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Exclusive: Aramco Trading sells first U.S. West Texas Light crude to South Korea’s Hyundai – sources

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Aramco Trading Company (ATC) sold its first-ever cargo of U.S. West Texas Light (WTL) crude, with a South Korean refiner the buyer, as the Saudi Aramco unit expands its U.S. oil dealings to boost trade volumes, four people familiar with the matter said.

ATC is key to Saudi Aramco’s strategy as it expands its refining and petrochemical operations to boost global sales. The trading unit has been buying U.S. crude from Texas refinery Motiva [MOTIV.UL] to re-sell in Asia, the people said.

ATC has been shipping U.S. oil such as West Texas Intermediate (WTI) Midland crude, Eagle Ford condensate and sour grade Mars to refiners in Japan, South Korea, Taiwan, Thailand and the United Arab Emirates since last year, they said.

It expanded that selection of U.S. crudes earlier this month, loading its first-ever 1 million-barrel cargo of WTL, the people said. The shipment is expected to arrive at Hyundai Oilbank’s [INPTVH.UL] refinery in Daesan in October, they said.

This was also Hyundai Oilbank’s first WTL crude purchase, two of the sources said.

The sources declined to be named as they were not authorized to speak to the media. Saudi Aramco and Motiva did not respond to a request for comment. Hyundai Oilbank declined to comment.

The shipment follows an agreement this year for Saudi Aramco to take a 17% stake in Hyundai Oilbank, South Korea’s smallest refiner by capacity. The firms also signed two 20-year contracts for Aramco and its trading arm to supply 250,000 barrels per day (bpd) of crude from January 2020.

ATC was set up in 2012 initially to market refined products, base oils and bulk petrochemicals, but it has expanded into crude, competing with trading and international oil companies.

The company is using Motiva’s expertise in sourcing and pricing U.S. crude to expand its trade volume, the people said. Because of its experience as a refiner, Motiva is able to get good prices for U.S. oil, one person said.

In return, ATC buys Iraqi Basra crude for Motiva when the market is favorable, the people familiar with the matter said.

The United States has become the world’s biggest oil producer as shale oil discoveries have pushed its output above 12 million bpd, sending U.S. exports to a record above 3 million bpd since a crude oil export ban was lifted in 2015.

Over the past year, more of the output from the Permian Basin, the biggest U.S. shale field, has been of a super light oil known as WTL with an API gravity – a measure of density – similar to condensate.

ATC has especially stepped up condensate sales to refiners in South Korea and the United Arab Emirates after they stopped importing the petrochemical feedstock from Iran due to U.S. sanctions, trade sources said.

Besides supplying U.S. Eagle Ford condensate, ATC’s WTL shipments could increase as more of the light oil becomes available for export after new pipelines connect shale oil production from the Permian Basin to U.S. Gulf Coast terminals, one of the people said.

Plains All American’s 670,000-bpd Cactus II pipeline began commercial deliveries this month. The pipeline segregates WTL barrels to maintain quality from the oilfield to the dock, which is vital to Asian refiners, the people said.

“Asia should have demand for it with their (condensate) splitters and capabilities to run ultra light crudes,” one source said.

South Korea surpassed Canada to become the biggest buyer of U.S. oil in June.

 

Trump’s Tariffs Will Make These Ordinary Things More Expensive

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President Donald Trump’s trade war with China is probably going to cost you some money.

The newest round of tariffs on Chinese goods was announced on Aug. 1 and targets consumer goods, including everyday items like clothes, shoes, video games, computers and toys.

Trump wrongly claimed earlier this summer that the U.S. wouldn’t be paying for the fallout from the tariffs on China and said that China would be absorbing the costs.

But American companies are the ones who end up paying for tariffs imposed by Trump on products imported from China. The companies then typically add the cost of those tariffs onto the prices that customers pay.

Unless Trump and Chinese President Xi Jinping can ease the tension between the two of them and call off the trade war, consumers will feel the burn after Trump’s tariffs take effect in September and December ― some of the busiest shopping months of the year.

A JPMorgan analysis estimates that this latest round of tariffs, on top of existing ones, will cost the average household in the U.S. $1,000 per year.

Shoes, in particular, will be impacted by the tariffs. A whopping 99% of shoes sold in the U.S. are made in China.

Apple customers should also be worried. Many of the tech giant’s most popular products are assembled in China, including its iPhones and iPads. Apple’s Mac Pro, its newest desktop model slated to hit the market this fall, is also being assembled in China.

While some American companies can apply to be excluded from the burden of Trump’s tariffs, the president very publicly denied Apple from such exceptions.

Tariffs Hurt the Heartland, a group of American trade groups fighting to end tariffs, said Friday that the latest round will jack up prices for consumers and called on Congress to intervene in Trump and Xi’s trade war.

“The administration is betting the health of our entire economy on a tariff strategy that is a proven loser,” the group said in a statement. “These added tariffs will ratchet up consumer prices, stall business investment, escalate uncertainty and cost American jobs.”

Here are some of the types of products imported from China whose prices could soon go up thanks to the trade war. (The full list, which contains hundreds of goods and materials, can be found here.)

Starting in September:

  • Clothes including suits, coats, jackets, pants, dresses, accessories and
  • underwear
  • Umbrellas
  • Ovens and stoves
  • Beef and chicken
  • Ketchup
  • Cheese
  • Chocolate
  • Bed linen
  • Blankets
  • Curtains

Starting in December:

  • Cellphones, laptops, computer monitors, keyboards, headphones and
  • speakers
  • Shoes including athletic shoes, boots and waterproof shoes
  • Christmas decorations
  • Handbags
  • Picture frames
  • Toys
  • Fishing rods and poles
  • Diapers
  • Combs
  • Umbrellas
  • Video games and consoles

5 Ways To Cultivate A More Diverse, Inclusive & Equitable Energy Workforce

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When I assumed the role of CEO of the Solar Energy Industries Association in January of 2017, I pledged to make diversifying the solar industry a top priority. No doubt, we still have our work cut out for us, but we have made important progress.

Last month, my organization issued a #DiversityChallenge, our call to address diversity and inclusion in the workplace, industry-wide and more. I challenged solar companies and other energy trade associations to join me in signing the CEO Action for Diversity and Inclusion pledge. Nearly 100 organizations, including almost 80 solar companies, accepted our challenge and united with me in committing to the CEO Action pledge and vowing to work toward creating more diverse workplaces.

At SEIA, we’ve had difficult conversations with our board members about bringing more diversity to our board ranks, and we have substantially improved diversity and inclusion. But we’re simply not where we need to be, and it’s time for the solar workforce — and the energy workforce more broadly — to better reflect the communities we serve.

The reasons for this urgency are apparent. Diverse teams have a competitive advantage: According to McKinsey, companies that are ethnically diverse are 33% more likely to outperform their industry peers and have higher financial returns. The 2018 Women in the Workplace reportfound that in companies that lack diversity, women are 20% less likely than straight white men to win endorsement for their ideas; people of color are 24% less likely; and LGBT folks are 21% less likely. And that lack of endorsement and validation has cascading effects on future advancement opportunities, an employee’s sense of inclusion in the workplace and, ultimately, on the organization’s success.

To achieve equity and inclusivity in the workplace, organizations must recognize that there are systemic forces that have contributed to a lack of diversity. A company’s culture reflects its leadership values, and is the heartbeat of any successful organization. Ideally, it drives inclusivity and can propel great organizations forward. But this isn’t always the case — the environment of a workplace can also hold its employees back.

Too often, ingrained practices leave talented people on the sidelines. Leaders must take steps within their own organizations that cement their commitment to more inclusive workplaces, both in the eyes of current and future employees.

To benchmark solar industry progress, we released a comprehensive diversity study with The Solar Foundation. The results weren’t pretty: More than half of men in the solar industry feel they have successfully moved up the career ladder, while only 37% of women feel they have and even fewer people of color feel they’re advancing.

To make lasting changes to company culture, you need buy-in at all levels of leadership, including the board of directors.

There are five clear ways to generate this kind of buy-in at every level, across an organization:

1. Make diversity and inclusion a core value: First and foremost, organizations need to make diversity and inclusion a core value that is reflected in mission statements and strategic plans. This includes incorporating diversity and inclusion into performance evaluations for managers and making diversity something that’s celebrated, not feared.

2. Include diversity and inclusion in decision-making: Diversity should be part of any major company decision. You should consider whether decisions are consistent with your diversity and inclusion values.

3. Spell out the business case: Understand and communicate why a diverse workforce is important to your organization’s overall success. Use data as a powerful, objective tool to secure support from skeptics.

4. Train leaders: Provide leadership training in diversity, inclusion, cultural competency and other diversity-related topics to help organization leaders build the skills needed to nurture an inviting work environment. Training sessions should include a discussion of the organization’s values, the value of a diverse workforce, the definition of diversity and inclusion and an open discussion of cultural differences, biases and stereotypes.

5. Challenge leaders to be role models: As role models, leaders should “live the values.” Leaders can endorse an organization’s diversity and inclusion goals and values. Employers can celebrate the leaders who are living these values to encourage others to strive toward this model.

Without commitment from senior leaders and the rank and file alike, lasting changes cannot be made. These five steps must happen in concert with a clear vision from senior leaders and a sustained effort to address systemic issues preventing progress. While senior leaders will most likely be the ones to kick-start these efforts, in order to be successful, employees will also need to take ownership of these values and goals. It’s on all of us to make changes, and I’m challenging other CEOs to join me in making diversity and inclusion a top priority.

Costco’s first China store was so popular it shut down traffic. But can it keep the buzz going?

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Costco has built a cult following in the United States — now it’s China’s turn. The country’s first Costco store is so popular that it had to shut down early on its first day because of too many shoppers.

The retailer opened its first physical outlet in Shanghai on Tuesday morning, and it quickly got too crowded to stay open.

“The store has been clogged up with crowds,” Costco said in a text message alert to its members in China. “To provide you with better shopping experience, Costco will suspend business in the afternoon. Please don’t come.”

Police were deployed to restore order and manage traffic jams around the store, with law enforcement urging people to remain calm.

“For your safety, we hope citizens who want to go to Costco can maintain a rational attitude about consumption and avoid going out during rush hours. Those who have already gone there, you must follow orders,” the Shanghai police said in a statement on its verified account on Chinese social network Weibo.

The photos posted by police with the statement included one of a sign Costco put up outside the store, which read: “The parking lot is full. It takes three hours to wait.”

The road ahead

While Costco has had an online presence in China for five years through a partnership with Chinese e-commerce firm Alibaba (BABA), the new brick-and-mortar store in Shanghai marks a significant investment.

Costco’s annual membership program, which accounts for the bulk of its profit, is also cheaper in China — it costs 299 yuan ($42) compared to $60 in the United States.

But despite the early buzz around its Shanghai store, the US retailer will have to prove it can stick around for the long haul. It has to contend not only with global rivals like Walmart (WMT) and big Chinese players like Alibaba and JD.com, but also with China’s rapid economic changes and its growing online retail industry.

“There is big market potential for Costco in China, as its value for money strategy is attractive to many middle-class consumers,” said Michelle Huang, an analyst at Rabobank in Shanghai.

“Whether Costco can succeed in the long term depends how well it can adapt to China’s dynamic retail landscape,” she added.

Day one hype

While there are challenges on the horizon, the early hype around China’s Costco stores is very real.

Echo Zhou, a 28-year-old financial professional in Shanghai, said she arrived at 9:10 a.m., but didn’t make it to the parking lot until an hour later and finally got into the store around 11 a.m.

“The surrounding roads were paralyzed. The highway nearby was also congested,” she said.

“By the time I got in, there were crowds of old people who had already wiped out some shelves.”

Zhou said she decided to leave without buying anything as there was little room for shoppers inside the store, which was packed with crowds and the big shopping carts.

“I will give it another chance three months later as I’ve got the membership,” she added.

UK employers want more staff, but fear shortages as Brexit nears – survey

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British employers plan to hire more staff even as they remain pessimistic about the economy in the run-up to Brexit, according to a survey published on Wednesday which showed no sign of a weakening of the strong labour market.

But the Recruitment & Employment Confederation (REC) said severe skill shortages remained, especially in the public sector, and the government’s proposed restrictions on European Union workers after Brexit could make them worse.

Hiring intentions improved for permanent staff in the short and medium term, the REC survey showed.

Economists are watching for any signs that employers might cut back on hiring as the Oct. 31 Brexit deadline nears.

A fall in unemployment to its lowest rate since the mid-1970s has helped Britain’s economy to outperform most analysts’ expectations over the three years since the 2016 Brexit referendum.

REC said despite the stronger hiring plans, 46% of employers were concerned that they would be unable to find enough suitable candidates, especially among firms seeking workers with health and social care skills.

Within the public sector, 45% of employers said they had no spare capacity in their workplace, highlighting an immediate need to take on new staff.

“EU workers are an integral part of our health and social care system and the UK workforce as a whole,” Tom Hadley, REC’s director of policy and campaigns, said.

“It is essential that the government has in place a sensible transition towards an evidence-based immigration policy to help reassure employers and EU citizens.”

The government of new Prime Minister Boris Johnson has said it plans to introduce “a new, fairer immigration system” after Brexit that prioritises skills rather whether migrant workers are from the EU.

Third of UK’s top companies to cut executive pensions – investor body

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Nearly a third of the companies in Britain’s FTSE 100 index of blue chip firms have agreed to cut pension payments for executives, the Investment Association said on Wednesday, amid increasing scrutiny of the gap between bosses’ and ordinary workers’ pensions in Britain.

In February, the Investment Association, which represents big asset managers, said a company would be “red-topped” if it did not explicitly state that any new executive director would have pension contributions set in line with the majority of employees.

A red top is the highest level of warning used for companies where shareholders should have the most serious concerns, though the Investment Association has no formal power over how investors vote on company policies.

The aim is to stop pensions being used as a mechanism for increasing total pay.

A total of 30 FTSE 100 companies have made significant changes as a result of the campaign, the Investment Association said.

“Shareholders will continue to focus on bringing executive pensions in line with majority of the workforce over the next 12 months,” Chris Cummings, the Investment Association’s CEO, said in a statement.

“Companies that do not take on board shareholder concerns risk facing yet more shareholder rebellions next year.”

Of the 30 companies that have made changes, 17 have said that any new director will be given a pension contribution that is in line with the one given to the majority of staff, the Investment Association said in a statement.

Three companies have appointed new directors with a pension contribution in line with the majority of employees, six other companies have reduced contributions for existing and future executives and four companies have also reduced pension contribution for incumbent directors immediately, the Investment Association said.

“There is now more transparency than ever around the UK’s biggest companies and these results show that important issues of excessive executive pay and diversity on boards are starting to be taken seriously,” British Business Secretary Andrea Leadsom said in a statement.

The Investment Association has also said that Britain’s top companies will face a red warning if they do not have more than one woman on their board, adding to pressure for more female representation at top levels of management.

Ratings on all aspects of a company’s governance are done three weeks before its annual shareholders’ meeting.

Exclusive: Financial hit from 737 MAX will not slow appetite for services deals – Boeing CEO

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Boeing Co’s (BA.N) chief executive said on Tuesday that the financial fallout from the grounding of its 737 MAX jetliner would not slow the world’s largest planemaker’s appetite for deals in the higher-margin aircraft services sector.

“Our ability to do those continues to be strong,” Boeing CEO Dennis Muilenburg said at the company’s widebody manufacturing plant north of Seattle, referring to acquisitions it has made to enlarge its two-year-old Global Services division.

“We have the financial capacity to manage the MAX situation and continue to make our investments for the future,” he said.

Boeing’s fastest-selling, single-aisle jet was grounded in March after two deadly crashes. The company is working on a fix for software at the centre of both crashes and is aiming to get the jet back in the air as soon as October. It has completed around 560 flights with the new software, Muilenburg said on Tuesday.

“We still anticipate getting the return-to-service early in the fourth quarter,” Muilenburg said. “We are making progress on that schedule.”

Meanwhile, Muilenburg aims to expand the services business that includes aircraft parts, maintenance and analytics to $50 billion (40.7 billion pounds) in revenue in a decade from its 2018 revenue of about $17 billion.

Boeing bought parts distributor KLX Inc last year for $4.25 billion including debt, in its largest deal since merging with McDonnell Douglas in 1997. Boeing and rival Airbus SE (AIR.PA) are pushing into the market for repairs, maintenance and analytics as airlines consider outsourcing more of such services in an effort to keep a lid on costs.

RAMP-UP AHEAD

Boeing has had to divert resources to the 737 MAX from across the company as it works to win approval from aviation regulators for its software upgrade.

In April, Boeing dropped production to the current rate of 42 aircraft per month after halting deliveries of the MAX to airlines, cutting off a key source of cash and hitting margins. The total cost of the 737 MAX crisis has grown to more than $8 billion and counting.

Boeing told suppliers it will ramp back up to pre-crash production rates of 52 aircraft per month in February and reach a record 57 aircraft per month in June. Investors took that as a sign of optimism that the MAX will fly again commercially as early as October.

“We are also working with our supply chain on future rates,” Muilenburg said on Tuesday. “This is all consistent with that October return to service date.”

However, Muilenburg reiterated the timeline for rate increases and the return to service is in the hands of regulators, which will decide when the MAX can fly again commercially.

Although the MAX issue has diverted engineering resources and attention from other aircraft programs, Muilenburg said development work on a potential new middle-of-the-market aircraft, or NMA, “hasn’t been halted.”

“We have major risk reduction activities underway that are helping us protect the entry-into-service target date that we talked about,” he said, referring to an entry-into-service date of 2025. “We are still on that same macro path. We will make that decision when we are ready.”

Boeing’s plane must enter the market in 2025, when airlines will be retiring Boeing 757s and 767s, with Airbus poised to scoop up new plane orders.

Muilenburg also said on Tuesday that an aircraft order from China could result from any deal to end a yearlong trade war between the U.S and China, the world’s two largest economies.

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