TheChek News Flow

Overdoses linked to tranq, the street drug that can cause horrific wounds, have spiked 276 percent, according to the CDC.

Fatal overdoses linked to tranq dope—the deadly combination of illicit fentanyl and the veterinary sedative xylazine—are skyrocketing according to new data from the Centers for Disease Control and Prevention.

The report said fentanyl overdoses that included xylazine spiked 276 percent from 2.9 percent to 10.9 percent between January 2019 and June 2022, in 21 jurisdictions.

The deaths are more prevalent in the Northeast U.S..

Tranq has become notorious because of the severe skin lesions that some users develop, in extreme cases requiring people to have amputations. It also knocks users out for hours, and many users previously told VICE News they would take a hit of tranq, pass out, and wake up in withdrawal without experiencing any euphoria.

Because xylazine is a sedative and not an opioid, it does not respond to naloxone; naloxone should still be given to people having suspected tranq overdoses to reverse the effects of any opioids they may have taken.

But extended rescue breathing and oxygen tanks may also be required.

In April, the White House Office of National Drug Control Policy (ONDCP) designated fentanyl adulterated with xylazine an “emerging threat.”

Dr. Rahul Gupta, head of the ONDCP, has said tranq has been detected in all 50 states.

In early June, Pennsylvania temporarily made xylazine a Schedule III drug, purportedly to more easily arrest people cutting it into the illicit drug supply.

In 2021, 575 overdose deaths in Pennsylvania involved tranq dope, up from 90 overdose deaths in 2017.

“This action will protect veterinarians and other legitimate users and manufacturers of xylazine, which is an important medication for animal sedation, while also creating penalties for people who add illicit xylazine to the drug supply that is harming people in our communities,” said Dr. Debra Bogen, acting health secretary for the state, in a news release.

Ohio undertook a similar measure in March.

The Combating Illicit Xylazine Act, a bipartisan House and Senate bill, was introduced in March to schedule xylazine federally to allow the Drug Enforcement Administration to more easily track its presence in the supply chain.

However, drug policy and addictions experts previously told VICE News they’re concerned that scheduling xylazine will make it harder to study its impact on humans and could make the drug supply even more toxic once something else takes its place.

The Senate recently passed a bill that directs the National Institute of Standards and Technology to further research tranq and other synthetic opioids.

Emissions tax would impose high costs on maritime trade, says world’s largest exporter

China has urged poorer countries to oppose a levy on shipping emissions and stronger targets for decarbonising one of the world’s most polluting industries, criticising wealthy nations for setting “unrealistic” goals with “significant” financial costs.

Beijing distributed a “diplomatic note” to developing nations as they prepared for a critical meeting at the UN’s International Maritime Organization in July, according to four people present at IMO discussions. The lobbying effort comes days after France rallied 22 allies behind a shipping emissions levy.

China warned that “an overly ambitious emission reduction target will seriously impede the sustainable development of international shipping, significantly increase the cost of the supply chain and will adversely impede the recovery of the global economy”, according to a document seen by the Financial Times.

It added: “Developed countries are pushing the IMO to reach unrealistic visions and levels of ambition. [They are advocating] a flat [levy that] will lead to a significant increase in maritime transport costs.” Wealthy nations have not agreed a price for the emissions levy.

The efforts by China, the world’s biggest exporter which also has a large state-owned shipping industry, have deepened concerns over a lack of progress on decarbonising a fuel-intensive sector that delivers up to 90 per cent of traded goods globally, according to the OECD.

By the end of next week the IMO has committed to strengthening its ambition, which has long been criticised by environmental campaigners as weak, to halve annual shipping emissions from their 2008 levels by 2050. But participants in the talks at the IMO this week said China had helped to rally countries in closed-door negotiations that had become deeply divided between developed and developing member states.

Brazil, Argentina and South Africa have also opposed a levy on shipping companies’ emissions, which they fear would increase the cost of exports for their large commodities markets, according to two people close to the discussions.

Poorer countries are not united in opposition. The Marshall Islands, which are particularly exposed to rising sea levels as a result of climate change, have called for a $100-a-tonne emissions levy. Albon Ishoda, the country’s ambassador to the IMO, expressed concerns that the level of “polarisation has become unhelpful”, with some in the private discussions not living up to their national commitments on decarbonisation.

He added it was ironic that some developing countries had complained that a shipping emissions levy would increase their financial burden while at the same time calling for any money generated by this measure not to be invested outside the shipping industry.

According to the note seen by the FT, China called for any revenues generated by IMO regulations to be invested “in-sector”, arguing that wider use of these funds would transfer “the climate change financing responsibility from developed countries to . . . international shipping”.

It opposed setting 2050 as the final year to achieve net zero emissions, instead backing a broader goal of “net zero GHG emissions from international shipping around mid-century”. It said a shipping emissions levy was “a disguised way by developed countries to improve their own market competitiveness”.

President Xi Jinping has promised to cut China’s net carbon dioxide emissions to nearly zero by 2060.

Beijing’s State Council Information Office did not respond to emailed questions on Saturday.

The diplomatic note echoes comments by Premier Li Qiang, who argued at a World Economic Forum event last week: “It is unfair for developing countries to go by the standards of developed countries.

Developed countries should shoulder more responsibilities in meeting the climate challenge.”

At a summit in Paris during the same week, France and other wealthy countries called for the IMO to set targets that would align shipping with international ambitions to limit global warming to 1.5C above pre-industrial levels. The EU already plans to impose a financial cost on shipping pollution by introducing the sector into its emissions trading scheme.

China’s warnings about the effects of such measures were last week countered by the World Bank, a lender to developing countries. It argued in a blog post that allowing wider use of any revenues from an emissions levy would support poorer countries which have little opportunity to invest in the shipping sector directly.

The electric-car maker is expected to release second-quarter global deliveries amid stiffening EV competition

Tesla TSLA 1.66%increase; green up pointing triangle has been slashing prices across its lineup for much of this year, trying to rally sales and prevent a buildup of unsold inventory.

The company’s second-quarter deliveries, expected as early as Sunday, will show how well the markdowns are working to entice customers.

Analysts surveyed by FactSet expect Tesla to have delivered about 445,000 vehicles globally in the April-to-June period, a roughly 75% increase over a year earlier and another record quarter for sales.

Tesla has been targeting 50% annual delivery growth on average, though it has set a more modest goal for this year.

The car company has been adding factory production at a time when underlying demand for its vehicles is showing some signs of softening following years of blistering sales increases.

Deliveries in the first quarter rose 36% from a year earlier, lifted in part by a series of price reductions that also dented earnings.

The electric-car maker will face another test in a few weeks when it reports second-quarter results. Investors will be looking closely at how Tesla’s recent pricing actions have affected the bottom line.

Tesla’s operating margin, a measure of profitability, fell to 11.4% in the first quarter, from 19.2% in the first three months of 2022.

Still, it remains higher than that of many carmakers.

The world’s top seller of electric vehicles, Tesla has regained momentum this year after a punishing 2022, in which the stock had its worst annual performance and the company fell short of its target for deliveries.

Tesla’s shares have more than doubled in the first six months of this year, ending June at $261.77, as the company has remained upbeat about its growth prospects and recruited several car company rivals to use its fast-charging network.

But the stock remains below a peak of more than $400 a share in November 2021, and Tesla is under pressure to prove to Wall Street it can keep winning over buyers amid intensifying competition in the EV market.

Other car companies are expected to release their second-quarter sales Wednesday.

This spring, Chief Executive Elon Musk unnerved some investors when he declared the company was prepared to sacrifice near-term profitability in pursuit of growth, a strategy that rival automakers have largely abandoned over the years.

“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and higher margin,” Musk said in April.

“This is a good time to increase our lead further,” he added.

Over the past year, Tesla has gone from having monthslong waiting lists for many of its models to accumulating inventory.

To juice demand, Tesla has employed a range of promotional tactics, from outright price cuts that are unusual in the car business to more conventional techniques such as discounts and freebies.

Since early January, starting prices across its lineup have dropped between 14% and 28% in the U.S., depending on the model, according to The Wall Street Journal’s review of the changes on Tesla’s website.

The reductions have stoked sales, pressured rivals and divided customers, some of whom have been caught on the wrong side of the price changes.

Tesla aims to boost sales from the 1.3 million vehicles delivered last year.

It has set a goal of producing 1.8 million vehicles in 2023.

To achieve its targets, it has been adding factories around the world. It officially opened one in Texas last year and another in Germany to help it churn out more cars. With the added output, it needs to keep sales rising to avoid an inventory buildup.

Adding to the pressure is that Tesla, unlike traditional automakers, doesn’t have a dealership network to help it sell down excess stock if it starts to pile up.

Because of its direct-sales model, the car company holds the inventory on its books until it can make a sale and has to do the work of storing the vehicles and finding buyers, a task that becomes more onerous if supplies build.

In the first quarter, the value of Tesla’s finished goods—a measure that reflects unsold vehicle inventory and those in transit to customers, among other products available for sale—increased to roughly $4.6 billion, up from less than $1 billion the year before, securities filings show.

While Tesla has often tinkered with prices—adjusting them up and down in a way that is similar to the dynamic pricing models of airlines and hotels—the revisions this year have resulted in substantial price cuts.

For example, in the U.S., Tesla has adjusted the price of one version of its Model Y SUV at least seven times in the past six months.

Together, those changes have resulted in a dramatic downward revision: the long-range Model Y now starts at $50,490, compared with $65,990 in early January.

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As of late June, Tesla also was offering thousands of dollars off certain vehicles it had in stock, and some buyers qualified for a $7,500 federal tax credit on top of that.

Tesla’s discounts have stood out at a time when car companies are mostly holding the line on such promotions.

The industry on average spent about $1,900 per vehicle on sales incentives in May, according to automotive services firm Cox Automotive.

Some buyers have been frustrated by Tesla’s recent price cuts, which are more visible than the discounts and sales promotions other car companies heap on.

Paul Gassman paid $60,240 for his Model Y in December 2022, after a $3,750 discount and before taxes and fees. Six months later, that same vehicle would have cost $51,490.

“That is the cost of transparency: You know whether you got a good deal or not,” said Gassman, who owns an enterprise software company and lives outside Jacksonville, Fla. Still, he said, “I think I’d prefer that than being in the dark and feeling good because I really don’t know what the going rate is.”

Moscow relying on 'dual use' equipment and third-party exporters

Russia has for months been importing drones from Chinese companies explicitly for use in its invasion of Ukraine, despite denials from Beijing that such equipment is being deployed in the war, a Nikkei Asia investigation has found.

Between December 2022 and April 2023, Russian companies imported at least 37 Chinese unmanned aerial vehicles worth around $103,000 that were designated in customs clearance records as being "for use in the special military operation," the Russian government's name for the Ukraine war.

...

The menswear brand’s production arm Forall Confezioni SpA has sold its assets to Manifattura Veneta to ensure continuity.

MILAN — Pal Zileri’s tailored jackets and employees at its Quinto Vicentino plant in Italy have found their white knight, WWD has learned.

After months of negotiations, Nicola Ferraretto, founder of fellow fashion manufacturer J6, together with other investors, has bought out the industrial and manufacturing branch of Forall Confezioni SpA, Pal Zileri’s production and operative arm, through a newco named Manifattura Veneta.

The deal, whose financial details have not been revealed, entails the buyout of Forall Confezioni’s machinery, workforce and manufacturing agreements. It does not include the Pal Zileri brand, which is and remains controlled by Qatari fund Mayhoola, owner of Valentino and Balmain.

Following the deal, Manifattura Veneta will begin operations with a 70-person workforce and a new, 43,055-square-foot production complex located just opposite the storied site in Quinto Vicentino, in the outskirts of Vicenza, where Forall Confezioni operated.

In a joint interview with WWD, Ferraretto, chief executive officer of Manifattura Veneta, and Massimiliano Tintinelli, chief restructuring officer and board member at Forall Confezioni SpA, touted the M&A deal as the result of lengthy negotiations that saw all relevant parties involved, including Mayhoola, trade unions and the Veneto Region.

“The main goals were to ensure continuity for employees and manage the [Pal Zileri] brand more accurately, trying to maintain our manufacturing capabilities and craftspeople in the Veneto region, because Pal Zileri’s manufacturing is ‘Vicentina’ [from Vicenza, Italy], Venetian,” Tintinelli said.

“The most important aspect was maintaining quality, tradition and [presence on] the territory. Our stakeholder [Mayhoola] was very committed to that,” he added.

Several international, mainly financial parties, expressed interest in acquiring Forall Confezioni SpA, but none qualified as much as J6’s Ferraretto, Tintinelli said.

After a few years of stopgap maneuvers — entailing extraordinary wage support measures, employee relocations and reskilling plans — which saw the Veneto Region as well as trade unions contribute to safeguarding the workforce in the interim period, two former Forall employees liaised with Tintinelli and Ferraretto.

Mayhoola’s full support of any potential scenario that would ensure continuity for the plant also contributed to the deal, Tintinelli said.

“Forall was experiencing significant revenue drops, but Mayhoola has always recapitalized the company as it aimed for issues to be fixed and [finally] focus on the brand’s [operations],” the executive said.

In pre-pandemic years, and before Tintinelli’s appointment to his role, Forall also served as a third-party manufacturer for other fashion brands, a business it discontinued amid deteriorating market conditions.

“When I joined, Forall needed restructuring because it was operating at a significant loss. The COVID-19 pandemic further dampened the formalwear sector, as we’ve seen [happening] to other competitors and [sales of formal] jackets hit a roadblock. Today we’re experiencing, so to say, a strong rebound and that’s happening for competitors and for Forall, too, which saw [revenue] upticks in the past couple of years,” Tintinelli explained.

The executive described the road to selling Forall’s assets as a “reengineering of all processes.”

“We had to rewrite processes rather than adapt them because they were outdated and old,” he said.

Out of the 450 workers that as of 2020 were employed at different operational levels, from Pal Zileri-branded stores to manufacturing activities and brand operations, the restructuring relocated around 43 in brand activities, about 60 in retail, in addition to the 70 workers who transitioned to Manifattura Veneta. An additional 30 people were affected by a redundancy plan.

In the workforce, Tintinelli said, were about 10 to 15 percent seasoned employees whose value in preserving the company’s know-how was irreplaceable.

Manifattura Veneta will employ 70 workers at the start, but Ferraretto said he aims to grow that number to 130 to 150 artisans in due time.

The relocation to the new plant was made possible by the support of Mayhoola, Tintinelli said, highlighting how unlikely such a move would have been if the stakeholder was not really committed to the brand.

Ferraretto has been helming the J6 fashion manufacturer for 13 years and has primarily worked with up-and-coming and cutting-edge designers. “I was not much interested in the Pal Zileri brand, its name would hardly trigger any interest. That was until I visited the former Forall plant. I was mesmerized, that’s when everything began,” he said.

“Our long-term ambition, right from the start, was to acquire and revitalize this excellent production asset, becoming a strategic partner to them and [together] becoming one of the most important hubs in Italy for canvassed and half-canvassed clothing, as well as [set foot] in womenswear, courting the luxury sector for the production of jackets and pants,” he added.

He plans to resume the third-party manufacturing activity and add a made-to-measure service, banking on the assets he believes Forall never entirely lost, such as flexibility, speed and modernity.

“I think…brands need Pal Zileri’s [manufacturing expertise]. It’s an ambitious project, it’s not just about offering a second chance to some employees somewhere in the Italian province, it’s a long-term project and vision,” Ferraretto said.

Manifattura Veneta will remain fully independent from J6 and was established by Ferraretto in tandem with two other investors, Claudia Giacomelli and Luca Trevisiol.

The two former Forall employees who played a pivotal role in liaising Ferraretto with Tintinelli, Patrizia Mastromauro and Alessandro Baraldo, will also retain a minority interest in Manifattura Veneta while holding managerial roles at the company.

“There’s great energy.…There’s a sense of release for employees because this is their life, it’s a home to them. It will bring benefits to all involved parties,” Ferraretto said.

Once again, the week can be summed up in two words we’ve heard all year — artificial intelligence. Investors went crazy again — led mainly by large corporations or their VC arms — dumping big sums of cash into everything AI. That included a huge round of more than $1 billion.

With all the big money thrown around the space, the only real question left is: When will AI start to write this weekly column?

1. Inflection AI, $1.3B, artificial intelligence: The big news of the week was undoubtedly this Palo Alto, California-based startup. Inflection AI is building what it says will be the “largest AI cluster in the world” and has created large language models to allow people to interact with its AI-powered assistant called Pi, or Personal AI. Pi lets people quickly receive relevant information and advice on their interests. To build the platform, the startup locked up a huge $1.3 billion round led by Microsoft, Reid Hoffman, Bill Gates, Eric Schmidt and new investor Nvidia, which values Inflection AI at $4 billion, according to Forbes, which first reported the news. The new funding brings the total raised by Inflection to more than $1.5 billion, per the company.

Founded last year, the generative AI platform is a competitor to other AI firms such as OpenAI and Google.

It was co-founded by Mustafa Suleyman, who previously co-founded the Google-owned AI lab DeepMind and serves as CEO at Inflection.

2. Runway, $141M, artificial intelligence: New York-based Runway made this list not that long ago after Business Insider reported on this unannounced round. It finally was announced, with Runway raising a $141 million extension to its December $50 million Series C from Google, Nvidia, Salesforce Ventures and existing investors, among others. At the time of the original report, the new cash valued the company at $1.5 billion. Runway helped develop the AI image generator Stable Diffusion, and launched its video-to-video generative AI app in April. The app lets users transform videos into different styles, such as claymation or watercolors.

Founded in 2018, the company has raised nearly $240 million, per Crunchbase.

3. Author Health, $115M, health care: Health care has been big in recent weeks, and this week a big round went to a newly launched mental health startup. Author Health locked up a $115 million round from General Atlantic and Flare Capital Partners. The Boston-based health care platform creates a team of doctors, nurses, therapists and community health workers for Medicare Advantage recipients with serious mental health disorders. Data from The Commonwealth Fund shows 1 in 4 people with Medicare have a mental illness, but only as much as 50% receive treatment. Author Health is the latest startup to look at government health programs as a revenue stream. EasyHealth, Cityblock Health, CareBridge and Spark Advisors are other startups that have done similar.

4. (tied) Celestial AI, $100M, semiconductors: It seems like photonic chips — which use light to send signals as opposed to the electricity used by conventional processors — is becoming a thing with investors. In late May, Boston-based Lightmatter raised $154 million in the space and this week Celestial AI joined it in cashing in. The Santa Clara, California-based startup raised a $100 million Series B funding led by IAG Capital Partners, Koch Disruptive Technologies and Temasek’s Xora Innovation fund. Such tech is needed now more than ever with AI requiring both faster and more energy-efficient computing.

Founded in 2020, the company has raised nearly $164 million, per Crunchbase.

4. (tied) Cyera, $100M, cybersecurity: Data may be king, keeping track of it and securing it can be a pain. Enter data security startup Cyera — which locked up a $100 million Series B led by Accel.

Cyera offers a platform that helps security teams at companies understand what data they have and how it’s used, as well as how to secure it.

Such platforms can be useful as security teams struggle with growing amounts of data while also often facing staffing issues. Since closing its Series A last March, the company says it has realized 800% revenue growth. Founded in 2020, Cyera has now raised $164.5 million across three rounds, per Crunchbase. The round comes amidst a funding slowdown in cyber — which has seen a significant dip since the fourth quarter of 2021, per Crunchbase data. The sector saw four consecutive quarters of decline before hitting $2.7 billion in the first quarter of this year — a slight uptick from the $2.4 billion in the final quarter of 2022. However, that first-quarter number represented a 58% drop from the $6.5 billion such startups saw in the same quarter of 2022.

4. (tied) Redpanda Data, $100M, data: Streaming data startup Redpanda Data raised a $100 million Series C led by Lightspeed Venture Partners, Google Ventures and Haystack. The San Francisco-based startup provides real-time streaming data services, helped by — you guessed it — artificial intelligence and machine learning. Companies are able to analyze data as soon as it’s collected. The platform works by being both a data storage system and a data streaming system in which companies can integrate their own data into the machine-learning system to bolster responses.

The company says it multiplied its revenue growth 5x over and doubled its workforce through its last fiscal year.

Founded in 2019, the company has raised nearly $166 million, per Crunchbase data.

4. (tied) Typeface, $100M, artificial intelligence: Yet another AI startup makes the list. San Francisco-based generative AI startup Typeface — which launched in February with a $65 million raise — raised a $100 million Series B led by Salesforce Ventures with participation from Lightspeed Venture Partners, Madrona, GV, Menlo Ventures and M12 (Microsoft’s venture fund). The company’s AI platform helps with enterprise content creation such as product shots, blog posts, social media ads and job posts that meet brand specifications.

8. Augmedics, $83M, health care: Chicago-based Augmedics, a developer of augmented reality surgical navigation, closed a $82.5 million Series D led by CPMG.

Founded in 2014, the company has raised nearly $144 million, per Crunchbase.

9. Presidio Medical, $72M, medical devices: South San Francisco, California-based Presidio Medical, which develops a transformational neuromodulation platform, closed a $72 million Series C led by Deerfield Management.

Founded in 2017, the company has raised $102 million, per Crunchbase.

10. (tied) Fly.io, $70M, apps: Chicago-based Fly.io, a remote app delivery network developer, raised a $70 million Series C led by EQT Ventures.

Founded in 2017, the company has now raised more than $110 million, per Crunchbase.

10. (tied) K36 Therapeutics, $70M, biotech: Cambridge, Massachusetts-based biotech startup K36 Therapeutics closed a $70 million Series B led by Nextech Invest. Founded in 2021, this is the first announced round by the company, per Crunchbase.

Inflection’s big round led the way in all deals raised this week, but was followed by two deals from China.

The major crude producer is cutting back output, but a key indicator suggests traders believe supplies won’t shrink for months

The oil market has sent a warning to Saudi Arabia and everyone else betting that prices are poised for a rebound: Don’t count on it.

The petroleum-rich kingdom throttled back output starting this weekend, part of a high-stakes gamble unveiled last month to crimp supply. Saudi officials think that demand will outstrip production later this year, teeing up a rally that will restore a gusher of profits to oil producers. Analysts at the International Energy Agency and Wall Street banks agree that demand could return in the second half of 2023.

Trouble is, the oil market appears to be at odds with them. A key market indicator suggests traders believe that supplies won’t shrink for months.

The gauge is based on the gap between the price of oil at different dates. In recent days, contracts for Brent oil that will change hands imminently fell to a discount compared with crude that will be delivered down the line. That dynamic, known as contango, is a signal that supplies are more than sufficient to meet demand.

“It’s a really bearish sign,” said Greg Newman, chief executive of London-based brokerage Onyx Capital Group. The surprise is that the Brent price itself hasn’t tumbled, Newman added. He expects Brent to lurch down to between $58 and $62 a barrel.

The implication is that Saudi Arabia, the second-largest crude producer behind the U.S., might have to take more drastic action to boost prices in the face of sluggish demand, higher interest rates and an unexpected bounty of oil from the U.S., Iran and Russia.

A spokesperson for the Saudi energy ministry didn’t respond to requests for comment.

China’s recovery has been slower than economists had predicted. Beijing put forward a plan to kick-start growth, but investors say it is insufficient so far to prompt a big rise in commodities demand.

Brent-crude prices slid 13% in the first half of the year to about $75 a barrel Friday, despite previous cuts by the OPEC+ cartel that Riyadh leads.

That has meant cheaper prices at the pump for American drivers heading into the summer travel season.

Regular gas prices averaged about $3.54 a gallon heading into Independence Day, more than $1.30 cheaper than a year ago.

Fuel consumption is weakening in China and in Europe, according to Marwan Younes, chief investment officer of hedge fund Massar Capital Management. A portion of China’s near-record crude imports appears to be heading into strategic reserves, he said.

“The larger, broader macro forces are really going to be dampening global growth,” Younes added.

By cutting output, Riyadh has bolstered prices for the high-sulfur crude it produces but failed to jump-start the broader market, said Adi Imsirovic, director at consulting firm Surrey Clean Energy and a former trader.

As a result, a price benchmark in Dubai last week rose to a premium to Brent crude, the global standard, for the first time since the fall of 2020. It is a rare occurrence because oil traded in Dubai is denser and contains more sulfur.

Dubai prices are heavily influenced by Saudi output whereas Brent measures the price of oil produced in Europe and Texas.

Higher Dubai prices are good news for state oil giant Saudi Aramco, which bases its export prices in Asia on that market. There is a catch. Aramco is exposed to the frail North Sea market through its sales to Europe, which are priced off Brent.

“The Saudis are back on their own again, cutting output single-handedly to support the market,” Imsirovic said. “It goes back to the old mantra that’s true again: that OPEC is strong in a strong market and is weak in a weak market.”

An added risk for oil bulls is that contango in Brent deters money managers from investing in oil derivatives. When futures contracts get more expensive the farther they are from expiration, bullish investors lose money as they adjust positions to avoid taking delivery of oil cargoes.

There are pockets of strength that could prompt prices to zip higher. U.S. drivers, who consume almost a 10th of the world’s oil, are burning through 3.8% more gasoline than they were a year ago.

A change to the way Brent prices are calculated—adding U.S. crude into the mix—might also be muddying the signal the benchmark sends about the state of the global market.

Even so, Massar’s Younes said, any rally in crude could be short-lived. A big drag is the downturn in petrochemical output, part of a slump in manufacturing. Refiners are losing money for each barrel of plastics ingredient naphtha that they produce. So they cut back on purchases of crude needed to make the oil product.

Higher interest rates have encouraged refiners to sell stocks of oil by raising storage costs, weighing on prices. Add a surge in Iranian oil exports amid talks with Washington, and some analysts are growing more gloomy.

“The problem is when you cut production in an already weak environment, the impact is limited,” said Ole Hansen, head of commodity strategy at Saxo Bank. “It looks like we could be here for a while.”

A funny thing happened on Wall Street in June: the chief executives of two massive US retail chains, Macy’s and DSW, quietly told investors they would be bringing back Nike products to their stores later this year.

Nike is “one of the most important brands for our customer”, said Macy’s CEO Jeffrey Gennette on June 1. “We had lots of customers that were disappointed that we didn’t carry it over the past year.”

The announcement was something of a surprise, and seemed to contradict Nike’s prolonged, much-publicised, and controversial strategy of focusing on selling directly to the consumer.

In 2017, Nike said it would begin trimming its network of retail partners from some 30,000 accounts to just 40. At the time, the sneaker giant was hoping to drive higher-margin sales on its website, through proprietary apps such as SNKRS, and in Nike-owned stores.

The strategy, initially called the Consumer Direct Offense, has been successful: Nike’s direct sales have grown from about 15 per cent of annual revenues in 2017 to more than 40 per cent in its fiscal 2023, which ended in May.

Some $21.3bn in Nike sales came from consumer transactions directly through the company’s own stores, apps, or website in the financial year just ended.

But the pivot has not been so kind to other retailers, some of which had relied on Nike goods for their own success. It put several independent, “mom and pop” stores out of business, while others said Nike’s sales switch had compromised sneaker culture hubs that had fostered the brand for decades.

That’s why some retail analysts were curious about the Macy’s and DSW announcements. Beth Goldstein, a footwear industry analyst at Circana, told Scoreboard that in the US, family footwear retailers (like DSW) and major department stores (like Macy’s) have been losing market share for several years as consumer preferences shifted during the pandemic.

When quizzed why Nike was reviving its relationship with Macy’s and DSW, and what that said about the brand’s retail strategy, chief executive John Donahoe insisted it was an “evolution of the same marketplace strategy . . . driven by the consumer”. He noted that “multi-brand” chains “help us serve distinct consumers or price points”.

Nike’s direct to consumer push isn’t without its own challenges: freight costs, foreign currency exchange rates, and product markdowns have all weighed on margins, despite its overall success at selling directly to consumers.

Donahoe told analysts on the company’s earnings call this week that it still intends to focus first and foremost on its own direct selling channels, followed by “neighbourhood authenticators” — local stores in select districts that lend Nike credibility in sport or culture, and lastly chain retailers.

Even so, big chain stores will be hoping the return of Nike goods can help lift their floundering fortunes.

F1’s Alpine brings in storytelling consortium

Hot on the heels of Wrexham’s fairytale promotion back to the English football league, Hollywood duo Ryan Reynolds and Rob McElhenny are making a new foray into the world of sport.

The pair are among a group of investors buying a 24 per cent stake in Formula One team Alpine, the Renault-backed racing franchise, though it’s unclear how much money the two actors are actually putting in.

The incoming shareholders include RedBird Capital, owner of AC Milan, and a new offshoot called Otro Capital run by former RedBird executives. Creed-star Michael B. Jordan (a minor investor in Premier League team Bournemouth) and Main Street Advisors are coming in too.

The valuation of $900mn marks a new high for F1 and puts it on a par with some big European football deals.

The price has been pushed up by F1’s booming popularity in the US, and also the sport’s new spending caps that have put a lid on costs.

Netflix series Drive to Survive may have set the wheels in motion, but with F1 recently adding both Miami and Las Vegas to its global line-up of host cities, the sport is laying down some long-term foundations stateside.

Reynolds clearly has an eye for a good investment (read our profile of him here). He sold his Aviation Gin brand to Diageo for $600mn, and T-Mobile is awaiting approval to buy Mint Mobile in a deal that would net the Canadian actor around $300mn. Both those wins are partly thanks to the marketing savvy deployed by Maximum Effort, his agency.

In announcing the stake sale, Alpine made it clear what it was after: partners who could build a global audience with smart campaigns. RedBird is trying to do that with AC Milan, selling Italy’s fashion capital alongside its football team.

Reynolds and McElhenny have successfully done it too — albeit on a different scale — with Wrexham. The little Welsh club now has 1.4mn followers on TikTok and close to 1mn on Instagram, while the team will play Manchester United and Chelsea on its upcoming US tour.

That’s all thanks to Welcome to Wrexham, the Disney TV show fronted by the two actors.

Alpine hasn’t won an F1 championship since 2006. But one lesson from Wrexham is that a team doesn’t have to be good to attract big sponsors and global fans. It just needs a good tale to tell, ideally to a new, untapped audience.

The challenge now for the investors in Alpine will be coming up with a compelling storyline in a sport that is seriously lacking in twists as Red Bull leaves everyone else in the dust.

Hudson Yards developer sees strong demand for ‘lifestyle offices’ despite record commercial vacancies

The view from the observatory atop Manhattan’s Hudson Yards was clouded on a recent afternoon by smoke from distant wildfires in Canada. But that has not dimmed Jeff Blau’s outlook for the sprawling development or the high-end offices that are its speciality.

At a time when offices are dragging the commercial real estate sector into crisis, Blau, the chief executive of Related, one of the largest US developers, is planning to build 10 new towers in cities across the US and in London, an investment that will total an estimated $6.5bn.

The idea is not an easy sell to investors just now, Blau acknowledged. The trend of remote working that was accelerated by the Covid pandemic has slashed office attendance and pushed up vacancies.

A record 70.3mn square feet of available space sat on the Manhattan office market at the end of the second quarter, according to Savills.

Investors and lenders have become desperate to reduce their office exposure.

Still, Blau believes there is a shortage of the most modern and lavishly equipped offices — buildings he now refers to as “double-A” or “lifestyle offices”. That conviction has arisen from the performance of Hudson Yards on the west side of Manhattan. 

“We’ve had some of our best leasing over the last 12 months in the middle of all this period of time when everyone says the ‘office is dead’ — except it’s not,” Blau said, noting that Related was securing rents on the upper floors of its newest tower, 50 Hudson Yards, in excess of $200 per sq ft. That is more than double the $95.53 average asking rent for a class A building in Midtown, according to Savills.

For its forthcoming towers, Related is targeting Austin, Miami, West Palm Beach, Santa Clara, Boston, Chicago, Detroit and Brent Cross in London. Those projects are in various stages of development. The most advanced, in West Palm Beach, is already under construction and boasts signed leases. 

Its confidence in offices is such that Related is also planning to eventually build a 2mn sq ft office tower on the as-yet-undeveloped west side of Hudson Yards. That site will also host a casino if a joint-bid with Wynn Resorts is selected for one of three forthcoming New York licences.

“Every landlord thinks they have an A building, right?

But some of these A buildings are 50 years old.

And even if they have been well taken care of over the term, they are not the same as the new buildings,” Blau said. “These buildings truly are differentiated in every which way.”

Those at Hudson Yards boast advanced air filtration and energy efficiency, and vast floor plates that can accommodate an entire firm on a single floor. Their ever-increasing amenities range from private cafeterias overseen by celebrity chefs to concierge medical clinics and, most recently, helicopter shuttle service to local airports.

The combined effect, according to Blau, is an environment that pulls employees back into the office — something for which certain companies will pay dearly. 

“I don’t care what industry they’re in — every CEO wants their employees back in the office five days a week. He may not be saying that because he’s afraid that his employees will quit or he won’t be able to attract employees. But if you asked them, is that a better way to run his business — is it more productive, is it more innovative? They will say ‘yes,’” he argued. “Once it becomes about employee talent attraction and retention, then the rent becomes irrelevant.” 

According to Related, occupancy among Hudson Yards’ tenants now averages more than 80 per cent from Monday through Thursday. (“Friday,” said Blau, “has turned into a national holiday.”)That compares to less than 50 per cent for the rest of the city. 

It is not clear whether employees are responding to the carrot of Hudson Yards’ plush offices or the stick of bosses like BlackRock’s chief executive, Larry Fink, who recently ordered his workers back to their desks four days a week.

Either way, Related received further validation recently when Brad Lander, the New York City comptroller and a one-time Hudson Yards sceptic, noted the development was now delivering $200mn more in annual tax revenue than forecast — and growing. “So this is one place I gotta say I got it wrong,” Lander told Errol Louis on the Inside City Hall programme. (As for its architecture — slammed by many critics as soulless — there were still “some questions,” Lander noted).

Other developers are also betting on super offices. SL Green has reaped similar success at One Vanderbilt, near Grand Central Station, with some rents topping $300 per sq ft. Hines, its partner on that venture, is also convinced there is a shortage of top-quality office space. RXR, meanwhile, is soon to join the fray with 175 Park Avenue.

“Each market can probably only support one or two of these,” Blau said. “But that’s our business. That’s what we focus on.”

Blau, 55, was handpicked by Related’s founder, Steven Ross, while still a student at their alma mater, the University of Michigan. He joined the firm in the midst of the early 1990s commercial real estate crisis. This time, he observed, many properties were performing well — they were simply overleveraged at a time of rising interest rates.

“Anyone who has too much debt is struggling right now. That’s one of the lessons — don’t put too much debt on your buildings,” Blau said. “Almost all of this is driven by interest rates, across the board. And then we do have this segment of older office [buildings] that [are] struggling at the property levels.” It helps that Related is privately held, and so, unlike some publicly traded competitors, it is not under pressure to mark its buildings to market. 

Blau was one of Ross’ top lieutenants on the Time Warner Center — now the Deutsche Bank Center — at Columbus Circle. It confirmed Related’s evolution from an affordable housing specialist to a developer of mixed-use projects that blend retail with luxury condominiums and offices.

Hudson Yards, the largest development in North America, features those same elements on a far grander scale. It was also a daunting engineering challenge because of its location above a working rail yard. Related was selected from a group of bidders in 2008 after the financial crisis prompted another developer to pull out.

The original plan was for Hudson Yards’ office towers to play a supporting role by attracting the affluent to its retail space and condominium towers. In the event, they have been its star performers. Three towers — 10, 30 and 55 Hudson Yards — are now 100 per cent leased. Some early tenants, such as Tapestry and BlackRock, were lured from Midtown with favourable deals, according to leasing experts. A fourth tower, 50 Hudson Yards, is nearly 90 per cent leased.

By contrast, the anchor tenant for the shopping mall, Neiman Marcus, was pushed into bankruptcy in 2020 by the Covid pandemic, leaving three abandoned floors. “The demand for office is so strong we’re converting that space — instead of retail — back to office,” said Blau.

Another thing that has not gone quite to plan: the Vessel spiral staircase sculpture at the centre of Hudson Yards. Ross viewed it as an iconic piece of public art. Instead, it has featured in several suicides and been closed to visitors for nearly two years as Related tests safety netting.

As Related focuses on new construction, other developers are plotting different paths through the office crisis. Some are spending heavily to upgrade dated buildings. Others are trying to convert them to residential use. Blau sees possibilities in both but is not a great fan of either approach. 

He praised Vornado’s refurbishment of PENN 1, a 1970s tower at Pennsylvania Station, for example, but foresaw a limited ceiling for its rents. As for conversions, office towers were simply not designed for residential use, he noted, making it expensive to repurpose them. Adding to the cost is the need to first empty them.

“They often don’t go to zero per cent occupancy. They go like 70, 60, 30 — and then the 30 never want to leave. And then you have to spend so much money to convert that it’s basically the cost of essentially building a new building,” Blau said. “And if that’s true, you should tear the building down and build a proper building.”