BusinessDay 24 May 2017

Wednesday 24 May 2017
C002D5556
BUSINESS DAY
A7
China nearly doubles tax on some
sugar imports to 95%
LUCY CRAYMER
Read Ambitiously
OPEC’s Foil: It can’t drain enough stored oil
to siphon off over 300 million barrels
GEORGI KANTCHEV, SARAH MCFARLANE &
of crude oil from OECD stocks, which
BENOIT FAUCON
reached record highs of over 3 billion
barrels last year.
OPEC is likely to extend and
But OECD stocks continued increasing
in early 2017 and fell in March
perhaps even deepen its
production cuts on Thursday
for one main reason: It
to the International Energy Agency, a
by just 32 million barrels, according
has failed to drain superhigh levels of
global adviser to oil-consuming places
oil in storage enough to raise prices
such as the U.S., India and Europe.
significantly.
Even if the OPEC and non-OPEC cuts
On Sunday, Khalid al-Falih, energy
are extended into the second half of
minister for the Organization of the
2017, stocks won’t draw down to the
Petroleum Exporting Countries’ top
five-year average this year, the IEA said.
producer, Saudi Arabia, said OPEC and
An OPEC official said the group’s
its production-cutting allies need to
plan was beginning to work and merely
keep holding back output for another
needed more time.
nine months. The group’s top leaders
“Stocks are now coming down,” the
meet in Vienna on Thursday to make
maneuver by OPEC,” said Antoine of the $60 a barrel target that Saudi official said.
a decision.
Halff, senior researcher at Columbia Arabia wants.
The official said OPEC was also
“We are all ready to consider other
University’s Center on Global Energy OPEC leaders say they want to concerned about high inventories in
creative suggestions that may emerge
Policy. “By choosing a storage target, reduce storage levels in the Organization
for Economic Cooperation and nomic crisis depressed demand and
2008 and 2009, when the global eco-
to between now and May 25,” Mr. Falih
they set themselves up for failure.”
told reporters in Riyadh.
Almost six months after OPEC’s 13 Development—a club of industrialized prices, sending storage levels higher.
OPEC’s predicament underscores
members and 11 other heavyweight countries like the U.S.—to a five-year Storage levels eventually fell, and prices
the powerful role global oil inventories
producers pledged to cut around 2% of average. About 550 million barrels rose, in 2009 as the crisis abated and oil
now play, after years of being a technical
detail that some traders ignored.
global oil supply, stored crude has only of crude and oil products have been demand growth returned.
recently begun falling and remains at added to the world’s stocks since OPEC focus on storage levels came
With more data available than ever, oil
historically high levels. Oil prices were 2014, when prices began crashing, after the cartel was humbled by U.S.
storage has joined shale production as
up almost 1% at $51.12 a barrel on said Christopher Bake, a member of shale production’s ability to withstand
a symbol of a global glut of crude that
Monday but remain below the levels the executive committee at the world’s low prices. Now the group has found
has knocked OPEC on its heels.
reached in the days after the production
cut’s announcement and short OPEC leaders have said they want is also
largest oil trader Vitol Group.
that its power to flush oil out of storage
“The production deal was a risky
limited.
Beijing is nearly doubling
its tax on some imported
sugar—further weighing on
one of the worst-performing
commodities of 2017.
Saying that an investigation had
found that imports have seriously
damaged China’s sugar industry, the
Ministry of Commerce said the tax on
imports beyond the first 1.95 million
tons a year will be raised to 95% from
the current 50%, effective immediately.
After a year, the rate will fall to 90%;
after two years, to 85%. The tax on the
first 1.95 million tons will remain 15%.
China is the world’s largest sugar
importer. Combined official and illegal
imports rose 60% in the three years
through Sept. 30, the U.S. Department
of Agriculture estimates. Official imports
for the current crop year, ending
Sept. 30, were projected to reach 3.5
million tons.
Sugar prices in China, whose production
is barely half of consumption,
are more than double the global
price—making it profitable to import
even with a 50% tariff. But the tax
increase “is going to disincentivize imports,”
said Charles Clack, a sugar analyst
at Rabobank, making importing
sugar a lot less competitive compared
with growing domestically. Sugar production
in China is less mechanized,
and hence more expensive, than in
much of the world.
Chinese imports of the animal feed
dried distillers grains fell by half in
2016, after Beijing imposed new tariffs
following a dumping investigation.
It is a testy time for international
trade. China’s announcement of a
sugar investigation last September
came barely a week after the U.S.
challenged China at the World Trade
Organization over its support program
for wheat, rice and corn growers. There
is a longstanding dispute between the
U.S. and Mexico over whether Mexico
dumps subsidized sugar in the U.S.
market.
Growing Chinese demand for
foreign sugar—primarily from Brazil,
the world’s biggest producer—has
become a major price driver in recent
years. In the year ended Sept. 30, global
prices surged 67% partly due to a sharp
rise in illegal imports to China from
Myanmar, which tightened global
supplies.
Nokia and apple move from courtroom
foes to business partners
DOMINIC CHOPPING
Nokia Corp. NOK 0.49%
and Apple Inc. AAPL
0.61% have settled longrunning
intellectual
property disputes and agreed to a
multiyear patent license, moving
from courtroom foes to business
partners.
Financial details of the deal
weren’t disclosed, but Nokia
will receive an upfront cash payment
from Apple, with additional
revenue during the term of the
agreement.
The companies said Tuesday
that Nokia will provide certain
network infrastructure products
and services to Apple while Apple
will resume carrying Nokia digital
health products in Apple retail and
online stores. They will also jointly
explore future collaboration in
digital health initiatives.
“This is a meaningful agreement
between Nokia and Apple,”
said Maria Varsellona, chief legal
officer at Nokia, responsible for
Nokia’s patent licensing business.
“It moves our relationship with
Apple from being adversaries in
court to business partners working
for the benefit of our customers.”
Shares in Nokia rose nearly 6%
in early trading.
At the end of last year Nokia
confirmed it had filed actions in
11 countries in total, saying Apple
violated 40 of its patents covering
technologies such as display,
user interface, software, antenna,
chipsets and video coding.
At the same time, Apple filed a
suit in the U.S. District Court for
the Northern District of California,
arguing that Nokia excluded some
patents from that agreement and
transferred them to third-party
companies “to be used for extorting
excessive royalties” from
Apple. It asked the court to award
damages and rule that Nokia
breached its contract.
Bundesbank head says ECB
needs to be ready to rein
in stimulus
TOM FAIRLESS
The European Central Bank
shouldn’t wait too long before
withdrawing its large
monetary stimulus, German
central-bank president Jens Weidmann
warned on Monday, wading
into a debate over how quickly the
ECB should signal a policy shift.
Pressure has been building in
Northern Europe for a policy change
from Frankfurt as the region’s economy
picks up. Eurozone inflation
recently jumped to 1.9%, within the
ECB’s target range, after languishing
close to zero for years.
But top ECB officials have yet
to signal they are ready to change
course and start winding down
their €60 billion-a-month bondpurchase
program, known as quantitative
easing or QE. ECB President
Mario Draghi says the topic hasn’t
even been discussed by the bank’s
25-member governing council.
Speaking in the German city of
Bochum, Mr. Weidmann argued
that the ECB’s easy-money policies
are currently appropriate because
underlying inflation in the 19-nation
eurozone—excluding volatile food
and energy prices—remains weak.
If the region’s economic recovery
continues, however, the ECB “will
move closer toward normalizing”
its policy mix, the Bundesbank
president said.
“It’s important that the central
bank tightens policy again when
that’s required for controlling inflation,”
Mr. Weidmann said.
The Bundesbank president has
been the most outspoken internal
critic of the ECB’s massive bondpurchase
program, which is aimed
at supporting growth and inflation in
the currency bloc. He reiterated that
criticism on Monday, arguing that
bond purchases blur the boundary
between fiscal and monetary policy.
In particular, the ECB shouldn’t
delay changing its policy mix because
governments want to keep
their borrowing costs low, he said.
Still, Mr. Weidmann argued it
was “indisputable” that the ECB’s
easy-money policies are currently
appropriate, even if there are different
opinions about the right level of
stimulus and the choice of instruments.
Over the long term, though, easymoney
policies generate risks for
the stability of the financial system
by undermining the profitability
of banks and potentially creating
financial bubbles, he warned.