The end of the USD in global trade? + Agility posts drop in net income

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What we're tracking today

TODAY: Egypt secures financing for first phase of high-speed rail + Could we be nearing the end of the USD’s dominance in trade?

Good morning, friends, and welcome to the first week of a new month. We spent our weekend wading through the wonderful feedback we got from all of you following our first issue on Thursday. From the bottom of our hearts, thank you — it is an honor for us to write to you every morning.

THE BIG LOGISTICS STORY in our part of the world- The Islamic Development Bank (IsDB) agreed to provide Egypt with EUR 318 mn in financing for the 660-km first phase of the Sokhna-Alexandria high-speed rail line.

^^ We have all the details on this story and more in the news well, below.

HAPPENING TODAY-

It’s the beginning of a new month (and quarter),with a handful of notable changes for logistics players in the region:

#1- UAE-Israel agreement on non-oil trade comes into effect: TheUAE-IsraelComprehensive Economic Partnership Agreement (CEPA), which could see non-oil bilateral trade between the countries reach upwards of USD 10 bn, came into effect at the beginning of the month,according to a statement from the UAE’s Economy Ministry. The agreement will remove trade barriers, facilitate the international expansion of SMEs, and reduce or eliminate tariffs on 96% of product lines between the countries.

This is the latest in a series of similar agreements for the UAE, which has finalized pacts with India, Indonesia, Turkey and Georgia, the statement said. The agreements come as part of the country’s push to double its GDP to AED 3 tn by 2030.

#2- Higher Suez Canal transit fees for oil tankers went into effect at the beginning of the month. Tankers carrying crude oil and petroleum products will now be subjected to a 25% surcharge, while their empty counterparts are to pay an extra 15%, up from 5% for both laden and ballast vessels.

WATCH THIS SPACE-

#1- KMG and ADPcould expand oil tanker fleet: KazMunayGas (KMG) and Abu Dhabi Ports(ADP) discussed the possibility of buying a tanker fleet with a deadweight of 8-12k tons for their JV, Caspian Integrated Maritime Solutions (CIMS), earmarked for the transport of oil through the Caspian and Black seas, according to a press release. Talks also involved the development of a service fleet specifically for the Kazakhstan area of the Caspian Sea. The JV was established in February of this year.

#2- Iraq to resume northern oil exports this week: Iraq’s federal government and the Kurdistan regional government (KRG) have reached an initial agreement to resume Kurdish oil exports through Turkey this week, KRG head Lawk Ghafuri said on Twitter. The agreement will continue to be in effect until an oil and gas law is approved by the Iraqi government, Ghafuri writes.

Refresher: The pact follows the recent arbitration case that halted oil exports of some 400k bpd of oil coming out of the Kurdish region of Iraq to Turkey, without the consent of Iraq's State Oil Marketing Organization (SOMO). The agreement will allow SOMO and KRG to jointly export and supervise Iraq's oil, Reuters cited an Iraqi official and KRG official as saying during the talks leading up to the agreement. Revenues of oil exports will be deposited into KRG’s ministry of natural resources account, and be supervised by Iraq’s federal government, the Iraqi official reportedly told Reuters.

DATA POINT- Egypt’s Alexandria Port had its busiest month in seven years in March, which saw a 42.2% m-o-m increase in the movement of ships, according to a port authority statement. Some 404 vessels called at the port in in March, 120 more than the previous month. Bulk vessels saw the highest rate of increase from February, rising 91% m-o-m, while ferries rose 83.2%, and general cargo vessels surged 41.3%.

THE BIG STORY ABROAD-

Take that, Bretton Woods: A challenge to the USD’s dominance in global trade? China and Brazil said last week they will ditch the greenback and carry out bilateral trade in their domestic currencies last week, AFPreports. Egypt and India, meanwhile, are considering executing their trade in INR,Bloombergreports, citing an Indian government official. The greenback’s position at the center of global trade took another hit a few days ago when China settled a bill for LNG imports from the UAE in CNY for the first time. The country is also in talks with Saudi Arabia for a similar arrangement to settle oil shipments.

The man behind BRICS wants more: Former Goldman Sachs economist Jim O’Neill is urging BRICS nations to expand and work together to curb the USD’s hegemony as the currency of international trade, according to a recently published paper picked up by Bloomberg. The economist — who was the first to coin the acronym BRICS — stressed that this realignment makes more than just good sense, saying the USD “plays a far too dominant role in global finance” and has “dramatic” knock-on effects. He also urged the bloc to restrict new admissions to members which further the group’s agenda and that the alliance zero in on initiatives that “focus on climate finance, improving healthcare and boosting trade,” according to the business information service.

Egypt wants to cut its reliance on the USD + get access to more development finance: Egyptian President Abdel Fattah El Sisi signed off on a multilateral agreement for Egypt to join the ranks of BRICS’ USD 100 bn multilateral lender New Development Bank (NDB) last week. The deputy chairman of Egypt’s House Economic Committee, Mohamed Abdel Hamid, said in January the move was part of a bid to curb the USD’s dominance of global trade.

About the NDB: The NDB is a multilateral development bank set up in 2014 by the BRICS to fund infrastructure projects in its member countries.

SOUND SMART- Why do countries trade with each other in USD? You can thank the Bretton Woods process in the wake of the Second World War. Listen to this great podcast from Planet Money (listen, runtime: 19:00) or read the transcript here.

MARKET WATCH-

OPEC+ yesterday made a surprise oil production cut of c.1.2 mn barrels per day (bbl / d) in a move that should translate into higher prices — and fresh global economic risk,Bloomberg reports. The production cuts came a day before the alliance’s ministerial panel was set to meet. Saudi Arabia led the herd, pledging a cut of 500k bbl / d, while the UAE, Kuwait, Iraq, and Algeria also said they would cut production.

Analysts were caught flatfooted, havingpenciled in table output from tomorrow’s meeting through the end of 2023 amid heightened global inflation and concerns over supply. Oil traders see oil prices rising in 2H 2023 as demand grows by some 2 mn bbl / d this year, fuelled by China’s full emergence from years of covid-19 lockdowns, the business information service reports.

OPEC+’s oil production was already estimated to have declined in March due to oilfield maintenance in Angola and a halt in some of Iraq exports, according to a Reuters survey. The survey suggests OPEC+ pumped 28.9 mn bbl / d in March, down 70k bbl / d from February and more than 700k bbl / d from September. Iraq — one of OPEC’s biggest producers — saw its oil revenues fall around 33% y-o-y in March to USD 7.4 bn, weighed down by a drop in oil prices driven by the turmoil in the global banking industry, Zawyareported yesterday.

ICYMI- Crude futures plummet to c.USD 70 — a 15-month low — in tandem with the global banking crisis before paring losses to USD 80. The pledges bring the total volume of cuts by OPEC+ to 3.66 mn bbl / d, Reuters estimates.

MEANWHILE- The Baltic Dry Index, the Baltic Exchange’s main sea freight index fell to a six-week low last week on the back of lower shipping rates for capesize and supramax vessels, Reutersreports. The overall index — which takes into account the rates for capesize, panamax, and supramax shipping vessels — fell 1%, its lowest since 9 March. The capesize index fell 11.5% for the second consecutive week, while the supramax index was also down 10.1% for the week. Baltic Dry tracks rates for ships carrying dry bulk goods.

Global sea freight volumes fell 2.5% in 4Q 2022, despite the final quarter traditionally being the busiest period of the year, according to the Global Shippers Forum’s container shipping market quarterly review, picked up by Supply Chain Digital. The report showed that sea trade volumes continued to fall steadily in early 2023 amid persistent inflation, high energy prices, and dimmed consumer demand for goods.

“This has stopped being just a supply chain or a shipping issue. Shippers and carriers are firmly in the hands of global economic forces,” Secretary General of Global Shippers Forum James Hookham said, adding that, although shippers have “undoubtedly benefited from the dramatic fall in spot rates over the past nine months,” weak demand “will be of more concern to shippers than the cost of their shipment.”

ALSO WORTH KNOWING ABOUT THIS MORNING-

India extends export ban on diesel and gasoline: India’s government will extendexportbans on diesel and gasoline in a bid to secure adequate domestic supply,Reuters reports, citing a notification from the Indian government. The government has asked refiners to redirect 50% of their annual gasoline exports and 30% of diesel exports to the domestic market. India had put the restrictions in place last year, after some refiners prioritized the re-export of marked-down Russian oil over domestic supplies.

AND- More than 100 lorries carrying flour for Yemeni traders are being held at checkpoints in Sanaa, Taiz, and Al Bayda, Arab News reports. The flour is being held by militia to push traders to pay their taxes, Arab News says.

Islamic Development Bank extends EUR 318 mn to fund Egypt’s first high-speed rail line

The Islamic Development Bank (IsDB) will provide Egypt with EUR 318 mn in financing for the 660-km first phase of the Sokhna-Alexandria high-speed rail line, after the bank’s board approved the move during its meeting yesterday, according to an IsDB press release. Details about the terms of the financing have not been disclosed.

European bank financing in the pipeline: Egypt’s cabinet said last week that it had approved international funding from European banks for the high-speed rail link, without giving further info. The entire project is set to cost some USD 23 bn.

High-speed rail: Siemens Mobility, Orascom Construction, and Arab Contractors have signed contracts with the Egyptian government to build the country’s new 2k-km high-speed rail line. The first phase will link Ain Sokhna to Marsa Matrouh, while additional lines will join Cairo to Hurghada as well as to Abu Simbel near the country’s southern border. Deutsche Bahn and El Sewedy Electric are on board to operate the first line under a EUR 1 bn+ contract signed last year. The project, according to government officials, is set to be the sixth-longest rail network in the world, connecting 60 Egyptian cities with trains running at up to 230 km/h.

Work is starting soon: French construction firm NGE and its subsidiary TSO should begin laying the first half of track for the rail’s first phase “in early 2023.”

DP World adds new edible oil terminal at Berbera port

The UAE’s DP World has kicked off construction of a new 18k ton edible oil terminal at Somaliland’s Berbera Port, according to a press release. When completed, the terminal will for the first time allow Berbera to service 16 meter draught ships and handle shipments of bulk edible oil. The terminal’s capacity will be expanded “as demand grows,” the statement says.

The terminal has been leased out: The first phase of the terminal has already been leased on a long-term basis to Mzahim Investment, a subsidiary of investment manager Al Ghurair Investments, which has experience in the edible oils market.

SOUND SMART- DP World took over management of Berbera Port back in 2017, and has sinceimplemented new digital systems andincreased cargo volumes by 35% at the port. This new terminal is part of DP World’s efforts to make Berbera a main trading hub in the Horn of Africa, with a potential to serve a population of c.140 mn people. The company has been investing heavily in the infrastructure of ports and logistics in the continent, with a USD 1 bn pledge to invest in African ports and logistics as part of a joint venture with the UK’s development finance institution, British International Investment.

Lebanon has outsourced its postal services’ management to CMA CGM subsidiaries

CMA CGM subsidiaries to manage Lebanon’s postal service: A consortium of Merit Shipping and Colis Privé France, subsidiaries of French shipping group CMA CGM, were granted the contract to manage Lebanon's postal service, the country’s Telecoms Ministry said in a statement. The country’s postal service is currently being managed by Liban Post.

What we know: The Lebanese state’s share in the contract for the management of the country’s postal services will be 15.5% during the initial year of the consortium’s management, the statement says, without clarifying how percentages will be broken down after the first year. The floor in the auction would have given the Lebanese government a 10% share in the contract, according to the statement.

What we don’t know: The statement did not disclose the value of the consortium’s bid or when CMA CGM or its subsidiaries will take control of management over the country’s postal service. It’s also scant on details regarding the services CMA CGM will manage.

About the companies: Merit Shipping is CMA CGM’s agent in Beirut.CMA CGMacquired French delivery firm Colis Privé last year as a means to continue to expand its last-mile logistics services.

JFDZ calls on the private sector to invest in a logistics center for pharma + medical supplies in QAIA

JordanFreeDevelopment Zone Group (JFDZ) is calling on pharma manufacturers to invest in a logistics center for the export and re-export of medical supplies and pharma products in Queen Alia International Airport (QAIA)’s freezone, JFDZ Director General Abdulhamid Gharaibeh saidlast week.

The details are vague: The statement did not disclose a deadline for proposal submissions or the exact investment value.

The basics: The center is in the QAIA freezone, with a special road that connects it directly to the cargo center. That will ensure the handling of medical supplies and pharma products is carried out efficiently while avoiding risks of damage to the sensitive goods, Gharaibeh says.

The JFDZ is working overtime to drum up business: Earlier this month, JFDZ agreed to 16 investment contracts for firms in the transit and export sector as a means of promoting investments in the QAIA freezone.

Is Egypt moving closer to privatizing (part of) two state logistics firms?

A step closer to stake sales in Damietta, Port Said port operators: Egypt’s Financial Regulatory Authority is currently reviewing faire value assessments of Egyptian state-owned logistics handling firms Port Said Container and Cargo Handling Company (PSCCHC) and Damietta Container and Cargo Handling Company (DCHC), Al Borsareports, citing sources it says are in the know. Financial Banking Consultants International (FinBi) wrapped up the valuation studies a week ago, according to the news outlet.

Gulf players are reportedly vying for strategic stakes in the state-owned logistics firms: Abu Dhabi Ports (ADP) reportedly put forward an initial offer for a controlling stake in both DCHC and PSCCHC. Meanwhile, talks with Qatar’s sovereign wealth fund for stakes in the two firms had reportedly stalled over the size of the stake on offer, as Egypt’s Transport Ministry is reportedly reluctant to sign off on the Qatari fund acquiring a majority stake in the companies.

Both companies are subsidiaries of Egypt’s Holding Company for Maritime Transport and were named in the Egyptian government’s list of 32 state-owned companiesin the country’s state privatization program. Egyptian investment bank CI Capital is set to assume the role of advisor on both transactions.

Agility’s net income falls, revenues soar in FY 2022

Agility’snet income fell 93% y-o-y to KWD 68 mn in FY 2022, the company said in itsearnings release. The company’s 2021 financials included its global integrated logistics business, which it sold in August of that year to DSV Panalpina. On a like-for-like basis, the company’s net income rose 153.5% y-o-y, when Menzies Aviation and HG Storage International’s performance — both acquired by the company in 2022 — are excluded. The Kuwaiti warehousing and industrial developer’s revenues rose 77.6% during the year to reach KWD 863.4 mn.

Agility’s aviation assets saw ups and downs last year: Agility’s aviation services reported KWD 294 mn in revenues, including National Aviation Services’ (NAS) full-year performance and five months of Menzies’ results. The company’s ground handling operations partially recovered due to the recovery of air travel, but this was “slightly offset” by a reduction in revenue from covid-19-related services provided mainly in Kuwait, it said. Cargo volumes also slowed near the end of 2022, according to the release.

The rest remained solid:The company’s fuel logistics subsidiary, Tristar Business’ revenue rose 60.1% y-o-y to KD 252.9 mn, while Agility Logistics Parks’ (ALP) revenues rose 10% y-o-y in 2022. United Projects for Aviation Services Company (UPAC) reported a 28.2% y-o-y increase in revenue for 2022, mainly on the rebound in airport-related services after the lifting of covid-19 restrictions. Global Clearinghouse Systems (GCS), Agility’s customs-modernization company, reported 4% y-o-y revenue growth in 2022.

What they said: “Agility had a strong 2022, marked by two major acquisitions that are reshaping the company and creating new opportunities. But like all businesses, we face global economic uncertainty in 2023, as well as uncertainty regarding government land lease policy in Kuwait,” Vice Chairman Tarek Sultan said.

The company will not be distributing dividends for FY 2022 as a result of the “uncertainty related to public sector policy with respect to land use [in Kuwait] and the role of the private sector in the economy,” according to its earnings release. The recommendation is subject to the approval of the annual general meeting.

BACKGROUND- Agility acquired Menzies in August 2022 and consolidated it with National Aviation Services (NAS), Agility’s legacy ground handling business. Its energy logistics subsidiary, Tristar, also acquired a 51% stake in HG Storage International last year for USD 215 mn.

AD Ports to implement vessel management system. PLUS: News on Suez Canal, Egypt’s food security, road maintenance in Kuwait, trade in Iraq and aviation

AVIATION-

#1- The UAE’s national airline Etihad Airways signed an MoU with China SouthernAirlinesto expand cooperation in the airline supply chain, according to a press release from Etihad. Under the MoU, the two carriers will work on mutual procurement of ground handling, cargo handling, bonded warehousing services, catering, and maintenance, repair, and overhaul.

#2- Abu Dhabi Aviation (ADA) is seeking approval from its shareholders to issue c.AED 4 bn (roughly USD 1 bn) in convertible bonds to ADQ Aviation and Aerospace Services, which when completed in 2Q 2023, would see the ADQ subsidiary take a c.60% stake in ADA, according to an ADX filing (pdf). Once the ongoing merger between the two companies is finalized, the bonds would automatically be converted into new ADA shares worth AED 6.14 apiece.

BACKGROUND- ADQ Aviation had offered to move its entire shareholdings of Etihad Engineering and the Advanced Military Maintenance Repair and Overhaul Center, as well as its 50% ownership of Global Aerospace Logistics, into Abu Dhabi Aviation in a merger last October. The board approved the move and said it would recommend it to its shareholders in a meeting in March, according to the filing.

MARITIME-

AD Ports Group will implement a vessel traffic management information system (VTMIS) across five of its ports in the UAE, according to a companypress release. The new system will help improve maritime safety at Khalifa Port, Zayed Port, FreePort, Musaffah Port, and Al Dhafra region, by integrating communications between radar, CCTV, radio, weather systems and more, providing operators with real-time data and improving vessel-to-vessel and vessel-to-shore communications. The company will also upgrade its vessel traffic control center with video walls and operator consoles to provide a comprehensive view of the tracked vessels at the center.

PROJECTS-

Kuwait has received interest from 35 foreign companies for contracts for road maintenance and paving, Al Qabas reported, citing sources it says are in the know. The firms vying for the contract include 20 Turkish outfits, five from Japan, three from each of China, France, and South Korea, and one German firm. The Public Works Ministry is in talks with the companies, and hopes to finalize details in two weeks’ time. Representatives from six embassies in Kuwait gave the Public Works Ministry a list of firms interested in bidding for the contracts in a meeting earlier this month.

Details: The companies awarded the contracts would have to open offices in Kuwait to oversee regular maintenance work. Work on the roads is scheduled to commence in mid-July 2022. The sources did not disclose the financial value of the contracts.

STORAGE-

EU food security funds on their way to Egypt:The Italian Agency for Developmentand Cooperation (AICS) is getting EUR 40 mn from the EU to help the Egyptian agriculture and supply ministries grow more resilient wheat and upgrade storage capacity, Egypt’s International Cooperation Ministry said in a statement. This is the first tranche of the EUR 100 mn in funding announced last year from the EU to improve food security in Egypt.

Where’s the money going? Some EUR 25 mn will support Egypt’s Agriculture Ministry to buy better seeds, while Egypt’s Supply Ministry will spend the remaining EUR 15 mn to build new siloes and complete the information system geared for controlling the movement of wheat in Egypt, according to the statement. The parties are currently discussing the allocation of the remaining EUR 60 mn.

TRADE-

Iraq has acceded to the UN’s TIR trade convention, according to a filing (pdf) by the UN Economic Commission for Europe (UNECE), which oversees the trade agreement. Iraq’s accession to the framework should make it easier for the country to benefit from its strategic location at the crossroads of global trade, and boost “east-west and north-south connectivity,” International Road Transport Union Secretary General Umberto de Pretto said, according to a statement.

SOUND SMART- The Customs Convention on International Transport of Goods (TIR) is a multilateral treaty and global transit system that helps facilitate seamless transport of freight across international borders. The framework boosts coordination between customs offices in participant countries with the purpose of limiting time-consuming border checks while also providing authorities with requisite checks and guarantees.

ZONES-

SCCT gets new incentives at East Port Said Port: The Suez Canal Economic Zone (SCZone) and Suez Canal Container Terminal Company (SCCT) inked a framework agreement that will see SCCT get fresh incentives for its operations at East Port Said Port, according to a statement. The incentives include reductions on berthing, port, and pilotage fees in accordance with tonnage and numbers of containers aboard. The incentives come as part of the SCZone’s plan to promote shipping through East Port Said Port.

Chinese shipyard builds world’s biggest shuttle oil tanker

A Chinese shipyard has just delivered the world’s largest shuttle oil tanker to Shanghai North Sea Shipping, according to state-owned news outlet CGTN. The 155k-ton behemoth was built by Dalian Shipping Industry Company and named NS Pioneer. When fully fueled, the vessel can sail up to 22k nautical miles, which is about the distance of two round trips from Shanghai to Dubai, according to the outlet

SOUND SMART- The term “Suezmax” is a shipping term applied to the largest class of vessels that can transit the Suez Canal without being towed. Ships of this class typically have a tonnage of between 120k-200k tons.

Calendar

MARCH

28-30 March (Tuesday-Thursday): Mediterranean Ports and Shipping 2023, Grand Hyatt, Athens, Greece.

APRIL

18-20 April (Tuesday-Thursday): Intermodal Africa, Durban International Convention Centre, South Africa.

25-27 April (Saturday-Monday): World Cargo Symposium, Hilton Istanbul Bomonti Hotel and Conference Centre, Istanbul, Turkey.

MAY

4 May (Tuesday): Deadline to submit proposals for the design, construction, finance, operation, and maintenance of the Salalah-Thamrait trucking road in Oman.

9-11 May (Thursday-Saturday): Airport Show, Sheikh Saeed Halls 1-2, DWTC, Dubai.

9-12 May (Thursday-Sunday): transport logistic, Trade Fair Center Messe München, Munich, Germany.

10-12 May (Friday-Sunday): The African Aviation Summit: Air Finance Africa Conference & Exhibition, Sandton Convention Centre, Johannesburg, South Africa.

15 May (Wednesday): Exports + FDI Forum, Four Seasons Hotel Cairo at Nile Plaza, Cairo, Egypt.

15-16 May (Wednesday-Thursday): Middle East Rail, Abu Dhabi National Exhibition Centre, Abu Dhabi.

15-16 May (Wednesday-Thursday): Mobility Live Middle East, Abu Dhabi National Exhibition Centre, Abu Dhabi.

15-17 May (Wednesday-Friday): Global Fleet Conference, Cascais, Portugal.

16-18 May (Saturday-Monday): Baltic and Black Sea Ports & Shipping, Radisson Hotel & Suites, Gdansk, Poland.

16-18 May (Saturday-Monday): Seatrade Maritime Logistics Middle East, Dubai, UAE.

16-18 May (Saturday-Monday): IATA Ground Handling Conference, Abu Dhabi National Exhibition Center, Abu Dhabi.

18 May (Monday): UN-Turkey-Russia Black Sea grain agreement extension expires.

24 May (Friday): Fleet and Mobility Summit, Dubai.

JUNE

6-7 June (Tuesday-Wednesday): Ports and Customs Week, Cape Town, South Africa.

JULY

16-17 July (Thursday-Friday): The Levitate Conference and Exhibition, St. Regis Amman Hotel.

24-25 July (Monday-Tuesday): ICSG Istanbul, Istanbul Lutfi Kirdar Convention & Exhibition Centre, Istanbul.

SEPTEMBER

20-22 September (Wednesday-Friday): Transport Evolution Africa Forum and Expo, Inkosi Albert Luthuli ICC Complex (Durban ICC), South Africa.

OCTOBER

3-5 October (Tuesday-Thursday): Smarter Mobility Africa Summit, South Africa.

EVENTS WITH NO SET DATE

2H2023: Construction of Neom’s first hydrogen fueling station will kick off.

2024

12-13 February (Monday-Tuesday): Breakbulk Middle East conference, Dubai Trade Centre.

2025

Iraq will complete phase one of the construction of the Grand Faw Port.

DHL and Aramco’s logistics and procurement hub in Saudi Arabia will commence operations.

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