FED RATE HIKE POSITIVE FOR GCC
The impact of the Federal Reserve’s rate rise will be broadly positive for the Gulf region. The Fed last week increased its benchmark rate for the second time in three months, this time to a range between 0.75 per cent and one per cent. The impact of the world’s de facto central bank rate hike on the UAE and the GCC more generally will be broadly positive for the Gulf for two key reasons.
First, we may see further dollar weakness, and by implication weaker Gulf currencies, as the Fed declines to raise rates as aggressively as the market anticipates. Fed chairman, Janet Yellen, had warned earlier this month that stronger US growth justifies a more aggressive stance on interest rate hikes than we have seen in recent years. Yet the so-called ‘dot plot’ chart, which shows where Fed policy committee members believe rates will be over the coming years, shows no change from the December announcement. The average forecast is at 1.375 per cent for end of 2017, and 2.125 per cent for the end of 2018.
It looks like she was bluffing with her earlier aggressive talk (as she did throughout most of last year), and is happy to be
‘accommodative’ to support economic growth. This moderate approach to future rate hikes triggered a fall in the dollar on forex markets, which has dragged down other currencies that are linked in some way to the dollar, such as the UAE dirham. Should the Fed remain dovish, while US inflation and growth continue to accelerate, further dollar (and dinar) weakness is on the cards. Good for Gulf tourism, foreign-owned real estate and other export sectors.
10TH FUTURE ENERGY SUMMIT
The 10th World Future Energy Summit (WFES) opens in Abu Dhabi, with the 2017 edition expected to be the biggest ever. Hosted by Masdar as part of Abu Dhabi Sustainability Week, the WFES drives the business case for sustainability. Held under the theme of ‘Sustaining the Clean Energy Consensus; Empowering New Players’, WFES 2017 will bring together the world’s leading technology providers, government delegations, innovators and thought leaders in Abu Dhabi. Organisers expect around 880 companies from 40 countries and 38,000 attendees from 175 countries. That is a substantial increase on 2016, with around 600 companies and 32,000 attendees.
As WFES reaches its 10-year milestone, visitor numbers are around three times the figure for the first event in 2008. Mohamed Al Ramahi,
CEO of Masdar, said: “Through the World Future Energy Summit, Masdar has helped to build an internationally respected platform that is sharing the knowledge, experience and investment necessary to make renewable energy and clean-tech adoption a commercial reality in the region today and in markets beyond.”
CHINA INCREASES IMPORT OF IRANIAN OIL
TEHRAN – China imported in February 657,900 barrels of crude oil per day from Iran, an increase of 18 percent year on year, according to data from the Chinese General Administration of Customs.
China’s Iranian crude oil imports may rise to a record this year as state-owned oil firms lift more crude through their upstream investments while extending their current supply contracts, senior industry and trading sources said.
Chinese firms were expected to lift between 3 million to 4 million barrels more Iranian oil each quarter in 2017 than last year, four sources with knowledge of the matter estimated. That would be about 5 percent to 7 percent higher than the 620,000 bpd of Iranian crude the country has imported during the first 11 months of 2016, according to the customs data.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), won an exemption from the group’s production cuts agreed to on Nov. 30 and may raise output slightly.
16 NEW DAMS IN IRAN THIS YEAR
TEHRAN- Managing Director of Iran Water Resources Management Company Mohammad Haj-Rasouliha announced that 16 embankment dams will be inaugurated in the country during the current Iranian calendar year (which started on March 21).
While mentioning it one of the most important plans in water sector of the country in the current year, he referred to building about 50,000 hectares of irrigation and drainage networks as the other important program of the Ministry of Energy in this year, IRNA reported. The official also pointed to inauguration of 15 embankment dams with the storage capacity of about three billion cubic meters of water as one of the major measures taken in the past calendar year.
CHINA TO SUPPLY SUBWAY CARS TO IRAN
Chinese state-owned train makers announced two separate deals to supply subway cars to Iran, which is trying to bolster one of the largest urban rail systems in the Middle East.
The military-affiliated Norinco International disclosed a 93 million euro ($100 million) contract to manufacture 70 subway cars for the Tehran Metro, according to a statement released to the Shenzhen Stock Exchange on Monday.
Cars will be sold to Tehran Wagon Manufacturing Co., a joint venture formed between Norinco, with a 29% stake, together with Tehran’s official subway operator, and a division of China’s top train manufacturer CRRC Corp. Ltd.
Norinco’s parent is a military-owned trade company that develops and exports defense equipment and technology, and has been helping Iran to build a mass transit system for years under a previous arrangement, according to earlier reports.
In 2015, the joint venture inked a 9 billion yuan ($1.3 billion) deal to supply about 1,000 subway cars for the Tehran Metro. The joint venture also holds a contract to construct the Tehran Metro Line Six, which is expected to be completed this year, for $1.2 billion.
In a separate deal, also in Tehran, the Nanjing Puzhen branch of CRRC said it has updated an agreement with an Iranian train operator, stating that 200 remaining subway cars in an order for 315 will be produced locally, in Iran, instead of China. “This will enhance Iran’s industrialization level and create job opportunities,” said Hossein-Rajab Salahi, director of Iran’s railway transportation office.
China has spent trillions of yuan over the last decade building up state-of-the-art subway and high-speed rail systems throughout the country, providing greater mobility within and between cities as part of its transition from a planned to a free-market economy. Following that buildup, companies like Norinco and CRRC have been energetically marketing their rail expertise across the globe as part of a Beijing policy that encourages exports of homegrown technology.
Earlier this month, CRRC began construction on a rail car factory in Chicago, a year after securing a $1.3 billion contract to supply cars to the Chicago Transit Authority. That followed another international deal in January, when CRRC won a $277 million order from Boston’s subway operator.
CHINA, RUSSIA KEY SOURCE FOR DUBAI TOURISM
Dubai recorded a significant jump in tourist traffic in the first two months of 2017 on the back of a sudden surge in Chinese and Russian visitors following the introduction of free on-arrival visas for both nationalities.
The Department of Tourism and Commerce Marketing (Dubai Tourism) reported a stellar 12 per cent year-on-year growth across the first two months of 2017, which saw Dubai welcoming just over three million visitors. The growth in numbers was nearly four times the rate of the previous year, giving a key indication that Dubai is on track to surpass its target of hitting 20 million visitors by 2020.
“Supported by growth in all key markets, China and Russia in particular drove the volumes and set the stage for a strong first quarter result. This period witnessed a 60 per cent growth in overnight tourists from China, with January alone peaking at a dramatic 102 per cent, while attracting a total of 157,000 Chinese visitors across just the first two months,” a statement from Dubai Tourism said. Visitor traffic from Russia jumped 84 per cent over the same period last year, with February delivering a massive 140 per cent volume increase to bring a total of 65,000 travellers in the first two months, Dubai Tourism said.
DEMAND FOR STEEL ON RISE
Conares, the second largest and the only private steel manufacturer in the UAE, is geared for a busy 2017. The company has already earmarked the increase in its manufacturing capacity to 1 million tonnes. The conglomerate based in Jebel Ali Free Zone commenced the installation of its 12” pipe mill at its facility.
Steel manufacturing sector in the UAE is currently witnessing standard trends with improvement in growth by 15 to 20 per cent compared to that of the last year, thanks to the announcement of major infrastructure development projects across the country. From the steel industry standpoint, local manufacturers are in a strong position to cater to each of the upcoming projects.
The state-of-the-art steel plant of Conares spread in an area of over 1.5 million square feet at Jafza currently manufactures steel pipes and rebars. The rebars form about 20 per cent of the UAE market share and the pipes cater to 25 per cent of the total market demand in the region. Operational in these two major segments of the steel industry, Conares has carved a niche for itself and grown to be a key manufacturer. Its global and regional presence gives Conares a competitive advantage in sourcing raw materials. Conares has been growing to deliver 1 million tonnes of steel annually. Being a 100 per cent privately owned entity, the company’s assets exceed $300 million of investments in the UAE.
“2016 has been fairly good with a consumption of 3 to 3.2 million tonnes of steel, while in 2017 we expect the market to grow to about 3.5 to 4 million tonnes. Looking further at 2018 and 2019, there will be moderate growth. The steel market in the UAE is very active with the local producers being able to match up to the international prices and the country’s growing demand. We are indeed very thankful to the
UAE’s Ministry of Economy for the support extended to us. We actively seek further considerations from the Government to protect the interests of local producers in the Emirates. The competition among the indigenous and international imports is fierce with the UAE manufacturers matching up to the prices at most times.”
EMIRATES TO INTRODUCE LAPTOP AND TABLET SERVICES ON BOARD
Emirates will introduce a new service to enable customers to use their laptops and tablet devices until just before they board their flights to the US. Emirates customers travelling to the US via Dubai will be able to utilise their laptops and tablet devices on the first part of their journeys, and also during transit in Dubai. They must then declare and hand over their laptops, tablets, and other banned electronic devices to security staff at the gate just before boarding their US-bound flight.
The devices will be carefully packed into boxes, loaded into the aircraft hold, and returned to the customer at their US destination. There will not be any charge for this service. Passengers on US-bound flights starting their journeys in Dubai are encouraged to pack their electronic devices into their check-in luggage in the first instance, to avoid delays.
Customers should be aware that there will be a detailed search of all hand baggage on non-stop flights to the US from Dubai. They should therefore declare their devices before the search, or ensure their electronic devices are packed into their check-in luggage in the first instance. Sir Tim Clark, President, Emirates Airline said: “Our aim is to ensure compliance with the new rules, while minimising disruption to passenger flow and impact on customer experience. Our new complimentary service enables passengers, particularly those flying for business, to have the flexibility to use their devices until the last possible moment.
NEW RULES FOR REGISTRATION OF IMPORTED USED VEHICLES
The Ministry of Interior announced that as of May 1, registration of imported used vehicles will be subject to a conformity letter by the Emirates Authority for Standardization and Metrology (ESMA), verifying compliance with the new regulations on import of used vehicles.
Brigadier Ghaith Hassan Al Zaabi, Director General of Traffic Coordination at the Ministry of Interior urged all importers of used vehicles to apply for the conformity letter for the vehicles before registering them at the different licensing departments in the UAE. He added that the new regulations had been circulated to all licensing departments across the UAE, saying that it will further enhance safety of the motorists and minimise accidents.