Exclusive: Top Japanese chip gear firm to honor U.S. blacklist of Chinese firms - executive - Reuters

TOKYO (Reuters) - Japan’s Tokyo Electron, the world’s No.3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters.

Chinese and U.S. flags are set up for a signing ceremony during a visit by U.S. Secretary of Transportation Elaine Chao at China's Ministry of Transport in Beijing, China April 27, 2018. REUTERS/Jason Lee

The decision shows how Washington’s effort to bar sales of technology to Chinese firms, including Huawei Technologies, is ensnaring non-American firms that are not obliged to follow U.S. law.

China, which is locked in a crippling trade war with the United States, is pushing to build its semiconductor industry to reduce its reliance on U.S., Japanese and European suppliers for chip-making machinery.

“We would not do businesses with Chinese clients with whom Applied Materials and Lam Research are barred from doing businesses,” the executive said, referring to the top U.S. chip equipment firms.

“It’s crucial for us that the U.S. government and industry see us as a fair company,” he said, citing Tokyo Electron’s long U.S. partnership since the 1960s, when it started off as an importer of U.S. equipment.

He did not want to be named given the sensitivity of the matter. Applied Materials and Lam Research declined to comment.

Another major Japanese chip equipment supplier is also considering halting shipments to blacklisted Chinese firms, a person familiar with the matter said.

“The issue is beyond something we can decide on our own,” said the person, who also declined to be identified.

Executives at other equipment suppliers said they were communicating closely with the Japanese industry ministry.

“We haven’t received any specific instructions from the ministry,” one of the executives said. “We are aware that we could be in deep trouble if we take advantage of the U.S. export ban to expand businesses with China.”

DIFFICULT TO REPLACE U.S. RIVALS

The Tokyo Electron executive did not specify the names of the Chinese clients, but state-backed memory chipmaker Fujian Jinhua Integrated Circuit Co is currently on a list of entities that cannot buy technology goods from U.S. firms.

Fujian Jinhua did not respond to an emailed request for comment. A handful of other Chinese companies and research institutions are on a ‘red list’ that U.S. companies have been advised to avoid.

Huawei’s chip arm, HiSilicon, is a so-called fabless company focusing on chip design and thus is not normally a buyer of chip-manufacturing gear. But Huawei also faces major risks from non-U.S. suppliers adhering to the U.S. blacklist.

British chip designer ARM, owned by Japan’s SoftBank, has halted relations with Huawei, potentially crippling the Chinese company’s ability to make new chips for its future smartphones.

But Taiwan Semiconductor Manufacturing Co, global leader in chip production and maker of many Huawei chips, has said it would continue to be a supplier to Huawei.

U.S. law specifies that any product comprising 25% or more U.S. content is subject to the U.S. export control restrictions.

But the Japanese chip equipment executives did not cite that as a reason for cutting off supplies to some Chinese companies.

“It’s not impossible for Japanese companies like Tokyo Electron to replace their U.S. rivals and complete production lines for China,” an executive at a U.S. chipmaker said. “But in reality, that’s very difficult considering a U.S. backlash.”

CHINA CHIP TECHNOLOGY LAGS

Five Japanese companies rank among the world’s top 10 chip equipment firms. The highly specialized chip equipment industry is relatively small, but the gear is strategically critical for all semiconductor manufacturers.

Making chips involves numerous processes that require different types of equipment. Each market segment is typically dominated by just a few players.

Tokyo Electron controls nearly 90% of the market for microchip coaters and developers. It competes directly with Applied Materials and Lam Research in some segments.

Beijing has been investing heavily to grow domestic chip equipment suppliers as part of an effort to achieve its goal of producing 70% of the semiconductors it uses by 2025.

But industry sources say technologies at those suppliers are still far behind, leaving China dependent on imported equipment.

Today, only 16% of the semiconductors used in China are produced in-country, half of which are made by Chinese firms, according to the Center for Strategic and International Studies, a Washington-based think tank.

But aggressive investments by local chipmakers and foreign players like Samsung Electronics made China the world’s No.2 market for chip equipment last year.

Many chip equipment manufacturers are forecasting substantial profit drops this year as the China-U.S. trade war dampens demand for chips and chip equipment globally.

Reporting by Makiko Yamazaki; additional reporting by Stephen Nellis in San Francisco, Editing by Jonathan Weber and Himani Sarkar

Our Standards:The Thomson Reuters Trust Principles.

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https://www.reuters.com/article/us-usa-trade-china-semiconductors-exclus/exclusive-top-japanese-chip-gear-firm-to-honor-u-s-blacklist-of-chinese-firms-executive-idUSKCN1TC0H6

2019-06-11 06:14:00Z
CAIiEM6JDkq-0MuOzoBvYMiKUBcqFAgEKg0IACoGCAowt6AMMLAmMOpn

Asia stocks rise as policy tweaks boost China markets - Investing.com

© Reuters. A man looks on in front of an electronic board showing stock information at a brokerage house in Nanjing

By Shinichi Saoshiro

TOKYO (Reuters) - Asian stocks gained on Tuesday, led by Chinese shares after Beijing eased financing rules to boost local government spending on public works, and bolstered by investor relief following a U.S. decision to hold off import tariffs on Mexico.

Hopes that U.S. interest rates will be cut as early as next week have also provided broader support.

In early European trade, the pan-region were up 0.06%, German gained 0.04% and futures added 0.14%.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.8%.

The climbed 2% after China said on Monday that it would allow local governments to use proceeds from special bonds as capital for major investment projects in a bid to support the slowing economy.

Australian stocks rose 1.5%, South Korea's added 0.55% and Japan's edged up 0.3%.

U.S. stocks extended their recent climb on Monday, with the rising for the sixth trading day.

Relief that the United States had stepped back from an immediate imposition of tariffs on Mexico encouraged buyers, though U.S. Secretary of State Mike Pompeo warned the United States could still slap tariffs on Mexico if not enough progress was made on its commitment to stem illegal immigration. ()

While global markets have been given some reprieve, fresh U.S. trade threats against China were seen limiting any major boost to investor sentiment.

U.S. President Donald Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade talks with Chinese President Xi Jinping at the G20 summit.

The U.S. president has repeatedly said he expected to meet Xi at the June 28-29 summit in Osaka, Japan, although China is yet to confirm any such meeting.

"The lift from the U.S.-Mexico trade development is likely to be a temporary one for the equity markets as the bigger issue between the United States and China remains unresolved," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

"Nervousness will prevail in the markets until the G20 summit. And there is no guarantee that matters will improve even if the U.S. and Chinese leaders meet at the summit."

Tensions between Washington and Beijing rose sharply in May after the Trump administration accused China of having reneged on promises to make structural economic changes during months of trade talks.

Investors worry that the conflict could prompt China to retaliate by putting U.S. companies on a blacklist or banning exports to the United States of rare earth metals. China accounts for roughly 80% of U.S. rare earths supply which are essential for high-tech goods.

(GRAPHIC: Rare earth production - https://tmsnrt.rs/2I9MfL5)

In the currency markets, the dollar extended gains it made against its peers in the wake of Friday's agreement between the United States and Mexico.

The against a basket of six major currencies was a shade higher at 96.774 after advancing 0.2% on Monday.

The dollar was up 0.15% at 108.600 yen and the euro was steady at $1.1315 following a loss of 0.2% the previous day.

The benchmark U.S. Treasury 10-year yield stretched an overnight spike and touched an 11-day peak of 2.157%. The yield had risen about 6 basis points on Monday as the U.S.-Mexico deal boosted risk appetite and curbed investor demand for safe-haven government debt.

The Treasury market has experienced volatility over the past week, with the 10-year yield having fallen to a near two-year low of 2.053% on Friday after a soft U.S. jobs report raised expectations for an interest rate cut by the Federal Reserve.

The prospect of the central bank lowering rates this year had already risen earlier last week after a number of Fed officials including Chairman Jerome Powell hinted they were open to easing monetary policy.

Market focus was on the Fed's next policy meeting on June 18-19 and what kind of signals the central bank could use to provide regarding monetary policy direction.

"While it easy to focus on the potential reaction should the Fed not meet the market pricing, a world where the Fed signals an intent to ease married with a better feel to U.S.-Sino relations, is a world where traders take additional risk," wrote Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone.

U.S. West Texas Intermediate (WTI) futures were up 0.58% at $53.57 per barrel, finding some traction after sliding the previous day.

Crude oil fell on Monday, with U.S. futures losing 1.3%, as major producers Saudi Arabia and Russia had yet to agree on extending an output-cutting deal and with U.S.-China trade tensions continuing to threaten demand for the commodity. [O/R]

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2019-06-11 05:55:00Z
CBMibmh0dHBzOi8vd3d3LmludmVzdGluZy5jb20vbmV3cy9zdG9jay1tYXJrZXQtbmV3cy9hc2lhLXN0b2Nrcy1yaXNlLWFzLXBvbGljeS10d2Vha3MtYm9vc3QtY2hpbmEtbWFya2V0cy0xODkzODE30gEA

Hudson’s Bay stock jumps after group makes cash bid for company shares - Global News

Hudson’s Bay Co. stock was up 42 per cent Monday after a group of shareholders, including executive chairman Richard Baker, proposed taking the retailer private once it completes the sale of its remaining German holdings for $1.5 billion.The group, which holds a 57 per cent stake in HBC, is offering $9.45 per share in cash to other investors — the same price paid by one of Baker’s entities to the Ontario Teachers’ Pension Plan in January.Story continues belowREAD MORE: All Home Outfitters locations in Canada to close, HBC says“While we continue to believe in HBC’s long-term potential, it has become clear that the significant challenges, risks and uncertainties facing HBC in the rapidly evolving retail environment are best addressed in a private market setting,” Baker said in a statement.“Our all-cash proposal would provide HBC’s public shareholders the ability to realize immediate and certain value for their shares at a substantial premium while transferring the risks and uncertainties facing HBC to the continuing shareholders.”HBC shares, which ended last week at a record-low close of $6.37, have been falling in recent years as the company has struggled to keep up with a changing retail environment.The shares traded for $9.20 by late-morning Monday, after hitting a 2019 intraday high of $9.40 earlier in the day.WATCH: Hudson’s Bay signs deal to sell Vancouver location

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June 10, 2019 at 08:31PM

Canfor announces significant temporary reductions in production capacity in B.C. - CBC.ca

Canfor Corporation has announced it will be "significantly" curtailing operations at all of its B.C.'s sawmills, except Wynnwood, for two to six weeks.

The announcement comes less than a week after the corporation announced it would be permanently closing the Vavenby sawmill in July, affecting 172 jobs.

According to a written statement from the company, the majority of mills will be curtailed for two weeks, with extended curtailments of four weeks at Houston and Plateau, and six weeks at Mackenzie.

The curtailments are scheduled to run from June 17 through July 26.

"The curtailments are due to very poor lumber markets and the high cost of fibre, which are making the operating conditions in B.C. uneconomic," the statement reads in part.

The curtailments will reduce Canfor's production output by approximately 200 million board feet — a unit of measurement used to quantify lumber in the U.S. and Canada.

Following the previously announced closure of Vavenby in July, Canfor will have 12 sawmills in Canada, with total annual capacity of approximately 3.55 billion board feet.

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June 11, 2019 at 08:09AM

'They can’t flood the market or they will crush the price': Tilray’s deal with Privateer explained - Financial Post

B.C.-based cannabis producer Tilray Inc. is planning to merge with its biggest shareholder, Privateer Holdings, in order to facilitate the controlled release of Privateer’s stake onto the public markets.

The complex transaction will ultimately see Privateer divest from all its holdings and become a shell entity, with its major shareholders directly receiving Tilray stock in a “tax efficient” way.

News of the merger and extended lock-up sent Tilray’s share price, which closed Friday at US$38.80, soaring by almost 15 per cent in the first few hours of morning trading.

“Privateer will disappear. Tilray will have a group of shareholders that own much of the stock for the next one year, and then there’ll be a slow release of stock onto the market in the second year following the merger,” said Michael McCloskey, who was formerly invested in Tilray through his investment firm GreensKeeper Asset Management.

The transaction involves the reorganization of 75 million shares — 77 per cent of Tilray’s total share base — that are currently owned by Privateer, a Peter Thiel-backed private equity firm founded by Tilray CEO Brendan Kennedy.

“Privateer’s problem is that it holds most of the company, so they can’t flood the market or they will crush the price. So the longer they can draw out the period that they can sell, it will take selling pressure off the stock, which is what we had been seeing until today,” McCloskey said.

Privateer had promised investors that it would not sell Tilray shares until the second half of 2019, following the expiration of a lock-up period in January this year.

But over the past six months, Tilray has seen its stock price erode dramatically — the shares are now worth half what they were worth in mid-January. They are also trading at just a fraction of the US$300 level they reached during frenzied trading last fall.

In the first year following the closing of the merger with Privateer, some of Tilray stock will be released only to institutional investors through block trades, or via stock sales to strategic investors, at the discretion of Tilray, according to a company press release.

“The biggest problem with Tilray’s stock has always been its cap structure and that small float. You just never knew when Privateer was going to flood the market with stock,” said Khurram Malik, Partner and Head of Research at Jacob Capital Management.

“So these lock-up extensions, and orderly release of shares will ensure that investors are not going to be caught off guard with the stock price. I’d say if this merger, and the eventual exit of Privateer from this structure makes Tilray much more on par with its peers, equity-wise,” Malik said.

Tilray’s chief financial officer Mark Castaneda said in this morning’s press release that the transaction “will give Tilray greater control and operating flexibility, while allowing us to effectively manage our public float.”

The conditional release of Tilray’s stock to certain chosen institutional investors could potentially pave the way for major alcohol, tobacco and pharmaceutical companies to become key partners in the pot firm, Castaneda hinted, in an interview with Bloomberg News. Tilray currently has a $100 million joint-venture agreement with European brewer Anheuser-Busch InBev to research and make cannabis-infused non-alcoholic drinks for the Canadian market.

Tilray has been the target of short sellers since its public debut — its small float did not help, and the company’s stock experienced sharp swings in volatility for the first three months of trading on the Nasdaq. Tilray’s most recent quarterly earnings have also failed to impress investors, contributing in part to the steady six-month selloff.

“The basis of the short thesis on this company is that there’s just been too much of an overhang with Privateer’s ownership. Tilray guys are taking away that factor, so the stock might stabilize. But I still think the company is grossly overvalued, and we’re going to see constant selling pressure,” McCloskey predicted.

The merger, and extension of the lock-up is still subject to a shareholder vote, which will take place “as expeditiously as possible,” according to the company.

• Email: vsubramaniam@postmedia.com | Twitter: VanmalaS

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June 11, 2019 at 02:45AM

OPEC's Struggle To Avoid $40 Oil | OilPrice.com - OilPrice.com

A few weeks ago, OPEC+ was mulling the possibility of exiting the production cut agreement because the oil market was at risk of over-tightening. Now Saudi Arabia is scrambling to extend the cuts and may even unilaterally lower its own production further in an effort to head off a price slide.

On Monday, officials from Saudi Arabia and Russia reportedly discussed a possible scenario in which oil prices crashed below $40 per barrel, a recognition that the market has rapidly deteriorated. They view that outcome as a possibility if they can’t agree on an extension. “Today there are big risks of oversupply,” Russian Energy Minister Alexander Novak said in Moscow after meeting with Saudi oil minister Khalid al-Falih. “We’ve agreed that we need to run a deeper analysis and to see how events unfold in June.”

Russian President Vladimir Putin seemed to fuel speculation of a rift in Vienna in comments to Interfax news last week. “Of course Saudi Arabia wants oil prices to remain higher,” the Interfax news agency quoted Mr. Putin as saying. “But we have no such need due to the more diversified nature of the Russian economy.”

The Saudis, of course, are desperate to prevent such a downward spiral. “Both at the bilateral and the OPEC+ level, we work in order to take preventive steps so as not to allow that scenario to happen,” al-Falih said in Moscow. He is undoubtedly trying to convince Novak of the wisdom of extending the production cuts. Perhaps to sweeten the pot, Saudi Arabia is considering investments in “multiple” projects in Russia, including the Arctic LNG 2 gas project, a stake in Russian petrochemical company Sibur Holding, along with other projects in partnership with Gazprom and Rosneft, Bloomberg reports. Related: Platts: OPEC Oil Production Slumps With Saudis Cutting Deeper

The outlook for the oil market has darkened rather quickly. Less than a month ago, the IEA predicted a rather significant supply deficit in the second quarter even as it acknowledged some cracks in demand. But since then things have seemingly taken a turn for the worse, with oil posting its worst month since the financial crisis.

A growing number of analysts are drawing up downbeat assessments for the oil market next year. “The balances for 2020 were already worrisome, and the downgrade in demand we are contemplating put them potentially in the ugly category,” Roger Diwan of IHS Markit Ltd. told Bloomberg. Notably, top analysts see a supply surplus next year even if output from Iran and Venezuela fails to rebound. For instance, S&P Global Platts, as of now, estimates a surplus of 400,000 bpd in 2020, while the EIA puts the glut at a more modest 100,000 bpd. IHS Markit sees a whopping 800,000-bpd surplus.

The reason is that demand is cratering and U.S. shale is still expected to grow. “There is growing evidence of a sharper-than-expected slowdown in demand,” said Martijn Rats, oil analyst at Morgan Stanley, according to Bloomberg. The U.S.-China trade war has dramatically increased concerns about an economic slowdown.

The global economy is decelerating, with manufacturing activity around the world slowing down, a sure sign of an economy hitting some bumps. “You’ve suddenly got all sorts of countries around the world seeing their manufacturing indexes fall into contraction territory. That’s going to be bad for demand,” Bill O’Grady, chief market strategist at Confluence Investment Management, said in a Wall Street Journal interview. Related: Russian Energy Minister: Oil Could Still Drop To $30

But assuming OPEC+ decides to extend the production cuts, the group will go a long way in guarding against a more dramatic selloff, even if it requires ongoing sacrifice on their part. “The weak economic data and widening trade conflict have made for a gloomier demand outlook. In response, we have revised our third-quarter forecast for Brent down to $66 (previously $73),” Commerzbank wrote in a note. “We are leaving our year’s end forecast of $70 unchanged…This is because we are convinced that OPEC and Russia will do everything in their power to prevent an oversupply and to ensure higher prices.”

The bank noted that while Putin is skeptical of letting prices rise too far, and is generally satisfied with prices in their current range, he has also indicated that Russia and OPEC would make a joint decision. “This suggests that Russia will take part in a production cut agreement beyond mid-year,” Commerzbank concluded.

Saudi Arabia may go further. After the U.S. announced no new waivers for countries buying Iranian oil, there was speculation that Riyadh would decide to boost output, perhaps by as much as 400,000 or 500,000 bpd. But with the recent weakening of the market, that’s now off the table. Instead, Saudi Arabia trimmed output by 120,000 bpd in May from a month earlier. The Saudis “could potentially even take production lower,” Helima Croft of RBC Capital Markets told the WSJ.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:

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June 11, 2019 at 06:00AM

Housing starts drop 13 per cent in May - The Globe and Mail