Making Pakistan-Iran Trade Possible

Pakistan Must Opt for Oil for Food was the title of my first blog posted on June 17, 2012. I am tempted once again to talk about the same, as Pakistan continues to suffer from the worst balance of payment crisis. Iran is not only Pakistan’s next door neighbor but has repeatedly assured its capability to meet Pakistan’s energy demand.

The reason I am raising this issue again is that European Union member countries and India are allowed to import oil and gas from Russia, facing sanctions. If those countries are not barred from buying energy products from a “Sanctions Ridden Country” why can’t Pakistan buy energy products from Iran?

For decades the United States is saying “Iran is busy in producing nuclear warheads”. However, it hasn’t come up with any credible proof. Many critics say it is a hoax call. They remind of the similar allegation against Iraq that was busy in production of weapons of mass destruction.

After United States, withdrew from JOCPA during Donald Trump era, the perception is getting credence that the super power considers Iran a hurdle in creation of its hegemony in the region, the major supplier of crude oil and gas.

There is also growing feeling among Pakistanis that due to the US pressure on the ruling junta the country not only stopped buying crude oil from Iran, but also stopped construction of Iran-Pakistan gas pipeline. The people privy to information also says that even supply of wheat and rice to Iran has been put on hold.

 They refer to Iraq which was allowed to export oil under “oil for food program”.

The US is fully aware that Pakistan’s GDP growth being pegged due to looming energy crisis and the country needs low cost energy products immediately. However, Pakistan is not being allowed crude oil and gas from Iran.

The time has come Pakistan should assert itself and convince the US that buying energy products from Iran bodes well for Pakistan. If India can pay Iran in Rupee, Pakistan should be allowed to buy energy products from Iran against supply of wheat and rice.

 

Airlines cancel thousands of US flights

Airlines canceled nearly 2,700 US flights as of Saturday afternoon after a massive winter storm snarled airport operations around the country, frustrating thousands of holiday travelers, reports Reuters.

There were flight delays within, into or out of the United States totaling about 6,200 as of Saturday afternoon, according to flight tracking website FlightAware, which showed total US flight cancellations at around 2,700.

The cancellations as of Saturday afternoon included over 750 from Southwest Airlines and nearly 500 from Delta Air Lines.

The flight disruptions came as an arctic blast gripped much of the United States on Saturday, causing power outages and car wrecks. Plummeting temperatures were predicted to bring the coldest Christmas Eve on record to several cities from Pennsylvania to Georgia.

Temperatures were forecast to top out on Saturday at just 7 degrees Fahrenheit (minus 13 Celsius) in Pittsburgh, surpassing its previous all-time coldest Christmas Eve high of 13 F, set in 1983, the National Weather Service (NWS) said.

Winter storms have increased in frequency and intensity over the past 70 years, according to the US Global Change Research Program.

This is in part due to climate change, according to the Environmental Defense Fund, because the planet evaporates more water into the atmosphere as it warms, leading to more overall precipitation.

On Friday, US flight cancellations were reported at 5,936, according to FlightAware.

“Increased air traffic volume and winter weather affecting the northern half of the US could still cause delays to holiday travel," the Federal Aviation Administration (FAA) said on Saturday, though travel conditions were expected to improve.

An NBC News affiliate reported that inclement weather canceled over 130 flights as of Saturday morning at the Seattle-Tacoma International Airport. Some passengers told the news outlet they were not notified before coming to the airport.

An ABC News affiliate showed long lines at the Denver International Airport on Saturday morning, where over 150 flights were delayed and nearly 130 were canceled.

Passenger railroad Amtrak canceled dozens of trains through Christmas, disrupting holiday travel for thousands.

 

Indonesia confirms ban on bauxite export

Indonesian President Joko Widodo has confirmed an export ban for bauxite starting in June 2023 to encourage domestic processing of a material used as the main ore source of aluminium.

The resource-rich nation has surprised markets with its commodity exports policies, including brief but controversial bans earlier this year on shipments of palm oil and coal, of which Indonesia is the world's biggest exporter.

It is also among the world's top suppliers of bauxite, with China its key buyer. The timing of Indonesia's ban, however, is in line with its current mining law.

The president said the bauxite ban aimed to replicate Indonesia's success in developing its nickel processing capacity after halting exports of its raw form in January 2020, which enticed foreign investors, mostly from China, to build local smelters.

The measure, which led to a dispute at the World Trade Organization (WTO), also helped boost the value of Indonesia's exports.

"The government will remain consistent in implementing down streaming so the value add can be enjoyed domestically for the country's development and people's welfare," said Widodo, who is popularly known as Jokowi, emphasizing the importance of jobs creation.

China was the biggest importer of Indonesia's bauxite until Jakarta introduced a mineral export ban in 2014, which it lifted in 2017.

According to Wen Xianjun, a former head of the aluminium department at the China Nonferrous Metals Industry Association, Indonesia's 2014 ban prompted China to boost its efforts to develop aluminium resources in Africa instead.

"Compared with then, China's imports of bauxite are more diversified now," Wen said.

China imported 17.8 million tons of Indonesian bauxite in 2021, and 17.98 million tons in the first 11 months of year 2022, about 15.6% of its total imports, according to customs data.

Lately, three-month aluminium futures contract on the London Metal Exchange rose 0.6% at US$2,386.50 a ton, while the most-traded aluminium contract on the Shanghai Futures Exchange was up 0.2% to 18,595 yuan a ton.

The announcement by Indonesia is not expected to have significant impact on prices.

"It won't cause any major supply headwind as Indonesia now only accounts for a relatively small share of China's supply, Guinea and Australia will immediately make up the lost volume (after the ban)," an aluminium trader at a large trading house in China said.

Indonesia has four bauxite processing facilities with 4.3 million tons of alumina output capacity, while more are under construction with collective capacity of nearly 5 million tons, said chief economic minister Airlangga Hartarto.

Indonesia's bauxite reserves are enough for up to 100 years production, he said.

The country's mining law also states exports of other unprocessed minerals such as copper will also be stopped. Jokowi did not specify the timing of shipment bans on the other materials.

He said there was a possibility that legal action could be pursued against Indonesia for banning bauxite exports, but it would not deter him.

The WTO last month ruled in favour of the European Union in a dispute on nickel ore exports, which Indonesia is appealing.

 

 

 

Battle to shift from fossil fuels to metals

According to a Reuters report, the global trade war will shift from fossil fuels to metals and raw materials. Russia’s invasion of Ukraine highlighted the risk of relying on autocratic states for energy. Even if Europe’s gas crisis eases, Western manufacturers’ focus will switch to reducing China’s dominance in materials key to a cleaner economy.

Europe needs to cumulatively spend US$5.3 trillion on clean energy projects by 2050. That requires a six-fold increase in the global production of copper, lithium, graphite, nickel and some rare earths by 2040 show International Energy Agency (IEA) estimates.

Yet China dominates the processing, and to a lesser extent the extraction, of many critical industrial ingredients. It refines 58% of lithium produced globally, 65% of cobalt and over one-third of nickel and copper.

Ostracised Russia is also big in nickel, palladium and cobalt.

Europe, which imports between 75% and 100% of most metals, looks particularly vulnerable.

In response, Western companies can strike deals with suppliers in friendly countries, open mines at home, or boost recycling.

The first approach is the fastest and is underway. In 2022 carmakers have ramped up partnerships with mines and invested directly in mining projects, data from Fitch Solutions shows.

General Motors took a stake in Australia’s Queensland Pacific Metals to secure nickel and cobalt for green SUVs.

Opening new mines at home looks safer but takes longer. Take lithium. Europe doesn’t currently mine an ounce of the key electric-vehicle battery component. And the United States only supplies 2% of global demand. But things are changing.

Sibanye Stillwater is aiming to operate Europe’s first lithium mine in Finland in 2025; France’s Imerys is seeking to extract 34,000 tons of lithium hydroxide annually from a mine opening in 2028. If all European lithium mining projects transpire, they could supply around 40% of its expected demand of 600,000 tons of lithium carbonate equivalent a year by 2030, says one European miner.

The United States, which only holds 3% of the world’s lithium reserves, has passed legislation to subsidize domestic extraction of crucial materials.

Neither approach is foolproof. Mining in developed markets may mean pushback from environmentally conscious citizens. Critical metals producers could also make life trickier for buyers by forming cartels.

That’s why Western nations’ best option is ultimately to recycle metals from used appliances. Companies like Umicore and Redwood Materials already own the technology to reuse batteries and smartphones.

Europe recycles 17% of the globe’s battery production. But this share will rise to 48% by 2025, Fitch Solutions suggests.

Unfortunately, recycling is costly. But in a polarized world, protecting Western industries and jobs will merit a premium.

 

India-Israel: Three decades of strong ties

In year 2022, Israel and India are celebrating the 30th anniversary of their full diplomatic relations. In the last three decades, bilateral trade has increased from US$200 million in 1992 to over US$7.86 billion in 2021-22. It is expected to rise sharply once the free trade agreement is concluded.

India is attractive to Israeli businessmen. The economic relations, once dominated by defense, diamonds and drip irrigation are now driven by hi-tech, cyber security, innovation and mobility.

India’s emergence as one of the fastest-growing major economies, its democratic character and its maturing relations with the United States and Gulf countries makes it an attractive proposition for Israeli businesses.

More direct flights and opening of new routes with the Gulf airlines have significantly increased tourism in both directions.

The launch of the I2U2 group has multiplied the avenues of cooperation. It addresses the issue of financing the use of cutting-edge Israeli technologies in the price sensitive Indian market.

The Israeli TV series Fauda is wildly popular in India, which spawned an Indian remake, Taanav. The road is paved for more collaboration in the areas of cinema and entertainment.

Indians have become the largest contingent of foreign students studying in Israel.

Start-up entrepreneurs from Israel and India are extremely successful in Silicon Valley, and they get along well with each other due to numerous common values.

It has a spillover effect. A number of delegations of Indian CEOs and Family Offices have started visiting Israel on a regular basis.

The successful bid by India’s Adani Group and Israel’s Gadot Group to purchase Haifa port has paved a way for cooperation on large infrastructure projects.

Iran dispatches export cargo ship to Venezuela

A ship carrying Iran-made export goods has been dispatched by the Islamic Republic of Iran Shipping Line Group (IRISL) to Venezuela, IRIB reported.

According to IRISL, this is the fourth vessel carrying consignments produced by Iranian producers to the Latin American country in the current year.

As reported, another ship is also scheduled to be sent to Venezuela next month if anticipated capacities are being completed.

The IRISL has notified Iranian authorities and the chambers of commerce of the country, expressing readiness to create regular shipping line to export Iranian commodities to Venezuela.

Iran hosted the ninth meeting of the Iran-Venezuela Joint Economic Committee on November 15, 2022 during which the two sides reached agreements for the expansion of cooperation in several areas.

A senior delegation of Venezuelan officials including the country’s Transportation Minister Ramon Blazquez and Agriculture Minister Wilmar Castro Soteldo visited Iran to attend the mentioned meeting to explore new avenues for mutual cooperation.

The major economic event was co-chaired by Venezuelan Transport Minister Ramon Blazquez and Minister of Defense and Armed Forces Logistics of Iran Mohammadreza Gharaei Ashtiani.

At the end of the meeting, the two sides inked a comprehensive cooperation document covering a variety of areas including industry, mining, energy, petrochemical, trade, agriculture, science, and technology.

Addressing the event, Ashtiani said, “We firmly believe that the successful holding of this committee meeting will be the beginning and a turning point in the macro and strategic relations between the Islamic Republic of Iran and the Bolivarian Republic of Venezuela under the leadership of Seyed Ebrahim Raisi and Nicolas Maduro, the presidents of the two countries.”

He stressed that Iran and Venezuela are two independent countries with close and common positions on regional and international issues.

Prior to the two countries’ Joint Economic Committee meeting, Soteldo met with Iranian Agriculture Minister Javad Sadati-Nejad and the two sides inked a cooperation document on plant conservation and quarantine.

As reported, the signed document is a prelude to future agreements in various agriculture fields including mechanization, contract farming, knowledge and technology transfer, etc.

Speaking at the signing ceremony, Sadati-Nejad mentioned the visit of several Venezuelan delegations over the past few months, saying that these exchanges indicate the determination of the two countries to expand mutual ties.

Emphasizing the capabilities of the Islamic Republic of Iran regarding the export of agricultural products, the minister expressed hope that the export of all kinds of agricultural products and food such as dried fruits, citrus fruits, apples and etc. to Venezuela will be realized as soon as possible.

He also called on the Venezuelan side to consider special tariff reductions for Iranian agricultural products in future exchanges.

Also, on the sidelines of the two countries’ Joint Economic Committee meeting, Blazquez met with Head of Iran’s National Development Fund (NDF) Mehdi Ghazanfari during which the Iranian side expressed readiness for investment in Venezuela’s oil and petrochemical projects.

Blazquez also held a meeting with the former Head of the Islamic Republic of Iran Customs Administration (IRICA) Alireza Moghadasi during which the two sides signed an agreement on customs cooperation.

According to Moghadasi, mutual assistance and cooperation in technical fields, exchange of information between the customs of the two countries, especially focusing on the mutual identification of authorized economic operators (AEO) and risk management, are among the important provisions of this agreement.

Top performing sectors and scrips of year 2022

Let me and you accept the harsh reality that 2022 was a bad year for Pakistan’s capital market. Market value (market capitalization) of companies listed at Pakistan Stock Exchange (PSX) declined 17% to RKR6.4 trillion. In US$ terms it plummeted 35% to US$28 billion. Still there are some islands of excellence.

Real Estate Investment Trust (REIT), Synthetic & Rayon, and Sugar were the top performing sectors in 2022 as their market cap increased by 12%, 6% and 5% respectively, despite bad market conditions.

Technology sector was up 2% and outperformed the market despite fall in global listed technology stocks.

As against these, Engineering, Automobile Parts, and Miscellaneous sectors remained the worst performing sectors posting decline of 45%, 41% and 34% respectively.

REIT sector that has only one listed company gained in 2022 due to stable dividend yield coupled with changes in regulations on REITs investment for banks. To recall, State Bank of Pakistan (SBP) recently allowed banks to count their investments in shares issued by REIT towards achievement of housing and construction finance targets.

Synthetic & Rayon also posted strong performance led by rally in Ibrahim Fiber Limited (IBFL).

Sugar sector performance was led by JDW Sugar Mills (JDWS) that announced buy back.

Engineering sector (mainly steel related companies) was badly impacted due to economic slowdown and subdued construction activity.

Automobile parts sector also remained amongst worst performing sectors primarily due to import restrictions, high financing rates and lackluster demand.

For its analysis, Pakistan’s leading brokerage house, Topline Securities assumed sectors with minimum market capitalization of US$100 million adjusted for new listings including Adamjee Insurance (AICL), and Telecard Limited (GEMSNL).

Lotte Chemical (LOTCHEM) doubled while Airlink was down substantially in 2022. LOTCHEM was the top performing stock of the market in 2022 where the scrip gained more than 100%. Investors were excited over potential sell off by Lotte Chemical Corporation South Korea (parent company of LOTCHEM) and subsequent public offer for minority shareholders.

LOTCEHM was followed by Faysal Bank (FABL) and Unilever Pakistan Foods (UPFL). The strong stock performance by FABL is on announcement to convert into an Islamic Bank followed by a special dividend.

Similarly, UPFL stock was up 34% as the company posted strong profitability growth of 33%YoY in 9M2022.

Systems Limited (SYS), Pakistan’s largest listed IT firm remained amongst the top performing stocks for the third consecutive year as the company continued to post strong profitability growth in spite of economic challenges.

Air Link Communication (AIRLINK) declined 54% due to low profits led by lower volumetric sales.

Gul Ahmed Textile Mills (GATM) also reported decline by 52% amid slowdown in textile exports.

Searle Company Limited (SEARLE) was down 52% due to lower profits led by falling gross margins driven by significant jump in raw material cost and company’s inability to immediately pass full impact on to consumers.