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  • Cathay Pacific shelves US dollar bond plans amid Hong Kong unrest

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    Sat, 2019-10-19 02:10

    SINGAPORE: Cathay Pacific Airways has shelved plans for its first US dollar debt deal in 23 years, the airline said on Friday, after sources told Reuters that global investors had questioned the pricing due to civil unrest in Hong Kong.

    The airline, the biggest corporate casualty of widespread anti-government protests in the Asian financial hub, on Friday lowered its second-half profit expectations, citing “incredibly challenging” conditions in its home market.

    Cathay had started meeting investors in Hong Kong and Singapore on Sept. 24 after it mandated four banks to explore carrying out a US dollar denominated bond, according to a term sheet issued at the time, seen by Reuters.

    It would have been the first US dollar debt deal for Cathay since 1996 and had been touted as a landmark transaction for the airline given all of its debt is denominated in Hong Kong dollars.

    The issuance was to be unrated, and two sources with knowledge of the matter said that Cathay was willing to pay 200 basis points over the US Treasuries rate to secure three-year or five-year funding, with the size and term of the placement dependent on demand.

    FASTFACT

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    Cathay has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

    However, investors demanded a higher price of at least 300 basis points over US Treasuries, which made the deal more expensive for Cathay, said the sources, who were not authorized to speak publicly about the matter. Cathay’s term sheet had said the transaction would be reliant on market conditions. A Cathay spokesman on Friday said the Hong Kong dollar private placement market was providing more funding opportunities and a debt issuance in that market was completed last month. “We will continue to monitor the US dollar bond market in future,” he said in a statement.

    Dealogic data showed that Cathay raised $102 million in October and $64 million in May through Hong Kong dollar denominated deals.

    The airline has only carried out 12 bond transactions in the past decade and all were priced in Hong Kong dollars.

    Cathay had mandated Bank of America Merrill Lynch, BNP Paribas, Deutsche Bank and HSBC to work on the shelved US dollar bond deal. 

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    Holiday Inn-owner IHG hit by weak China, Hong Kong bookingsIn protest clouds, Hong Kong tourists see silver lining

    Posted: by Arab News

  • China‚Äôs growth slows to 6% in third quarter, weakest in 27 years

    Sat, 2019-10-19 03:53

    BEIJING: China’s economy expanded at its slowest rate in nearly three decades during the third quarter as it was hit by the long-running US trade war and cooling domestic demand, data showed Friday, with an official warning of “mounting downward pressure.”

    With China a key driver of global growth, the soft reading added to concerns about the world economy and prompted speculation that authorities will unveil fresh stimulus following a series of other recent measures.

    Gross domestic product expanded 6.0 percent in July-September, from 6.2 percent in the second quarter, according to the National Bureau of Statistics (NBS).

    The reading — in line with an AFP survey of 13 analysts — is the worst quarterly figure since 1992 but within the government’s target range of 6.0-6.5 percent for the whole year. The economy grew 6.6 percent in 2018.

    While NBS spokesman Mao Shengyong said the economy was showing stability, he warned: “We must be aware that given the complicated and severe economic conditions both at home and abroad, the slowing global economic growth, and increasing external instabilities and uncertainties, the economy is under mounting downward pressure.”

    Services and high-tech manufacturing were the key areas of growth, while employment was “generally stable,” he said.

    Beijing has stepped up support for the economy with major tax cuts and measures making it easier for banks to increase lending, including a reduction in the amount of cash they must keep in reserve.

    And on Wednesday the central People’s Bank of China said it would pump 200 billion yuan ($28 billion) into the financial system through its medium-term lending facility to banks, to maintain liquidity.

    But the efforts have not been enough to offset the blow from softening demand at home, which highlights the struggle leaders have in their drive to recalibrate the economy from one driven by exports and investment to one built on consumer spending.

    The trade conflict and weak domestic demand prompted the International Monetary Fund to lower its 2019 growth forecast for China to 6.1 percent from 6.2 percent on Tuesday.

    A “phase one” deal announced by US President Donald Trump last Friday after he met China’s top negotiator Liu He in Washington offered a temporary reprieve from further tariff hikes.

    The deal, however, did not roll back any of the tariffs already imposed on hundreds of billions of dollars in trade between the economic powers, nor did it address another round of import taxes planned for December.

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    Holiday Inn-owner IHG hit by weak China, Hong Kong bookingsChina’s GDP growth grinds to near 30-year low as tariffs hit production

    Posted: by Arab News

  • Riyadh Cables Group eyes business in Bangladesh

    Author: 
    Sat, 2019-10-19 03:49

    DHAKA: Riyadh Cables Group Company (RCGC), a Saudi cable producer, has expressed interest in expanding its corporate footprint in Bangladesh. A high-powered RCGC delegation completed a 6-day visit to Bangladesh on Thursday.

    RCGC exports its electricity cables worldwide and the company is the fourth largest electric cable producer in the world.

    The visiting delegation comprising Engineer Moaaz Ali Younes, business development manager at RCGC, and Bassam Maes, the marketing director, visited different government agencies in Dhaka with a view to exploring investment opportunities.

    During their meeting with officials of Bangladesh Investment Development Authority (BIDA) on Wednesday, the RCGC delegation expressed potential interest in investing in the overhead electricity cable producing sector of the country.

    “We had a successful discussion with the RCGC, although it is still at a primary level. We have briefed them about all the benefits for the foreign investors ensured by the Bangladesh government,” director of BIDA Mohammad Ariful Hoque told Arab News.

    Hoque said that after returning to Saudi Arabia the RCGC will move forward with the investment proposal and submit the final idea to the Bangladesh embassy in Saudi Arabia.

    “Most probably, it is going to be a joint venture form of investment with the state-owned Eastern Cable Company. If everything goes well, we hope the investment will start coming into Bangladesh by next year,” Hoque said.

    “The amount of investment from RCGC is yet to be finalized. However, we can expect it will be around $30 million,” another source from BIDA said, requesting not to be named.

    Bangladeshi economists said they welcomed the investment proposal from RCGC, stating it will work as a “confidence builder” and create a “signaling value” among other foreign investors.

    Zahid Hussain, former lead economist of the World Bank in Dhaka, said that Bangladesh’s economy was expanding at a very fast rate and there was a huge internal demand for overhead cables for building new transmission and distribution lines.

    “This new investment will help the country in rebuilding the image crisis in terms of FDI (foreign direct investment). We are still not doing very well in attracting FDI. If this sort of foreign investment starts coming here, it will definitely boost the economy at a significant level,” Hussain said.

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    Posted: by Arab News

  • Tankers defer retrofits to cash in on freight rates

    Author: 
    Sat, 2019-10-19 03:43

    SINGAPORE: Tankers that had been scheduled to install emissions-cutting equipment ahead of stricter pollution standards starting in 2020 have deferred their visits to the dry docks to capitalize on an unexpected surge in freight rates, three trade sources said.

    US sanctions on subsidiaries of vast Chinese shipping fleet Cosco in September sparked a surge in global oil shipping rates as traders scrambled to find non-blacklisted vessels to get their oil to market.

    The rates for chartering a supertanker from the US Gulf Coast to Singapore hit record highs of more than $17 million and a record $22 million to China earlier this week.

    By comparison, prior to the sanctions, shipping crude from the US Gulf to China cost around $6 million-$8 million.

    The extraordinary spike in freight rates proved too good to miss for some shipowners who were due to send vessels to the dry docks for lengthy retrofitting and maintenance work.

    “We can confirm several owners have postponed dry docking earlier scheduled for the months of October and November to take advantage of the skyrocketing freight rates,” said Rahul Kapoor, head of maritime and trade research at IHS Markit in Singapore.

    The shortage of ships to move crude oil was so acute that some shipowners also switched from carrying so-called “clean” or refined fuels like gasoline to “dirty” cargoes that include crude oil, despite the costs of having to clean them later.

    “Current rate levels are a no-brainer for pushing back scrubber retrofitting,” said Kapoor.

    Starting Jan. 1, 2020, the International Maritime Organization (IMO) requires the use of marine fuel with a sulfur limit of 0.5 percent, down from 3.5 percent currently, significantly inflating shippers’ fuel bills.

    Only ships fitted with expensive exhaust cleaning systems, known as scrubbers, which can remove sulfur from emissions, will be allowed to continue burning cheaper high-sulfur fuels.

    Ships must be sidelined for up to 60 days for fitting these, according to IHS Markit and DNV GL.

    While freight rates have abruptly come off their recent highs, shipowners can still profit from the higher charges.

    “One cargo loading at current elevated rate levels can not only finance the scrubber capex, but also account for extra costs incurred to install the scrubber at a later date,” said Kapoor, referring to the capital expenditure of fitting the scrubber.

    Freight rates are expected to hold firm for the rest of the year.

    “With seasonal demand support and tanker supply deficit still pronounced, we expect (fourth-quarter) tanker freight rates to stay elevated and end the year on a high note,” Kapoor said.

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    US sanctions hit global oil fleet as traders shun nearly 300 tankersBP: Our tankers won’t sail through Strait

    Posted: by Arab News

  • Trading tires: How the West fuels a waste crisis in Asia

    Author: 
    Sat, 2019-10-19 01:13

    NABIPUR: When night falls in the Indian village of Nabipur, the backyard furnaces come to life, burning waste tires from the West, making the air thick with acrid smoke and the soil black with soot.

    Not long ago, Nabipur was a quiet farming village in northern India. Now the village is home to at least a dozen furnaces burning a steady stream of tires to make low-quality oil in a process known as pyrolysis.

    Global trade in waste tires has almost doubled in the past five years, mainly to developing countries like India and Malaysia, according to customs data provided to the UN.

    Britain is currently the largest exporter, followed by Italy and the US. India is by far the biggest buyer, accounting for 32 percent of global imports last year, up from 7 percent five years ago, the UN data shows.

    Many of the tires are sent to recycling operations that comply with emissions and waste disposal regulations. But there is also a vast trade to backyard pyrolysis operations that do not, according to local authorities.

    In May, Reuters revealed that a mass poisoning in southern Malaysia had links to companies engaged in pyrolysis.

    Using unpublished customs data and interviews with dozens of industry sources, Reuters documented a growing international trade in waste tires that pollute the communities that host them, according to local authorities and health experts.

    For many developed countries, shipping tires abroad is cheaper than recycling them domestically. That helped drive international trade in rubber waste to nearly 2 million tons in 2018, equivalent to 200 million tires, from 1.1 million tons in 2013.

    The trade has also been fed by ravenous fuel demand for industrial furnaces in countries like India, the emergence of inexpensive Chinese pyrolysis equipment, and weak regulations worldwide. 

    Tyres are not defined as hazardous under the Basel Convention, which governs trade in dangerous waste, meaning there are few restrictions on trading them internationally unless specified by the importing country.

    In most countries, including China and the US, the majority of scrap tires are handled domestically and dumped in landfills, recycled or used as fuel in factories producing products like cement and paper.

    Pyrolysis supporters say the process can be a relatively clean way of disposing of tires and turning them into useful fuel. However, controlling emissions and processing waste residue from the burning of a product that is made up a wide range of chemicals, and synthetic and natural rubber is expensive and difficult to make profitable on a mass scale.

    State-of-the-art plants can cost tens of millions of dollars, whereas basic Chinese-made pyrolysis equipment is available from online retailers for as little as $30,000.

    An Indian government audit found that as of July 2019 there were 637 licensed pyrolysis plants countrywide, of which 270 were not complying with environmental standards and 116 had been shut down.

    The audit said most operators used rudimentary equipment that exposed workers to fine carbon particles and led to dust, oil and air pollution leaking into the plant and surroundings. Industry sources say several hundred more unlicensed pyrolysis businesses are operating across India.

    Pyrolysis plants have mushroomed in the southern Malaysian state of Johor over the last decade, industry sources said, where they supply fuel for ships.

    At one plant visited by Reuters near the Johor town of Kulai, Bangladeshi immigrants covered in carbon dust shovelled tires imported from Australia and Singapore into a Chinese-made furnace. They lived onsite in a hut next to the kilns.

    “People don’t know where old tires go,” said the owner, who gave his name only as Sam. “But if my factory doesn’t exist, where will the tires go?” He said he had a license to operate. Reuters could not verify this.

    The environmental impact of pyrolysis in places like India and Malaysia is making some exporting countries take notice.

    Australia, a major exporter of tires to Southeast Asia and India, said in August it would ban waste exports, including tires, although it did not give a timeline.

    Australia was “aware of allegations of unsustainable processing of waste tires in some importing countries” and did not want “to be part of such practices,” said a spokesman for Trevor Evans, the official who oversees waste reduction.

    Burning tires without adequate emissions controls can release numerous toxic chemicals and gases into the environment, as well as particulates, said Lalit Dandona, head of the India State-Level Disease Burden Initiative, a group of research bodies mapping health issues across India.

    He said the short-term effects for those exposed to smoke from burning tires included skin irritation and lung infections and that prolonged exposure could result in heart attacks and lung cancer. Other government bodies worldwide, including the US Environmental Protection Agency, have made similar conclusions. In a 1997 report, the EPA said emissions from burning tires included dioxins, sulfur oxides and a range of metals including mercury and arsenic.

    Many of the tires that end up in Indian villages like Nabipur start their lives in Britain. Indian waste tire imports from Britain alone in 2018 amounted to 263,000 tons — 13 percent of the total volume of tires traded worldwide — compared with 48,000 tons in 2013.

    Most European countries require tire manufacturers and suppliers to organize tire collection and treatment, meaning there are more home-grown recycling operations. There are no such requirements in Britain, however, which means that small firms can easily obtain licenses to collect waste tires and sell them abroad.

    Britain’s Department for Environment, Food and Rural Affairs (DEFRA) said it fully implements the rules of the Basel Convention but needs to do more about waste tires. DEFRA said it planned to make producers more responsible for old tires, as well as increase monitoring of shipments.

    Once in India, the tires are dispersed between recyclers who shred them for use in road-building or sports fields, firms that burn them as cheap fuel to make cement or bricks, and legal and illegal pyrolysis plants, importers and exporters said.

    India’s Automotive Tyre Manufacturers’ Association estimates that most imported waste tires end up in pyrolysis plants, according to the group’s deputy director, Vinay Vijayvargia.

    Faced with a growing backlash from environmental groups and residents living near pyrolysis plants, India is considering banning all but the most sophisticated operations. The country’s environmental court is expected to rule on the proposed ban in January.

    Six years ago, there were no pyrolysis plants in Nabipur, 70 miles south of New Delhi. Now there are 10, with most operating at night to avoid scrutiny, residents said. Reuters visited three small plants in the village.

    At one, tires embossed with ‘Made in Germany’ and ‘Made in USA.’ lay strewn on the floor and thick sludge seeped from pipes protruding from incineration drums. Most tires used for vehicles in India are made domestically.

    Workers wore no safety equipment, and their skin and clothes were covered in black soot. The owner, Pankaj, said a trader sells him tires imported from abroad.

    Villagers said they have suffered from breathing difficulties and eye and throat infections since the plants began expanding, and farmers had found black dust in their soil.

    Reuters could not independently verify the claims. It was also not possible to verify if the operations were licensed.

    “Used tires are not available locally, so they import from abroad,” said Shiva Choudhary, a businessman who leases out construction equipment in Nabipur. “They clean their own country and dump their garbage on us.”

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    Posted: by Arab News

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