Thursday November 6, 2014 | BUSINESS DAILY
21
MONEY & MARKETS
Egyptian cement
fi≥ms impo≥t coal
amid gas sho≥tage
Hong Kong
manage≥s
now seek
alte≥natives
ENERGY Supply from state-owned firm has been
intermittent and power blackouts commonplace
those for plants located near Cairo
Several of Egypt’s major cement proand other urban areas. Environducers have begun retrofitting their
plants to run on energy from importmentalists say extensive use of coal
ed coal, beating high gas prices and
as energy would be catastrophic for
Egypt, which already has high air polenergy shortages that have curbed
lution levels.
industrial output this year.
Arabian Cement has already startEgypt has been suffering from an
energy crisis in recent years as supply
ed a gradual switch to coal and has imfrom state-owned Egypported 700,000 tonnes so
tian Natural Gas Holding
far this year, mostly from
Company (EGAS) has been
Africa, Ukraine and
Demand fo≥ coal South
intermittent and power
Spain, Investor Relations
will be small
Manager Haitham El
blackouts commonplace.
Shaarawy said.
The government has
to sta≥t with
targeted energy-intensive
It expects to bring in
but could ≥ise
cement companies for cutanother 200,000 tonnes
offs while its priority has significantly once by the end of 2014, he
been to preserve gas for powe≥ p≥oduce≥s added.
power generation, which
He said the decision
sta≥t using it
would avoid blackouts and
had been largely a finanpublic unrest.
cial one, with coal prices
JENS ZIMMERMAN
around 30 per cent cheapCement companies
WOOD MACKENZIE OFFICIAL
er than gas prices.
began petitioning for
Gas shortages in April, May and
permission to use coal instead, and
June also had cut Arabian Cement’s
the Cabinet approved the industrial
first-half clinker production, a first
use of coal in April.
step in producing cement, by almost
Companies still must petition for
20 percent compared with the previindividual licences to burn and import coal.
ous year.
Lafarge Cement Egypt, which has
Some have already retro-fitted
one cement plant in the country, has
their plants to run on coal.
already converted it to coal and has
“Most of Egypt’s cement producers have been working towards fuel
applied for a permit to import coal, a
switching because of unreliable gas
spokeswoman said.
supply and high prices. Some have
Suez Cement, which has five cement factories, began testing coal
already started importing coal,” said
Jens Zimmerman, an energy markets
use at its Kattameya plant in Sepanalyst for Wood Mackenzie.
tember and will begin testing at its
Suez plant by year-end, the company
Permits are required particularly
Workers at an open cast mine near Hyderabad city, India. Coal traders have noted
the emergence of Egypt as a market. AFP
said in its quarterly earnings statement last week.
Zena Spinelli, a communications
manager for Suez, added that factories
near population centres will have to
undergo more rigorous evaluations
before the Egyptian Environment
Ministry clears them for licenses to
use coal.
Low global prices
The Kattameya plant is located in the
suburbs of Cairo.
Earlier this year, an Egyptian minister said government estimates had
found that burning coal in cement
plants alone would save 450 million
cubic feet of gas per day.
Coal is attractive because global
prices are hovering around five-year
lows.
Output is rising from countries in-
cluding Australia, Indonesia and the
United States, while demand growth
has been slowing due to sluggish economies and environmental concerns.
Coal traders have noted the emergence of Egypt as a market, but demand from its cement companies
alone is too small to reduce much
of the world’s surplus and affect
prices, Wood Mackenzie’s Zimmerman said.
“(Egypt’s) Demand for coal will be
small to start with but could rise significantly once power producers start
using it,” he said.
Egypt’s cabinet said on Sunday
that 38 local and international companies had recently applied to build
power plants using coal or renewable
energy.
- REUTERS
Dolla≥ fi≥ms, hits seven-yea≥ high ve≥sus yen afte≥ US polls
The dollar rose to a seven-year high
against the Japanese yen yesterday
after a victory by Republicans in the
United States’ mid-term elections
raised hopes for an end to political
gridlock in Washington, boosting
sentiment for riskier assets.
The dollar rose to as high as 114.40
yen , its highest level since December
2007, and last traded at 114.30, up 0.6
per cent from late US levels.
The dollar’s index against a basket
of six currencies gained 0.2 per cent to
87.185 to edge near a four-year peak of
87.406 set on Monday.
“Although the election results were
not a complete surprise, the risk-on
mood grew following news that Republicans enjoyed sweeping victories,” said
Shinichiro Kadota, chief FX strategist
at Barclays Bank in Tokyo. Republicans
rode a wave of voter discontent to seize
control of the US Senate in a punishing blow to President Barack Obama
that will limit his political influence
and curb his legislative agenda in his
last two years in office.
As risk sentiment was boosted, the
yen weakened against other currencies, such as the euro, which rose to a
seven-month high of 143.44 yen.
The euro also stemmed its fall
against the dollar as investors took
some profits on their bets against the
common currency after a report of a
rift at the European Central Bank over
its easing strategy.
The common currency last traded
at $1.2541, bouncing back from a twoyear low of $1.2439 hit on Monday.
Short covering in the euro was
prompted by a Reuters report that
quoted European Central Bank sources as saying colleagues of ECB Chief
Mario Draghi were unhappy with his
“secretive management style and erratic communication”.
Some were particularly angered
that Draghi had set a target for increasing the ECB’s balance sheet immediately after the governing council
explicitly agreed not to make any figure
public. “In essence, the report has cast
doubt that Mario Draghi’s colleagues
will follow along with his easy money
policies in the near term,” analysts at
CitiFX wrote in a note to clients.
“This supported a 60-pip rally in
EURUSD towards 1.2580 and influenced bearish sentiment for equity
markets globally.” The ECB meets
today and is expected to hold off on
fresh policy action.
The Antipodean currencies were
among the best performers overnight,
led by the New Zealand dollar, which
was further boosted by upbeat local
data. - REUTERS
Asset managers in Hong Kong are
scrambling to figure out how to meet
growing demand for yuan assets after they were hit by a double blow - a
shortage of China investment quotas
and the delay of a scheme linking the
Hong Kong and Shanghai stock exchanges.
Money managers in the world’s biggest offshore yuan hub are still waiting for new quotas after they were
nearly exhausted in late September,
even as Beijing is accelerating its
pace of granting quotas to London,
Singapore and Paris under its RQFII
(Renminbi Qualified Institutional Investor) program.
China’s State Administration of
Foreign Exchange (SAFE) allocated a
total of 11.1 billion yuan ($1.81 billion)
in RQFII quotas to foreign investors
outside of Hong Kong in October, official data showed. The Asian financial
centre got none.
It’s unclear why Beijing has not approved a fresh quota for Hong Kong,
but market participants guess Chinese
regulators may want them to make full
use of the existing quota and wait to
announce a new quota until the Hong
Kong-Shanghai “Connect” scheme is
ready, to ensure a successful launch.
Scheme
The “Connect” or “through-train”
scheme is a landmark project to connect the equity markets in the two cities. It would allow global investors to
trade China shares via Hong Kong for
the first time, while giving mainland
investors access to Hong Kong-listed
stocks.
It had been expected to begin trade
on October 27, but appears to have run
into regulatory and possibly technical
delays. “To be honest, it’s a bit challenging for CSOP because we have used
about 97-98 percent of our quota. We
sort of hoped to use the through-train
but it was delayed,” said Jack Wang,
chief marketing officer at CSOP Asset
Management in Hong Kong.
CSOP is the biggest RQFII player in
Hong Kong, with an aggregate quota
of 46.1 billion yuan ($7.54 billion), accounting for nearly one-fifth of the 270
billion yuan quota the city was granted.
The firm’s exchange-traded fund that
tracks the FTSE China A50 Indexand
allows investors to have exposure to
the top 50 companies in mainland China has been popular among investors
who want to hold yuan assets.
“What we are doing now is whenever there is some free quota from redemptions or some of the funds are not
very suited to the market, we move the
quota to products that are more suitable to the market,” Wang said.
-REUTERS