Tag / India

by Mike Poverello

Mozambique Could Drive the Need for 35 More LNG Carriers

Image credit: Nakilat

Image credit: Nakilat

With soaring energy costs, Japan appears to have a pretty uniform goal, to invest as much as possible in other sources of energy and energy supply chains around the world. Many others like Qatar and Saudi Arabia are following suit and hedging themselves for what is turning out to be a reversal of their business model. Even the Louisiana Offshore Oil Port, which connects the world’s largest oil tankers with over half of the United States’ refining capacity is readjusting its business model for the changing flow of energy. With the eventual opening of the Liquefied Natural Gas (LNG) flood gates from the US however, coupled with Free Trade Agreements to places such as Japan, American energy firms and tax payers stand to cash in on the huge price gap that exists between the price of gas in the U.S. versus that which exists overseas.

At the moment, there’s a fairly good balance between supply and demand when it comes to the supply of ships and the demand for LNG product to be carried. Qatar, for example, uses 54 LNG carriers to transport their 77 million metric tons per year of LNG. Qatar also has a 70% stake in the Golden Pass LNG terminal in Texas. Additional exports from the US Gulf Coast will directly equal increased demand for more LNG carriers.

While regulators in the US trudge through the LNG export approval process, energy firms like Anadarko charge ahead with an ambitious LNG agenda offshore Mozambique in a field which was recently found to have at least 65 trillion cubic feet of recoverable reserves. Places like Mozambique, and offshore Israel, have the potential to really change the LNG marketplace given the sheer size of their fields and their proximity to the Asian and European markets respectively.

In Mozambique, two 5 million metric tons per annum (mtpa) LNG trains are currently under construction to support the huge conventional gas finds located 25 miles offshore. Their partners on the project include Mozambiquan state oil company, Empresa Nacional de Hidrocarbonetos, E.P., India’s state-owned Bharat PetroResources Ltd, Indian private equity firm Videocon Hydrocarbon Holdings, Ltd, Thailand’s PTT Exploration & Production, and Mitsui & Co. Considering the partners involved, their target market will predominantly be India and Japan. First LNG production is planned for 2018 and their plans are to eventually ramp up production to 50 million mtpa, or 2/3rds of the current production of Qatar.

What does that mean for LNG shipping? A lot more ships. To handle 50 million mtpa, upwards of 35 LNG carriers may be needed for transportation if you compare the ratio between Qatar’s fleet size and their total LNG exports. Source: gcaptain.com

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by Mike Poverello

Supply Chain Foresight – a Perspective on BRICS and the South African Supply Chain

To reap the benefits of its recent membership of BRICS, South African businesses are looking at gaining a competitive edge through achieving global-standard supply chain performance, according to Supply Chain Junction, Manhattan Associates' Geo Partner in South Africa.

To reap the benefits of its recent membership of BRICS, South African businesses are looking at gaining a competitive edge through achieving global-standard supply chain performance, according to Supply Chain Junction, Manhattan Associates‘ Geo Partner in South Africa.

To reap the benefits of its recent membership of BRICS, South African businesses are looking at gaining a competitive edge through achieving global-standard supply chain performance, reports Supply Chain Junction, Manhattan Associates’ Geo Partner in South Africa. Unlike many other countries, South Africa was cushioned from the full impact of the world financial crisis thanks to the strict pre-existing credit controls it had in place. There were some knock on affects from close trading economies but over the last 15 months South Africa has enjoyed a growth economy. The International Monetary Fund (IMF) say this group will account for 61 per cent of global growth in three years time.

While South Africa’s economy (£506.91bn GDP) is dwarfed by those of the original BRIC constituents, the country is seen as the gateway to the continent of Africa, which as a whole has an equivalent sized economy ($2,763bn GDP), a population of one billion and rich resources. This has all made it a valued investment region for China in particular.

However, there are many cultural, logistical and geographical challenges the further one travels North from South Africa towards the Sahara. As an example, while there is 24,487 km of rail track in South Africa, there is just 259 km in Uganda; there are 92 mobile phones per 100 people in South Africa but just two per 100 in Eritrea. However, there is a great deal of raw potential, especially in countries such as Angola and Nigeria.

Participation in BRICS will drive a new competitiveness for South Africa and a key factor will be developing world-class supply chain management. Unlike in Europe, the US and Australia, few supply chain directors in South Africa sit on the board, which makes it harder for them to demonstrate how effective management of the supply chain can deliver competitive advantage. But this is likely to change as companies realise that they must align their supply chain and business strategies. If the recession failed to drive home the need for this, then the presence of Chinese companies in Africa will create significant pressure to do so.

This was an observation of the 2011 Supply Chain Foresight survey, conducted by Frost & Sullivan, which annually samples the opinions of South African supply chain executives. It found that while over three quarters of the respondents feel that the supply chain and business strategies of their companies are aligned, less than a third felt that the supply chain and logistics operations are fully optimised. Businesses are looking at how to optimise their distribution networks through building new facilities, streamlining existing processes or collaboration between trading partners. This has seen a lot of current activity surrounding warehouse management systems, forecasting, planning, replenishment and collaboration technologies, in particular.

Two thirds of respondents are considering investment in technology to enable collaboration with service providers. With the recession claiming many key suppliers the environment is changing from one where major companies squeeze suppliers on cost to one where they adopt a more collaborative approach. Cost reduction was the focus of the past recession, but now the objective is to satisfy customer expectations and to deliver value. Just over half of respondents to the Supply Chain Foresight survey cited customer service as the top supply chain objective. Reducing waste and improving efficiency in the supply chain are the perennial shorter term challenges with companies looking for better forecasting and planning tools to bring down inventory and shorten lean times. One interesting aspect of South African supply chain technology is the large number of in-house designed legacy systems, which is a consequence of the country’s isolation during the times of Apartheid. A propensity towards in-house designed systems remains today.

In terms of industry sectors, retail dominates but it remains firmly entrenched in the traditional channels. While some retailers have online retail websites, online and multi-channel is by no means a significant part of the current retail picture. Internet use is still quite low compared to other countries there are 4.42 million internet users in a population of 49 million and this figure is expected to remain low for some time yet. A further obstacle to the expansion of online sales is a high crime rate which leads to security issues in delivering goods to customers.

Wholesale distribution is quite small in size and complexity so the supply chain challenges tend not to be too complicated. There remain companies that feel they have been reasonably successful – being self-sufficient – and want to maintain that approach, along with a general tendency to look within, when it comes to benchmarking supply chains. However, a growing number of companies in South Africa recognise that there are other organizations across the globe doing similar things, but perhaps, a lot more efficiently.

Supply chain managers within these businesses are evolving a mindset focused on global best practice and the means of achieving it. These South African companies want to be best in their class. By building knowledge, benchmarking and improving against those benchmarks the win for this retailer is a supply chain that gives competitive advantage. As in other countries, companies looking to benefit from external expertise and a reduction in their capital costs will often outsource their logistics to third party logistics (3PL) operators. South Africa has numerous small local players and a handful of large lead logistics providers who tend to drive innovation. It is a small but highly competitive market. Logistics infrastructure and skills shortage in the supply chain continue to be huge issues in South Africa. The Supply Chain Foresight survey found that to deal with the skills shortage, in almost all areas companies either expose employees to new jobs through rotation, or development programs, or mentoring. These are generally in-house driven schemes. South Africa is an emerging market that is growing fast and offers a tremendous wealth of opportunities. In fact, the country has a great many successful businesses, and while many talk about becoming world class, many have already achieved it. Source: Supply Chain Junction

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by Mike Poverello

India’s Trade Challenges Unique Among the BRICs

In 2013, the prospects for trade for the BRIC economies (Brazil, Russia, India and China) will diverge. While the BRIC economies have been at the forefront of emerging market growth for the past decade, weaker export demand from the developed world since 2012 is impacting the trade balances of each BRIC country, reports Euromonitor International.

The widening trade deficit for India in particular, the only BRIC member in which imports outstrip exports, is threatening the country’s growth prospects for the year. India’s trade deficit widened in 2012 to 10.3% of GDP, as high oil prices further increased the cost of the country’s imports, while export growth slowed, leading the imbalance to worsen. This is compared to 2.9% surplus in China, 9.9% surplus in Russia and a 0.9% surplus in Brazil in 2012.  Both Russia and Brazil’s exports are buoyed significantly by primary resources, such as oil and gas. Euromonitor International expects India’s trade deficit to widen to 12.3% in 2013.

GREENEARTH INDIA 3India’s situation is unique. The country has not posted an annual trade surplus since at least 1977, primarily due to two key factors. First of all the country is highly dependent on imports of energy to maintain the country’s energy consumption. For example, the country imports 75.2% of the crude oil that it consumes, as a result, in 2012, imports of mineral fuels accounted for 33.9% of the country’s import bill. The rising costs of fossil fuels after 2010, as well as the low levels of energy efficiency have exacerbated India’s trade deficit issues;

Secondly, the economy’s external sector remains comparatively small in comparison with the other BRIC economies. The Indian economy has maintained growth through rising domestic spending and a burgeoning services sector, which in 2012 made up 53.4% of the economy. As a result, India’s exports made up just 15.7% of the country’s GDP in 2012, compared to 25.3% in China and 27.2% in Russia, Brazil is the exception with exports making up just 10.8% of GDP in the year;

However, over the majority of the period studied, the trade deficit has been offset by capital accumulation in India from FDI inflows into the country. Since 2006, a rapid acceleration in imports has led to a much larger trade deficit, while the financial crisis of 2007-2008 has meant FDI flows have tightened across the world. The trade deficit is therefore, a growing burden for India, as capital is diverted from India’s economy to fund rising import costs.

Although there are challenges for India’s external sector in 2013, the economy has seen very high trade growth, the fastest of the BRIC economies. Between 2007 and 2012, exports increased by 103.6% in US$ terms, while imports increased by 123.2%. Growth will continue in 2013, with 15.2% increase in exports and a 22.2% increase in imports. The rapid growth is a result of a burgeoning middle class and the development of export industries in the country. The long term prospects for India remain bright as a result, as the growing population and continued economic development offer considerable opportunities for investment. However, the trade deficit will continue to drag on economic growth until investor confidence in India returns. Source: Euromonitor International

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by Mike Poverello

First BRICS Heads of Customs Meeting

Delegates who attended the first BRICS Customs Heads of Customs Meeting [SARS]

Delegates who attended the first BRICS Customs Heads of Customs Meeting [SARS]

At a meeting hosted by the Commissioner near Bela Bela, South Africa from 7 to 8 March 2013, delegations from the Customs Administrations of Brazil, Russia, India, China and South Africa (BRICS) met for the first time. The BRICS Customs administrations exchanged experience and ideas in a spirit of openness so as to identify areas for cooperation so that they can most effectively and efficiently facilitate legitimate trade and combat illicit trade and Customs fraud. From 27 to 28 March, South Africa will also host the BRICS Summit in Durban, to be attended by various Ministers and the BRICS Heads of State.

Key points of discussion, focus and future cooperation –

Customs cooperation
The Heads of Customs committed themselves to consolidating and building on the cooperation that has already been established so that they can collectively curb Customs offences, safeguard the international supply chain and achieve effective enforcement of Customs legislation, while facilitating legitimate trade,both among BRICS countries and also globally.

Capacity building
As part of their cooperation to build Customs capacity in relation to human resources, technologies and procedures,the administrations would look into various practical and innovative solutions and endeavour to share their resources, knowledge and best practices with each other.

Cooperation at multilateral forums
A BRICS Customs mechanism will be established, including attachés networks based in Brussels and other strategic places, to identify issues of common interest, develop common responses and ensure regular engagement and interaction, including before important multilateral meetings.

Customs Mutual Administrative Assistance and the Exchange of Customs Information
The administrations also agreed to ensure that there is an enabling legal basis between them to support intra-BRICS Customs mutual administrative assistance and the exchange of Customs information. Such assistance and exchange will assist in combating illicit trade and protecting revenues and societies.

Facilitation of legitimate trade between BRICS countries
To further facilitate trade and reduce the Customs administrative burden on both trade and the administrations themselves, the administrations will exchange information in various areas of common interest and concern, including on the simplification of Customs procedures and the use of modern technologies and techniques.

The administrations will also work towards possible solutions for achieving mutual recognition of Customs controls and of trader management programs aligned to the Authorised Economic Operator (AEO) concept of the World Customs Organization (WCO), establishing Customs interconnectivity and supporting the WCO’s work on developing the Globally Networked Customs (GNC) model.

Opportunities for enforcement cooperation will also be explored, including possible joint actions, information sharing and other enforcement assistance. The use of international instruments developed by the WCO, including Conventions, Recommendations, Decisions and Declarations that support Customs trade facilitation, compliance and enforcement will be actively promoted.

Governance issues
A Governance Framework aligned to the overall BRICS commitments will be established. An annual BRICS Customs Heads meeting has been proposed whose deliberations would be informed to other BRICS forums, including in particular the Summit. Such a BRICS Customs Heads Meeting would be supported by a Customs working group under the guidance of the BRICS Heads of Customs. Source: SARS

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by Mike Poverello

Boost for Intra-African, BRICS Trade

BRICS-logoSouth African companies, including foreign companies based in South Africa, stand to benefit from relaxed cross-border financial regulations and tax requirements, Finance Minister Pravin Gordhan announced in Cape Town on Wednesday.

Delivering his 2013 National Budget speech in Parliament, Gordhan said that outward investment reforms that applied as part of a new set of “gateway to Africa” reforms would also apply to companies seeking to invest in countries outside of Africa, including in the BRICS (Brazil, Russia, India and China) countries

Boost for cross-border trade

These reforms include the relaxation of cross-border financial regulations and tax requirements on companies in South Africa, as well as reforms making it easier for banks and other financial institutions in South Africa to invest and operate in other countries.

Brand South Africa welcomed these moves as being in line with South Africa’s National Development Plan (NDP), which acknowledges the global shift of economic power from West to East, while also highlighting the rise of Africa.

“This is an important step to enabling trade and supporting regional integration,” Brand South Africa CEO Miller Matola said in a statement following Wednesday’s Budget speech.

Gordhan said Africa now accounts for 18 percent of South Africa’s exports, including nearly a quarter of its manufactured exports, and that the SA Reserve Bank had approved over 1 000 large investments into 36 African countries over the last five years.

Southern Africa development projects

South Africa is also helping to fund several development projects in the wider southern African region, with the Development Bank of Southern Africa (DBSA) accelerating investment into neighbouring countries, particularly in the field of electricity generation and transmission and road transport.

Added to this, South Africa’s Industrial Development Corporation (IDC) last year funded 41 projects in 17 countries to the tune of R6.2-billion. Most of these projects were in industrial infrastructure, agro-processing and tourism.

State company Eskom was also now considering investing in several regional generation and transmission projects outside South Africa. (Comment: I would have thought Eskom would ensure the money was spent on the local South African electrical grid! After having its expected 16% tariff increase halved last week, its quite incredible that such a notion can be in the cards. The South African public are truely being kept in the dark!!!)

Gordhan said there was a proposal to pool the foreign exchange reserves of the five BRICS member countries, with the idea of using this to support one another in times of balance of payments or currency crisis. Brazil, Russia, India, China and South Africa collectively hold reserves of US$4.5-trillion.

He said work was under way to create a trade and development insurance risk pool, with the aim of setting up a sustainable and alternative insurance and reinsurance network for BRICS members. Source: SA News.gov.za

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by Mike Poverello

The Top 5 Largest Economies in 2020

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), International Financial Statistics (IFS)Note: Purchasing Power Parity has been used as this is a method of measuring the relative purchasing power of different countries' currencies over the same types of goods and services, thus allowing a more accurate comparison of living standards.

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), International Financial Statistics (IFS)Note: Purchasing Power Parity has been used as this is a method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services, thus allowing a more accurate comparison of living standards.

By 2020, three of the world’s five largest economies will be emerging countries, accounting for 30.4% of global GDP in PPP terms. Advanced economies are being displaced by emerging market superpowers, notably the BRIC countries, which has been accelerated by the seismic effects of the global economic downturn of 2008-2009. Euromonitor International predicts that China will become the world’s largest economy in PPP terms in 2017.

Additionally, Russia will overtake Germany as the fifth largest economy in 2016. These shifts will influence global politics, business environments and investment flows while consumer markets in developing countries will rise in importance as the middle class expands.

1. China: Set to become world’s largest economy in 2017

A large manufacturing base, cheap labour costs, the world’s largest population and economies of scale have resulted in unprecedented economic growth in China. Although growth is slowing, the delayed recovery in advanced economies from the global economic downturn means China will overtake the USA as the world’s biggest economy in 2017, and account for 19.0% of global GDP in PPP terms by 2020. Challenges loom large, however, including rising labour costs, pollution, a potential real estate bubble and rapid ageing arising from the government’s one child policy. Euromonitor predicts that China’s working age population (aged 15-64) will decline from 2014.

2. USA: End of the American dream?

The USA will lose its position as the world’s number one economy in 2017. In 1990, the USA accounted for a quarter of global GDP in PPP terms but we forecast this to plummet to 16.0% by 2020. The country was where the global financial crisis began in 2008 and it has failed to recover to its potential while also slipping in global competitiveness rankings. Although the government avoided the “fiscal cliff” in 2012, one of the biggest challenges remains a budget deficit reduction strategy, without the ensuing political gridlock. Nevertheless, the USA retains advantages, namely as the world’s largest consumer market and a leader of technological innovation.

3. India: Demographic dividend to benefit country beyond 2020

India overtook Japan as the world’s third largest economy in PPP terms in 2011 and its demographic advantage means the country could become the world’s biggest economy in the coming decades. India has a young population where it is benefitting from its demographic dividend (when there are more people of working age and the proportion of the child population declines). Euromonitor forecasts that India will become the world’s largest population by 2025 and that its working-age population will increase by 11.6% in 2013-2020 compared to -3.1% in China. However, India lags in major indicators including educational attainment and infrastructure development.

4. Japan: Paying the price for decades of economic stagnation

Structural problems beset Japan, with decades of weak economic growth and deflation while it has totalled the highest proportion of public debt in the world at 235% of GDP in 2012. Although the country has not yet suffered a eurozone-style sovereign debt crisis, as the majority of its debt is domestically-owned, an increase of foreign debt could trigger a Japanese debt crisis. It has the oldest population globally (mean age of 44.7 in 2012) and a shrinking labour force which will add considerable strain on government finances, while a strong currency makes its exports uncompetitive. Yet Japan’s location within Asia means it can take advantage of cheaper production costs in the region and growing demand for its high-tech products from a burgeoning Asian middle class. Like the USA, it is a global technological leader, giving it a competitive edge over its emerging neighbours.

5. Russia: Overtakes Germany as fifth largest economy in 2016

Russia will become the world’s fifth largest economy in 2016 in PPP terms, driven by its energy sector, as one of the top oil and natural gas producers worldwide. It also offers potential in its rapidly expanding consumer market, which Euromonitor forecasts will be the ninth largest globally in real terms in 2020. Its accession to the World Trade Organisation in August 2012 further cements its integration into the global economy. The lack of economic diversification and modernisation remain key long-term challenges with government policy aiming to tackle this, for example, by investing in the Skolkovo Innovation Centre Project, Russia’s equivalent to Silicon Valley. Corruption, state control and bureaucracy also hamper the business environment in Russia. Like elsewhere in Eastern Europe, the Russian working-age population is in decline (-4.5% in 2013-2020) despite a short-term baby boom, which will pose a demographic challenge to sustaining non-oil economic growth. Source: Euromonitor.com

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by Mike Poverello

Ready for a cock-fight?

Brazil has taken the first legal step at the World Trade Organisation to challenge South Africa’s use of anti-dumping measures on shipments of Brazilian poultry meat, the global trade body said in a statement on Friday. Brazil has “requested consultations” with South Africa over South Africa’s accusation that Brazilian imports were “dumped”, or sold at an unfairly low price that damaged South Africa’s own poultry sales, the WTO said. If the consultations fail to resolve the issue, in 60 days’ time Brazil could ask the WTO to set up a panel to adjudicate.

The statement did not give any more details, but South Africa’s International Trade Administration Commission (ITAC) has imposed anti-dumping duties on frozen chickens and chicken meat imported from Brazil after investigating suspected dumping in 2008-2010. In 2010, Brazil accounted for 94.2% of South Africa’s total 26,916 tonnes of boneless chicken imports and 44.6% of the total 29,039 tonnes of whole chicken imports, ITAC’s investigation report said in January.

After calculating the extent of the unfair competition, South Africa put a provisional anti-dumping duty of 62.93% on whole chickens and 46.59% on boneless cuts from Brazil, except for boneless cuts from Aurora Alimentos, which would incur a duty of 6.26%.  The dispute is the first between Brazil and any African country and only the fourth brought against South Africa at the WTO.

All of the previous three cases, brought by India, Indonesia and Turkey, also concerned South Africa’s use of anti-dumping measures to protect its market from unwanted imports. None of those three disputes advanced to the panel stage. India and Turkey did not press their cases and Indonesia withdrew its challenge after South Africa withdrew its anti-dumping measures. Source: News24

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