Category: News This Week

  • In Memoriam: Jean-Louis Vander Elst

    In Memoriam: Jean-Louis Vander Elst

    Jean-Louis Vander Elst

    Jean-Louis Vander Elst died April 12 after contracting the coronavirus. He had been unwell for some time.

    Born in 1934, Vander Elst worked in the tobacco industry his entire career. He studied commercial engineering at Belgium’s Leuven University, spent time in the United States and subsequently joined his family company Tabacofina-Vander Elst in Antwerp, Belgium, where he stayed until 1982.

    The best-known tobacco product in Belgium at that time was the Belga cigarette. One of Vander Elst’s projects was to develop a filtered version of the brand. When Rothmans International took control of Tabacofina-Vander Elst in the early 1980s, Vander Elst joined Casalee in Antwerp.

    Six years later he became an independent trader.

    Vander Elst was admired and respected across the industry for his broad subject knowledge, along with his interest in mentoring and developing the skills of young people.

    Friends instantly recognized Vander Elst’s presence by the aroma of his pipe, which was usually filled with his favorite McBaren Mixture tobacco blend.

    To many he was known simply as “The Gentleman.”

  • France Bans the Online Sale of Nicotine Products

    France Bans the Online Sale of Nicotine Products

    Image by lydia-threads from Pixabay

    France has banned online sales of nicotine gum and patches after researchers suggested that nicotine may help protect against the coronavirus, reports the BBC. Sales of nicotine products are now restricted to pharmacies.

    The French government says people will be allowed to buy only one month’s supply of these products, with pharmacies registering buyers.

    The goal is to stop people putting too much nicotine into their bodies and to protect the supply for people who need it.

    Last week, data from a Paris hospital indicated that smokers were statistically less likely to be admitted for treatment for Covid-19.

    The revelation triggered a run on nicotine products.

    The theory that nicotine could play a role in blocking the virus is due to be tested at a hospital in Paris, using nicotine patches.

    The government’s chief health official said the study was interesting but warned that smoking killed 75,000 people a year in France.

    The official also warned that smokers who did become infected with coronavirus tended to have more serious symptoms.

    France has reported nearly 22,000 coronavirus-related deaths since the start of the outbreak earlier this year.

  • Experts: Call for Vape Bans Made Covid-19 Worse

    Experts: Call for Vape Bans Made Covid-19 Worse

    Anti-vaping activist groups continue to use the coronavirus crisis to advance their goal of restricting — or even completely banning — the use of vapor products. They argue that vapers are at higher risk of harm from COVID-19.

    However, the available evidence indicates the opposite: If they had worked to convince more smokers to switch to e-cigarettes, there might be fewer coronavirus-related deaths today, according to a story on insidesources.com.

    That’s the view of Dr. Michael Siegel, professor of community health sciences at the Boston University School of Public Health.

    “It’s absolutely true that if more public health activists had embraced e-cigarettes instead of opposing them and more smokers had been encouraged to switch, there would be less mortality from COVID-19 today,” Siegel told InsideSources. An estimated 2.5 million smokers have given up traditional cigarettes for vaping and other similar technologies.

    Siegel has spent much of his career working to reduce smoking and is no friend of Big Tobacco. At the same time, he embraces the “mitigation over prohibition” model for reducing tobacco use. Anti-tobacco prohibitionists — hoping to get every smoker to “just say no” — are fighting an unwinnable battle, Siegel said, according to the story.

    “What people need to understand is that smoking is such an addictive behavior, and it’s not just the nicotine. It’s the psychology as well. In the middle of a pandemic when people are under so much stress, asking these people to just quit cold turkey is ridiculous,” Siegel said.

    Pointing to claims that smoking and vaping can make coronavirus symptoms worse, some anti-tobacco activists are advocating limits, or even outright bans, on vaping products.

    Earlier this month, Rep. Raja Krishnamoorthi, chairman of the House Subcommittee on Economic and Consumer Policy, sent a letter to the Food and Drug Administration (FDA) asking the agency to “clear the market of e-cigarettes for the duration of the coronavirus pandemic.”

    The New York State Academy of Family Physicians has joined the call for a vaping ban, while other anti-tobacco groups like the Campaign for Tobacco-Free Kids and the Truth Initiative have been advocating restrictions on e-cigarettes for years, according to the story.

    Their efforts create the impression that the risks from traditional cigarettes and e-cigarettes are comparable. And that, Siegel argues, is a dangerous message.

    “There is no evidence for the claim that e-cigarette use has a significant impact on coronavirus patients, that’s just speculation,” Siegel said.

    Dr. Sally Satel, a visiting professor at Columbia University’s Irving Medical Center, agrees. “There is no evidence that vaping causes ‘interstitial lung disease,’ or fibrous scarring. Hundreds of thousands of former smokers have been vaping for at least 10 years to date without evidence of meaningful injury to their lungs,” she writes. “Over the longer-term, it must be said, vaping might cause impairment in lung function — though surely less injury than had vapers continued to smoke.”

    Even supporters of vaping restrictions acknowledge that there is little research involving the novel coronavirus.

    When NYC Mayor Bill de Blasio said “smoking or vaping” contribute to the impact of the coronavirus, Italian medical researcher and former president of the Italian Anti-Smoking League Riccardo Polosa tweeted, “Where is the evidence? Stop placing smoking and vaping on the same level. Get your facts straight, Mayor!”

    Conflating the risks of smoking and vaping is both bad science and discourages smokers from making the switch, health professionals like Siegel argue, according to the story.

    “The impact of smoking on the body’s ability to heal is so significant that most surgeons insist their patients quit prior to surgery because they know that smoking inhibits healing and increases the susceptibility to infection,” Siegel said. There’s no evidence of any similar health impact from vaping.

    If anti-tobacco groups are right about the deadly impact of coronavirus on smokers, then their goal should be to get as many smokers to stop as possible. And a CDC study found that “substituting some cigarettes with e-cigarettes was used by a greater percentage of smokers than the nicotine patch, nicotine gum, or other FDA-approved cessation aids.”

    Siegel makes the case more starkly: “In retrospect, the focus on fighting against e-cigarettes looks terrible. Imagine if, instead of 2.5 million former smokers who made the switch, we were in this coronavirus pandemic with 3 million, 4 million, 5 million ex-smokers. There’s no doubt we would be in better shape today.”

  • FDA Warns Against Illegal CBD Claims

    FDA Warns Against Illegal CBD Claims

    Photo: Julia Teichmann | PixaBay

    The U.S. Food and Drug Administration has issued warning letters to two companies for illegally selling unapproved products containing cannabidiol (CBD) in ways that violate the Federal Food, Drug and Cosmetic Act. This action is part of the FDA’s efforts to pursue companies that illegally market CBD products with claims that they can treat medical conditions, including opioid addiction or as an alternative to opioids.

    “The opioid crisis continues to be a serious problem in the United States, and we will continue to crack down on companies that attempt to benefit from selling products with unfounded treatment claims,” said FDA Principal Deputy Commissioner Amy Abernethy.

    “CBD has not been shown to treat opioid addiction. Opioid addiction is a real problem in our country, and those who are addicted need to seek out proper treatment from a health care provider. There are many unanswered questions about the science, safety, effectiveness and quality of unapproved products containing CBD, and we will continue to work to protect the health and safety of American consumers from products that are being marketed in violation of the law.”

    The two warning letters were issued to Biota Biosciences of Washington state and Homero Corp DBA Natures CBD Oil Distribution of New Hampshire.

  • Scandinavian Integrates Agio, Trims Workforce

    Scandinavian Integrates Agio, Trims Workforce

    Photo: Scandinavian Tobacco Group

    Scandinavian Tobacco Group (STG) has completed the plan for the integration of Agio Cigars, following the acquisition of Agio Cigars on Jan. 2, 2020.

    The combination of STG and Agio Cigars is expected to deliver substantial cost synergies within sales and marketing, production and back office functions. When full integration has been completed by the end of 2022, it is assumed that Agio Cigars will contribute to an increase in STG’s EBITDA margin before special items of more than 2 percentage points based on estimates of net synergies at the level of DKK225 million ($32.4 million).

    In reaching the synergies, special costs are estimated at the level of DKK450 million with cash impact and another DKK175 million in the form of noncash impairments related to factory closures, including write-down of buildings. Any amounts from the sale of property and buildings from closed-down factories are not included due to uncertainty about timing and sales prices.

    STG is changing its organizational structure as part of the integration. The company is moving from four to three commercial divisions and intends to close three production sites and upgrade two others. Financial reporting reflecting the new structure will begin from the second quarter of 2020.

    STG will close production facilities in Eersel and Duizel in the Netherlands and move the production to its other production facilities over the next nine months to 18 months. The production facilities in Moca in the Dominican Republic will be closed in the near future. Following the changes, around 800 employees are expected to be laid off. STG has approximately 11,000 employees.

    Niels Frederiksen

    “The changes we announce today are a step further in our transformation of Scandinavian Tobacco Group,” said Niels Frederiksen, CEO of STG. “They impact most parts of our organization as we build a more competitive and profitable business with a powerful brand portfolio, strong market positions and robust supply chains. It is an investment in our future and addresses the need for continuous optimization to remain competitive and succeed in tough market conditions. Regrettably, the changes also necessitate that we part ways with a number of hard-working and valued colleagues. I would like to thank every one of them for their efforts and dedication over the years.”

    STG expects to provide an update on the financial guidance for 2020, including Agio Cigars, as soon as the negative impact of Covid-19 on the business can be properly assessed. 

  • Court Rejects Challenge to Traceability Rules

    Court Rejects Challenge to Traceability Rules

    The EU Court of Justice (EUCJ) has rejected a legal challenge brought by the International Tax Stamp Association (ITSA) against the EU Tobacco Products Directive (TPD).

    Brought in the 2018, the ITSA claim contends that that the TPD implementing regulations on traceability and security features do not conform to the World Health Organization (WHO) FCTC Protocol to Eliminate Illicit Trade in Tobacco Products.

    The association believes that the TPD implementing regulation contravenes the FCTC Protocol’s Article 8. This article requires that the track-and-trace system for tobacco products is under government control, that duties should not be performed by or delegated to the tobacco industry and that public officials should interact with the tobacco industry and those representing its interests in tobacco track and trace only to the extent strictly necessary.

    In May 2019, the EUCJ dismissed the claims on the grounds that ITSA could not challenge the EU track and trace system because it did not have “a direct interest” in the TPD implementing regulation.

    The ITSA subsequently appealed this ruling citing the EUCJ’s “misunderstanding of certain basic facts”—but the appeal has now been rejected

    Juan Yanez

    ITSA Chairman called the ruling disappointing and curious. “The EUCJ determined that ITSA has no material interest in the directive’s derived regulation and the association’s claim was therefore not admissible,” he said. “ITSA members are independent of the tobacco industry and provide traceability systems as part of effective anti-illicit trade program, so how is it possible that ITSA and its members do not have a material interest in the regulations?”

    The FCTC Protocol to Eliminate Illicit Trade in Tobacco Products came into force in 2018 and track-and-trace provisions must be implemented by its parties by 2023. The WHO has yet to define detailed requirements, which are scheduled to be discussed at the second Meeting of the Parties to the Protocol later this year.

     The European Commission has committed to a review of the TPD in 2021.

  • Lebanon Legalizes Medical Marijuana

    Lebanon Legalizes Medical Marijuana

    The Lebanese parliament on Tuesday voted to legalize medicinal and industrial cannabis cultivation. The legislation was recommended by economic advisers previously. However, after the coronavirus pandemic dealt a devastating blow to the Mediterranean nation’s struggling economy, lawmakers pushed the law through.

    The new law would not legalize marijuana for recreational use. Instead, it would allow for the plant to be grown for export for medicinal and industrial purposes. The cultivation of cannabis by farmers would be regulated within the country, according to The Daily Star, a Lebanese English-language newspaper.

    Although the plant has long been widely and openly cultivated in Lebanon, particularly in the country’s eastern Bekaa Valley, growing cannabis was strictly illegal, according to an article in Newsweek.

    Under the new legislation, Lebanon would also aim to foster a new legal industry producing cannabis pharmaceutical items, including wellness products and CBD oil. Industrial products, such as fibers for textiles, could also be produced from the plant.

    Kareem Chehayeb, an independent Lebanese journalist and researcher, noted on Twitter that Lebanese political party Hezbollah opposed the new law. “Though their key allies supported the draft law, #Hezbollah were not the only party to oppose this,” Chehayeb tweeted.

    Hilal Khashan, a professor of political studies and public administration at the American University of Beirut, told Newsweek that legalizing cannabis would not be nearly enough to address Lebanon’s economic concerns. He also voiced skepticism that the government would be able to successfully implement the law, given Hezbollah’s opposition.

    “Hezbollah is a primary beneficiary of cannabis trafficking,” Khashan said. “The only way for Hezbollah to accept the ratification of the law is to be directly involved in its implementation—i.e., get its share from it.”

    Lebanon has been publicly discussing the possibility of legalizing cannabis for medicinal and industrial purposes for nearly two years. Back in July 2018, Raed Khoury, Lebanon’s former caretaker minister for economy and trade, bragged that the quality of Lebanese marijuana “is one of the best in the world” during an interview with Bloomberg News.

  • Cost of Crude Oil Futures Falls Below Zero

    Cost of Crude Oil Futures Falls Below Zero

    Oil did something Monday that made even market veterans shake their heads in wonder — the thinly traded, soon-to-expire May contract for West Texas Intermediate crude on the New York Mercantile Exchange traded, and closed, in negative territory, according to a story on marketwatch.com.

    “I’m not sure how to react to that other than say that nobody, whether they’re 120 years old or whether they’re 20 months old, has ever seen an oil price lower than this,” Tom Kloza, a 40-year market veteran and head of global market analysis for Oil Price Information Service, told MarketWatch just minutes before the market closed.

    Negative prices means someone with a long position in oil would have to pay someone to take that oil off of their hands. Why would they do that? The main reason is a fear that if forced to take delivery of crude on the expiration of the May oil contract, there would be nowhere to put it as a glut of crude fills up available storage.

    Negative oil prices would also seem to be a foreboding sign about the outlook for an economy kicked in the teeth by the COVID-19 pandemic. At first glance, it would also point to ever-cheaper gasoline prices at the pump — a potential positive for hard-hit consumers.

    The move was certainly emblematic of a historic bear market for oil, which has been sunk by the collapse of demand as a result of coronavirus outbreak and a brief but ugly price war between Saudi Arabia and Russia that added even more crude to an oversupplied market. But it also represents a phenomenon characteristic of futures markets, where wild price swings — albeit perhaps never on Monday’s scale — can occur around contract expirations, according to the story.

    The opposite of a ‘short squeeze’

    The May WTI crude contract CL.1, -103.06% CLK20, -103.06% closed Monday at -$37.63 a barrel, a one-day drop of $55.90, or 306%, according to Dow Jones Market Data. The May contract expires at Tuesday’s close. Any traders that are still long crude at that time must take physical delivery, while anyone short must make delivery.

    What happened Monday in the futures market was effectively the opposite of so-called short squeeze, a phenomenon that may be more familiar to investors. In a short squeeze, traders that are short the market fear they will be unable to find the underlying physical commodity and are forced to cover their positions, driving prices up sharply.

    On Monday, traders with long positions scrambled to get out amid a fear that it would be difficult to find a place to park physical oil amid a rising glut of crude. So in a way, Monday’s price action, while certainly bearish, was also something peculiar to the futures market, with the action in the thinly traded May contract not necessarily an accurate reflection of supply and demand fundamentals, according to the story.

    Note the contango

    Indeed, crazy things — albeit not this crazy — sometimes happen when a futures contract moves into expiration. The heaviest trading volume and positioning had long since moved to the June contract CLM20, -27.90% , which will become the front month when the May contract expires Tuesday.

    The June contract on Monday fell $4.60, or 18%, to settle at $20.43 a barrel. That also marked a further move into what’s known as “contango,” a condition in which future months trade at a premium to the spot price and the nearby contract. The premium of the next-month contract to the nearby contract was already trading at a record before Monday’s close.

    Will June suffer the same fate as the May contract in coming weeks? After all, storage is likely to be even more tight in the weeks ahead. The June contract was under heavy pressure Tuesday morning, falling around 21% to trade a little above $16 a barrel, while May remained in negative territory.

    Long-term market bulls argue that the steepness of the contango curve — the December 2020 contract CLZ20, -6.36% is trading above $32 a barrel — seems to indicate optimism for an eventual recovery as economies move past the pandemic shutdowns and demand for crude revives in the second half of the year.

    “Concerns about commercial and industrial oil storage capacity have exacerbated the current contango structure, but in the long run, the futures curve term structure is likely to normalize, implying potential appreciation for oil from here once the current temporary issues are resolved,” wrote Matt Weller, global head of market research at GAIN Capital, in a Monday note, according to the story.

    Storage running tight

    Those storage considerations are front and center, with data showing a historic jump in U.S. inventories, including a sharp rise in Cushing, Okla., the delivery hub for Nymex futures.

    “Supply is threatening to overwhelm storage in coming weeks, and the flood of crude oil shows no signs of abating,” said Robert Yawger, director of energy at Mizuho Securities USA, in a Monday note. If crude storage levels continue to rise at their current clip, U.S. inventories will break their all-time record in two weeks and reach maximum capacity in eight to nine weeks, he said.

    Kloza cautioned that it would be a mistake to read the price action as a sign that there’s no storage available, however.

    “It tells you that storage is fully accounted for and if you want to take delivery of oil you better have a place to put it or a pipeline to put it on, or otherwise you’re really screwed,” he said, according to the story.

    Even cheaper gas?

    The fall in the nearby contract won’t necessarily translate into ever-cheaper gasoline prices at the pump, analysts said. Gasoline prices in some states had already dropped to more than 10-year lows at the end of last week as Americans stay home thanks to the lockdowns aimed at containing the pandemic.

    Front-month Nymex gasoline for May delivery RB.1, -13.29% lost 4.24 cents per gallon, or 6%,to end Monday at 66.83 cents a gallon.

    “The futures market has its own ecology and that really was at work today, and it’s more about the inner workings of trading and investors and trapped longs than it is about…typical supply and demand fundamentals,” Kloza said.

  • Leaf Sales Commence in Malawi

    Leaf Sales Commence in Malawi

    Photo: Taco Tuinstra

    Maximum prices for contract tobacco reached $2.30 per kg while noncontract leaf fetched $1.20 on the first day of the tobacco selling season in Malawi.

    Minister of Agriculture and Irrigation Francis Kasaila on Monday officially opened the 2020 marketing season at Lilongwe Auction Floors with a secret price-bidding exercise.

    With the social distancing measures to combat the coronavirus, only about 3,000 tobacco bales will be put up for sale daily. In past years, about 10,000 bales would be put up for sale per day.

    In his remarks, minister Kasaila urged the stakeholders to work with farmers to make sure that they produce high-quality leaf.

    He expressed his optimism that this year’s marketing season will be good and satisfactory despite the Covid-19 pandemic. 

    The minister further commended the Tobacco Commission, Auction Holding Limited (AHL) and the tobacco-buying companies for taking proactive measures against the virus pandemic as evident in the availability of sanitizing and hand-washing materials at the floors and around the AHL premises.
     

  • PMI: Strong Quarter Amid Uncertainty

    PMI: Strong Quarter Amid Uncertainty

    Philip Morris International (PMI) reported net revenues of $7.15 billion in the first quarter of 2020, up from $6.75 billion in the 2019 first quarter. Operating income was $2.79 billion in the 2020 quarter compared to $2.05 billion in the comparable 2019 period.

    PMI sold 173.75 billion cigarettes and heated-tobacco units during the 2020 first quarter, down from 175.8 billion during the 2019 first quarter. The number of cigarettes shipped declined from 164.3 billion sticks in the first quarter of 2019 to 157.02 billion sticks in the first quarter of 2020. The number of heated-tobacco units, by contrast, increased from 11.5 billion units to 16.73 billion units between the two quarters.

    “We started the year with a very strong first quarter, reflecting continued structural growth momentum driven by our smoke-free portfolio and favorable combustible tobacco pricing,” said Andre Calantzopoulos, chief executive officer. “We experienced a limited impact on our performance from the early stages of the Covid-19 pandemic as the onset of government restrictions related to social distancing and travel were generally only implemented in our key markets over the course of March.

    “We expect that the pandemic will have adverse impacts on our full-year 2020 business results. Those already observable relate to a severe reduction of our duty-free sales, slower IQOS user acquisition and delayed minimum price enforcement in Indonesia. We also have to assume that, in certain markets, unemployment and related reductions in disposable income will have a temporary impact on market dynamics or the ability of certain small retailers to operate.”

    PMI indicated that it maintains enough inventory of inputs and finished goods and does not expect to see a disruption to its supply. Most of PMI’s manufacturing facilities are operational, including all heated-tobacco unit facilities, but manufacturing facilities representing 20 percent of its cigarette production are closed. However, PMI has over two months’ supply of heated-tobacco units, three months’ supply of IQOS devices and 1.5 months’ supply of cigarettes.