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Tag: Industry

  • LVMH acquires Belmond hotel group

    LVMH acquires Belmond hotel group

    The London-based owner of the Hotel Cipriani in Venice and the Orient Express train service is being acquired by LVMH for $3.2bn including debt, marking a return to dealmaking by the world’s largest luxury group by revenues. The acquisition of Belmond boosts the hotel portfolio of LVMH, which already has Cheval Blanc hotels in Courchevel, the Maldives, Saint-Barthélemy and Paris as well as owning Bulgari Hotel and Resorts.

    Belmond operates in 24 countries and its hotels include the Copacabana Palace in Rio de Janeiro and Hotel Splendido in Portofino. It also owns train services such as the Venice Simplon-Orient-Express and Belmond Royal Scotsman, and cruises including Belmond Afloat in France and Belmond Road to Mandalay.

    LVMH, which owns brands such as Christian Dior and Louis Vuitton, saw off interest from several other potential bidders for the deal, including private equity groups.

    Belmond, which used to be known as Orient-Express Hotels, had said in August it had hired Goldman Sachs and JPMorgan Chase for a strategic review.

    The acquisition of Belmond comes as companies seek to tap into a rising trend of so-called “experiential” luxury, with consumers buying fewer products and more experiences in areas such as high-end food and wine, luxury hotels and travel.

    “Our agreement today with the Belmond Group is entirely consistent with our continued investment in the field of experiential luxury,” Bernard Arnault said.

    He added that the deal will “bring us ever closer to our highly discerning customers”. “Bernard Arnault was one of the first to think hard about how best to attract and retain an increasingly volatile luxury customer,” said Thomas Chauvet, analyst at Citi. “Over the past decade, LVMH has expanded its reach beyond its traditionally boundaries with continued expansion of travel retail, the rollout of high-end hotels and spas,” he said.

    “While these activities have a limited impact on LVMH’s overall profit, these have been among the group’s fastest growing businesses over the past few years.” The global luxury hotel market was worth at $83.1bn in 2017 and is expected to grow at a compound annual growth rate of 4.3 per cent to reach $115.8bn by 2025, according to Grand View Research, a consulting firm.

    Paris-based LVMH said on Friday that it was buying Belmond for $25 per share in cash — a premium of more than $7 per share to the stock’s closing price on Thursday. That represents a value of $2.6bn for the overall equity of group.

    Including debt, Belmond is being valued at $3.2bn.

    In the year to September, Belmond made adjusted earnings before interest, tax, depreciation and amortisation of $140m on revenues of $572m.

    Its average price per room night ranges from $1,206 in Europe to $448 in Asia.

    The last substantial deal by LVMH chairman and chief executive Bernard Arnault was more than 18 months ago, when his family company Groupe Arnault paid €12.1bn for the minority stake that it did not already own in Christian Dior.

    At the time Mr Arnault said that LVMH was shunning external acquisitions because they were either unavailable or too expensive. “We’re not actively looking at external acquisitions, we’re focusing on internal growth,” said Mr Arnault in April 2017. “Given the current market, fewer and fewer assets are looking attractive to us. And the best assets are not for sale.”

    In 2016, LVMH also bought high-tech German suitcase maker Rimowa, which is headed by Mr Arnault’s son, Alexandre Arnault.

    The Belmond transaction is expected to complete in the first half of 2019.

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  • Securing Raw Materials Key to Competitiveness of Indonesia’s Textile Industry

    Securing Raw Materials Key to Competitiveness of Indonesia’s Textile Industry

    Indonesia is set to become one of the top five textile and textile product producers in the world by 2030, and the Ministry of Trade is forging ahead with its Making Indonesia 4.0 roadmap, which prioritizes the development of a number of industries, including the textile sector.

    Muhdori, the trade ministry’s director tasked with the textile, leather, footwear and various other industries, said the implementation of the roadmap would strengthen the textile sector’s global competitiveness, as it improves efficiencies and product quality.

    “Being highly integrated from upstream to downstream, this sector is competitive and is supported by a large amount of human resources for its production activities,” he said.

    The challenge for the textile industry was to become more efficient, while continuing to improve human resource competencies, in accordance with technological development, he said.

    “Being both an export-oriented and labor-intensive sector, the textile industry has thus far contributed significantly to Indonesia’s economic growth,” Muhdori said.

    According to the Ministry of Industry, textile and textile product exports have continued to increase in recent years. The textile and textile product sector’s contribution to Indonesia’s gross domestic product amounted to a record $10.46 billion last year, while exports were valued at $12.58 billion, up 6 percent from 2016.

    Increased Exports

    The Ministry of Industry pegged textile exports at $13.5 billion this year, along with the creation of 2.95 million new jobs in the industry, while exports are projected to increase further to $15 billion next year, with the creation of up to 3.11 million jobs. This will increase the sector’s share of Indonesia’s total exports to 1.6 percent.

    The ministry is optimistic that this year’s growth target of between 4 percent and 6 percent can be achieved. The textile industry grew 3.45 percent last year, having nearly doubled from 2016.

    However, this growth target also calls for an increased supply of raw materials, which currently consist of 51 percent synthetic fiber, such as polyester and nylon, 37 percent cotton fiber, and 12 percent rayon.

    But the industry still faces obstacles in reaching its full competitive potential, as nearly all cotton must be imported. In contrast, 80 percent of synthetic fiber and 85 percent of rayon are domestically produced, with these numbers expected to increase further.

    Rayon is a cellulose material extracted from soluble wood pulp. It offers better absorption and breathability than cotton. Rayon fiber has various uses, including in clothing, bedding, towels, baby wipes, masks and personal hygiene products.

    According to Redma Gita Wirawasta, secretary general of the Indonesian Synthetic Fiber Producers Association (APSyFI), rayon is most in demand in the fashion industry due to several advantages, such as comfort and disposability, which make it environmentally friendly.

    “Indonesia has the potential to become one of the largest rayon industry players in the world, supported by extensive land availability and a suitable climate. This makes Indonesia comparatively superior to other rayon-producing countries,” he said.

    Raw Materials

    Redma Gita said the growth of the rayon fiber industry requires sustainable raw material supply through industrial plantations.

    “Rayon plants supported by industrial plants not only strengthen the structure of the textile industry, but also reduce its dependence on imported raw materials, which has been an issue for national textile competitiveness,” he said.

    “This upstream industry could even generate foreign exchange as some of its production is exported,” he added.

    The Ministry of Industry noted that the production capacity of the rayon fiber industry has risen substantially over the past three years. Production is expected to increase to about 700,000 metric tons this year, compared with 565,000 tons last year and 470,000 tons in 2016.

    Production capacity growth is expected to continue until 2021, when it is expected to reach 1.2 million tons.

    However, the industry faces challenges from environmental activists. Redma Gita refuted allegations from Canopy, an international nonprofit focused on forest conservation, which stated that raw materials for rayon fiber comes from ancient and endangered forests in Sumatra and Kalimantan.

    “Those accusations are baseless. They have provided no proof of this whatsoever,” he said. He also highlighted the importance of the government in supporting the development of the national textile industry.

    Machmud Thohari, a forestry expert, meanwhile also questioned the Canopy report’s use of terms such as ‘ancient’ and ‘endangered’ to categorize forests.

    “As far as I know, the terms ‘ancient’ and ‘endangered’ aren’t commonly used in the scientific classification of forests,” he said.

    Thohari said the term ‘ancient forest’ may have been used to refer to an old-age forest or one that is many, many years (i.e.: centuries) old.

    On a similar note, Riau Governor Wan Thamrin Hasyim also condemned the Canopy allegations, as he sought to highlight the strategic industrial potential of the province.

    “The accusation must be clarified, as it can deter investors and [negatively impact] Riau’s economic growth,” he said.

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  • Nissan terminates contract with Vietnamese distributor

    Nissan terminates contract with Vietnamese distributor

    Japanese carmaker Nissan announced it has ended its tie-up with its distributor in Vietnam, Tan Chong, without disclosing the reason. Malaysian-owned Tan Chong Motor Holdings Bhd, said it would stop importing and distributing Nissan vehicles and parts in Vietnam from September 10 next year.

    Tan Chong said it “remains open to further discussion with Nissan to explore alternative solutions and business opportunities for mutual benefit in Vietnam.”

    Nissan said: “The termination of the joint venture with Tan Chong will not affect the sales of Nissan cars in Vietnam.”

    Its business operations would remain unchanged in the near future, it said. It is set to debut its seven-seat SUV Terra in Vietnam on December 18.

    Tan Chong, a multinational corporation based in Malaysia, is not only the official distributor of Nissan in Malaysia and Vietnam, but also in Laos, Cambodia and Myanmar.

    In Malaysia, it also distributes cars by Opel, Renault and Foton. Its subsidiary, Motor Image, also owns the rights to produce and distribute Subaru vehicles in Southeast Asia, including Vietnam.

  • Genesis starts by-the-month car subscriptions

    Genesis starts by-the-month car subscriptions

    Hyundai Motor luxury brand Genesis is starting a car subscription service, the first such effort by a domestic automaker in Korea. The company Thursday announced its Genesis Spectrum program. Under the program, subscribers can drive Genesis vehicles – including the G70, G80, G80 Sport and G90 – for 1.49 million won ($1,330) per month. The service is in collaboration with domestic rental-car companies and Hyundai Capital’s Deal Car.

    The fleet of available cars includes the 2018 G70 3.3 Sports Supreme, the G80 3.3 Premium Luxury, the 2019 G80 Sports 3.3T Premium Luxury and G90 3.8 Premium Luxury. The provided cars are relatively new, with fewer than 10,000 kilometers (6,213 miles) of accumulated driving, according to the carmaker. For those using the G70, G80 and G80 vehicles, cars can be switched twice a month. The G90 is available to subscribers only for test driving 48 hours a month.

    Subscribers will not have to pay any maintenance costs, including after-sales service and the purchase of replacement parts. They will have to renew their subscription every month, but no fee is charged for early termination of membership. The program offers pick-up and delivery in Seoul as long as the vehicles are reserved three days in advance.

    “Genesis has been researching opportunities our brand could offer customers,” an official at Genesis said. “One of the results of the survey is a subscription program, which is globally emerging as trend.”

    Genesis added that the subscription service will allow the brand to collect data about its customers and drivers, such as preferred models for certain age groups and car replacement cycles.

    While subscription services for cars are a global phenomenon, as fewer people opt for ownership, the concept hasn’t taken off in Korea yet.

    Hyundai Motor’s finance affiliate Hyundai Capital America has already launched a subscription service in the United States called Hyundai PLUS, where subscribers can use the Sonata, Tucson, Santa Fe and other models for a monthly fee. Other carmakers have been offering subscriptions in certain markets. Porsche runs Porsche Passport, Mercedes-Benz has Benz Collection and BMW has Access by BMW.

    Swedish carmaker Volvo recently started Care By Volvo, and has rolled out its “Don’t Buy This Car” campaign to promote the new service.

    “Subscription services are suitable especially for younger people who want to enjoy a diverse range of driving experiences while avoiding the financial burden of buying the car and then maintaining it,” said Kim Pil-soo, an automotive engineering professor at Daelim University.

    The Mini brand launched a subscription service in partnership with connected-car platform Epikar last month in Korea. Its membership fee is 1.79 million won, but it charges more depending on which model the customer wants to drive.

    The Genesis service started Thursday and will run for 10 months.

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  • Renault to start making Twizy cars in Korea from next year

    Renault to start making Twizy cars in Korea from next year

    Renault Samsung Motors, the Korean unit of French carmaker Renault S.A., is planning to start producing the Twizy ultra-small electric car in its sole domestic plant next year, industry sources said Monday. Renault Samsung, Busan Metropolitan City, and the Ministry of Trade, Industry and Energy are expected to sign an initial agreement this month to begin manufacturing Twizys, which are classified as heavy quadricycles in some countries, a person with direct knowledge of the matter said.

    He said assembly will begin “sometime during the 2019” at the carmaker’s plant in Busan, some 453 kilometers (281.5 miles) southeast of Seoul.

    This year, Renault Samsung has sold most of the 1,000 Twizys that were produced in its parent Renault’s plant in Valladolid, Spain, and shipped to Korea, a company spokesman said.

    The company plans to roll out up to 15,000 Twizys annually for domestic sales and exports to Asian markets, another person familiar with the matter said.

    Renault Samsung didn’t confirm the plan.

  • Hyundai Motor rejects renewed Gwangju plan

    Hyundai Motor rejects renewed Gwangju plan

    Hyundai Motor refused a revised plan that removed a restriction on collective wage bargaining at a proposed plant in Gwangju, further complicating plans for the factory. A council with representatives from the local government and area employers, labor unions and citizens on Wednesday agreed to remove a clause from the agreement that would have suspended collective bargaining for about five years at the new joint venture between the Gwangju city government and Hyundai Motor.

    The new company will be hiring workers for a production plant to be built on 628,000 square meters (155 acres) of land in the Bitgreen National Industrial Complex. The venture is the first in Korea to bring government and private industry together in the formation of a new manufacturing facility.

    Union representatives strongly protested the clause, calling it toxic.

    Rather than pushing the clause, the council decided to offer three alternative proposals to Hyundai Motor. The city and the automaker will continue negotiations.

    “Over time, Hyundai Motor and the labor union have retreated in their demands,” said Lee Byung-hoon, Gwangju vice mayor. “But the suspension of the wage bargaining clause was the biggest issue.”

    After the announcement was made, it was Hyundai that refused the proposal.

    “We cannot help but to point out the repeated revisions and backtracking [done by the Gwangju government],” Hyundai said through a statement.

    In the first meeting held at 10:30 a.m., all nine labor representatives, including Yoon Jong-hae, head of the Federation of Korean Trade Union’s Gwangju office, refused to attend in protest of the wage bargaining ban.

    The agreement between Gwangju city and the Korean automaker had included a clause in which wage negotiations were to be suspended until the cumulative production of compact SUVs reached 350,000 units. As Hyundai Motor guaranteed a minimum of 70,000 units a year, the labor union estimated that it would take about five years before the employees at the new plant would be able to negotiate.

    The meeting resumed at 3 p.m., and Yoon joined, raising the number of attendees to 22 out of a possible 28.

    The plant proposal has been under a tight deadline as an agreement needs to be reached before the National Assembly passes the budget. The ruling Democratic Party has announced that it plans to pass next year’s budget soon.

    Meeting the budget deadline is crucial as the city needs government funding to build the necessary infrastructure, including housing that will cost roughly 300 billion won ($269 million).

    The Gwangju plant project, first proposed in June 2014, has generated significant public interest as it could keep manufacturing jobs in Korea and contribute to the revitalization of the regional economy. It would also help ease the burden of high labor costs.

    The plan is for the Gwangju government and Hyundai Motor to create a new joint-venture company. The new Hyundai Motor plant will have the capacity to produce 100,000 compact SUVs a year.

    One of the key factors in this new job creation model is that employees will receive an annual salary of 35 million won, 38 percent of the 92 million won average salaries of Hyundai Motor workers.

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  • Kia’s sporty K3 GT balances speed and safety

    Kia’s sporty K3 GT balances speed and safety

    Kia Motors’ compact K3 GT hatchback stays true to its GT moniker with its impressive driving experience, but sacrifices comfort in search of a sportier style. Across an 80 km (50 mile) drive from Namyangju to Paju in Gyeonggi on Nov. 22, the K3 GT zipped across a course that mostly covered highways.

    Its driving performance was a far cry from the original commuter version as the vehicle’s acceleration responded instantaneously thanks to its 1.6 liter turbocharged engine. The GT responded to even the slightest pressure on the pedal, zooming to 180 kilometers per hour (112 miles per hour) with ease. Along with fast acceleration, the K3 GT rumbled when accelerating as the car’s electronic sound generator (ESG) added to the real sound from its new tuned dual mufflers, similar to the ESG included in Kia’s sports sedan, the Stinger.

    Petrol heads will also appreciate the sporty D-cut steering wheel on the front-wheel drive, which produced accurate steering as the vehicle entered and exited corners and a natural feel when switching lanes.

    While the fast GT may please driving enthusiasts with its performance, it doesn’t provide for the most comfortable ride.

    At high speeds of 150 km per hour, the hatchback model produced some road and tire noise that soon became distracting. The sound from the ESG and the unwanted cacophony of warning beeps from its various safety features didn’t help with the situation either.

    The vehicle also comes with tubular seats, which emphasize its racing theme and hold the driver in place during quick acceleration, but feel quite stiff on the passenger’s side.

    The interior has a clean, simple look with red stitching on the front seats that accentuates the sporty aesthetic. But the car will likely tire passengers during long-hour drives due to its tough and hardy feel.

    The sporty vehicle, however, maintains a competitive edge in safety as it comes loaded with a variety of smart features including forward collision warning and lane keeping assist in all its trims.

    While the various beeps that come in a range of pitches may be obtrusive, the lane keeping and changing features worked perfectly during the drive, as the steering wheel shifted on its own to steady the vehicle and issued alerts whenever a car was nearby when switching lanes.

    As for its exterior, the GT is a familiar offshoot of the original K3. It retains much of the original front design, but adds a touch of flair with subtle red accents in its signature Kia tiger-nose grille and 18-inch alloy wheels with an option of Michelin summer tires.

    The vehicle also keeps in touch with the utilitarian side of the original model, marking a return to foldable back seats that provide spacious room for storage.

    The original K3 has sold 37,125 units in the domestic market until October this year, 63 percent more than during the same period last year. The GT, offered either as a sedan or a hatchback, adds a sporty edge to Kia’s compact lineup, competing with Hyundai Motor’s high-performance offerings, such as the Avante Sport and the hatchback i30 N Line.

    “The K3 GT incorporates a powerful engine and technology optimized for high-speed driving to strengthen the driving performance,” said Kwon Hyug-ho, head of domestic sales at Kia Motors.

    The K3 GT starts at 19.93 million won ($17,800) and the entry hatchback version at 22.24 million won, compared to the 15.71 million won entry version of the 2019 K3 model.

    The competitive pricing puts pressure on Hyundai’s Avante Sport, which starts at 19.64 million won and the i30 N Line at 23.79 million won.

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  • Factories, tractors and robots benefit from 5G in Korea

    Factories, tractors and robots benefit from 5G in Korea

    All three of Korea’s mobile carriers launched their 5G networks on Saturday, the first day of December, officially kicking off an era of the high-speed network. SK Telecom started transmissions from its Bundang network management center in Seongnam, Gyeonggi; KT from its Gwacheon network control center in Gyeonggi; and LG U+ from Magok Science Park in western Seoul. All of the 5G networks operate on a 3.5-gigahertz (GHz) frequency band.

    5G boasts a 20 times faster data transmission speed than the currently prevailing fourth-generation long-term evolution (LTE). Its competitive edge lies in ultra-wide bandwidth, ultra-low latency and ultra-fast connectivity. Data transmission speed of 5G is more than 20 gigabytes per second (Gbps), meaning a 2.5-gigabyte ultra high-definition video can be downloaded in just one second.

    The network can currently only be accessed by corporate clients, not individual users. Businesses can use the card-shaped mobile routers to pick up the 5G network and convert it into super-fast Wi-Fi.

    Individual subscribers are expected to be able to start using 5G from March, when smartphone devices supporting the new network will become available. Samsung Electronics is expected to unveil its Galaxy S10 smartphone as early as February and may come up with two different versions: one supporting LTE and one that works on 5G.

    SK Telecom’s first 5G customer was Myunghwa, a product quality assessment firm in Banwol Industrial Complex in Ansan, Gyeonggi. The company is using the network to process ultra-high definition photos of auto components taken from different perspectives as the products are being moved on a conveyer belt. The images are transmitted using the 5G mobile router to a cloud server, where a high-performance artificial intelligence interface can instantly tell whether a product is faulty.

    SK Telecom also began test operations of its 5G autopilot vehicles in Hwaseong and Siheung, both in Gyeonggi. The vehicles are able to exchange information about their status while on the road with a control center and traffic lights dozens of times per second.

    KT celebrated the launch of its 5G network by having a robot as its first subscriber. The robot, called Lota, will be guiding visitors to the Seoul Sky observatory at Lotte World Tower in Songpa District, eastern Seoul.

    “We chose Lota to show that 5G doesn’t simply mean a generational shift, but will become a platform that will innovate our overall lives and industry,” said KT in a statement.

    KT plans to prioritize 24 major cities nationwide as well as key public transportation routes and university areas, where traffic demand is expected to be high, for 5G installation in the near future.

    LG U+’s first corporate customer is LS Mtron, an industrial machine developer based in Anyang, Gyeonggi. The two companies have jointly developed a 5G remote-controlled tractor, the first in Korea. LG U+ said 5G-based remote-controlled technologies may minimize human engagement in risky working environments, such as the removal of mines and industrial waste disposal.

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  • Vietnam needs more hotels as tourism blooms

    Vietnam needs more hotels as tourism blooms

    The “golden age of tourism” in Vietnam presents robust hotel development opportunities in Vietnam’s biggest cities. Troy Griffiths, deputy managing director of real estate consultant Savills, said Ho Chi Minh and Hanoi are “under-hoteled per population, per travel and per airlift capacity”.

    “Hotel is a particularly dynamic sector at the moment as Vietnam is experiencing a golden age of tourism, with international tourism rising 20-30 percent year-on-year and more Vietnamese travelling than any time before,” Griffiths said.

    “There’s a demand for five-star hotels which will be really a strong asset class for the future,” he added.

    As of November, 14.12 million foreigners visited the country, up 21.3 per cent year-on-year and exceeding last year’s 12.9 million, according to the General Statistics Office.

    South Koreans dominated the surge at 46.5 percent, followed by Hong Kong (32.8 percent), Finland (29.6 percent), mainland China (26.9 percent), Taiwan (15.6 percent), and Denmark (15.4 percent).

    In the same period, domestic travelers rose 20.91 percent.

    “Hanoi and HCMC had been pretty quiet in the past as they went through a bit of a bad phase, when international visitors would pass and go straight to Da Nang, Phu Quoc and Nha Trang.

    “Now we see they are actually coming to Hanoi and HCMC because they are both very charming cities for international tourists,” Griffiths said.

    “And their stay is lengthening. That means more five-star demand.”

    Vo Quoc Phuong Trang, head of hotel investment consultancy at real estate service firm Jones Lang LaSalle (JLL), also said that Hanoi and HCMC, with their steady economic and tourism growth, would continue to draw foreign investors in the high-end hotel segment, which Trang said has low risk but offers steady revenue.

    A report released in July this year by global consulting firm Grant Thornton stated that increasing numbers of well-to-do Vietnamese citizens are choosing to stay in five-star hotels and spend lavishly when they travel within the country.

    Vietnamese citizens accounted for 19.2 percent of 4-star and 5-star hotels guests in 2017, according to the report. Although this is a slight decrease from last year’s figure of 20.8 percent, the number of domestic guests staying at upscale hotels had increased for three consecutive years from 2014 to 2016.

    The country has seen a strong influx of international hotel brands and hotel management companies in the last few years. From 30 hotels with international brand names in 2010, the number had increased to 79 at the end of last year, according to Savills.

    There has been a particularly big jump this year with recent announcements by Mandarin Oriental and Movenpick in HCMC and Best Western Premier in the central province of Quang Binh, it said.

    The emergence of Vietnamese hotel operators is also a highlight in the local hospitality landscape.

    “Vietnamese hotel developers are also getting mature. They are acquiring international knowledge and becoming a really strong force in their own right as we have already seen across the resort cities with Vingroup, FLC, BIM and Sun Group,” Griffiths noted.

    Savills’ third-quarter report shows that the 5-star segment in Hanoi continued its strong performance in Q3 though the high travel season for foreign tourists lasts from the beginning of Q4 to April.

    Occupancy rate of five-star hotels in the capital city was highest, at about 80 percent, followed by four-star hotels (65 percent) and three-star hotels (59 percent).

    Average revenue of five-star hotels was $100/room/night, double that of four-star and three times that of three-star properties, the report said.

    Data said, ten out of 19 high-end hotels in the best locations in HCMC have foreign owners. These include Sheraton, Caravelle, InterContinental, Asiana Saigon, and Sofitel.

    In Hanoi, nine of 16 high-end hotels have foreign firms as major owners such as Melia, Sheraton, Sofitel Metropole, Nikko, and Pan Pacific being the major names.

  • Renault wants Posco auto steel in Morocco

    Renault wants Posco auto steel in Morocco

    French carmaker Renault has asked Korean steelmaker Posco to enter the Moroccan market and supply automotive steel, a person familiar with the issue said last Thursday. Renault approached the world’s fifth-largest steelmaker by output in early 2017 as part of its strategy to diversify its supply of steel, the source said, who asked not to be identified because he was not authorized to speak on the record about internal discussions.

    Renault relies on ArcelorMittal, the world’s largest steelmaker, for automotive steel.

    Posco has told Renault that the two sides will delay formal discussions on the issue, noting that it has no immediate plan to enter the North African country, said the person, who is in a position to know about the situation.

    “Posco could use Morocco as a gateway for exporting its steel products to Europe without tariffs as Morocco has a free trade agreement with the EU,” the person said.

    Last year Maghreb Steel, a Moroccan maker of flat steel products, asked Posco to invest in it and provide necessary technology.

    A Posco spokesman confirmed that Renault made the request and Posco reviewed it, but said Posco has not moved forward, citing market conditions.

    The official said he had no knowledge on Maghreb Steel’s request for Posco investment, and asked not to be named, citing policy.

    Officials of Renault and Maghreb Steel were not immediately available for comment.

    In July, the EU said it would impose tariffs of 25 percent on 23 categories of steel products if imports exceed a three-year average.

    The provisional safeguard measures – which can remain in place for a maximum of 200 days – are meant to protect the EU steel industry against a surge of imports following the U.S. imposition of tariffs on imports of steel and aluminum.

    The European Commission plans to make a final decision by early 2019, at the latest, and said definitive safeguard measures may be imposed if all conditions are met.

    Posco declined to give any details on its steel exports to the EU.

    Renault is the third-largest customer of Posco’s automotive steel, according to the person.

    Renault Samsung Motors – whose 79.9 percent stake is held by the French carmaker – uses Posco’s automotive steel for 99 percent of auto production at its plant in Korea’s southeastern port city of Busan.

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  • Food firms hope to feast on snack sales in Vietnam

    Food firms hope to feast on snack sales in Vietnam

    Vietnamese companies are hoping to make big bucks selling popular foods like fried chicken and crispy pork skin. Nguyen Ngoc An, general director of Vietnam Livestock Industry Company (Vissan), sees great potential in the snacks market. He is not referring to potato chips, but to fresh food made with chicken and pork.

    “Deep-fried pork skin, seaweed dried chicken and pha lau (pork meat and offal braised in a spiced stock) are favorite dishes among young people,” he said.

    “Such snacks will be a good source of revenue for the company in the near future.”

    Already in the market, Saigon Food JSC has released more than 10 fresh snack products, including rice paper pancakes, corn fried shrimps, and tamarind fried balut eggs, which are selling very well.

    Le Thi Thanh Lam, deputy general director of Saigon Food, said that the company’s products are sold at 7-Eleven convenience stores in Ho Chi Minh City.

    “In the near future, we will be exploring new product lines that fit the tastes of consumers to expand the snacks segment,” she said.

    A leading producer of poultry eggs, Ba Huan JSC has also latched on to this trend, launching a group of snack products including spicy chicken legs, skewers, sausages, and omega 3 flan.

    Pham Thanh Hung, deputy general director of the company, said these snacks are new to the market, but sales are quite high. Most of the products are sold in supermarkets or convenience stores. Spicy chicken legs are most liked, he said.

    Vinh Dat Food JSC, which introduced fresh snacks into the market before any of the above companies, said that initially, processed egg products such as balut egg stew, preserved black eggs and braised eggs saw slow consumption.

    But by 2017, explosive growth of this segment forced the company to invest in more production facilities to meet demand. In the coming months, the company will develop more soft-boiled egg products and wholesale various types of braised eggs to restaurants.

    The latest survey carried out by market research firm Decision La shows that on average Vietnamese youth spends VND13 trillion ($556.53 million) on snacks every month.

    And according to statistics by London-based market research firm Euromonitor, by the end of 2016, Vietnam had about 149,000 food kiosks on the streets, including mobile vans or fixed in front of houses, which earn about VND46.9 trillion ($2.01 billion) per year.

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  • SEA gives struggle to Dairy Farm International

    SEA gives struggle to Dairy Farm International

    “Significant challenges” across the Southeast Asian supermarket business are continuing to test Hong Kong-listed multi-format retailer Dairy Farm International. In a management statement discussing the company’s third-quarter performance – which did not include any figures – Dairy Farm said its businesses produced “mixed results” with a strong performance in health and beauty and good results from home furnishings and restaurants divisions. However, the performance of the Hong Kong supermarkets business has softened.

    The company said the Southeast Asian grocery store business – Cold Storage and Giant stores in Singapore and Malaysia – is expected to continue for the remainder of the year with the group’s full year results expected to be impacted by increasing costs from ongoing investment in technology, supply chain infrastructure, stores and people in order to improve the long-term performance of the business. Sales and profits fell in its supermarkets in both countries. Falling sales in Indonesia were mitigated by management action which resulted in reduced losses there.

    In North Asia, sales from the food businesses were slightly ahead of the same period last year, but profits were lower as a result of weakening margins and continued cost pressures, particularly from increased rents.

    However, the health and beauty businesses in Hong Kong and Macau (Guardian stores) delivered “strong sales and profit growth”.

    The Philippines food business showed good sales growth, benefitting from the opening of several new stores, but profit was slightly behind the prior year due to increased operating costs. There was continuing good sales and profit improvement in the group’s health and beauty businesses, notably in Malaysia and Indonesia.

    Ikea’s sales and profits were ahead of last year in Taiwan and Indonesia. In Hong Kong, sales were higher, supported by the new store which opened last year; however profits were lower as a result of higher operating costs.

    In Hong Kong, Maxim’s delivered another record-breaking mooncake sales performance during Mid-Autumn Festival, which was earlier than last year, and helped drive sales and profit higher during the period. Supermarket Yonghui reported strong sales growth in the quarter but profit was lower than the prior year due to investment in new formats and the additional costs of the new employee incentive scheme.

    Approval was received from the Philippines Competition Commission in August for the combination of Dairy Farm’s Food business in the Philippines with Robinsons Retail Holdings, with completion expected to take place within weeks.

    In early October Dairy Farm agreed to acquire the remaining 51 per cent interest in Rose Pharmacy in the Philippines, which is now subject to regulatory approvals.

    Dairy Farm, together with its associates and joint ventures, operate more than 7400 outlets, including supermarkets, hypermarkets, convenience stores, health and beauty stores, home furnishings stores and restaurants – employing more than 200,000 people. Total sales last year exceeded US$21 billion.

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  • Korea’s car companies discuss challenges

    Korea’s car companies discuss challenges

    Representatives of Korea’s major automakers and parts makers and industry officials gathered in Seoul Wednesday to discuss ways to breathe new life into the sluggish sector. The chief executives of the big five automakers — Hyundai Motor, Kia Motors, GM Korea, Renault Samsung and Ssangyong Motor — and their local parts makers and industry associations explored ways to tackle daunting challenges facing the industry.

    Korea’s auto industry is going through a hard time after GM Korea shut down its underutilized Gunsan plant in May, and Hyundai and Kia have been posting generally disappointing earnings this year.

    Small and medium-sized companies that make parts for the carmaker were more vulnerable to falling sales, with more than one-third of such Korean auto parts makers posting losses in the first half of this year, data by the think tank Korea Institute for Industrial Economics and Trade showed.

    They are also in the crosshairs as the United States is weighing slapping tariffs on foreign-made autos and auto parts on national security grounds.

    The participants called for the government to boost domestic demand, provide financial assistance to cash-strapped parts makers and lower regulations in emerging sectors, such as autonomous and electric vehicles.

    The automakers said they will seek ways to maintain over 4 million units in domestic car production and raise the number to 4.5 million by 2025.

    Hyundai Motor, the nation’s leading automaker, said it will invest 220 billion won ($193.8 million) over the next two years to develop an advanced lineup of its hydrogen-fuel electric car Nexo, with a goal of releasing over 30,000 units in the domestic market in 2022.

    GM Korea said it will hold trade shows to help its local contractors tap into the global market and supply 70 billion won in subsidies for small- and medium-sized contractors.

    Renault Samsung said it will operate a research and development fund worth 35 billion won by 2020 and form an alliance with Nissan and Mitsubishi to help its contractors make bids overseas.

    Ssangyong Motor promised to expand use of Korean-made parts and support its contractors in India.

    The Ministry of Trade, Industry and Energy said it will join industry efforts to overcome challenges and drive innovation in the sector.

    “If the auto industry and the government work together, we can come up with measures to deal with the hardship,” Industry Minister Sung Yun-mo said during a meeting with them.

    “We will gather opinions to prepare support measures, especially for parts manufacturers.”

    The ministry said it will unveil a comprehensive support package for the auto industry next month, which includes financial and R&D support as well as deregulatory measures.

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  • Chinese grocery market set for solid growth, says IGD

    Chinese grocery market set for solid growth, says IGD

    A report released by the international grocery research organisation IGD has forecast growth of 32.6 per cent in the Chinese grocery market by 2022, preserving its status as the largest grocery market in Asia. Grocery retail sales in China are set to rise to CNY 11.4 trillion (US$1.637 billion), more than India, Japan and Indonesia combined.

    The market is expected to see a CAGR of 5.8 per cent over the next five years, on par with Thailand but slower than markets such as India, Vietnam and Bangladesh, where the economy is growing faster.

    Globally, China will remain the second largest grocery market in the world by 2022, behind the US in terms of value.

    Shirley Zhu, programme director for IGD’s Asia-Pacific research, said China continues to be an exciting market to watch with its significant size and rapid growth. “Retailers with nationwide networks such as Sun Art, Yonghui, Walmart, CRV and Carrefour will reap rewards from ongoing expansion, partnerships with e-commerce players, improved efficiency and investment in small formats.

    “Similarly, e-commerce giants such as Alibaba and JD.com will see significant growth from both online and offline channels and become the second and third largest grocery retailers in China, respectively. Regional players such as NGS, Wumart and Bailian will continue on their journey of transformation and consolidation and focus on profitability.”

    Market share for hypermarkets and supermarkets will remain steady, close to 40 per cent of the market up until 2022. However, the supermarket channel will overtake hypermarkets as the largest sales channel with a market share of 20.7 per cent, says IGD.

    “Convenience will be the fastest-growing physical store channel”, said Zhu. “This will be driven by Alibaba and JD transforming traditional mom-and-pop stores, retailers opening smaller format stores and both local and overseas players expanding their networks through partnerships. Online and offline integration will drive online growth. As the fastest growing channel, we forecast online to contribute up to 11.1 per cent of sales in 2022.”

    Less than half of the grocery sales in China currently go through traditional trade. As the market continues to mature, traditional trade will keep losing share to modern trade, which currently accounts for about 57 per cent of total grocery retail sales and is predicted to grow to 66 per cent by 2022.

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  • Will Bangladesh’s garment industry survive?

    Will Bangladesh’s garment industry survive?

    Bangladesh is battling to keep its position as the world’s second-largest exporter of clothing after China, as it faces intensifying competition from Cambodia, Vietnam, Myanmar and now African countries like Ethiopia as global brands search for cheap labor.

    H&M, for instance, imports from an Ethiopian clothing factory it set up with Bangladeshi garment maker DBL.

    Japan’s Fast Retailing, operator of the Uniqlo casual clothing chain, is also eyeing a production base in the African country. Fast Retailing declined to comment for this story.

    The competitive pressure has sparked consolidation of what was once a mom-and-pop industry, reducing the number of factories 22% in the last five years to 4,560, according to the Bangladesh Garment Manufacturers & Exporters Association.

    Those who have survived gain market share, expand overseas and aim to go public.

    The industry is an engine behind the country’s more than 6% annual growth over the past decade.

    In the year ending in June, garment exports totaled $30.6 billion, up 8.8% and accounting for 83.5% of the country’s total exports, according to BGMEA.

    The country also increased its share of global clothes exports to 6.3% in 2016 from 4.0% in 2010, according to World Trade Organization data.

    But compared with China, which has a share of 34.5%, it is still a distant second along with countries like Vietnam, Italy and India.

    Labor in Bangladesh is still cheap.

    The average monthly wage is just $101, compared with $135 for Myanmar, $170 for Cambodia, $234 for Vietnam and $518 for China, according to surveys on select cities conducted by the Japan External Trade Organization between December 2017 and March 2018.

    But there are countries with even lower wages, such as Ethiopia with a monthly average wage of $50.

    Labor costs are rising across Asia, and Bangladesh is no exception.

    With general elections looming in December, the ruling Awami League has approved a 51% wage hike for garment workers, a decision that is weighing on the country’s garment industry.

    Companies operating in special economic zones, such as Universal Menswear, typically offer a 10% wage increase every year.

    But in election years, which come every five years, the government tends to promise more generous pay hikes.

    This has put the industry in a bind, as their Western customers, faced with online competition from Amazon and others, are demanding that prices be kept under control.

    Cost increases are not limited to labor.

    Garment makers in Bangladesh have been forced to make major investments in building safety, following a factory fire that killed 117 in November 2012 and the collapse of another known as Rana Plaza in April 2013, which left more than 1,100 dead. Since then, Western brands will not buy from Bangladeshi suppliers unless they are certified to be in compliance with stringent fire and building safety regulations.

    Factories in Bangladesh have grown in a haphazard fashion, some even operating on the upper floors of office or residential buildings.

    Western apparel makers feel more secure buying from countries like China and Vietnam, where manufacturing is better planned and organized.

    Today, most of the first-tier export-producing factories have been assessed for risk and have been improved or are in the process of being brought to a comfortable standard.

    A survey by McKinsey & Co. in 2013 found Bangladesh the No. 1 alternative to China as a manufacturing location.

    ILO’s Putiainen also says that Bangladesh could benefit as production leaves China due to cost and the U.S. trade dispute.

    But he added that global apparel brands will remain vigilant about the factory conditions in Bangladesh.

    Following the Rana Plaza accident, Ananta faced more price pressure from its customers, who demanded discounts in exchange for continuing to do business.

    That is one reason why Ananta, originally a jeans maker, is so keen to diversify into higher value-added items, such as men’s suits and lingerie.

    The strategy seems to be working. Annual sales have grown 20% to 30%. Sales in the current business year are projected at $300 million, up from $250 million in the previous year. Ananta aims for $1 billion dollars in sales within the next seven years.

    DBL, another Bangladeshi garment maker with an annual turnover of $450 million, is also branching out into sports wear and lingerie, according to company head M.A. Jabbar.

    DBL currently handles only cotton fabric, but “in the coming days, we are looking at man-made fiber,” Jabbar said.

    DBL is also adding upstream processes, such as spinning, dying, printing, fabric washing and embroidery production.

    Most garment makers in Bangladesh specialize in knitting operations, with fabrics and accessories imported mostly from China. With materials costs accounting for 65% to 70% of an item’s selling price, profit margin is razor-thin.

    “If Bangladesh focuses on the knitting business, it will eventually lose to even lower-cost producers like Ethiopia,” predicts Yoshiaki Kamiyama, senior researcher at the Japan Textiles Importers Association.

    “It has to innovate. It has to develop expertise other than just knitting.”