Regional economies need to double down on gains from shifting trade patterns, IMF says

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What we're tracking today

TODAY: Shifting trade patterns could spell promise + Regional shipping connectivity falls amid disruptions

Good morning, friends. We have a brisk issue this morning with a focus on the macro picture in terms of trade and shipping. There’s also a basket of updates on transportation projects between a handful of regional countries. Shall we?

PSA-

You can now get short-term berth rentals + docking services at Dubai ports through RTA: Dubai’s Roads and Transport Authority (RTA) will integrate its services within the Dubai Maritime Authority’s system to provide improved marine transport services within the Ports, Customs, and Freezone Corporation, according to a statement. The integration will see RTA offering options like short-term berth rentals at maritime stations which allow private boats to temporarily dock at maritime stations without requiring overnight stays.

WATCH THIS SPACE-

#1- The UAE, Iraq, Turkey, and Qatar have signed a preliminary agreement to work together on the Development Road project, according to a statement from the Iraqi prime minister’s office. The project, initiated last year by Iraq with a budget of USD 17 bn, aims to connect a significant commodities port on Iraq’s southern coast — Grand Faw Port — to Turkey’s border via rail and road networks.

#2- Borouge to partner with Egypt on oil production freezone: Abu Dhabi-based petrochemicals firm Borouge is in early-stage talks with Egyptian Prime Minister Mostafa Madbouly to sign a preliminary agreement with the Fujairah emirate and to set up a freezone focused on the production, storage and trade of oil and its derivatives, according to a statement.

#3- Kuwait is expected to finalize feasibility studies on a 700 km railway link to KSA by 16 May, Kuwait’s Al Qabas reported on Saturday, citing sources and documents it has seen. The implementation of the project is set to begin later this year or early next year, according to the news outlet. The bilateral initiative will link Kuwait’s southern border with Riyadh and is separate from a multilateral GCC-led railway project, sources also said.

#4- A resumption of oil exports via the Kurdistan-Turkey pipeline will “take some time,” Bloomberg reports, citing statements by Iraqi government spokesman Bassem Al Awadi. Baghdad is negotiating with foreign companies on volumes, exports, and prices, and there are no indications on how long talks will take, Al Awadi said. Turkey is ready to receive exports, but there are still outstanding issues between the autonomous region of Kurdistan, oil firms, and Iraq’s oil ministry, he also added.

REMEMBER- Oil exports to Turkey from Iraq’s northern autonomous region of Kurdistan were halted last year after a landmark decision by the International Chamber of Commerce deemed the transfers illegal and ordered Turkey to shell out USD 1.5 bn in damages to Baghdad.

IN OTHER TURKISH UPDATES- Afghanistan transported its first rail export shipment to Turkey via Iran, delivering 1.1k metric tons of mineral ore, Tasnim reported citing a statement from Afghanistan’s railway department.

#5- Strategies for UAE drainage infrastructure incoming: The UAE’s Energy and Infrastructure Ministry is preparing a “complete study” on dam and waterway expansions to help contain future storms, following President Mohamed bin Zayed’s directive to evaluate the country’s infrastructure after severe weather, Wam reports. The ministry has dispatched teams to assess the impact of heavy rainfall on dams and roads and create strategies to bolster dam capacity, enhance waterways, repair damaged roads, and upgrade rainwater drainage along federal roads to withstand severe future weather events.

DISRUPTION WATCH-

German frigate, dubbed Hessen, departed from the Red Sea on schedule after concluding its deployment on Saturday, Deutschland reported earlier this week. The air defense frigate was sent to the Red Sea in February as part of the EU’s Aspides naval mission to safeguard commercial shipping, Reuters reported earlier this month. Hessen’s departure has left Aspides one ship short, with Germany looking to send a replacement by August, the Maritime Executive said on Sunday.

One less vessel in the security mission? Aspides commander Greek navy Rear Admiral Vasilios Gryparis had indicated earlier this month that he needed more warships to carry out his mission, with the four frigates that he had on hand too few to cover the assigned area. Hessen’s departure without replacement means that Aspides has been scaled down to only three frigates.

MARKET WATCH-

Oil prices rose slightly this morning as investors continue to monitor the regional temperature, Reuters reports. Brent crude traded at USD 87.27 a barrel, while US West Texas Intermediate (WTI) crude contract for May regained a little traction from the previous session trading at USD 82.16 a barrel. Both grades had fallen by USD 0.29 in the previous session as indications that the Israel-Iran tensions would not impact regional oil supply.

Heavier crude grades are seeing higher spot premiums in comparison to lighter grades in the Asian physical market, as changes in the global oil market see an unusual shift to higher pricing for heavier and more sulfurous grades that are traditionally considered inferior, Bloomberg reports. Regional varieties of medium-density and higher sulfur crude, including Oman and UAE’s Upper Zakum, are raking in higher spot premiums compared to lighter grades, such as Murban, which are usually priced higher due to their greater yields of refined fuels. The shift in market pricing is attributed to OPEC+ cuts that have limited supplies of heavier crude grades, a boost in the volume of lighter grades exported from the US, higher margins on high sulfur fuel oil — that is produced from medium-sour grades — and a decline in margins from diesel refining in Asia, among other factors, Bloomberg said.

DATA POINT-

Saudi Ports Authority (Mawani) saw a 12.48% y-o-y increase in incoming containers to 235.7k standard containers in March, KSA’s transport ministry said on X.

OUR NEXT FORUM IN CAIRO-

Foreign investors are falling in love with Egypt again… Foreign investors we speak with (debt, equity, and strategic alike) have growing appetite for Egypt. They’re buying into local debt, eyeing promising shares, and committing bns of USD to both new ventures here and the growth of their existing businesses. They like the Egypt story that’s taking shape after the float of the EGP, and its competitive advantages are clear to many of them: It’s a massive consumer opportunity and a regional export hub of tomorrow.

The Enterprise Optimism Forum 2024 will do exactly what it says on the tin: Spark conversations about a future that sees Saudi Arabia, Egypt, and the the UAE at the heart of a more vital Middle East economy — and provide an early, actionable roadmap for those who are “long Egypt.”

We’ll be talking with you about the agenda over the coming couple of weeks. It features speakers from Egypt and abroad who are future-proofing their businesses and angling to capture tomorrow’s opportunities — and who aren’t afraid to answer some tough questions.

** Interested in attending? Tap or click here to let us know. Seating is limited.

CIRCLE YOUR CALENDAR-

Egypt will host the Egypt Facility Management Forum on Tuesday, 23 April and Wednesday, 24 April in Cairo. Business-owners, developers, service providers, technology leaders and suppliers will attend seminars and exhibitions on the facility management supply chain.

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.

Iran will host the Iran-Africa International Summit from Wednesday, 24 April through to Friday, 26 April in Tehran. The event will see Iran receive trade ministers from more than 40 African countries.

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.

Qatar will host the Autonomous E-mobility Forum from Tuesday, 30 April to Thursday, 2 May in Doha. The event will gather industry experts, senior officials, policy and technology experts, as well as government, academic, and media representatives, providing a platform for stakeholders to exchange know-how and recommendations for the implementation of autonomous e-mobility in the real-world.

Saudi Arabia will host the Saudi Smart Logistics exhibition and summit from Monday, 6 May to Thursday, 9 May in Riyadh. The trade fair brings together local and international suppliers, public officials, professionals, and logistics players, and provides a platform for networking, exchanging know-how, and showcasing new technologies, products, and services.

The UAE will host 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.

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

Regional economies need to curb risk and double down on gains from shifting trade patterns, IMF says

A way forward for regional trade: Geopolitical shocks including the war in Ukraine and Red Sea disruptions have shifted and destabilized regional trade patterns highlighting the importance of policies to handle such scenarios, according to a recent report (pdf) by the International Monetary Fund (IMF). Regional economies could curb risks and double down on gains from shifting patterns by reducing trade barriers, boosting regulations, and developing infrastructure. Red Sea disruptions can be remedied by diversifying trade routes and investing in alternative logistics corridors, the report says.

Red Sea disruptions have hit hard: Since the onset of the war in Gaza, rates for shipping 40-foot containers from China to the Mediterranean have surged four-fold, from USD 1k to USD 4k, the report says. Regional economies that are highly reliant on Red Sea trade were disproportionately affected, with volumes at Jordan’s Aqaba Port halving between November and February. KSA reshuffled trade from Jeddah on the Red Sea to Dammam on the Persian Gulf. Continued disruptions could still have more profound effects, with persisting disruptions for 2024 forecasted to lead to a 10% drop in exports from MENA countries bordering the Red Sea, the report said. Moreover, disruptions have seen trade mediated via the Suez Canal drop 50% between November and the end of February.

What to do? Regional economies should double down on supply chain management and boost air freight capacity to tackle the Red Sea crisis. Longer term, MENA must develop multimodal logistics corridors to safeguard against disruptions, the report says.

Not all geopolitical shocks spell disaster for trade: Regional hydrocarbon exporters saw a boom following the EU’s decision to switch away from Russian energy in the wake of the Ukraine war. MENA’s share of EU energy imports surged from 2.3% in 1Q 2022, to 5.8% in 4Q 2023, with most of the gains attributed to KSA and Algeria.

The report considers three scenarios for global trade fragmentation: The first scenario sees the Western bloc isolating Russia, while continuing to trade normally with our region. The second scenario sees international trade divided into three blocs — a Western bloc, an Eastern bloc, and a neutral bloc which includes MENA. The third scenario does away with our region’s neutrality, aligning them with the Western or Eastern trading blocs based on their UN voting patterns.

How does MENA fare across the different paths? In scenario one, our region will benefit from rerouted trade flows, experiencing modest gains to trade volumes and GDP. Scenario two sees the greatest gains for us, with substantial boosts to trade volumes and GDP as neutrality permits MENA to mediate trade between rival blocs. The third scenario sees economic declines in trade and economic growth across the region, with the notable exception of the GCC, which sees modest gains in trade due to lower tariffs, the IMF says.

Where do we go from here? The report suggests that economies improve digitalization and customs regulations to double down on potential gains for shifting trade patterns. On a medium term outlook, the IMF prescribes regulatory reforms and investments to fill “gaps” in infrastructure and relieve “infrastructure bottlenecks.”

Regional liner shipping connectivity falls amid Red Sea disruptions

Liner Shipping Connectivity declined in regional countries reliant on Red Sea trade with significant drops seen in Egypt, Israel, KSA, and Jordan, according to data from the most recent update of the United Nations Conference on Trade and Development ’s (UNCTAD) Liner Shipping Connectivity Index (LSCI). The index tracks countries’ connectivity to the global containerized shipping network by collating data on direct connections, weekly calls, companies providing services, services available, total deployed carrying capacity, and the size of largest ships received, according to UNCTAD’s methodology. The notable drops in regional connectivity performance between Q4 2024 and the present correlates with Houthi-related Red Sea attacks, which began in the previous year’s final quarter and saw most of the world’s major carriers reroute shipments away from the Red Sea.

Israel was also among the hardest hit regionally: The country’s shipping connectivity plummeted 43.78 points q-o-q to 91.31 points in Q1 2024, with Yemen’s Houthis particularly targeting Israel-linked or Israel-bound shipping. Israel’s chief Mediterranean ports at Ashdod and Haifa have also been targeted by Iranian proxies in recent months. As a result, Israel’s ranking on the index dropped 19 places, to 57 in Q1, from 38 in Q4.

Jordan was also hard hit, with operations at Aqaba port — the country’s only maritime gateway — severely affected by Red Sea disruptions. Jordan’s LSCI shed some 20 points q-o-q to 52.13 in Q1 2024, with the same period seeing the country drop 19 spots in rankings to 85. The country set up a task force, which includes the Jordan and Amman Chambers of Commerce, the Jordanian Navigation Syndicate, and the Jordanian Logistics Association, to handle the sudden drop in volumes at Aqaba. The task force urged Aqaba Container Terminal to provide incentives for marine routes that continue to serve Aqaba Port in late January, while also proposing waiving storage fees for shipping providers and owners of empty containers prepared for export.

Saudi Arabia also saw poorer connectivity since disruptions started, shedding 43.26 points q-o-q to 248 points in Q1 2024. The Kingdom also fell 5 spots in rankings to 23 globally in this year’s first quarter.

Egypt did better in terms of connectivity than other countries on the Red Sea, but was the worst off financially as Red Sea disruptions slashed Suez Canal receipts. Egypt fell only two spots in rankings between Q4 2023 and Q1 2024, settling at 22 worldwide in terms of its liner shipping connectivity. However, the decision by major carriers to reroute across the Cape of Good Hope saw Suez Canal transits fall by some 40%. If disruptions persist throughout this year, the country could lose USD 3.5 bn in FX revenues in 2024, equivalent to about 10% of net international reserves and half of its import bill.

The UAE seems to have seen some modest benefits from Red Sea disruptions, with the country gaining one spot in rankings to 56 globally since disruptions started in Q4 2024, while its index held steady at 307.9. UAE ports on the Persian Gulf and the Arabian Sea are displaced from the Red Sea and were thus unaffected in terms of the GCC’s substantial containerized trade with Asia. Moreover, the UAE’s bunkering hub at Fujairah saw record sales in March, on the back of a boost in demand attributed to reroutes.

Oman LNG + TotalEnergies ink LNG offtake agreement, Emirates Skycargo integrates API with DB Schenker, Mawani adds East Africa Express service

SUPPLY CHAINS-

TotalEnergies has inked a Sale and Purchase Agreement (SPA) with Oman LNG to offtake 0.8 mn metric tons per annum of LNG for a 10-year period beginning in 2025, according to a press release. TotalEnergies holds a 5.54% stake in Oman LNG. TotalEnergies also reached a Final Investment Decision (FID) on the Marsa LNG project, a joint venture between TotalEnergies and Oman’s state oil company OQ, producing 150 mn cubic feet of gas per day. The FID will see the JV expand production and develop new infrastructure, the statement said.

REMEMBER- Oman LNG signed a sales and purchase agreement (SPA) with Turkey’s BOTAS Petroleum Pipeline Corporation for the supply of 1 mn metric tonnes per annum (mtpa) of LNG for 10 years, beginning 2025.

SHIPPING + MARITIME-

Another shipping service comes to King Abdul Aziz Port in Dammam: Saudi Ports Authority (Mawani) has added a new shipping service boosting links with ports in East Africa, dubbed East Africa Express, to its King Abdulaziz Port in Dammam, according to a statement. The new service will link the port to Mundra in India, Qasim in Pakistan, Abu Dhabi and Jebel Ali in the Emirates, via weekly trips with capacities up to 11k TEU, the statement said.

SUSTAINABILITY-

DP World gets serious about sustainable development: DP World has developed aSustainable Development Impact Disclosure (SDID) to assess the impact and monitor how far investments go towards meeting UN Sustainable Development Goals, according to a statement. “This disclosure not only demonstrates our commitment to sustainable development but also sets a path for industry-wide accountability,” CEO and Chairman Ahmed bin Sulayem said in the statement. DP World has invited industry players to share their feedback on the SDID by 1 September on this website.

LOGISTICS HANDLING-

Emirates Skycargo has kicked off an API connection with global logistics service solutions provider DB Schenker internal booking engine, according to a statement last week. The service provides a host-to-host connection with DB Schenker’s internal booking engine and aims to boost the efficiency of air freight bookings by providing access to Emirate Skycargo’s schedules, standard and contract tariff rates, available capacity and the airline’s global cargo network, the statement said.

OTHER STORIES WORTH KNOWING THIS MORNING-

British Airways resumes flights to Abu Dhabi: British Airways landed at Zayed International Airport following a four-year hiatus on Sunday morning, and is set to offer daily flights from London Heathrow to Abu Dhabi year-round. (Statement)

LNG shippers unimpressed by boost to Panama Canal transit slots

LNG shippers are not tempted by extra slots at the Panama Canal, and remain set on transiting the Cape of Good Hope route to reach Asian markets, S&P Global reported last week. LNG vessels will still face added restrictions despite the boosted slots, but shippers also don’t see a need to transition away from Cape of Good Hope because the route is “cheap enough,” a European shipbroker told the outlet. Unlike traders, importers which keep LNG cargoes for domestic use, such as South Korea and Japan, may turn to the new slot, another Asia-based broker said. The Cape of Good Hope is particularly liked by US LNG exporters, with 18 shipments transiting so far in April, compared with just 3 in April of last year, the outlet also said.

ICYMI- The Panama Canal Authority announced plans to increase daily slots to 32 ships per day between mid-April and June, last week.

Calendar

APRIL

23-24 April (Tuesday-Wednesday): Egypt Facility Management Forum 2024, Cairo, Egypt.

24 April-1 May (Wednesday-Wednesday): Abu Dhabi Mobility Week, Abu Dhabi, UAE.

25-26 April: Driftx. Abu Dhabi, UAE.

24-26 April (Wednesday-Friday): The Iran-Africa International Summit, Tehran, Iran.

27 April-1 May (Saturday-Wednesday): Iran Expo 2024, Tehran, Iran.

28-29 April (Sunday – Monday): World Economic Forum, Riyadh, Saudi Arabia.

29 April- 2 May(Monday-Thursday): GLA Global Logistics Conference, Dubai, UAE.

30 April- 2 May(Tuesday-Thursday): Autonomous E-mobility Forum, Doha, Qatar.

MAY

2-3 May (Thursday-Friday): Geneva Dry,Geneva, Switzerland.

2-4 May(Thursday-Saturday): The International Conference on Logistics Operations Management, Marrakesh, Morocco.

3-5 May (Friday-Sunday): The Logistics and Supply Chain Management Conference, Tunisia, Tunis.

6-9 May (Monday-Thursday): Saudi Smart Logistics, Riyadh, Saudi Arabia.

7-9 May (Tuesday-Thursday): Annual Investment Meeting (AIM) Congress, Abu Dhabi, UAE.

14-15 May (Tuesday-Wednesday): Seamless Middle East, Dubai, UAE.

14-16 May (Tuesday-Thursday): The Airport Show, Dubai, UAE.

20-22 May (Monday-Wednesday): The Electric Vehicle Innovation Summit, Abu Dhabi, UAE.

21-23 May (Tuesday-Thursday): WAGA 2024, Riyadh, Saudi Arabia.

21-24 May (Tuesday-Friday): Global Supply Chain Forum 2024, Bridgetown, Barbados.

26-28 May (Sunday-Tuesday): ProPak Mena 2024, Cairo, Egypt.

27-30 May (Monday-Saturday): Comex Technology Show, Muscat, Oman.

JUNE

2-4 June (Sunday-Tuesday):IATA Annual General Meeting (AGM) and World Air Transport Summit, Dubai, UAE.

19-21 June (Wednesday-Friday): World Freezones Organization’s Annual International Conference and Exhibition, Bari, Italy.

27 June (Thursday): East Med Maritime Conference, Beirut, Lebanon.

29 June (Saturday): The Investment Conference in cooperation with the European Union, Brussels.

OCTOBER

6-8 October (Sunday-Tuesday): Routes World 2024, Bahrain.

8-10 October (Tuesday-Thursday): The Global Rail Transport Infrastructure Exhibition and Conference(Global Rail), Abu Dhabi.

7-9 October (Monday-Wednesday): AFSIC – Investing in Africa, London, UK.

8-10 October (Tuesday-Thursday): AntwerpXL Expo, Antwerp.

22-24 October (Tuesday-Thursday): Asean Ports and Logistics, Johor, Malaysia.

NOVEMBER

11-14 November (Sunday-Thursday): ADIPEC Maritime and Logistics Exhibition and Conference, Abu Dhabi.

13-15 November (Wednesday-Friday): The Bahrain International Airshow, Sakhir Airbase, Bahrain.

18-20 November (Monday-Wednesday): The Heavy Equipment and Truck (HEAT) Show, Dhahran Expo, Damman, Saudi Arabia.

DECEMBER

10-12 December (Tuesday-Thursday): Middle East Business Aviation, Dubai, UAE.

20 December (Wednesday): The Iran-Senegal Joint Economic Cooperation Commission, Dakar, Senegal.

EVENTS WITH NO SET DATE

1Q 2024: Construction of phase 3 of Agility’s logistic park in Abidjan, Côte d’Ivoire to be completed.

1Q 2024: Egypt’s Transport Ministry to launch pre-qualification tender for Cairo-Alex freight railway.

1H 2024: Civil Construction subcontracts for construction firms in Oman for implementation of the Abu Dhabi – Suhar rail link to be announced.

2H 2024: Bahri’s barges for Saline Water Conversion Corporation (SWCC) to begin initial and commercial operation.

King Salman Energy Park is set to become operational.

The Cross-Border Digital Trade Forum, Dubai.

2025

Mid-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.

AD Ports-operated Safaga Port’s multi-purpose terminal will become operational.

Phase 3 of APM Terminals Tangier MedPort to be complete and operational.

1Q 2025: Sadr Park’s Logistics Center in Riyadh to be completed.

1Q 2025: Phase twoof Jafza Logistics Park to be completed.

2027

4Q 2027: Oman’s Musandam Airport construction to be completed.

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