In Tuesday's UK papers

20 September 2005 08:03  [Source: ICIS news]

A summary of political, economic, trade, business and product news affecting the chemical and related industries.

 

International Economics and Politics

 

Cut taxes to compete with Asia, say researchers

The leading industrial economies need to reform their corporate tax systems by reducing taxes on capital to attract new investment if they are to overcome Asian countries' advantage in labour costs, a study by a Canadian research group concludes.

The CD Howe Institute says while taxes in such countries as the US, the UK and Germany may appear low relative to the size of their economies, the structure of their tax regimes is a serious disincentive to capital investment. "Heavy taxes on investment discourage businesses from buying the new-vintage capital and latest technologies that improve labour productivity," the study concludes.

It notes that in assessing the corporate tax burden it is important to take into account differing rules on depreciation, inventory costs and other business taxes, including sales taxes, financial transaction taxes and other levies on investment.

Financial Times page 12

 

ECB chief rules out interest rate cuts

Jean-Claude Trichet, president of the European Central Bank (ECB), further dampened expectations of any cut in eurozone interest rates, saying that they were already "extremely low".

The Times page 42 (Need to Know)

 

Euro hit by German election stalemate

The euro fell to a seven-week low against the dollar on Monday after Germany's election ended in a stalemate, casting doubt over the country's ability to enact the policy changes needed to bolster economic growth.

Angela Merkel, Christian Democratic Union (CDU) leader, and her rival Chancellor Gerhard Schroder of the Social Democratic Party (SPD) both claimed the right to form a government after the unprecedented poll outcome left the two parties with an almost equal number of seats in parliament.

There are expected to be extended talks taking place about potential coalitions which are likely to increase uncertainty over the pace and direction of the country's economic policy. Economists have already interpreted the outcome of the poll as a clear rejection of Merkel's reform programme. One possibility remains a grand coalition between the SPD and CDU but Elga Bartsch, economist at Morgan Stanley, said such an alliance would probably "lead to reform deadlock".

The failure of Merkel to land a decisive victory has been seen as a disappointment for the wider issue of economic reform of the European Union (EU). Tony Blair, the British prime minister, had hoped to use the UK presidency of the EU to promote economic reform and the reshaping of Europe's social model. Blair was counting on Merkel winning a solid mandate for reform in Germany to send a signal to other European countries on the need for deep supply-side changes.

The Times page 8/9

The Independent page 63

Financial Times page 1, 10 -11, 18, 19, 20 (Lex), 21, 30

The Daily Telegraph page 18

The Guardian page 16, 17, 23 (Notebook)

 

EC to scold UK for budget deficit

The European Commission (EC) is poised to embarrass the UK government tomorrow (Wednesday) over the worsening state of the UK's public finances. It is set to rebuke it for breaching a ceiling of 3% of GDP (gross domestc product) on state borrowing under the EU stability and growth pact in 2004-05. Brussels expects London to borrow above the ceiling for four years in a row, with a breach also projected this financial year and next financial year.

Separately, the pound fell to its lowest level against the dollar for three weeks after Steve Nickell, of the Bank of England's monetary policy committee (MPC), said that there is a "serious risk" that the UK economy may not recover as strongly as suggested by Bank forecasts. His remarks combined with comments recently by David Walton, another MPC member, to keep alive speculation over further cuts in UK interest rates.

The Times page 42 (Need to Know), 48

Financial Times page 2

 

French minister defends protectionist stance

Thierry Breton, France's finance minister, has sought to allay concerns about rising protectionist rhetoric in his country by saying that Paris was following the lead of the US in promoting economic patriotism and defending strategically important companies.

Amid a political controversy about the threat of foreign takeovers of French companies, Breton said the government was still finalising its list of strategic sectors but that it would not be limited to defence and national security.

Last week, Charlie McCreevy, the European Union's (EU) internal market commissioner, warned that he would sue the French government if it tried to block foreign takeovers without proper justification. His remarks follow the publication of preliminary proposals from the French government to defend 10 industrial sectors.

Financial Times page 12

 

Bigger role for Asia urged in IMF decisions

Asian governments needed to be given a greater say in the International Monetary Fund's (IMF) decision-making if the institution was to remain relevant, Rodrigo Rato, the fund's managing-director, said on Monday.

He singled out Asia as a region "whose place in the world economy has grown far more than its role in the fund". His report said that the IMF had been spread in too many directions by demands of its members. It also needs to ensure that its "surveillance" of member country economies is directed to the most relevant policy questions rather than "cover-the-waterfront" reporting. The IMF also needs to cut down overlap between its work and that of the World Bank and streamline its internal bureaucratic procedures.

Financial Times page 12

 

Trade

 

Mandelson fires off protectionist warning

Peter Mandelson gave warning of the dangers of protectionism on Monday and challenged the European Union's (EU) partners to make offers that would ensure the success of a new round of trade talks this year.

The European trade commissioner's comments were designed to inject much-needed impetus into the World Trade Organisation (WTO) talks, which face a crucial meeting in Hong Kong before Christmas.

He conceded that the 25 EU countries had to do their share of the "heavy lifting" to ensure agreement, but he emphasised that no longer would they accept a situation where their moves were simply "pocketed without parallel moves by others". He said that the EU was prepared to take action against partners that failed to respect international rules. Those ignoring European companies' intellectual property rights would face sanctions, while any refusal to open up their public procurement markets would prevent them bidding for EU contracts.

The Times page 52

Financial Times page 12

 

Pharmaceuticals

 

GSK pulls trial on HIV/Aids drug

GlaxoSmithKline (GSK) ha suffered a serious setback in its race to develop a new type of HIV/Aids drug that stops the virus from entering human cells.

The British pharmaceutical giant has suspended a key trial of Aplaviroc on patients who have never taken Aids medicines before, after uncovering serious liver problems among two patients testing the drug.

The Times page 47

 

Energy

 

Oil driven up by hurricane fear

Crude oil prices surged $3.65 to $66.65 a barrel on the New York Mercantile Exchange (Nymex) as fears grew that a second hurricane was heading towards the Gulf of Mexico.

Chevron and Shell have announced precautionary evacuations of Gulf facilities, as conducted three weeks ago before Hurricane Katrina, after which oil production still remains down 56% and natural gas output down by 34%.

Oil prices were also responding to an offer by the oil cartel Opec to put its remaining spare capacity up for sale. The offer did not meet with much enthusiasm because it is felt refinery capability rather than supply is the real problem.

The Times page 37

The Independent page 63

Financial Times page 1, 12, 25, 29, 30, 44, 45, 46

The Daily Telegraph page 36

The Guardian page 24

 

Russian oil groups agree to price freeze

Russia's six biggest oil companies promised to freeze the domestic price of oil products until the end of the year after a meeting with Viktor Khristenko, the country's minister of industry and energy.

The government insisted the move was simply a "goodwill" gesture by the oil companies and not part of any wider political deal. However, the offer appeared to be part of negotiations between the oil industry and the government to ease the tax burden that currently takes away the benefits of high oil prices to the companies. Russian oil companies have been lobbying the government to introduce tax holidays for developing new fields, which need large investment, and to decouple the natural resources tax from the world oil prices. At present the tax paid by Russian companies on oil production is linked to the world oil prices regardless of where the oil is sold.

Financial Times page 12

 

Company News and Results

 

Dyno Nobel sold to Australian combo

An Australian team of Macquarie Bank and chemicals group Orica, the world's leading commercial explosives maker, on Monday announced a winning bid of US$1.7bn (Euro1.40bn) in the auction of Norway's Dyno Nobel.

Dyno Nobel is the number two commercial explosives company founded by dynamite inventor Alfred Nobel. The company was put up for sale this year by Industri Kapital, the Swedish-based private equity firm that took the business private in 1999.

Orica's acquisition of Dyno Nobel, its nearest rival, would enlarge its share of the commercial explosives market to around 40%, about 10 times larger than its closest competitor.

The merged company's size across several economies has brought the deal under the scrutiny of competition watchdogs.

Financial Times page 28

The Times page 42(Need to Know)

 

Norsk Hydro pays $2.5bn for US oil group Sipnnaker

Norsk Hydro, the Norwegian energy and metals group, is buying Spinnaker Exploration, the US oil company operating in the Gulf of Mexico, for about $2.5bn (Euro2.05bn).

The all-cash transaction represents Hydro's biggest acquisition of overseas oil and gas assets to date. "We need to expand outside Norway given that the Norwegian continental shelf won't be able to deliver the growth we need," said Eivind Reiten, chief executive.

Spinnaker's seismic database covering most of the Gulf of Mexico is one of the company's key assets. The Houston-based group also has exploration positions in Nigeria.

Financial Times page 29

 

DuPont forced to raise prices

US chemicals giant DuPont said record-high energy prices would force it to raise prices on all its products.

"Prices of crude oil, natural gas and petroleum products ... are expected to remain elevated," said DuPont corporate economist Robert Shrouds. A group report said crude oil prices for 2006 would be above 2005's average.

The Daily Telegraph page 33

 

Gazprom closer to buying Sibneft

Gazprom edged closer on Monday to the purchase from Roman Abramovich of his controlling stake in Sibneft, a leading Russian oil company, when the gas giant raised a $12bn (Euro9.8bn) loan from a group of Western banks.

The financing will enable state-controlled Gazprom to buy the 72% shareholding in Sibneft owned by Millhouse Capital, the investment vehicle owned by Abramovich. Sibneft, which claims 4.5bn barrels in reserves, produced 34m tonnes of oil last year and the Millhouse stake was valued yesterday (Monday) at more than $11bn.

The Times page 46

 

Novartis chief hangs tough on Chiron offer

The head of Novartis is standing by his company's $40-a-share contested bid for Chiron, the US vaccines company, stressing that he is reluctant to become drawn into a competitive auction or to raise Novartis' offer.

Daniel Vasella, chairman and chief executive of the Swiss pharmaceuticals group, said: "Very clearly, we have a walkaway price."

His comments followed last month's rejection of Novartis's $4.5bn (EUro3.7bn) bid by Chiron's independent directors. Justifying Novartis's bid for the 58% of Chiron shares it does not already own, Vasella said: "This is a good fit which offers additional growth opportunities. There is a business rationale in vaccines, diagnostics and bio-pharmaceuticals but Chiron has substantial challenges."

Financial Times page 30

 

BASF chief strikes confident note

BASF is confident its pricing power and portfolio will allow it to achieve a "significant' increase in sales.

According to a Financial Times' review of the world's largest producer of chemicals in terms of sales - some $45.6bn in 2004 - its main worry is not how to cope with rising input prices but how best to deploy the company's cash pile.

Chief financial officer Kurt Boch explains: "In many markets we are one of the largest suppliers of chemicals products, so if we show discipline on the supply side, that can have a positive effect on prices in the market."

BASF's oil and gas business provides a natural hedge against the adverse effect of raw material prices suffered by its traditional chemicals business. Boch says it is keen to strengthen this division.

The group's sizeable available resources have made it the subject of interest whenever there is speculation of potential acquisitions. Bock plays down such speculation - "... our policy is to look at smaller and medium-sized acquisitions that are easily digested."

Financial Times page 30

 

Acambis calls for lawsuit to be dismissed

Acambis, the British drug company that struck it rich after developing a smallpox vaccine, has asked a judge in the US to throw out a lawsuit alleging it stole trade secrets from a Danish rival.

In August, Bavarian Nordic, a Danish vaccines maker backed by GlaxoSmithKline (GSK), sued Acambis for millions of pounds, alleging that the British company had misappropriated a copy of a new smallpox vaccine that had been given to the US government to help to speed up research.

In defence documents filed with the court, Acambis claims Bavarian's dispute is with the US government, not with its own scientists.

The Times page 47

 

Alizyme losses top £10m

Alizyme, the UK drug development company, on Monday revealed losses had risen from £1.4m to £10.7m ($19.3m/Euro15.8m) in the first half of the year but said cash burn would slow in the remainder of the year.

The group's shares fell on disappointment that the group did not provide an update on Cetilistat, the anti-obesity drug. Concerns have grown over the potential market for anti-obesity drugs because the condition is not seen as medical.

Research and development (R&D) costs rose from £2.9m the year before to £9.1m in the first six months of this year. Cash or equivalents stood at £40m, following a £32.8m fundraising completed in May.

Financial Times page 26

 

(Some of the stories may not appear in all editions of the relevant newspapers.)

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