>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • OXM +6.5%, TCOM +6.2%, SOL +5.9%, PLTK +5.1%, FUL +5.1%, JBT +3.2%, STGW +3.1%, WIX +3%, RIOT +2.7%, MOLN +2.7%, EGY +2.7%, SGHC +2.2%, MITK +1.9%, FSM +1.9%, DDD +1.5%, KBR +0.6%
  • Gapping down:
    • COOK -18.6%, ENJY -10.7%, MOMO -8%, APLS -6.9%, SCS -5.8%, JD -4.1%, KBH -3.6%, ASND -3.5%, OLLI -1.9%, ASTL -1.9%, EXAI -1.6%, CS -1.1%, PRM -0.8%, ARGX -0.5%

FT : Christie’s offers Warhol Marilyn for $200mn

Christie’s offers Warhol Marilyn for $200mn



Christie’s has set ambitions high for Andy Warhol’s signature square silkscreen, “Shot Sage Blue Marilyn” (1964). The auction house describes the work as “poised to become the most expensive 20th-century artwork to sell at auction” when it is offered for $200mn in May. The work vies with Pablo Picasso’s “Les femmes d’Alger (Version O)” (1955), which sold for $179.4mn in 2015 and is currently the priciest 20th-century work to sell publicly — though this is after fees and before inflation is factored in.

Certainly, the Warhol’s asking price is a record — the previous high was for Amedeo Modigliani’s “Nu couché” (1917), estimated at $150mn in 2018. (This sold for $157.2mn, including fees.) The Warhol is being offered without a guarantee from the Zurich foundation of the late siblings Thomas and Doris Ammann, to benefit children’s charities.

FT : ECB to oversee wind-down of Russia-linked bank in Cyprus

ECB to oversee wind-down of Russia-linked bank in Cyprus
RCB to repay €2.8bn of customer deposits or transfer them to another bank

The European Central Bank has taken the unusual move of appointing a temporary administrator to oversee the wind-down of RCB Bank, a Cypriot lender with strong Russian ties, which has been barred from agreeing new loans, deposits or investments.

The move was announced on Thursday and means RCB, which was created as a subsidiary of Russia’s state-owned VTB Bank in 1995, will repay its €2.8bn of customer deposits or transfer them to another bank, as first reported by the Financial Times.

RCB said in a statement on Thursday: “Although RCB has been, and remains abundant in liquidity and capital, the ongoing and extremely volatile geopolitical situation requires it to transform and adopt a new strategy — phasing out banking operations, while at the same time ensuring that the best interests of its clients are secured.”

The lender, which agreed the transfer of VTB’s controlling stake to its management on the day Russia invaded Ukraine, said it planned to transform itself into “a regulated asset management company, given the substantial assets on its balance sheet”.

Formerly called Russian Commercial Bank, the lender is in effect winding itself up before customers’ concerns over the war in Ukraine lead to it suffering the same fate as the Austria-based subsidiary of Russia’s Sberbank, which was placed into administration this month after being hit by a run on its deposits.

Banks with Russian clients have been particularly badly hit by western sanctions that limit the size of new deposits Russian nationals can make.

“The ECB decided to appoint a temporary administrator to closely monitor RCB Bank’s liquidity position and capital position and to oversee the orderly repayment of its depositors,” the ECB said in a statement on Thursday.

“The temporary administrator will not replace the current management body, but instead work with it and support the orderly implementation of the bank’s voluntary phasing-out plan,” it added.

>>> Europe : Brokers Upgrades & Downgrades - 24th of March 2022 V2(+)

>>> Up
* Acerinox Raised to Outperform at Credit Suisse; PT 17 euros (+)
* BAM Raised to Buy at ING; PT 3.50 euros
* BAT Raised to Overweight at JPMorgan; PT 4,000 pence
* BBVA Raised to Buy at JB Capital Markets; PT 6.50 euros (+)
* Bechtle Raised to Buy at Jefferies; PT 63 euros
* Bridgepoint Raised to Buy at Numis; PT 434 pence (+)
* Burford Capital Raised to Buy at Peel Hunt; PT 1,000 pence
* Enel Raised to Buy at Jefferies; PT 7 euros
* LU-VE Raised to Buy at Intesa Sanpaolo; PT 23.80 euros (+)
* Orsted Raised to Hold at Jefferies; PT 750 kroner
* OVB Holding Raised to Buy at SRC Research; PT 30 euros
* Outokumpu Raised to Neutral at Credit Suisse; PT 5.60 euros (+)
* Pandora Raised to Buy at DNB Markets; PT 940 kroner (+)
* Rightmove Raised to Sector Perform at RBC; PT 630 pence
* Schnitzer Steel Raised to Overweight at KeyBanc; PT $58

>>> Down
* Alcoa Cut to Equal-Weight at Morgan Stanley; PT $100
* Aperam Cut to Neutral at Credit Suisse; PT 51 euros (+)
* CaixaBank Cut to Neutral at JB Capital Markets; PT 3.60 euros (+)
* Drax Cut to Hold at Jefferies; PT 700 pence
* Enagas Cut to Sell at Bestinver; PT 18.50 euros (+)
* eQ Cut to Reduce at Inderes; PT 27 euros
* Finnair Cut to Sell at SEB Equities; PT 35 euro cents
* IAG Cut to Hold at Deutsche Bank; PT 155 pence
* JDE Peet's Cut to Sell at Berenberg; PT 24 euros
* L'Oreal Cut to Underperform at Jefferies; PT 314 euros
* Metrovacesa Cut to Neutral at Alantra Equities; PT 9 euros (+)
* Nokian Renkaat Cut to Hold at Nordea
* Wizz Air Cut to Hold at Deutsche Bank; PT 2,900 pence

>>> Initiation
* Aker BioMarine ASA Rated New Buy at Nordea; PT 60 kroner
* Befesa Rated New Overweight at Morgan Stanley; PT 81 euros
* Freenet Rated New Neutral at Oddo BHF; PT 25 euros
* Scatec Rated New Hold at Arctic Securities; PT 140 kroner

>>> Call
* BAT Raised to Overweight at JPMorgan on Vapor Potential (+)
* Bechtle Raised to Buy as Jefferies Says 4Q Marks the Trough (+)
* Befesa Initiated With New Overweight Rating at Morgen Stanley (+)
* European Utilities Stocks Facing ‘Defining Moment’: Jefferies
* Games Workshop On Track to Deliver ‘Strong’ 2H, Says Peel Hunt (+)
* MorphoSys a Buy at Berenberg With Pipeline Seen Undervalued (+)
* Rightmove Upgraded at RBC on Confidence It Can Meet Expectations
* Three Airlines Downgraded at Deutsche Bank on Tough Outlook (+)
* U.K. Defense Spending Boost Probably Coming in Autumn: Citi (+)
* Zur Rose’s Growth Challenging; Changes and Volatility Ahead (+)

WWD : Gucci Launches Customization Vault Project With Virtual Shop 10KTF for NFT

Gucci Launches Customization Vault Project With Virtual Shop 10KTF for NFT Initiative

As per the project, Gucci's creative director Alessandro Michele's avatar travels in the New Tokyo metaverse, invited by digital artisan Wagmi-san to his virtual shop, creating outfits inspired by the Aria and Love Parade collections.



MILAN — Gucci is bringing customization to a new level, designing a digital identity in an alternative virtual world, generated through the codes of the brand.
The luxury group has collaborated with virtual shop 10KTF to create the “10KTF Gucci Grail” project, a new NFT initiative that is taking place in the brand’s experimental space Vault.
Digital outfits are customized for those who already own a PFP, or an NFT profile “Picture for Proof” used by collectors as a portrait, or as an expression of artistic and technological talent. Bored Ape, World of Women and Cool Cats are among some of the 11 NFT selected collections.
As per the project, Gucci’s creative director Alessandro Michele‘s avatar travels in the New Tokyo metaverse, invited by digital artisan Wagmi-san to his virtual shop, creating two outfits in different colors, inspired by the Aria and Love Parade collections, respectively. The clothes are reserved for those who want a personalized Gucci outfit to wear in the parallel digital worlds.

Over the past few days, the icon of a crystal ball, a gift donated by Michele to Wagmi-san, was offered to three groups of people — those who already own a PFP, those who are part of the Gucci Vault community on the Discord platform, and those who already “live” in New Tokyo, where Wagmi-san is based.
Those who have redeemed the magical globe have been able to use it to see the outfits, choose them and receive the customized digital avatar representing them in a total Gucci look, created in the meta-atelier of Wagmi-san.
On Thursday, the last part of the project will allow those who have the crystal bowl to receive their PFP personalized with the chosen Gucci look.
Gucci underscored that “acquiring personalized virtual garments also involves several steps, not unlike the actual process of securing a designer creation (which requires several fittings).”

The 10KTF Gucci Grail project
IMAGE COURTESY OF GUCCI
All this is especially timely. As reported, the first Metaverse Fashion Week kicks off on Decentraland on Thursday featuring catwalks, virtual retail storefronts, immersive experiences, arty spaces with fashion and music, panel talks and other events. More than 60 brands are on deck to participate in Metaverse Fashion Week, including Tommy Hilfiger, Dolce & Gabbana, Elie Saab, Nicholas Kirkwood, Perry Ellis, Imitation of Christ, Estée Lauder, Etro and many more, with several setting up shop in digital stores that visitors can teleport to and browse.
As reported, The Gucci Vault has been playing host to a series of crypto-based projects, including NFT drops such as the SuperGucci collaboration with Superplastic.
Gucci teamed with the creator of animated celebrities, limited-edition vinyl toys and digital collectibles to unveil SuperGucci, a three-part drop including NFTs and ceramic artworks. The project also includes Superplastic’s animated celebrity artists Janky and Guggimon in the Gucci Vault.
The event builds on Gucci’s signature designs and Superplastic’s celebrity-packed CryptoJanky NFT drops created by Janky and Guggimon.
Gucci has also launched on Discord to foster open conversations with the community about what’s next for the experimental space.

Vault will continue to present monthly drops of rare vintage finds, as well as a regular rotation of exclusive capsules, special collaborations and new brands.
This is the latest metaverse initiative for Gucci, which last May participated in Christie’s online auction, Proof of Sovereignty, curated by Lady PheOnix, one of the leading voices for contemporary digital art and culture in the new media landscape.
Gucci was present with its first NFT, with artwork conceived using digital animation drawn from Gucci Aria, the house’s fashion collection that marked its 100th anniversary in 2021. The fashion film was codirected by Michele and award-winning photographer and director Floria Sigismondi.
The artwork underlying the NFT recognized Aria’s overarching message of a yearning to bloom and flourish after the shadow of winter has passed and this visual tale brought Gucci into a new media space. The starting bid was $20,000, but the NFT was sold in June at $25,000.
Also, Gucci sold a digital version of its Dionysus bag on Roblox for about $4,115 last August, which is roughly 20 percent more than the physical object.

WWD : Why Hudson’s Bay Co. Wants Kohl’s Corp.

Why Hudson’s Bay Co. Wants Kohl’s Corp.
The Toronto-based Hudson's Bay is a leading bidder for Kohl's but has some competition.

Last week’s disclosure that Hudson’s Bay Co. is bidding for Kohl’s Corp. came as a surprise, yet there appears to be plenty of rationale for a deal.

Richard Baker, the governor, chairman and chief executive officer of the Toronto-based HBC, is a risk taker, a shrewd dealmaker, and he knows real estate well and how to shine a light on the hidden values in a company. He’s been in the business of buying, operating and selling department store retailers and retail real estate.

“Richard Baker needs another revenue stream for Hudson’s Bay,” said one retail expert who requested anonymity. “There is only so much growth potential left in Saks and in Hudson’s Bay,” which operates strictly in Canada, while Saks operates in the U.S. and Canada.

“A deal for Kohl’s would give Baker something to play with other than Saks and Hudson’s Bay,” said another retail source. “You can bet Baker is looking at the Kohl’s real estate. He could sell off some of it. Amazon and others are looking for additional properties they could use for warehouses.” There could also be sale-leasebacks of store properties.

Some reports value Kohl’s real estate at $8 billion, higher than the company’s current market cap of around $7.8 billion. Bidding action on Kohl’s has pushed the stock price up.

Hudson’s Bay could bring the Menomonee Falls, Wisc.-based Kohl’s to Canada, though that market is roughly one-tenth the size of the U.S. and it’s limited, and Kohl’s, with its moderate prices, could cannibalize sales at The Bay department stores that are throughout Canada. Expanding U.S. retail into foreign countries is never easy, and most often unsuccessful. Target’s foray into Canada failed, and Nordstrom and Saks Fifth Avenue locations in Canada have reportedly not all lived up to expectations.

There could be back-of-the-house synergies obtained by integrating Kohl’s into HBC, and if a deal is consummated, HBC could consider splitting Kohl’s dot-com and brick-and-mortar stores businesses into separate companies. Kohl’s management has rejected that idea but has been under pressure from activist shareholders to consider the possibility and other strategic alternatives, including selling the company. Macellum Advisors, which has a 5 percent stake in Kohl’s, has been most critical of the retailer’s financial performance and management.

Baker, along with Marc Metrick, CEO of Saks.com, engineered the split up of the physical stores and dot-com businesses of HBC’s Saks, Saks Off 5th and Hudson’s Bay divisions. The moves enabled HBC to attract investors and improve assortments technology, and web experiences, and recruit some talent. HBC hopes to ultimately take Saks.com public, mirroring the IPO of Mytheresa.com a year ago.

There’s another reason why HBC would pursue Kohl’s: Baker’s ambition to grow HBC by obtaining the Neiman Marcus Group and combining it with Saks Fifth Avenue to create a luxury empire in the U.S., has not been realized, despite years of on-and-off talks between the companies. Last year’s bankruptcy of the Neiman Marcus Group and its restructuring out of Chapter 11 proceedings via a debt-for-equity deal gave NMG new owners, making the possibility of an HBC merger with NMG more remote.

HBC has had mixed success with retail operations. It was unable to turn around Lord & Taylor and Fortunoff’s, which were both shut down, though they were struggling prior to HBC’s ownership, and HBC pulled out of Europe after buying and selling Kaufhof in Germany. A handful of Hudson’s Bay and Saks Off 5th stores established in Europe were short-lived and closed after HBC pulled out of Germany.

Still, HBC made a $1 billion cash profit by buying Kaufhof for $2.5 billion and selling it for $3.5 billion. That money was used to take HBC private. HBC also profited from the sale of Lord & Taylor real estate, and sources close to HBC told WWD that there has been growth at Hudson’s Bay and at Saks Fifth Avenue, largely through expanding dot-com operations and better merchandising. Saks Off 5th is also growing its assortment and elevating its marketing.

Sources told WWD that the Kohl’s auction process has entered a second phase, and a few months will pass before a resolution. A deal is likely in the high $60 or $70 per share range. Bids received so far are said to be in the mid $60 range. Kohl’s stock is currently trading at just over $60.

HBC and other reported bidders — Sycamore Partners, a private equity firm that has Belk, Loft, Express, Hot Topic, Ann Taylor and other retailers in its portfolio; Leonard Green & Partners, a private equity firm that has been active in the retail sector, and Starboard Value’s Acacia Research Corp. — believe Kohl’s has potential for greater profitability and sales.

Kohl’s fourth-quarter net income declined 13 percent to $299 million and was impacted by inventory shortages, slowed traffic due to Omicron and some tax implication. Operating income, which eliminates the impact of the tax difference, was up 42 percent to $450 million in the last quarter.

For the year, the net reached $938 million, compared to a loss of $163 million in 2020, which was more heavily impacted by the pandemic. Revenues reached $19.43 billion, below the $19.97 billion generated in 2019, but ahead of the $15.96 billion generated in 2020.

Kohl’s generated about $6 billion in volume online, or just under 30 percent of its total volume in 2021, and has stated intentions to grow online revenue to $8 billion annually.

Under the leadership of CEO Michelle Gass, Kohl’s has implemented several growth strategies that haven’t fully kicked in yet and could bear fruit in the future, namely the rollout of Sephora shops inside Kohl’s, the addition of several high-profile brands such as Calvin Klein and Tommy Hilfiger, the plans to open 100 new stores over the next four years, on top of the 1,100 or so already operating, and digital growth. Kohl’s has about 200 Sephora shops installed in its stores, and plans to have Sephora in 850 stores by 2023.

“Kohl’s is going to blossom if you leave Michelle Gass alone,” said veteran retail analyst Walter Loeb. “They are going to get $2 billion out of Sephora. There is a clear direction to be an active and casual destination, and they are opening 100 stores. I think Kohl’s will try to have more locations in center cities, like Target has. There is so much space available in center cities so why not put a Kohl’s in there? Smaller stores in more urban areas would be more productive.”

Kohl’s stores aren’t the most exciting retail theater. Yet they are easy to shop with simple, one-level floor plans. They’re also accessible, having off-mall locations primarily in strip centers so you can drive right up to them. Kohl’s is also associated with offering value and discounts, and with its strong loyalty program and popular Kohl’s Cash rewards.

Speculation that HBC would partner with Sycamore on a deal for Kohl’s is believed to be false. Sources said HBC placed its own bid, as did Sycamore. Kohl’s has acknowledged there have been bids submitted but has not identified the bidders.

“I like Kohl’s as a company. I happen to think there is a lot of opportunity at Kohl’s,” said one former retail captain. “A lot of Michelle’s ideas and strategies are quite good. Sephora will be a home run. And there could be opportunities in the real estate market involving some financial re-engineering,” meaning monetizing the real estate to boost profitability while unloading some less profitable locations. “There is also still a lot of opportunity in product. I think it’s still too basic versus fashion. For HBC, this could be a great acquisition.”

“So far, I believe the bids are relatively low,” Loeb said. “It’s a question of whether someone wants to bid aggressively and spend more money. If a deal happens, it maybe could work but only if they keep Michelle and all the merchants in place, though typically the new owners try to put their people in.”

On Monday, Kohl’s characterized the bids received as “non-binding and without committed financing,” as reported. The retailer said it is engaged in a “robust” review of certain bids to acquire the company and is giving the bidders an opportunity to refine their offers.

Kohl’s said in a statement that Goldman Sachs has been authorized to “coordinate with select bidders who have submitted indications of interest to assist with further due diligence so that they have the opportunity to refine and improve their proposals and include committed financing and binding documentation.”

On Tuesday, Macellum issued a letter to shareholders urging them to vote for the 10 individuals Macellum has nominated for the Kohl’s board, which would wipe out the existing board and create a new one. Kohl’s, meanwhile, is urging shareholders to stick with the existing board. Shareholders will vote on the board at the Kohl’s annual meeting scheduled for May 11.

Macellum also expressed doubts about the company’s growth strategies, “We believe the board is allowing management to embark on a high-risk strategy that leaves little margin for error,” Macellum said in its letter. “While we agree having Sephora will help drive traffic to the stores, our concerns are centered around the cost required to do so and the ultimate earnings accretion of this initiative.”

Macellum wrote, “The board’s unwillingness to meaningfully monetize any of the company’s approximately $8 billion in real estate is clear evidence, in our mind, that the current directors are only concerned with maintaining the status quo, rather than creating meaningful shareholder value.”

(ZH) Trading Houses Will Collapse As "Margin Call Doom Loop" Goes Global, Trafig

Trading Houses Will Collapse As "Margin Call Doom Loop" Goes Global, Trafigura CFO Warns

Sometimes repo guru Zoltan Pozsar is so far ahead of his time, it takes the "experts" weeks just to read up on all the required source docs to even grasp what he is talking about.
Last week we reported that the Bloomberg news that one of the world's largest independent energy merchants - the secretive Trafigura which trades hundreds of billion in commodities every year - was facing "margin calls in the billions of dollars" meant that the commodity "margin call doom loop" idea floated more than three weeks ago by Pozsar who warned that commodity traders and clearinghouses could be facing a liquidity crisis of historic proportions, was coming true and despite Barclays' earnest attempts to minimize its impact, could threaten broader financial stability and was manifesting itself in broad liquidity squeezes which could be observed in the surge in such unsecured funding markets as the FRA-OIS.
That was just the start, because the very next day Zoltan was proven correct again, after the FT reported that Europe’s largest energy traders have taken the place of Europe's insolvent banks in calling on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
Yes, that's what happens when a "margin call doom loop" goes global.
The FT wrote that in a letter it had seen, the European Federation of Energy Traders, a trade body that counts BP, Shell and commodity traders Vitol and the margin-call stricken Trafigura as members, said the industry needed “time-limited emergency liquidity support to ensure that wholesale gas and power markets continued to function”.
“Since the end of February 2022, an already challenging situation has worsened and more [European] energy participants are in [a] position where their ability to source additional liquidity is severely reduced or, in some cases, exhausted,” EFET said in its letter, dated March 8 and sent to market participants and regulators.
It was "not infeasible to foresee . . . generally sound and healthy energy companies . . . unable to access cash", the letter warned, clearly ignoring that "generally sound" companies would have anticipated such a fat tailed scenario. The fact that they didn't suggests that they were either not "generally sound", or "healthy" and certainly did not plan accordingly. And yet somehow their stupidity and/or greed makes them eligible for Fed bailouts?
Days came and went, with nothing but silence from the central banks who perhaps ignored the severity of the coming liquidity crisis, and why not - after all most of the world's biggest commodity traders have more than one billionaire in their org chart, let them spend money to bail out their companies. But while this particular bailout request may have sounded too grotesque to both central banks and the general public, to the commodity firms the sudden margin-call induced liquidity shortage was all too real.
Fast forward to today, when in a follow up to its report from last week, the FT writes that according to Christophe Salmon, Trafigura’s chief financial officer, the crisis in global energy markets will force some smaller commodity traders out of business and unleash a wave of consolidation in the sector.
Salmon warned that the spike in capital needed to keep commodities flowing around the world since Russia invaded Ukraine would squeeze smaller trading houses out of the market.
Christophe Salmon: ‘The barriers to entry to our sector as supply chain managers are increasing’
“When we go through these crises — and let’s not forget we’re getting out of two-and-a-half years of Covid situation — there will be another set of consolidation of the commodity trading sector,” Salmon told the FT Commodities Global Summit in Lausanne on Wednesday.
The global commodity trading sector is dominated by large groups such as Trafigura, Vitol and Gunvor but Salmon said many smaller traders were facing a multitude of problems from rising capital requirements to a lack of access to credit.
“The barriers to entry to our sector as supply chain managers are increasing,” he said.
Salmon's dire comments come as every day we see confirmation of Pozsar's worst case scenario, and amid the rising concerns about a liquidity crisis sweeping commodity financing, Europe’s largest traders continue to plea with banks and governments to offer “emergency” assistance to prevent a cash crunch as large swings in commodity prices push up the cost of trading. Of course, since these are independent trading houses which several years ago their paid-for lobbyists were trotted out to explain that they are not - in fact - systematically important, we fail to see how they could possibly make a case where taxpayer funds goes to bail out a handful of billionaires, when simple nationalization would do.
It is this worst case scenario that has prompted nothing short of panic among traders at the FT conference, who have voiced concerns that difficult conditions such as banks demanding hefty initial margins — cash for hedging future contracts — had contributed to a breakdown in the proper functioning of commodity markets, particularly gas and nickel.
Fears over hydrocarbon supplies from Russia, the world’s second-largest gas producer and third-biggest in oil, have rattled markets. Europe has yet to impose sanctions on Russian energy exports but banks, shipping companies, insurers and refiners are “self-sanctioning” and avoiding touching oil from the nation.
In a delightful irony, this is not the first time that commodity trading houses have been this close to collapse: back in 2013/2014 during their last near-death experience when Chinese commodity financing imploded and pushed trading giants such as Glencore close to collapse, the industry promptly trotted out its "paid for hire" mercenary consultant to draft white papers (even more ironically, the White Paper was commissioned by Trafigura) that the sector was not, in fact, too big to fail (the alternative would have been partial or complete nationalizations). Oh how they wish they could reverse on this optimistic take now.
So just to make sure that the message is heard loud and clear, Salmon said that if the commodity traders go down, they will drag the rest of the world with them, and that "ruptures to commodity financing would feed through to consumers."
“We are already in a vicious cycle on the futures market. I want to stress the impact that it will have on the physical market," he said.
"We are more and more engaged with governments in order to inform the governments of the likelihood of market disruptions, meaning stock-outs of certain products in certain regions."
Translation: watch for 1970s style lines at your local gas station, something that is probably taking place in Europe as we type: European gas prices jumped to more than €300 per megawatt hour this month before easing below €100, while Brent crude, the international oil benchmark, has risen 20 per cent since the invasion of Ukraine to $118 per barrel.
Furthermore, as discussed yesterday when we observed the coming diesel crisis, these same traders expect to have higher levels of working capital tied up with more barrels on the sea since Russian oil must travel further to Asian customers and replacement supplies for Europe must also spend more time in transit.
Salmon’s observation over the viability of smaller traders comes amid uncertainty over the future of Gazprom’s UK trading arm, which Boris Johnson’s government is on standby to put into “special administration”, a de facto nationalization. The unit is vital to the cheap supply of energy for many British industrial businesses.
And while Salon waits for some response from central banks, he isn't taking any chances and on Wednesday, Trafigura said it had closed a $2.3 billion revolving credit facility, adding to a $1.2 billion package arranged earlier this month and after exploring funding from private equity groups. As reported previously, Trafigura has also been holding talks with private equity groups to secure additional financing, although for now it appears that those talks haven't gone anywhere.
Trafigura aside, things among the trading giants are going from bad to worse: earlier today we reported that Mercuria Energy Group, a Swiss commodity trading giant, secured a $2 billion emergency credit facility from banks as commodities prices surge following Russia’s invasion of Ukraine. The credit facility, which was secured earlier this month, can be renewed or closed in six months time, Bloomberg reported, adding that trading houses have been seeking funds to maintain their physical and derivative positions as prices of everything from natural gas to metals soar. With markets upended and sanctions threatening to disrupt raw materials supplies, traders are facing a liquidity squeeze that could reshape the sector.
“We do have to size our activity and our risk appetite with our financing capability. It’s as brutal as that,” Frederic Barnaud, group chief strategy and commercial officer at Mercuria, said Wednesday in a panel discussion at the FT Commodities Global Summit in Lausanne.
Hilariously, the Geneva based Mercuria was facing a mini liquidity crunch not long after it posted a record profit in 2020 as it cashed in on wild swings in gas, power and oil markets during the pandemic. “You cannot be too hungry on profit and risk taking and not have the infrastructure and relationship with banks or other ways of capital forming to endorse your businesses,” said Barnaud.
The report prompted us to point out that between Trafigura, Gunvor, Mercuria, "every commodity trader hit with massive margin calls", explaining their desire to get some of that sweet, sweet central bank bailout money.
There was more turmoil elsewhere in the commodity world today. Qatar, the biggest shareholder of the world's best known commodity trader Glencore sold a stake worth $1.1 billion (the Qatar SWF is selling 159 million shares out of its stake of 1.22 billion shares). After the sale, Qatar will drop to 2nd largest holder in Glencore, and former CEO Ivan Glasenberg will climb to 1st.
Another commodity trading giant, Gunvor Group, a leading oil and liquefied natural gas trader, also rushed to shore up its liquidity saying that it may boost its equity by selling a stake, the latest sign of how volatile commodity markets are pushing trading houses to scour for new sources of capital.
Torbjorn Tornqvist, Gunvor’s chief executive officer and controlling shareholder, said that the company had reduced its trading volumes as a response to higher and more volatile prices. An equity partner would allow the company to grow, he said.
“For us to go and really, shall I say, exploit the potential of the company, it would be desirable to explore additional equity,” Tornqvist said at the Financial Times Commodities Global Summit. “We are open to find an alliance which could increase the size of the company.”
As we reported at the time, Gunvor was one of a clutch of large natural-gas traders facing huge margin calls in October, when prices spiked in Europe. The company has adapted its trading to accommodate higher and more volatile prices, it said this week.
“We are doing less volume than we normally do,” Tornqvist said on Tuesday. “In the right time, we can size this up in no time. This is our business model.”
Tornqvist took a majority stake in Gunvor in 2014, after co-founder Gennady Timchenko was sanctioned by the U.S. over ties to Vladimir Putin following Russia’s 2014 annexation of Crimea. Timchenko subsequently exited the company. The trader, based in Cyprus with major trading operations in Geneva, has repeatedly denied any connections to Russia’s leadership. In a statement this week, it highlighted that only 6% to 11% of its trading book over the past five years has originated in Russia, and said it was doing no new business in the country.
Tornqvist, who owns 88.4% of Gunvor, has been looking to reduce his stake for a number of years. In 2019, the company held talks about selling a stake to Algeria’s state oil and gas producer, Sonatrach. But the talks ended amid political upheaval in Algeria. The rest of the company is owned by other employees. Any potential equity partner would need to complement Gunvor’s existing business, and Tornqvist said he doesn’t intend to step back.
“I’m not in the market to sell out,” he said, confirming he was in the market to sell out, and if commodity volatility persists at the current pace for a few more months, all of his colleagues at the helm of the handful of giant commodity traders, will be doing the same. The question is whether there will be any buyers.

(ZH) Goldman: How China's COVID Lockdowns Could Disrupt Global Supply Chains

Goldman: How China's COVID Lockdowns Could Disrupt Global Supply Chains

As China continues to struggle with its worst COVID outbreak since the virus first emerged in Wuhan more than two years ago, one of the biggest questions on the minds of American companies (not to mention investors) is how badly the lockdowns ordered by the CCP will disrupt production in the country's factories, which form a critical link in the global supply chain.
Unsurprisingly, investment banks have been peppered with questions about the economic backlash stemming from China's 'zero tolerance' approach to combating COVID (and this latest omicron-driven outbreak in particular). As COVID cases continue to climb (with Shanghai recording a record case tally this week that's inspired a wave of panic buying), Goldman estimates that lockdowns have impacted population centers responsible for roughly 30% of China's GDP.
Overall, daily cases have declined slightly from their peak on March 20. But that doesn't mean the outbreak is over.
In its latest sell-side research report on the issue, a team of Goldman analysts "assess potential disruptions to China’s supply chains from intermediate goods, exports, final output and logistics perspectives, mainly through analyzing provincial level input-output tables."
Here's what they found: the greatest impact from the lockdowns will be on China's chemicals, transportation equipment and timber/wood product".
Furthermore, Goldman's analysis suggests that "Jiangsu, Jilin, Guangdong, Shaanxi and Shanghai are more important among the virus-impacted provinces in terms of their roles in nationwide supply chains."
The Goldman team breaks down the potential impact of lockdowns on various industries across several of the worst-hit Chinese provinces and/or cities.
The report also cites "anecdotal evidence" to suggest that regions with mid-to-high risk districts are indeed facing delivery delays or production suspensions to various degrees that could have a cascading impact.
While CCP policymakers have taken steps to mitigate the impact of lockdowns on China's economy (the most recent example would be the reopening of factories in Shenzhen, as well as its port), they have continued to stress a "people first, lives first" approach.
Taken together, all of this suggests a couple of potential outcomes: Possible implications: "1) overall supply chain might be more resilient than before given the same outbreak severity, as policymakers are moving more swiftly to resume production once local Covid situation appears to be under control; 2) structural imbalances between large and smaller companies might further increase, as major production/investment projects, which are usually handled by large companies, might be given the “green light” and resume production ahead of other projects when policymakers relax restrictive policies."
Moving beyond the most heavily impacted industries, the Goldman team also analyzed the impact of supply chains on other critical industries like computer components, paper and paper products (including the toilet paper that memorably disappeared from American supermarkets during the early days of the pandemic). The chart below reflects the current impact of lockdowns on these industries.
Finally, Goldman also published an analysis examining the most vulnerable industries to Chinese lockdowns.
Using the past as a guide, Goldman also charted the impact on deliveries via the ports.
As the CCP switches from broad-based lockdowns to more "targeted" measures, Goldman expects the impact will be worse for smaller firms as opposed to larger enterprises with more flexible and robust supply chains.
Goldman's analysis concluded that should 30% of the Chinese economy experience a COVID shutdown lasting a month, it would reduce annual GDP growth by a whole percentage point.
But the bigger question is: as these issues cascade throughout the global economy, what might the impact be for the US?

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