrik Negara to import liquefied natural gas in order to meet domestic demand, a ministry official has said.

Hendra Fadly, the director of upstream oil and gas at the ministry, said on Tuesday that “Indonesia will not gush out natural gas forever” and that importing LNG was consequently “very likely.”

According to Hendra, PLN may import LNG soon despite a favorable outlook on domestic production, as the shale gas revolution in the United States has helped drive down prices of gas.

“It is better to import LNG cheaply and export [our] gas at a higher price,” Hendra said.

The price of natural gas on the spot market in the US hovers at around $4 to $5 per million metric British thermal units (mmbtu), while Indonesia can fetch as much as $16 per mmbtu from exports.

PLN’s gas division chief Suryadi Mardjoeki was quoted by Reuters as saying on Monday that PLN was still short of 22 LNG cargoes from the projected demand of 56 LNG cargoes next year.

PLN expects LNG demand could reach 60 cargoes by 2016 and is pinning its hopes on a number of ongoing projects that could help them cope with the demand.

About 52.7 percent of Indonesia’s domestic gas production, or 3,782 mmbtu, has been allocated for domestic consumption this year while the remainder, about 3,393 mmbtu, is earmarked for export.

Natural gas accounts for about 30 percent of the total 46,428 megawatts of installed capacity in Indonesia.

Poor infrastructure is widely cited as the reason why Indonesia needs to export its natural gas. The gas pipeline network is concentrated mostly on the islands of Java and resource-rich Sumatra, while many recent natural gas discoveries are located offshore and in the eastern part of the country.

Benny Marbun, PLN’s director for commercial affairs, said that electricity consumption grew 7.58 percent to 46.81 terrawatt hours in the first three months of 2014.

He added that electricity consumption may grow at 7.5 percent this year, lower than the projected 9 percent set in the state budget, due to slower economic growth.

“In addition, last year’s growth was only 6.93 percent while the forecast was 9 percent,” he added.
Lower-than-expected electricity consumption growth may not result in lower subsidies as the price of crude oil and the currency exchange rate also play a role in the cost of the subsidy, Benny said.

Jakarta Globe

Monday, April 21, 2014

Argentina to Cut Taxes on Biodiesel Amid EU Anti-Dumping Dispute

Argentina will temporarily scale back taxes on biodiesel for domestic use to help the industry as the South American nation battles the European Union over anti-dumping measures.
The government will send a bill to Congress ordering the exemption of a 22 percent tax on biodiesel used in thermoelectric plants and a 19 percent tax on biodiesel for gasoline blends until the dispute with the EU is resolved, President Cristina Fernandez de Kirchner said yesterday in a speech in Buenos Aires.
The EU slapped Argentina with duties on biodiesel imports last year, saying producers have access to raw material at prices that are kept artificially low. Argentina has requested the formation of a panel at the World Trade Organization in order to resolve the dispute and said the nation is being punished for being competitive in a free market, Fernandez said.
“We’re in the middle of a true trade war,” Fernandez said during the speech. “We have to protect those who need our help.”
Argentina’s biodiesel industry has about 33 processing plants and employs 1,600 people, she said. Fernandez inaugurated a biodiesel plant in Santa Fe province yesterday run by Renova SA. Renova is a joint venture between Glencore Xstrata Plc and local producers Vicentin and Molinos Rio de la Plata SA, according to a 2011 Economy Ministry report on the industry.
Louis Dreyfus Commodities BV, Bunge Ltd and Cargill Inc also operate biodiesel plants in Argentina, according to the report.
Argentina is the world’s largest exporter of soybean oil and derivatives and the third-biggest exporter of soybeans and corn.
“Sometimes it seems these decisions are taken against the president or the government without thinking about the individuals that are affected,” Fernandez said.

Reliance Profit Rises to Two-Year High as Rupee Boosts Exports

Reliance Industries Ltd. (RIL), operator of the world’s biggest oil refinery complex, reported its highest quarterly profit in more than two years as a decline in the value of the rupee boosted export earnings.
Net income in the quarter to March 31 for the company controlled by billionaire Mukesh Ambani, India’s richest, matched analyst estimates as refinery margins recovered from the previous three months, and it starts projects that will add to revenue. Higher profit is making analysts the most bullish on the company’s stock in more than two years, while its shares have increased to the highest since May 2011.
Profit increased to 56.3 billion rupees ($933 million), or 17.4 rupees a share, in the quarter from 55.9 billion rupees, or 17.3 rupees, a year earlier, the Mumbai-based company said in a stock exchange filing yesterday. Sales rose 13 percent to 951.9 billion rupees, missing the median estimate of 1 trillion rupees of 24 analysts surveyed by Bloomberg.
“Sales during the quarter could have been better but for the declining gas production and lower refinery production due to a shutdown in February,” said R.K. Gupta, managing director of New Delhi-based Taurus Asset Management Co.
The company’s stock, which has gained 20 percent since Feb. 28, compared with a 15 percent increase in the 10-member S&P BSE Oil Index, rose 1.9 percent to 959.10 rupees on April 17. The markets were closed yesterday for a public holiday.

Rupee Weakness

The company operates two refineries with a combined capacity of 1.24 million barrels a day located next to each other at Jamnagar in the western state of Gujarat. They have the ability to process cheaper, lower grades of crude into high-value products for use in Europe and the U.S.
A majority of the fuels and chemicals Reliance makes are exported and paid for in dollars. A lower value of the rupee against the greenback increases export earnings when converted to the local currency.
The rupee averaged 61.80 per dollar in the quarter ended March 31, compared with 54.20 a year earlier. The currency has gained 2.5 percent this year, touching an eight-month high on March 28.
Reliance earned $9.3 for every barrel of crude it turned to fuels in the quarter, compared with $10.1 a barrel a year earlier and $7.60 a barrel in the preceding three months, the company said.

Net Debt

The company had 881.9 billion rupees of cash and equivalents as of Mar. 31, deposited in banks, mutual funds and government securities, versus debt of 899.7 billion rupees.
Reliance is building a plant that will turn petroleum coke, a byproduct from the refinery, to gas that will be used to produce power for its factories. Once operational, this will widen refining margin by as much as $2 a barrel.
Out of the planned capital expenditure of $12 billion to $13 billion for the petrochemical and refinery businesses, the company has already spent 30 percent and the rest will be deployed over the next 18 to 24 months, Alok Agarwal, chief financial officer, told reporters in Mumbai yesterday.
The price difference between light grades of crude and heavier varieties widened to an average $5.10 per barrel in the quarter from $4.50 a year earlier, Nisha Sharma, a Mumbai-based analyst with KR Choksey Shares & Securities Ltd., wrote in an April 9 report. A bigger gap benefits Reliance because it can process heavier grades of crude.
Brent crude, a lighter variety, averaged $107.87 a barrel in the quarter in London trading, compared with $112.64 a barrel a year earlier.

Will Outperform

Over the next three years Reliance’s core business of refining, petrochemicals and gas production will boost earnings before interest, depreciation, tax and amortization by 25 percent as projects including a gas-cracker plant and petroleum coke gasification facility start, Prayesh Jain, a Mumbai-based analyst with IIFL Holdings Ltd., wrote in an April 1 report.
“While the global environment has been moderately improving for refining margins and petrochemical spreads, Reliance will outperform the benchmarks by a significant margin,” Jain wrote.
JP Morgan analysts led by Samuel Lee expect gas output from the company’s biggest deposit off India’s east coast to increase to as much 16 million cubic meters a day by the end of this year as Reliance and its partner BP Plc (BP/) repair producing wells in the KG-D6 block, according to an April 2 report. It may produce 12.5 million cubic meters a day in the quarter ended March 31, according to KR Choksey Shares.

Gas Prices

India’s Election Commission on March 24 ordered the federal oil ministry to defer an increase in prices of gas produced from the nation’s fields from April 1 until national polls are over. Reliance and state-run explorers including Oil & Natural Gas Corp. would’ve benefited from the gain in rates from the current $4.20 per million British thermal units.
Elections to choose India’s next government started April 7 and will end May 12 with results scheduled to be announced on May 16.
For every $1 increase in gas prices and at a production rate of 15 million cubic meters a day, IIFL estimates Reliance’s earnings per share will gain by 1.5 percent in the year that began April 1.
“Once a new government comes and higher gas price comes into effect, we will see better performance,” Taurus Asset’s Gupta said.

China Premier Li Reiterates Plans to Boost Clean Energy

China, the world’s biggest investor in renewable energy, reiterated plans to boost construction of solar and wind power plants along with projects to transmit electricity from the clean sources.
The nation will also start construction of some key nuclear power projects in eastern coastal areas and “reasonable” hydropower plants, according to comments from Premier Li Keqiang posted on the central government’s website.
The statement reinforces China’s commitment to look for alternative sources of energy as the nation’s policy makers grapple with improving the nation’s air and water supplies.
The world’s largest carbon emitter is planning the energy projects to stabilize growth and adjust its energy structure after Li declared war on smog in a speech last month, vowing to shut coal-fired furnaces among other measures. Beijing’s air quality failed to meet government standards 52 percent of the time last year, the Ministry of Environmental Protection said in March.
Mainland China has 20 nuclear reactors in operation, 28 being built, and more about to start construction, which would deliver a more-than-threefold increase in capacity by 2020, according to the World Nuclear Association’s website. New approvals for nuclear plants recommenced in October 2012, after their suspension following the 2011 Fukushima disaster.
Jiangsu Shentong Valve Co. (002438) led shares of Chinese nuclear-related companies higher. The nuclear-plant valve maker rose as much as 5.1 percent to 17.06 yuan, headed for the highest in 22 months, and traded at 16.56 yuan as of 10:29 a.m. in Shenzhen. Shanghai Electric Group Co. (2727) traded 3.4 percent higher in Shanghai.
China will begin building ultra-high voltage and regular grids to deliver power from the country’s west to the east, Li said in the statement, underscoring a previous plan. The country will also promote clean-energy vehicles.
Electricity power system reform will be speeded up and trade between power suppliers and users will be promoted, the statement said.