WORLD DEVELOPMENTS

Highlights:

Korea: Due to Korea’s economic crisis, the market share of foreign brand cigarettes decreased by 60 percent during the first half of 1998. U.S. market share decreased to 2.1 percent in the first quarter of 1998 from 6.9 percent in 1997. Prior to Korea’s financial difficulties, consumers’ preference for foreign brand cigarettes steadily grew at the expense of domestic brands. During the economic downturn consumers are shifting back to domestic brands because retail prices of foreign brand cigarettes have increased due to the country’s weakened currency. The Korean won has lost 28 percent of its value against the American dollar over the past year. However, the economic crisis has not spoiled Korea’s appetite for cigarettes. Domestic consumption was up 4 percent during the first three months of this year. Sources predict that purchases of foreign brand cigarettes will recover as Korea’s economy strengthens.

Russia: RJ Reynolds International Tobacco Unit, maker of Camel, Winston and Salem cigarettes as well as a Russian brand (Peter I), plans to temporarily halt cigarette production in Russia. Sources state that pricing problems, a lack of credit and liquidity among its Russian wholesalers and distributors, coupled with political problems are the reasons for the temporary shutdown. RJR has invested over $400 million since 1992 and has captured approximately 20 percent of the Russian cigarette market. It is not known when operations will resume.

Indonesia: Area planted to leaf tobacco in 1998 is expected to slightly increase to 216,000 HA. However, leaf tobacco production is projected to decrease by 1.1 percent to 147,000 tons due to unexpected rains during the planting season. Flue-cured tobacco imports, which account for 67 percent of imported leaf tobacco, are expected to reach 25,500 mt, down 15 percent. Domestic consumption of leaf tobacco is expected to total 174,100 mt, down 11 percent due to a decrease in demand for cigarettes.

Auctions:

Zimbabwe Tobacco Auction Update: Zimbabwe’s Tobacco Association reported 196,376 metric tons of flue-cured tobacco were sold during the first 23 weeks of the auction season for an average price of U.S.$1.76 per kilogram. Sales during the twenty-third week totaled 8,588 tons and averaged about $1.58 per kilogram, well below the season average price. Sales for the 22-week 1997 season totaled 184,877 tons and averaged U.S. $2.35 per kilogram. The 1998 crop is estimated at approximately 205,000 tons.

Zimbabwe Flue-Cured Tobacco Auction Update
Week 23
September 10 to 16, 1998

Last modified: Wednesday, November 26, 2003