Breakingviews - Made-in-China planes face bumpy flight abroad
Challenging the duopoly is slow work. Comac's long-delayed C919 - meant to compete with the Airbus 320 and Boeing 737 - only completed its first commercial flight in 2023. The Chinese company previously said it was aiming for the European Union Aviation Safety Agency (EASA) to certify the plane this year - a crucial endorsement if Comac wants to sell in other markets.
To date, the manufacturer has built, opens new tab less than two dozen C919s, and it is hoping to ramp up annual production to 200 by 2029. Still, that would be less than a third of Airbus' output last year. Moreover, the process of winning European certifications can take up to six years.
Any attempt by Beijing to use next month's summit celebrating 50 years of diplomatic relations between the EU and the People's Republic to speed things up looks like it will be a hard sell even if President Xi Jinping's administration purchases Airbus planes as a sweetener. The bloc is already reeling from a surge of overall Chinese exports and the two sides have a long list of thorny trade issues to tackle spanning electric vehicles, French cognac and rare earths.
There are other hurdles to Comac's journey West. The company depends on imported components, including the C919's engine, for instance. That makes it vulnerable to U.S. President Donald Trump's export controls. Switching to domestic suppliers may also push back the EU certification process.
At least Comac has its home market, where the country's top airlines are all state-backed. In its Made in China 2025 policy document unveiled roughly a decade ago, the government laid out goals including having local manufacturers account for 10% of the domestic aircraft market by 2025 and even higher percentages for related equipment and components.
By 2044, China's domestic travel market will be the world's largest by traffic flow, Boeing estimated, opens new tabthis month, and the country's commercial fleet will more than double to 9,755, equivalent to 19% of the total. That should help make up for what will be a fraught journey overseas.
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Reuters
an hour ago
- Reuters
Investors mobilise for weeks of market whiplash from wild-card events
LONDON, July 3 (Reuters) - Big investors are mobilising to trade through weeks packed with wild-card events that may shatter the calm in stock markets and drive big swings for assets they see as exposed to both positive or negative surprises, from gold to corporate credit. U.S. Treasuries, the dollar, yen and euro zone debt may also turn volatile, investors said, Thursday's U.S. jobs data is followed by next week's crunch U.S.-European Union tariff deadline and then an unpredictable French budget vote. After that, markets face an August 12 deadline for U.S.-China talks to achieve a trade deal. "I can't think of a time in my history in markets, which is pretty long, where you've had so much risk and so little risk premium," said Insight Investment head of investment specialists April La Russe, referring to the compensation for holding risky assets over cash. Here's a look at how investors are gaming out potential market flare-ups in the days and weeks ahead. Russell Investments global head of solutions strategy Van Luu said market participants were pricing a mildly positive outcome on July 9, with the U.S. and EU either settling for 10% universal tariffs or postponing a resolution, as the U.S. had with China. He had turned negative on corporate credit because yields were underpricing the economic risks of ongoing tariff uncertainty, he said. With Brussels now pushing for exemptions for key EU export sectors, the worst case scenario was a deadlock and markets starting to fear reciprocal tariffs, he said. Amundi global head of macro Mahmood Pradhan, a former IMF deputy director for Europe, said the July 9 outcome was a coin-toss but a benign result was already priced into risky assets. World stocks(.MIWD00000PUS), opens new tab have rebounded and are up 24% since a low of April 8, soon after U.S. President Donald Trump delivered his "Liberation Day" April 2 bombshell of tariffs on imports from around the world. "Given the rally we've had, there might not be more upside," Pradhan said. Any outcome on July 9 could hit the dollar and spark cross-currency volatility, investors said. The greenback is already down some 10% against other major currencies so far this year . Treasuries would suffer if talks broke down in a threat to world trade, Artemis head of fixed income strategy Liam O'Donnell said. A long and steady accumulation of Treasuries by overseas investors and central banks has been partly driven by the dollar's dominant position in global trade flows. Gold, (.XAU), opens new tab which has soared by more than 25% year-to-date to $3,344 as investors piled into the precious metal to hedge portfolios against inflation and recession risks sparked by high tariffs, is also vulnerable to a positive EU tariff outcome. "We could see profit taking (on gold) by real money investors and also hedge funds," Edmond de Rothschild multi-asset head Michael Nizard said. While latest U.S. payrolls data is released on Thursday, the next official payrolls report on Aug. 1 could be a bigger jolt to world markets than tariffs, coming at a time of holiday-thinned trade, investors added. "In terms of what would produce the biggest market surprise, I think it's actually U.S. data because that has been flying under the radar," Russell's Luu said. Artemis' O'Donnell said the upcoming U.S. job reports were the biggest event risk for markets. Luu said gauges of expected volatility in some world currencies seemed too low, particularly those expressing how Japan's yen, which can rip higher when U.S. rate cut bets build, might swing against the dollar and the euro in the months ahead. There are also crunch dates for Europe that could revive anxiety about debt stress, overshadowed so far by investors tapping assets such as triple-A rated German Bunds as Treasuries' haven appeal has diminished. French Prime Minister Francois Bayrou survived his eighth no confidence motion on Tuesday but investors are wary about his chances of getting a plan to trim the euro zone's biggest budget deficit on July 14 through a parliament rocked by right-wing rebellions. Germany's stimulus bonanza is also now rolling, with an upper house vote on business tax breaks on July 11. Benchmark Bund yields are about 25 basis points (bps) higher so far this year to around 2.62% given expectations for increased bond sales to fund extra borrowing. The extra yield bond investors demand for lending to France over Germany, at 70 bps now , might be too low given the immediate French budget risk ahead. "We prefer an underweight position in French sovereign bonds in the near term," RBC Wealth Management investment strategy head Frédérique Carrier said. And Britain is also back on the watch-list as government U-turns on welfare reforms threaten a budget blowout, sparking fresh bond selling.
The Herald Scotland
2 hours ago
- The Herald Scotland
Scotch whisky distillers change course as US lifts barriers
'What we're seeing right now is a once-in-a-generation set of challenges facing the Scotch whisky industry,' a spokesperson for the Scotch Whisky Association said. 'Businesses of all sizes, but particularly SMEs (small and medium-sized enterprises), are operating under considerable strain as input costs have risen, from increased raw material and energy prices to the rise in employment costs. 'Consumer spending is also being impacted, the impact of which is being felt across the supply chain and hospitality sector. 'On the international stage, the key markets relied upon by smaller and medium sized companies to establish their business – the UK, the EU, and the US – are all facing their own unique obstacles which have put up barriers to trade and access.' The founder of one Scotch distillery said it has switched its focus to Asia because of the higher cost of exporting to the US. 'It's a real challenge for us,' said Martin Murray, co-owner of Thurso-based Dunnet Bay Distillers. 'We'd set out a plan for 2025 with market visits and investment, but that has been significantly impacted by the US tariffs. As a result, we've changed our strategy to be investing in sales in Asia. Our sales in China are going well in a market that still has challenges post-Covid.' Ian Palmer, founder of InchDairnie Distillery in Fife, said: 'The immediate term impact has been confusion and uncertainty over the tariffs leading to our distributors being very cautious. 'In the long term, there will be price increases for the US consumer leading to a loss of volume and that will be more evident at the 'value' end of the market.' Despite the challenges in the US, industry figures are encouraged by the recent signing of the UK-India trade deal, which will bring freer access for exports to one of the world's biggest whisky markets, as well the emergence of key markets in Asia such as Vietnam. Scotch whisky veteran Billy Walker, owner of The GlenAllachie Distillery in Speyside, said: 'There's money to be spent there. I can see Vietnam becoming a huge holiday area in the next few years because it has such a wonderful coastline with remarkably decent infrastructure. 'And they are knowledgeable. They are not novices when it comes to Scotch whisky.'
The Herald Scotland
2 hours ago
- The Herald Scotland
Scotch whisky industry sailing through choppy waters
The Trump tariffs landed as distillers were dealing with an almighty hangover from a post-Covid boom. Demand for premium Scotch whisky cooled as economic conditions deteriorated in key markets such as China, the US and Latin America, leaving importers with surpluses of stock to work through. Geopolitical turbulence, with Russia continuing its assault on Ukraine, attacks on shipping in the Mediterranean, and conflict between Israel and Hamas in Gaza, has done nothing for consumers' thirst for the water of life either. The impact of these challenges has been writ large in recent results from major industry players. In June, Bruichladdich owner Remy Cointreau cited the volatile global economic and geopolitical backdrop as it scrapped a key long-term target, highlighting the effects of tariffs both in US and anti-dumping duties in China, a major market for the company's Cognac exports. That came shortly after Johnnie Walker Diageo warned in May that US tariffs may hit its profits by $150 million a year. Pernod Ricard, owner of Dumbarton-based Chivas Brothers, cited the fall-out from US tariffs in April as sales fell short of forecasts in the third quarter. Given this background, it was no surprise that Scotch Whisky Association (SWA) was blunt in its assessment when asked to comment on the trading outlook by The Herald Business HQ Monthly, with the industry body also highlighting the impact on distillers from the high cost of production. Read more: 'What we're seeing right now is a once-in-a-generation set of challenges facing the Scotch whisky industry,' a spokesperson for the SWA said. 'Businesses of all sizes, but particularly SMEs (small and medium-sized enterprises), are operating under considerable strain as input costs have risen, from increased raw material and energy prices to the rise in employment costs. Consumer spending is also being impacted, the impact of which is being felt across the supply chain and hospitality sector. 'On the international stage, the key markets relied upon by smaller and medium sized companies to establish their business – the UK, the EU, and the US – are all facing their own unique obstacles which have put up barriers to trade and access. The US is our most valuable market, and is vital for many companies as they establish their export portfolio. 'It's important that talks continue between governments on both sides to reduce the current 10% the tariff burden for Scotch in the US. In the EU, we are monitoring developments on the new UK-EU deal to understand how the Scotch whisky industry can benefit.' With the impact of tariffs imposed during the first Trump president still fresh in their minds – the 25% tariff on single malt is believed to have hit exports by £650 million - Scotch whisky distillers are reporting disruption in the US market. Some distillers are changing their approach to the US, which remains the sector's biggest market by value. The value of Scotch shipped to the US was measured at £971 million in 2024. (Image: GlenAllachie) Billy Walker of GlenAllachie is upbeat about the industry's prospects in Vietnam 'The immediate term impact has been confusion and uncertainty over the tariffs leading to our distributors being very cautious,' said Ian Palmer, founder and chairman of InchDairnie Distillery in Fife. 'In the long term, there will be price increases for the US consumer leading to a loss of volume and that will be more evident at the 'value' end of the market. 'The more premium end will be better placed to ride out the storm. Our brands, our Scottish rye whisky, RyeLaw, and our recently launched peated malt, KinGlassie, are both at the premium end. At present we are managing both our costs and our price point, as well as preparing to be flexible. 'Historically, the US has always been seen as solid and safe market. This has gone now, so we are looking to manage the risk by ensuring we have a good geographic spread for our brands.' The uncertainty which has arisen from the Trump tariffs was also highlighted Martin Murray, co-owner and founder of Thurso-based Dunnet Bay Distillers. 'It's a real challenge for us,' he said: 'We'd set out a plan for 2025 with market visits and investment, but that has been significantly impacted by the US tariffs. It feels like we're living week to week and that's not good for anyone in the supply chain. The possibility of [tariffs] rising to 25% would have a big impact on sales and investment in this market. As a result, we've changed our strategy to be investing in sales in Asia. Our sales in China are going well in a market that still has challenges post-Covid.' Commenting more generally on the outlook, Mr Murray added: 'Currently, it certainly feels very turbulent, but there is an underlying resilient demand. We're braced for a challenging period, whilst things come back into balance. At the moment it feels like it's perfect storm of economic headwinds, trade policy uncertainty and changing behaviours. 'The biggest threats are tariffs in the US, and the impact on increasing costs in hospitality in the UK. For us we see the opportunities as being the continued trend of premiumisation and emerging markets.' Scotch whisky veteran Billy Walker, owner of the GlenAllachie Distillery in Speyside, said he is working in partnership with its US importers to spread the cost of tariffs on both parties. Read more: Mr Walker, who before acquiring GlenAllachie had built up and sold the BenRiach Distillery Company and previously worked for Ballantine's, Inver House, and Burn Stewart, said: 'We're trying to mitigate [the tariff] by taking 50% of it on us. So from an importer's point of view, they are going to be confronted with a 5% [cost increase]. 'But on a general position, these tariffs are going to be more damaging than the previous ones, because the previous ones were only on single malt. These are on all Scotch whisky.' Asked if there was any hope of the US tariffs on UK goods being reduced, Mr Walker said the SWA, which represents the industry in government matters, was doing a 'terrific job with the appropriate political people in the UK to find a way to mitigate them, or to get them reduced or removed'. But he said: 'I don't think they are going to get them wholly removed… it would be really welcome if they disappeared completely, but I don't think that is likely in the short-term.' Despite the challenges on the immediate horizon across the Atlantic, distillers emphasised the importance of the US market to the industry's prospects in the long run. Richard Urquhart, sales director at Elgin-based Gordon & MacPhail, owner of the Benromach and The Cairn distilleries in the north of Scotland, said the importance of the US to the company and the wider industry 'hasn't changed despite the imposition of tariffs'. Mr Urquhart said: 'While these tariffs have undoubtedly introduced added complexity and cost pressures, we remain committed to the market and to our American consumers and we will continue to work closely with our in-market partners to minimise impact. 'In terms of strategy, we will continue to navigate the changing environment. It's not about pulling back, it's about adapting. We remain focused on delivering exceptional whisky experiences, regardless of the trading climate.' For some distillers, it is a case of as you were. William Dobbie, managing director of R&B Distillers, owner of Isle of Raasay Distillery, said that US tariffs 'present a bit of short-term but are manageable together with our import partners'. He told The Herald Business HQ Monthly: 'The tariff on UK goods is not as punitive as some other regions in the world, which is manageable for now. The US tariffs are not changing our strategy at all. In fact, we are investing in the US market and plan to have some boots on the ground there over the next 12 to 24 months. 'Our independent, private ownership means we can take a very long-term point of view and allow us to make decisions that will put the business in a strong place long after the challenging short-term market conditions we are experiencing. If we changed our business plans at every whim of the current US administration we would be changing them every week, which is not something we have a desire or need to do.' Read more: Away from the US, distillers' hopes of building sales in the burgeoning spirits market of India received a major boost recently. The UK-India trade deal, which followed years of negotiations between the two countries, halved tariffs on imports of whisky and gin to India from 150% to 75%. The tariffs will then be reduced to 40% by the 10th year of the agreement. 'The UK-India trade deal is genuinely transformational for the Scotch whisky industry,' said Mr Murray at Dunnet Bay Distillers. 'Reducing tariffs from 150% to 75% immediately, and to 40% by year ten, opens unprecedented opportunities in what's already the world's largest whisky market by volume. 'Industry experts estimate this could increase Scotch exports to India by £1 billion annually, while generating £3.4bn in additional tax revenue for the Indian government through increased sales. For new distilleries like Castletown Mill, this is particularly significant because the deal enables smaller and independent producers to access the Indian market for the first time. 'India's growing middle class of over 300 million people represents a massive opportunity for premium spirits with authentic heritage stories. We've just got to be patient as we start our distillation of whisky this year.' Other markets are emerging strongly for the industry. Mr Walker highlighted the potential of a range of markets in Asia for Scotch whisky, including South Korea, Taiwan, Singapore and Malaysia, and singled out Vietnam as one to watch. Describing Vietnamese people as 'hard-working, energetic, and entrepreneurial', Mr Walker said: 'There's money to be spent there. I can see Vietnam becoming a huge holiday area in the next few years because it has such a wonderful coastline with remarkably decent infrastructure. 'And they are knowledgeable, they are not novices when it comes to Scotch whisky.' Mr Palmer also highlighted the potential of Asia for the industry. He acknowledged Asia and South America are 'not immune' to the current economic and trade uncertainty, but forecast that 'Asian markets will probably come out of the mist sooner than other markets'. Mr Murray added: 'We're finding challenges in most markets at present. The recovery post pandemic has not materialised and we're still seeing consumer spending habits changing. There are signs of a recovery with orders coming in regularly from China.' While there has been a steady flow of new distillery openings in Scotland over the last couple of decades, the current conditions may lead potential developers to think twice about investing in new facilities for Scotch whisky production in the current climate. Mr Palmer believes there is currently 'plenty' of distilling capacity, 'so any new distillery will have to have a long-term funding plan in place and develop a product that brings something new to the marketplace'. He added: 'I don't think more of the same will work in the current economic environment.' Mr Murray was slightly more optimistic on this front, noting: 'I believe there is still scope for new distilleries to open. I believe the traditional route to market is going to be less important as direct digital marketing and sales give new distilleries access to a significant audience willing to pay for premium products. 'Emerging markets have the place to play in supporting new distilleries' sales in the long term.'
