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.

 

Investors dump equities

Investors have dumped equities at a record pace in the days since major central banks signaled they won’t be deterred in their fight against inflation—a fitting end to the worst year for world stocks since the global financial crisis.

Equity funds were hit by outflows of almost US$42 billion, the highest ever, in a week when the Federal Reserve, the European Central Bank and the Bank of Japan all sounded staunchly hawkish notes in their policy outlook for next year, squashing bets of an imminent return to the era of cheap money.

In the US on Friday, new numbers showing inflation cooling there seemed to mollify some investors, as markets rose slightly to end the week.

US stocks ended Friday’s session with gains as investors digested data showing inflation is continuing to ease and the Federal Reserve’s rate hikes are serving their purpose. 

Both the S&P 500 and the tech-heavy Nasdaq 100 still suffered their third week of losses, the longest losing streak for both indexes since late September, as investors this month grappled with a hawkish Fed and data pointing to a resilient economy that can handle more rate-hike pain. 

Treasuries ended a holiday-shortened session lower. The benchmark 10-year yield climbed the most this week since early April 2022, ending Friday around 3.75%. The dollar suffered a weekly drop. This week’s gains took the yen to its highest level since June as the Bank of Japan’s sudden increase in its yield trading band is expected to encourage Japanese investors to bring money home.

Data on Friday showed the Fed’s closely watched measure of inflation cooling and consumer spending stagnating. Consumers’ year-ahead inflation expectations also dropped this month to the lowest since June 2021, a survey by the University of Michigan showed. Both sets of data calmed sentiment on Friday. 

“I think there is very little depth of liquidity, and a lot of daily and weekly options. But it has seemed like really exaggerated moves relative to any news,” said Peter Tchir, head of macro strategy at Academy Securities. “It seems like we rally hard on ‘Santa’ and weaker inflation data and selloff hard on good data and eco fears.”

While central bank officials this year have repeatedly said that they’ll keep raising rates, markets have often shrugged off these warnings. But economic data has continued to keep investors on the edge. They’ve especially been attuned to information pertaining to jobs, since softening in the labor market is something the Fed is keeping an eye on. 

“Historically, usually the market has been right, but in 2022 it’s been the Fed,” Jim Bianco, founder of Bianco Research, said on Bloomberg Television and Radio. “Are we going to get the pivot in 2023 or are we going to get the pivot in 2024? If the market doesn’t get the pivot, which it is expecting, I think there’s going to be some room for disappointment.”

Investors have cheered a moderation in inflation in recent months. But data underscoring a strong economy has often led to choppy sessions for markets, with some traders reassured that a US recession is still at bay while others fear this means the Fed will stay aggressive.

In commodity markets, everything from oil to gold and copper rose on Friday. Oil posted substantial weekly gain as Russia said it may cut crude production in response to the price cap imposed by the Group of Seven on its exports, highlighting risks to global supplies in the New Year.

United States endures massive winter, blackouts and power outages

Tens of millions of Americans endured bone-chilling temperatures, blizzard conditions, power outages and canceled holiday gatherings Friday from a winter storm that forecasters said was nearly unprecedented in its scope, exposing about 60% of the US population to some sort of winter weather advisory or warning.

More than 200 million people were under an advisory or warning on Friday, the National Weather Service said. The weather service’s map depicts one of the greatest extents of winter weather warnings and advisories ever, forecasters said.

Power outages have left about 1.4 million homes and businesses in the dark, according to the website PowerOutage, which tracks utility reports.

The Tennessee Valley Authority, the nation’s largest public utility, ended its rolling blackouts Friday afternoon but continued to urge homes and businesses to conserve power.

In Georgia, hundreds of people in Atlanta and northern parts of the state were without power and facing the possibility of sub-zero wind chills without heat.

Nearly 5,000 flights within, into or out of the United States were canceled Friday, according to the tracking site FlightAware, causing more mayhem as travelers try to make it home for the holidays.

“We’ve just got to stay positive,” said Wendell Davis, who plays basketball with a team in France and was waiting at O’Hare in Chicago on Friday after a series of flight cancellations.

The huge storm stretched from border to border. In Canada, WestJet canceled all flights Friday at Toronto Pearson International Airport, beginning at 9.00 am as meteorologists in the country warned of a potential once-in-a-decade weather event.

In Mexico, migrants waited near the US border in unusually cold temperatures as they awaited a US Supreme Court decision on whether and when to lift pandemic-era restrictions that prevent many from seeking asylum.

Forecasters said a bomb cyclone — when atmospheric pressure drops very quickly in a strong storm — had developed near the Great Lakes, stirring up blizzard conditions, including heavy winds and snow.

Multiple highways were closed and crashes claimed at least six lives, officials said. At least two people died in a massive pileup involving some 50 vehicles on the Ohio Turnpike.

A Kansas City, Missouri, driver was killed Thursday after skidding into a creek, and three others died Wednesday in separate crashes on icy northern Kansas roads.

Michigan also faced a deluge of crashes, including one involving nine semitrailers.

Brent Whitehead said it took him 7.5 hours __ instead of the usual six __ to drive from his home near Minneapolis to his parents’ home outside Chicago on Thursday in sometimes icy conditions.

“Thank goodness I had my car equipped with snow tires,” he said.

Activists also were rushing to get homeless people out of the cold. Nearly 170 adults and children were keeping warm early Friday in Detroit at a shelter and a warming center that are designed to hold 100 people.

“This is a lot of extra people” but it wasn’t an option to turn anyone away, said Faith Fowler, the executive director of Cass Community Social Services, which runs both facilities.

In Chicago, Andy Robledo planned to spend the day organizing efforts to check on people without housing through his nonprofit, Feeding People Through Plants. Robledo and volunteers build tents modeled on ice-fishing tents, including a plywood subfloor.

“It’s not a house, it’s not an apartment, it’s not a hotel room. But it’s a huge step up from what they had before,” Robledo said.

In Portland, Oregon, nearly 800 people slept at five emergency shelters on Thursday night, as homeless outreach teams fanned out to distributed cold-weather survival gear. Shelters called for volunteers amid high demand and staffing issues. Employees were laid low by flu or respiratory symptoms or kept from work by icy roads, officials said.

DoorDash and Uber Eats suspended delivery service in some states, and bus service was disrupted in places like Seattle.

The power ceased at Jaime Sheehan’s Maryland bakery for about 90 minutes Friday, shutting off the convection oven and stilling the mixer she needed to make butter cream.

“Thankfully, all of the orders that were going out today already finished yesterday,” she said a few moments before the power returned.

At about the same time, Corey Newcomb and his family were entering their sixth hour without power at their home in the small town of Phenix, Virginia.

“We are coping and that’s about it,” Newcomb said in a Facebook message.

South Dakota Governor Kristi Noem said she was deploying the National Guard to haul timber to the Oglala Sioux and Rosebud Sioux tribes and help with snow removal.

“We have families that are way out there that we haven’t heard from in two weeks,” Wayne Boyd, chief of staff to the Rosebud Sioux president, said.

Fearing that some are running out of food, the tribe was hoping to get a helicopter on Saturday to check on the stranded.

The Oglala Sioux Tribe, meanwhile, was using snowmobiles to reach members who live at the end of miles-long dirt roads.

“It’s been one heck of a fight so far,” said tribal President Frank Star Comes Out.

On the Pine Ridge Indian Reservation, Harlie Young was huddled with five children and her 58-year-old father around a wood stove as 12-foot (3.6-meter) snow drifts blocked the house.

“We’re just trying to look on the bright side that they’re still coming and they didn’t forget us,” she said Friday, as the temperature plunged to frigid lows.

The weather service is forecasting the coldest Christmas in more than two decades in Philadelphia, where school officials shifted classes online Friday.

Atop New Hampshire’s Mount Washington, the tallest peak in the Northeast, the wind topped 150 mph (241 kph).

In Boston, rain combined with a high tide, sent waves over the seawall at Long Wharf and flooded some downtown streets. It was so bad in Vermont that Amtrak canceled service for the day, and nonessential state offices were closing early.

“I’m hearing from crews who are seeing grown trees ripped out by the roots,” Mari McClure, president of Green Mountain Power, the state’s largest utility, said at a news conference.

Calling it a “kitchen sink storm,” New York Governor Kathy Hochul declared a state of emergency. In parts of New York City, tidal flooding inundated roads, homes and businesses Friday morning, with police trudging through knee-deep water to pull stranded motorists to safety in Queens.

In Iowa, sports broadcaster Mark Woodley became a Twitter sensation after he was called on to do live broadcasts outdoors in the wind and snow because sporting events were called off. By midday Friday, a compilation of his broadcasts had been viewed nearly 5 million times on Twitter.

“I’ve got good news and I’ve got bad news,” he told an anchor. “The good news is that I can still feel my face right now. The bad news is, I kind of wish I couldn’t.”

 

 

 

 

 

 

 

Pakistan Stock Exchange benchmark index declines 4%WoW

The political turmoil in the country, along with the continuation of the currency crisis, has led to weakness in the market during the week ended on December 23, 2022. The KSE-100 index settled at 39,669 points, down 1,632 points or 4%WoW. 

The index slipped below 40,000 level since late July 2022. The weakness in the index was accompanied by a meager improvement in participation over the past week, with average daily trading volume at 180.2 million shares during the week, as compared to 161.9 million shares in the earlier week.

Other major news flow during the week included: 1) July-November current account (CAD) shrank 57%YoY, 2) GoP likely to slap flood levy on non-essential imported items, 3) definitive agreement regarding Reko Diq project finalized, 4) Pakistan’s REER index declined to 98.8 in November, 5) gas sector 10-member body formed on circular debt settlement, 6) SBP lowers FY23 growth forecast, 7) international donors to extend over US$16 billion for rehabilitation of flood victims, 8) S&P lowered Pakistan’s sovereign rating, and 9) Super tax to become applicable in TY23 and onwards. Furthermore, the foreign exchange reserves held with the SBP fell to US$6.1 billion.

On the currency front, the PKR remained largely flat against the US$.

Top performing sectors were: Textile Weaving, Tobacco, and Insurance, while the least favorite sectors were: Leasing Companies, Refineries, and Cable & Electrical Goods.

Stock-wise, top performers included: LOTCHEM, AICL, PSEL, PPL, and PAKT, while laggards were: PGLC, PAEL, TRG, ANL, and PIOC.

Flow wise, Banks/DFIs were the major buyers with net buy of US$7.9 million, followed by Companies with net buy of US$5.0 million. As against this, Brokers and Individuals were major sellers during the week, with a net sell of US$3.8 million and US$3.8 million, respectively. Foreign Investors were sellers of US$3.3 million during the period.

With the political uncertainty and currency crisis still ongoing and no definitive action from the IMF on the horizon, the market is expected to witness pressure in the near future.

Sentiments further worsened by the advent of security tensions in the Northern part of the country. In this backdrop, the need of the hour is to arrest the country’s dwindling reserves, which would be dependent on flows from multi-lateral and bi-lateral sources.

Any news regarding foreign inflows would be well received by the market.

Furthermore, with inflation readings persisting at elevated levels in the foreseeable future, further tightening by the SBP is still on the cards, fear of which would likely to keep sentiment in the equity markets muted. Consequently, analysts advise clients to stay cautious while building new positions in the market.