TODAY: Egypt floats the EGP, Arcapita closes a SAR 1.8 bn logistics fund + Houthi attacks turn deadly

Good morning, ladies and gents. It’s a very busy morning with somber news emerging from the Red Sea and developments filing in from all corners of the region, but first…

THE BIG LOGISTICS STORY- Egypt’s CBE takes its hands off EGP, delivers 600 bps rate hike: The Central Bank of Egypt (CBE) floated the EGP yesterday, leaving the exchange rate “to be determined by market forces” after it hiked interest rates by 600 bps at a surprise monetary policy meeting. The EGP is worth just under 60% less against the greenback this morning compared to the same time yesterday, having closed the day at a range from 49.50 to 50.85 — it had been stuck at 30.95 since last year.

What about interest rates? The CBE raised its overnight deposit rate by 600 bpd to 27.25%. The lending rate now stands at 28.25% and the main operations rate is now at 27.75%. This is the second rate hike of 2024, following a 200 bps move last month.

“The unification of the exchange rate is crucial, as it facilitates the elimination of foreign exchange backlogs following the closure of the spread between the official and the parallel exchange rate markets,” the CBE said in a statement (pdf).

Local players agree: “The widening gap between official and informal EGP-USD rates caused increasing worries in the market with businesses experiencing sales halts due to the instability of real-time prices. Some importers are pricing commodities at EGP 75 per USD or higher. The rising prices of staples and services, coupled with the severe USD shortage, escalate operational costs for logistics providers in both the global and local markets,” CEO of Egytrans Abir Leheta told us.

What does this mean for us? Banks exchanged more than USD 1 bn via the interbank market yesterday to cover backlogged requests to fund the imports of basic commodities. Egyptian importers of strategic and critical goods should see relief first, one of the nation’s most senior private-sector bankers told Enterprise. “We will prioritize importers of food, medicine and the like — the idea is to get critical stuff out of ports as soon as possible and then move on to production inputs and everything else in the backlog.”

Estimates of the size of the backlog vary wildly depending on who you talk with, but we think it’s in the range of USD 6-8 bn when you exclude duplicate orders and other distortions. Prime Minister Mostafa Madbouly has signaled that the release of goods from ports is a priority.

WATCH THIS SPACE-

#1-DP World to host Dubai Chamber offices abroad: Dubai Chambers has inked a strategic MoU with UAE-based port operator DP World to host the former’s offices at its facilities abroad, according to a statement. The agreement comes as part of plans to establish 50 international representative centers for Dubai Chambers by 2030 to reel in foreign direct investment and talent to the emirate, the statement said.

#2- Turkey’s Dortyol oil terminal will no longer receive Russian cargoes citing concerns over a ramp up in US sanctions, Reuters reports. Turkey had emerged as a top importer of Russian oil in the wake of the country’s invasion of Ukraine, with Russia directing Europe and US bound energy shipments to Asia, Turkey, and Africa, the newswire said. Terminal operator Global Terminal Services informed clients that it will no longer accept imports from Russia citing efforts to remain fully compliant with US restrictions. The terminal had imported some 11.7 mn barrels of Russian crude and fuel last year, the newswire said, citing Kpler tracking data.

#3- Qatar Airways has returned its full fleet of Airbus A350 jets to service after settling a dispute over damage to painted surfaces with planemaker Airbus, Reuters reported earlier this week, citing the airline’s CCO Thierry Antinori. The bolstered fleet will enable the carrier to proceed with expansions in routes connecting Europe with Asia, Australia, the Indian Ocean, and Africa. Qatar Airways disputed safety concerns with Airbus after paint cracks revealed a lightning protection layer on the brand new airframes, with the pair eventually resolving the dispute outside of court last year, the newswire said.

#4-Is QatarEnergy getting new LNG carriers? South Korean shipbuilder Hanwha Ocean has inked a MoA to build 12 LNG carriers with an unnamed regional shipping company believed to be Qatar’s state-run QatarEnergy, Business Korea reports. The shipbuilder is currently reviewing the contract, “We will make a related public disclosure when the details are finalized,” Hanwha Ocean said.

MARKET WATCH-

#1-Baltic Index dips, ending 12-session winning streak: The Baltic Exchange’s dry bulk sea freight index — which tracks rates for the capesize, panamax, and supramax vessel segments — was down 0.3% to 2291 points on Tuesday, breaking a 12-session winning streak, Reuters reports. Declines in the larger capesize segment overshadowed gains in smaller segments, with the capesize subindex dropping 1.4% to 4148 points, while Panamax increased 1.8% to 1805 points, and Supramax bumped up 1.2% to 1297 points, the newswire said.

#2- Oil prices rebounded on Wednesday, reversing a four-day decline, as indications of market tightening on the back of OPEC+ cuts outweighed concerns about shortfalls in demand in the US and China, Reuters reports. Brent gained 0.65% to USD 82.57 a barrel by 09.22 GMT, while West Texas Intermediate (WTI) increased 0.82% to USD 78.79 a barrel. OPEC+ decided on Sunday to extend output cuts into this year’s second quarter, which coupled with Red Sea disruptions led to tighter supplies in the Asian markets, yielding upward price pressure, the newswire said. Meanwhile, lack of big-ticket stimulus packages in China, and ambiguities on the Federal Reserve’s disposition towards interest rate cuts supplied downward pressure, the newswire added.

DATA POINTS-

#1-Qatar’s trade surplus declined 31.5% y-o-y to QAR 54.5 bn in 4Q 2023 according to a Planning and Statistics Authority (PSA) press release. Merchandise exports declined 25.5% y-o-y to QAR 84.8 bn, with the decline mainly attributable to falling exports of mineral fuels, lubricants, and related materials, PSA said. Imports during the period declined 10.4% y-o-y to QAR 30.4 bn, PSA added.

#2- Trade between KSA and the GCC saw a 13% y-o-y boost to SAR 55.58 tn in 4Q 2023, with the Kingdom seeing a SAR 13.03 tn trade surplus, SPA reports. KSA’s exports to the GCC came in at SAR 34.3 tn during the period, representing some 11.5% of the country's total exports which summed up to SAR 297.9 tn. Total imports from the GCC came in at SAR 21.27 tn and accounted for 10.6% of the Kingdom’s total imports. The UAE represented KSA’s top non-oil trading partner in the GCC bloc, followed by Bahrain, and Kuwait, SPA said.

CIRCLE YOUR CALENDAR-

The UAE will host Abu Dhabi Mobility Week from Wednesday, 24 April to Wednesday, 1 May in Abu Dhabi. The event, organized by The Department of Municipalities and Transport – Abu Dhabi (DMT), will feature announcements, forums, and introduce a mobility strategy for the emirate.

Saudi Arabia will host a special World Economic Forum event from Sunday, 28 April through to Monday, 29 April in Riyadh. The event will focus on global collaboration and energy.

The UAE will host the 23rd edition of the Airport Show from Tuesday, 14 May through to Thursday, 16 May in Dubai. The 23rd Airport Show will see representation from airport suppliers, airport service providers, aviation executives, and regional decision makers. The event will highlight current innovations and new technologies, while emphasizing this year’s "Sustainability and Innovation," theme.

The UAE will host The Electric Vehicle Innovation Summit from Monday, 20 May to Wednesday, 22 May in Abu Dhabi. The event will see industry leaders come together to discuss sustainable mobility and tapping into groundbreaking advancements in electric vehicles while engaging with key decision-makers.

Check out our full calendar at the bottom of this email for a comprehensive listing of upcoming news events and news triggers.