Posts in category Business


ApprovedBusinessBusiness and finance

New technologies could slash the cost of steel production

ALTHOUGH he is best known for developing a way to mass-produce steel, Henry Bessemer was a prolific British inventor. In the 1850s in Sheffield his converters blasted air through molten iron to burn away impurities, making steel the material of the industrial revolution. But Bessemer knew he could do better, and in 1865 he filed a patent to cast strips of steel directly, rather than as large ingots which then had to be expensively reheated and shaped by giant rolling machines.

Bessemer’s idea was to pour molten steel in between two counter-rotating water-cooled rollers which, like a mangle, would squeeze the metal into a sheet. It was an elegant idea that, by dint of having fewer steps, would save time and money. Yet it was tricky to pull off. Efforts to commercialise the process were abandoned.

Until now. Advances in production technology and materials science, particularly for new types of high-tech steel, mean that Bessemer’s “twin-roll” idea is being taken up successfully. An alternative system that casts liquid steel directly onto a single horizontally moving belt is also being tried. Both techniques could cut energy…Continue reading

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ApprovedBusinessBusiness and finance

Mining companies have dug themselves out of a hole

FOR mining investors there is something sinfully alluring about Glencore, an Anglo-Swiss metals conglomerate. It is the world’s biggest exporter of coal, a singularly unfashionable commodity. It goes where others fear to tread, such as the Democratic Republic of Congo (DRC), which has an unsavoury reputation for violence and corruption. It recently navigated sanctions against Russia to strike a deal with Rosneft, the country’s oil champion.

Yet Glencore could still acquire a halo for itself. It is one of the world’s biggest suppliers of copper and the biggest of cobalt, much of which comes from its investment in the DRC. These are vital ingredients for clean-tech products and industries, notably electric vehicles (EVs) and batteries.

The potential of “green” metals and minerals, which along with copper and cobalt include nickel, lithium and graphite, is adding to renewed excitement about investing in mining firms as they emerge from the wreckage of a $1trn splurge of over-investment during the China-led commodities supercycle, which began in the early 2000s. The most bullish argue that clean energy could be an even bigger source of…Continue reading

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ApprovedBusinessBusiness and finance

A deal sparks talk of car-industry mega-mergers

THE Peugeot 3008, a striking SUV, was voted European car of the year on March 6th, the eve of the opening of the Geneva motor show, an annual industry shindig. PSA Group, the maker of Peugeots and Citroëns, would doubtless view it as the second prize it scooped that day. News also came that the French carmaker was buying Opel (branded as Vauxhall in Britain), the European operation of America’s General Motors (GM). Few of the car-industry experts at the show, however, would call Opel a trophy.

The consensus was that GM was right to rid itself of a business that had lost money for 16 years straight. Opel has around 6% of the European market; that makes it too small and inefficient in a business where scale is key. It has been confined mostly to Europe for three reasons: the particular tastes of the region’s car buyers (for instance, for small diesel cars); tighter emissions regulations outside Europe; and GM’s fear of taking sales from its other brands further afield. The result has been to leave it boxed in and isolated.

Shorn of Opel, the American firm can redirect investment to China and America, where its profit margins are…Continue reading

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ApprovedBusinessBusiness and finance

Chinese startups push into foreign markets

They’re coming your way

ON THE outskirts of Guangzhou, a city in southern China, lies an abandoned park filled with crumbling replicas of the wonders of the world. To the right are fading golden spires that are meant to represent Angkor Wat, a temple in Cambodia. On the left, a row of dusty Egyptian statues towers over a desolate Greek amphitheatre. Adding to the surrealism, the tops of the trees have been lopped off and a buzzing noise fills the night air.

This strange place is the testing ground for EHang, a Chinese startup that makes drones. (The treetops were chopped off, an employee explains, because drones kept crashing into them.) Hu Huazhi, EHang’s founder, is beaming. His firm has just set a world record for a drone-swarm light show in Guangzhou, where it flew a thousand small drones in perfect unison. Next it plans to launch an autonomous flying-taxi service with a giant drone big enough to take a person (pictured). Dubai has just signed a deal with EHang to launch drone taxis this summer.

EHang is an example of a new kind of Chinese firm, labelled “micro-multinationals” by some. In the past,…Continue reading

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ApprovedBusinessBusiness and finance

A volatile start for shares in Snap

Filter bubble?

WHEN Snap, the parent company of Snapchat, an app popular among teenagers for its disappearing messages, staged a public offering on March 2nd, Evan Spiegel, its 26-year-old boss, became a self-made billionaire. (Only John Collison of Stripe, an online payments startup, rivals him for such youthful tycoonery). Whether public-market investors will strike it rich remains to be seen. In its first day of trading Snap’s shares rose by 44%; they have since fallen by 16% from their peak, meaning around $5bn of market value vanished in days.

The volatility will probably continue. Optimists reckon that Snap’s market value could increase more than fourfold from around $26bn today as it adds users and advertisers. Very few large internet companies have gone public recently, which gives it tremendous scarcity value, says Roger Ehrenberg of IA Ventures, an early-stage investment firm.

But sceptics are growing in number. Every analyst who has started covering Snap’s stock has issued a negative rating. They question its high valuation and underline all the challenges. Snap’s growth has slowed in recent…Continue reading

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ApprovedBusinessBusiness and finance

Mukesh Ambani has made the business world’s most aggressive bet

SOME businesspeople are guided by experts, spreadsheets and crunchy questions. What is your three-year target for market share? Will a project deliver a reasonable return on the capital invested? A few hurl all the forecasts and reports into the bin and surrender to their own hunger to make a mark.

One such figure is Mukesh Ambani, India’s richest man. In September 2016 he placed one of the biggest business bets in the world by launching Jio, a mobile-telecoms network that allows India’s masses to access data on an unprecedented scale. In the past six months it has won 100m customers. Only one other firm on the planet has such an acquisition rate—Facebook. From Kolkata’s slums to the banks of the Ganges, millions of Indians are using social media and streaming videos for the very first time.

To achieve this, Mr Ambani has spent an incredible $25bn on Jio, without making a rupee of profit, terrifying competitors and many investors. The motivation for his gamble probably lies with his turbulent family history. Reliance Industries Limited (RIL), Mr Ambani’s company, was set up by his father, Dhirubhai, in 1957. Born in humble…Continue reading

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ApprovedBusinessBusiness and finance

Britain has second thoughts about foreign takeovers

ONE question prompted by Kraft Heinz’s failed $160bn bid for Unilever is whether Britain still wants to be the world’s entrepot for buying and selling companies. For decades it has been more open to mergers and acquisitions than any other big economy. Britain accounts for 3% of global GDP and its firms make up just 5% of global market capitalisation, but the latter have been involved in a quarter of cross-border M&A activity since 1997, either as buyers or as targets, according to Dealogic, a data firm.

Now Blighty is getting cold feet. The government frowned on the Kraft bid, aware, probably, of the dwindling number of large British firms that are left. Another proposed deal, the $11bn takeover of the London Stock Exchange by Deutsche Börse, its German rival, is on the rocks, partly because of the British firm’s insistence that the headquarters be in London, not Frankfurt.

Brexiteers promise that Britain is on the verge of a new, golden age of global commerce. But many of its captains of industry fret that its past wide-open policy on takeovers means that it now has too few big firms to hold its own. To understand the country’s…Continue reading

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ApprovedBusinessBusiness and finance

Samsung’s strategy office is dismantled

Latest episode of Dynasty

“THE de facto dismantlement of the Samsung Group” was how South Korea’s semi-official news agency, Yonhap, spun the news on February 28th that the sprawling conglomerate would scrap its Future Strategy Office, a management organisation of some 200 senior staff, and devolve power to individual affiliates as part of broad reforms. The office had become for many South Koreans a vexing symbol of Samsung’s secretive goings-on.

Longtime Samsung-watchers were less impressed. The parallels with an earlier disbanding of the same office in 2008, when it was known as the Strategy and Planning Office, were striking. Then, Lee Kun-hee, Samsung’s chairman, had been indicted for his involvement in a multi-trillion-won slush-fund scandal. Then, too, the group closed down the office to show it was serious about reform. But by 2010 it was reborn as the Future Strategy Office.

Lee Kun-hee’s son and presumed heir to the Samsung empire, Lee Jae-yong (pictured), is the one now behind bars. This week he was indicted by a special prosecution team on charges of bribery and embezzlement. Prosecutors have…Continue reading

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ApprovedBusinessBusiness and finance

A corruption probe raises uncertainty over the future of Eni’s boss

Badluck Descalzi?

WHEN Eni, Italy’s oil major, this week revealed a return to profit in the fourth quarter and a long-term commitment to keep the barrels flowing, there was much to cheer. Three years on from Claudio Descalzi’s appointment as CEO, Eni has made spectacular oil and gas discoveries even as its peers retrenched amid the oil-price slump. Sanford C. Bernstein, a research firm, says only half in jest that it is “evolving into an actual oil company”.

But a cloud hangs over the firm, which is 30% state-owned—and over Mr Descalzi (pictured) personally. He is caught up in an Italian probe into alleged corruption in a deal Eni struck in partnership with Royal Dutch Shell in Nigeria, just as he is seeking reappointment as CEO in April. The company’s response to the scandal, especially its treatment of independent board members, raises questions about its commitment to good corporate governance.

In 2011, Eni and Shell jointly paid $1.3bn for a huge offshore oil block, known as OPL 245, which has more than 9bn barrels of probable reserves. Over $1bn of this flowed to a shell company. That firm, Malabu,…Continue reading

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ApprovedBusinessBusiness and finance

Conformity, nostalgia and 5G at the Mobile World Congress

“A SEA of sameness.” A veteran of the Mobile World Congress (MWC), Ben Wood of CCS Insight, a consultancy, was not expecting much from the mobile industry’s main trade show this week in Barcelona. As one product launch followed another, it was easy to lose track. Whether it was LG, Huawei or Wiko, they all showed off yet more black rectangles with slightly varying specifications.

Another reminder of the smartphone business’s maturity was that the most talked-about new device was the Nokia 3310 feature phone (pictured), an updated version of a phone first made 17 years ago. With limited internet connectivity, it appeals partly as a “digital detox”, said Arto Nummela, chief executive of HMD Global, a Finnish startup with ex-Nokia executives which licenses the brand.

The mobile industry is far from done in terms of genuinely new products. But the action has moved to parts of the business that do not lend themselves to splashy events and massive crowds (the tent erected by Huawei, a Chinese maker of all sorts of telecoms gear, to launch its new P10 smartphone was huge, but hundreds were still left waiting outside). Most innovation in…Continue reading

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ApprovedBusinessBusiness and finance

Shipping’s blues

Scrappy don’t

TOO many new ships, too few old ones scrapped. Since the financial crisis, after which trade growth slowed, the Baltic Dry Index—a measure of bulk freight rates—has fallen by 93%. Prices for transporting containers have plunged by the same amount on some routes. In 2008 it cost $2,000 to send a 20-foot box from China to Brazil; now it costs $50. The industry is drowning in red ink. Hanjin Shipping of South Korea, the world’s seventh-largest line, went bust last August, and even Maersk Line, which has the lowest costs in the industry, lost $367m in 2016.

But there was some optimism this week at European Shipping Week in Brussels, an industry event. Bosses at bigger lines reckon the worst is over. Higher levels of scrapping will cut overcapacity, argues Rolf Habben Jansen, CEO of Hapag-Lloyd, a German line. The industry may break even this year, predicts Rahul Kapoor of Drewry, a consultancy.

But many shipowners are still too reluctant to send their hulks to the scrapheap. The problem can be clearly seen in the container-shipping business. Last year firms scrapped 194 ships, accounting for 3% of…Continue reading

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The Rwandan Patriotic Front’s business empire

RWANDA has a reputation for enterprise. Its government has largely stamped out small-scale corruption and trimmed regulations, making the country the second-best place in Africa to do business, according to the World Bank’s widely-followed ranking. But the dominant political party, the Rwandan Patriotic Front (RPF), does more than help business: it runs its very own conglomerate.

Crystal Ventures, the RPF’s holding company, has investments in everything from furniture to finance. It owns the country’s biggest milk processor, its finest coffee shops and some of its priciest real estate. Its contractors are building Kigali’s roads. There are several firms offering security services in Rwanda but the guards from ISCO, part of Crystal Ventures, are the only ones who tote guns. The company is reckoned to have some $500m of assets.

Its expansion is aided by the fact that its chief rival is Horizon, a similar group that is accountable to the ministry of defence, with interests in construction and logistics. Critics argue that Crystal Ventures and Horizon both get cushy government deals which mask the failures of their enterprises, several of…Continue reading

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ApprovedBusinessBusiness and finance

A digital revolution in health care is speeding up

WHEN someone goes into cardiac arrest, survival depends on how quickly the heart can be restarted. Enter Amazon’s Echo, a voice-driven computer that answers to the name of Alexa, which can recite life-saving instructions about cardiopulmonary resuscitation, a skill taught to it by the American Heart Association. Alexa is accumulating other health-care skills, too, including acting as a companion for the elderly and answering questions about children’s illnesses. In the near future she will probably help doctors with grubby hands to take notes and to request scans, as well as remind patients to take their pills.

Alexa is one manifestation of a drive to disrupt an industry that has so far largely failed to deliver on the potential of digital information. Health care is over-regulated and expensive to innovate in, and has a history of failing to implement ambitious IT projects. But the momentum towards a digital future is gathering pace. Investment into digital health care has soared (see chart).

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ApprovedBusinessBusiness and finance

Travis Kalanick’s uber-apology

“I MUST fundamentally change as a leader and grow up.” It is rare for the boss of a big technology firm to be so contrite. It is even more of a surprise to have Travis Kalanick (pictured), the chief executive of Uber, a popular ride-hailing company, go that far: he is one of the most pugnacious entrepreneurs in Silicon Valley. “This is the first time I’ve been willing to admit that I need leadership help and I intend to get it,” he added.

Mr Kalanick had little option but to grovel. On February 28th Bloomberg, a media group, released a video showing a heated discussion between him and an Uber driver, Fawzi Kamel, about the fact that the firm has lowered the rates its drivers receive. Mr Kamel told Mr Kalanick that he had lost $97,000 and gone bankrupt because of him, at which point Mr Kalanick lost his cool: “Some people don’t like to take responsibility for their own shit.”

The video capped a terrible month for Mr Kalanick. First, more than 200,000 subscribers deleted their Uber app after the firm was accused of breaking a strike by taxi drivers protesting Donald Trump’s executive order against refugees. Then a former…Continue reading

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ApprovedBusinessBusiness and finance

Taxi drivers overcharge when passengers are on expenses

MORAL hazard is a problem that crops up frequently in economics. People behave differently if they do not face the full costs or risks of their actions: deposit insurance makes customers less careful about choosing their banks, for example.

Moral hazard can also be second-hand. Take medicine. A patient with private insurance may be happy to sit through extra tests, and a doctor may be happy to order them. Doctors might be more reluctant to order tests if they know that the patient would bear the full cost.

A newly published paper* sets out to test this secondary problem by examining a common-enough situation—taking a taxi ride in a strange city. The authors, a trio of academics at the University of Innsbruck, sent researchers on 400 taxi rides, covering 11 different routes, in Athens, Greece. In all cases, the researchers indicated they were not familiar with the city. But in half the cases, the researchers indicated that their employers would be reimbursing them for the journey. The researchers in the latter group were 17% more likely to be overcharged for their trip and paid a fare that was, on average, 7% higher.

The most…Continue reading

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