Trade Winds update volume 40

Abeyla Exports > News > Trade Winds > Trade Winds update volume 40
Jul 26, 2021 Posted by: Abeyla Exports Trade Winds

No steel increase for the month of August, steel prices are set to remain the same as ArcelorMittal has not announced any price increase for the month of August, however after last weeks protests a Force Majeure was declared as no goods could move from the various plants. This has put a strain on supply as a backlog has been built up.

The Force Majeure from ArcelorMittal remains in place until further notice.

A further fuel hike is expected for the month of August, again contributing to logistic costs and we are most likely going to see an increase in freight rates.

Chaos, rioting, looting destroys the economy and sectors, there was a week of total madness and chaos in South Africa as protestors, rioted and looted in the name of the former president.

To looting and burning shops, to stealing infrastructure, the total cost of damages is still being calculated.

KwaZulu-Natal’s total cost of damages has been calculated to over 20Billion Rand and an estimated 55% damage to the province’s GDP. Gauteng’s total losses are still being calculated.

The estimated damage to the trucking industry alone following the violence and looting in KwaZulu-Natal and Gauteng is R250-R350 million in burnt-out trucks and cargo. This doesn’t account for the amount of trucks that had to remain in place as the looting went on.

It is noted that the loss assessment for the road freight sector is based on initial figures and could increase.

Not only has it impacted hugely on the economy of the South Africa, but it has set the recovery of the economy back by at least 10 years, if not longer.

The supply chain from the Port of Durban to Gauteng and cross-border was completely cut off, with the N3 not being passable for trucks to supply much-needed fuel, groceries, pharmaceuticals, and many other supplies. The food security in KwaZulu-Natal and Gauteng will be severely impacted over the next few months, and it will be a gloomy picture as those companies that have been impacted by the devastation try to rebuild and start again.

What has happened in South Africa over the past week has not only impacted on the economy of South Africa, but it has also impacted on other landlocked countries in the SADC region who rely heavily on South Africa for imports of fuel, groceries, pharmaceuticals, mining equipment and vehicle spares. These countries that have used South Africa in the past as a transit route for exports through the Port of Durban will now most likely turn to alternate routes for exports such as Walvis Bay, Beira, and Dar es Salaam.

The Port of Durban in the last few years seen a decline in exports of copper and cobalt from the Copperbelt in Zambia and DRC due to inefficiencies, and the Port of Dar es Salaam now exports 73% of all DRC’s copper. The Ports of Walvis Bay and Beira have both recently built world-class container terminals that can now challenge the Port of Durban. They are more efficient, and their costs are lower than the Port of Durban.

Despite all the doom and gloom there is one positive to look forward to. South Africans by nature are resilient people and we will not let this type of behaviour define us.

Dip in SA mining production but positive outlook on the cards, South African mining output was 3.5% lower in May than in the preceding month, statistics have shown. This is disappointing but amid red-hot commodity prices, the sector remains one of the bright spots in an economy that is literally going up in flames in places at the moment.

On a year-on-year basis, production increased by 21.9%, but that was off a low base as in May of last year the sector was in the process of a gradual reboot. Indeed, it fell almost 30% in May 2020 compared with the same month in 2019, Stats SA’s historical data show, however the overall picture to date is positive.

Reflecting the surge in prices on expectations regarding the global economic recovery, mineral sales leapt by 88.2% in the year to May, led by platinum group metals, which soared by 258.2%.

The roaring commodities cycle has benefited South Africa’s wider economy, leading to hefty trade and current account surpluses and underpinning the often vulnerable rand. It is also giving investors a reason to at least hang on to their shares as rich dividends have been paid out with a lot more cash on the horizon.

But the current wave of looting in the wake of the incarceration of former president Jacob Zuma could bode ill for the sector this month, given the potential disruptions to supply chains. Mining output has so far been unaffected but if fuel and other supplies are affected, the sector’s productive capacity will not escape unscathed. Then there is the small matter of getting product to ports in KZN amid the mayhem.

Global mining giant Rio Tinto mothballed its Richards Bay Minerals operation in response to ongoing community violence, which included the murder in May of general manager Nico Swart. Two years ago, it halted a planned $465-million expansion to the asset for the same reason. That was all a dress rehearsal for the unfolding failure of the state, seen vividly this week in the skeletal remains of looted and torched shopping centres and warehouses.

Transnet suffers cyber-attack! Early yesterday morning, South Africa’s entire port and rail network was shut down by the biggest cyber breach in Transnet’s history after hackers broke into the state-owned company’s country-wide system used for the movement of cargo.

The software security breach that paralysed the country’s port and rail network will require outside intervention from a highly capable IT professional to undo.

The attack was so broad that the gates allowing personnel to enter and exit the ports were stuck shut.

The state-owned logistics company has said that port and rail systems will continue to operate using manual systems, which means overall operations will be heavily affected.

IT at Transnet has also asked users to refrain from sending mails to the port terminals as well as the EDI route, the NAVIS applications and the Transnet website itself.

Transnet said that it was working to reduce downtime to ensure that the systems were up and running as soon as possible.

At this stage, it has not confirmed how long it will take before its systems are back online and fully operational.

Load-shedding returns! with the cold weather back, Eskom has announced at any given time that load-shedding will be implemented without warning if needs be.

After last weeks event, this is the last thing the country needs right now.

It’s been more than a month since President Cyril Ramaphosa lifted the limit for generation for companies without the need for a licence from 1MW to 100MWbut gazetting of the amendment is taking far longer than necessary.

After grim years of load-shedding, it seemed that South Africa’s future was brighter, with cutting of red tape for embedded generation projects of up to 100 MW. This frees up industry and business to build and use their own substantial embedded generation capacity, giving them a more reliable electricity supply and easing pressure on the national grid, however weeks later, we’re still waiting for Minister of Mineral Resources and Energy, Gwede Mantashe, to formally gazette this updated limit in an amendment to Schedule 2 of the Electricity Regulation Act.

When the president made the announcement in June, he said that the relevant legal processes would be followed and gave the minister 60 days to gazette the amendment.

Outa believes this matter is urgent and not complicated and that 60 days are not required waiting time but a maximum.

Border updates, no current delays or issues have been reported at the various borders within Southern and Central Africa.

Delays were experienced at Beitbridge during last weeks’ riots where queues of up to 7km’s were being experienced, this has dissipated since the beginning of this week.

Competition in the shipping industry to be addressed, The Federal Maritime Commission and the Department of Justice Antitrust Division have signed an interagency Memorandum of Understanding (MOU) to foster increased cooperation and communication in their respective oversight and enforcement responsibilities of the ocean liner shipping industry.

FMC Chairman Daniel Maffei and Acting Assistant Attorney General Richard Powers signed the first-ever MOU between the two agencies following the executive order addressing competition issued by President Biden.

The MOU establishes a framework for the FMC and the Antitrust Division to continue regular discussions and review law enforcement and regulatory matters affecting competition in the shipping industry.  It also provides for information and expertise exchanges between the agencies that may be relevant and useful in meeting their oversight and enforcement responsibilities.

The glory days for shipping lines, whose increased rates and charges have been the subject of intense scrutiny, may be over.

The International Federation of Freight Forwarders’ Sea working group has been actively campaigning against increased rates and charges from shipping lines for some time

The crackdown is believed to be part of a more wide-ranging drive to root out anti-competitive behaviour in all sectors of the US economy.

Air shipments leaving USA require full screening, The International Civil Aviation Organization now requires 100% of all international airfreight to be screened, this was implemented 1 July 2021.

Originally, only shipments originating from a known shipper transporting on a passenger airplane needed to be screened however from the beginning of this month, cargo moving on all-cargo aircrafts must be screened regardless if it’s a known or unknown shipper.

This has already caused delays in cargo moving as many airlines’ warehouses are already at full capacity with the screening adding to this woe.

Another issue with this is that the shipper will now also be paying for the screening service which is charged by the relevant airlines.

Zimbabwe economy expected to grow next year, Zimbabwe’s economy is projected to grow by 5.4 percent next year, driven by growth in mining, manufacturing, and electricity sectors.

According to the 2022 budget strategy paper presented by the finance minister during a cabinet meeting, government revenue is expected to rise to 17.8 percent of the gross domestic pro (GDP) next year from 16.4 percent in 2021.

Expenditure will also increase to 19.4 percent of the GDP from 18.2 percent in 2021.

The Zimbabwean government has projected the country’s economy to register a 7.5-percent growth in 2021, recovering from a recession last year.

Meanwhile, in order to boost foreign currency earnings from tobacco, the cabinet had approved a new policy to localize the financing of tobacco production, as opposed to the current system where the bulk of the crop is financed through offshore funding.

Tobacco leaf is one of the major foreign currency earners for Zimbabwe.

South African troops land in Mozambique, a division of the South African National Defence Force arrived in Mozambique’s Cabo Delgado province earlier this week.

An image surfaced showing SANDF plane offloading soldiers, military vehicles and equipment. The troops are said to be special forces who will form part of the Southern African Development Community’s standby force.

The deployment was originally planned for the 15th of July however Mozambique had not yet signed the status of forces agreement that would authorise regional boots on the ground.

Further details of the force are still unclear. It is also not clear to what extent the SANDF’s internal deployment to respond to the unrest in KwaZulu-Natal and Gauteng will affect South Africa’s role in Mozambique.

Exciting times for some as the snow falls! Snow has fallen over various parts of South Africa over the last few days namely in Kimberly and the Eastern Cape.

For some it’s the very first time they get to enjoy what is possibly a once in a lifetime experience whilst others may dread the cold that follows.