GLOBAL SUPPLY CHAIN MAY 2016 ISSUE

May 2016 Issue 26

ENHANCING THE BUSINESS OF LOGISTICS

Qatar gears up New logistics facilities

The Big questions On Big data

Gulf Warehousing On a growth trajectory

THE COOL

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The cool chain SIGNATURE MEDIA FZ LLE P. O. Box 49784, Dubai, UAE Tel: 04 3978847/3795678 Email: info@signaturemediame.com Exclusive Sales Agent Signature Media LLC P.O. Box 49784, Dubai, UAE Publisher: Jason Verhoven jason@signaturemediame.com Directors: Deepak Chandiramani Deepak@signaturemediame.com Peter Dass peter@signaturemediame.com Managing Editor: Munawar Shariff munawar@signaturemediame.com Art Director: B Raveendran ravi@signaturemediame.com Production Manager: Roy Varghese roy@signaturemediame.com

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Increasing interest in healthful food, and a growing middle class all over the world are pushing cold chains to globalise. Consumers now demand higher-end products, such as Alaskan salmon, that must travel extended distances and ship quickly to ensure freshness.

In pharmaceuticals, added product specialisation and sensitivity means they are more often being shipped globally to reach their markets. Logistics practices must comply with each country’s regulations and maintain the strictest requirements. This intensified focus on quality and the consumer experience means refrigerated warehouses across the food and pharma cold chain must maintain as many as five different temperature zones.

Pharmaceutical manufacturers, too, are dealing with more sensitive products, such as customised treatments for rare diseases. These products often include more high-value active ingredients that offer shorter shelf lives and carry strict temperature requirements. Cold chain operators are eager to find new strategies to reduce costs.

In retail, requirements for smaller, more frequent orders are driving the use of multi-cell trailers - refrigerated trailers in which insulated curtains are hung at intervals to create different temperature zones.

Shipper demand for efficiency, visibility, and product freshness is driving cold chain 3PLs to add a wide range of value-added services. While air is the predominant choice for pharma transport, some shippers have shifted to steamship as the ability to manage and track locations and temperatures in containers has improved. All this and so many more trends affecting the cool supply chain.

(Page 24.)

Also inside a report on new logistics facilities in Qatar, IATA’s analysis on air freight, Emirates’ SkyCargo’s new product for temperature sensitive cargo and an indepth look at the manufacturing industry through RAK Ceramics; amongst other articles.

We’ll see you in June.

Munawar Shariff Managing Editor munawar@signaturemediame.com

MAY 2016 3

May 2016 Issue 26

ENHANCING THE BUSINESS OF LOGISTICS

32

24 06 News 16 Country report - Qatar Diversification well underway A drive to encourage entrepreneurship in Qatar is gaining pace

18 Country report - Qatar New logistics facilities Qatar’s logistics sector is growing rapidly

20 Country report - Qatar Focus on renewable energy Government to generate two per cent of energy needs via renewable sources by 2020

22 Country report - Qatar Qatar - A leading fertiliser exporter Qatar is an international leader in fertiliser exports

24 Cover The big chill: Cold Chain logistics trends The heat is on food and pharma 4 MAY 2016

companies to keep refrigerated freight frosty, hence, the top 10 trends

32 Manufacturing top quality ceramics

As UAE focuses on the manufacturing sector, RAK Ceramics has been at it since the early 1990s

38 Going big on all fronts A look at Big Data with Frost & Sullivan

44 Market analysis - air cargo

IATA’s February air cargo overview identifies that it has been a turbulent time for air freight

48 Precious cargo protection

Emirates SkyCargo launches new protection solution for temperaturesensitive cargo

38

50 Doha’s meeting failed.

Oil crash next?

Hussein Sayed, Chief Market Strategist at FXTM, gives his perspective on what’s expected from the market

52 Enhancing the ease of business transactions

Dubai Trade reports significant growth in 2015, with a five per cent growth in online transactions

54 Fuelling future growth Milaha wins feedering contract extension with Muntajat

56 Growing fast and strong

GWC records 15 per cent year-onyear in net profits

58 Iran’s future prospects Frost & Sullivan finds that Iran’s petrochemical industry provides unbridled growth opportunity for development across its value chain

2020 READY

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DP World and P&O Maritime win Cyprus Port concession agreements

Republic of Cyprus Minister of Transport and Communications Marios Demetriades and DP World Group Chairman and CEO Sultan Ahmed Bin Sulayem at the signing of the concession agreement

Arcapita acquires Logistics Park in Dubai Arcapita has acquired a logistics park in Dubai, UAE, for a total transaction value of approximately USD 100 million (AED 367295000). The investment comprises nine freehold plots of land in the Al Quoz Industrial Area, covering an area of approximately 630,000 square feet. By the third quarter of 2016, the site will consist of

6 MAY 2016

ten completed warehousing facilities that will be under a long term master lease with a reputable UAE conglomerate.

The investment will capitalise on Dubai’s growing logistics market and will offer premium warehousing facilities to tenants in one of Dubai’s most established and sought after industrial areas.

DP World and the Government of the Republic of Cyprus have entered into two separate concession agreements for the commercialisation of activities within Limassol port, Cyprus. DP World Limassol has been awarded a 25 year concession for the exclusive right to operate the multipurpose terminal, whose activities include break-bulk, general cargo, ro-ro and the operation of the passenger terminal. Simultaneously, P&O Maritime Cyprus (a wholly-owned subsidiary of DP World Limited), has also been awarded a 15-year concession to exclusively provide a full range of port marine services including tugs and pilotage at the port of Limassol.

Both concessions will be awarded to a joint venture between DP World and G.A.P. Vassilopoulos Public Limited, a logistics and services company, listed on the Cyprus Stock Exchange. DP World shall hold 75 per cent of the share capital of each joint venture, as well as the management rights.

Additionally, DP World is all ready to implement the new International Maritime Organisation (IMO) Safety of Life at Sea (SOLAS) regulation, which comes into effect on July 1st, 2016. The new regulation mandates that shippers of goods must obtain the Verified Gross Mass (VGM) of laden export containers and communicate it to ocean carriers sufficiently in advance of the ship stowage planning.

Ocean carriers and container terminal operators will be legally obliged to ensure that containers without a VGM are not loaded on to a ship in all 162 IMO member states that are required to enforce the new law. DP World’s global terminals will have certified weighing capabilities if this is permitted under the locally adapted implementation of the SOLAS regulation. Comprehensive weighing services will be offered for exporters to determine the Verified Gross Mass (VGM) of each container so that they comply with the new legislation.

Emirates Refreshment Company signs exclusive distribution deal with UNIKAI Foods Emirates Refreshment Company, also known as Jeema Mineral Water, has appointed UNIKAI Foods PJSC as the exclusive distributor of Jeema mineral water and the ‘O COLA’ brand of carbonated soft drinks for the Emirate of Abu Dhabi, including Abu Dhabi city, Eastern Region (Al Ain) and Western Region.

Following this agreement, UNIKAI will create 10 distribution routes for the company. The contract, signed by Abdulla Al Qubaisi, ERC’s Chairman, and Mana Mohammed Saeed Al Mulla, Chairman of UNIKAI, is forecast to expand sales of Jeema Mineral Water and ‘O COLA’ soft drinks to 1.3 million cartons in 2016.

ACTS completes geotechnical investigations and geophysical surveys for Doha Metro Project

Engr. Khaled Awad, Chairman of ACTS

Advanced Construction Technology Services (ACTS) has revealed that it has completed geotechnical investigations and geophysical surveys on five construction packages of the metro lines being executed in Doha, Qatar.

The Doha Metro will be one of the most advanced rail transit systems in the world. It will have four lines – namely the Red, Green, Gold and Blue metro lines – planned over a total length of approximately 240 kilometres, and will feature 106 stations over the whole network. Designed to cover the Greater Doha area, the Metro will be underground for the central city networks, and will mainly be at ground level or elevated whilst at the outskirts.

MAY 2016 7

Agility’s new transport solution Focus on data management for aviation safety specialists Global aviation experts gathered in Dubai at the World Aviation Safety Summit to tackle the most pressing issues and initiatives surrounding the international aviation industry.

Sector specialists analysed how data management can transition from a responsive function into a core planning and prevention tool across the industry.

They also looked at methods of collecting, analysing and sharing flight safety data to enhance proactive and predictive safety.

In a session that focused on data management, members of the Advisory Board discussed how to introduce safety performance indicators, based on positive performance alongside strategies for the successful prevention of incidents and the effective management of threats and hazards. An increasing number of industry players are choosing more data management tools. There is also an increased international focus on how to reduce safety risks caused by human error, and how to fully recover data crucial for analysing aircraft-related incidents.

8 MAY 2016

Agility Grid registered its presence in the recently held MENA Transport Congress and Exhibition, which showcased the most innovative products in the public transport sector, in addition to services and solutions relating to better and sustainable mobility. It was the first time Agility Grid exhibited its complete transport solutions.

Said Costa Boukouvalas, CEO of Agility Grid,“We are working with our technology partners to deliver cuttingedge transportation solutions that are reliable, scalable with maximum performance. Our development team has created a connected platform from which the passenger is able to work, socialise, be informed and entertained during their journey.�

With the new solutions developed by Agility Grid and its partners, transport operators will be able to view and track their assets, and act responsively to different scenarios. They will also have the ability to learn from analytical information gathered from all Agility Grid systems to help them optimise the passenger experience.

NAFL signs MOU with Dubai Trade

dnata exceeds one million tonnes of cargo handled at Dubai World Central

dnata has reached a key milestone in its operation at Dubai World Central (DWC), handling over one million tonnes of air freight since its first full year of operation in 2011. In just five years, dnata has seen a staggering 90 per cent increase in freight volume, recording 170,260 tonnes in 2015, up from 89,729 tonnes in 2011. The performance has far exceeded the original growth forecast of 20 per cent.

While expected to be the largest airport in the world once completed, dnata has already had the privilege of handling a

range of unique and unusual cargo at Dubai World Central. This includes the world’s largest ever piece of cargo, a 95 tonne gas turbine bound for a government project in Northern Nigeria; a variety of prototype, racing, classic and luxury cars, an original Batmobile brought in for an auto show; as well as relief shipments from the regional World Health Organisation destined for Pakistan,Yemen and Iraq. The airport has also accommodated the largest aircraft in the world, the Antonov AN225, with ground support from the dnata team.

The National Association of Freight and Logistics and Dubai Trade have signed a memorandum of understanding signifying cooperation in terms of training on their two main courses - Certified Customs Broker- CCB and CTLP – Certified Logistics and Trade Professional.

Members of both NAFL and Dubai Trade will benefit from this partnership by getting discounts on courses.

Present at the ceremony Nadia Abdul Aziz were members of NAFL and Dubai Trade, led by Eng Mahmood Al Bastaki, Board Member and CEO of Dubai Trade, and Nadia Abdul Aziz, President of NAFL. The MOU seeks to synergise the activities and initiatives of both parties to promote the development of the UAE freight and logistics industry through Professional training and raising Industry standards.

Also revealed at the event was Dubai Trade’s Instant Online Smart Service of Cargo Insurance. The web portal is the biggest online portal for freight forwarding available 24x7 with instant services. This alliance between NAFL and Dubai Trade reinforces drive Dubai’s economy, Tourism, Transport, and Trade. NAFL also strives to integrate smart services for their members through e-learningsmart classes and by venturing with reputed vendors from the industry.

MAY 2016 9

More regulation needed to reduce food and construction waste, say experts

Habiba Al Marashi

10 MAY 2016

Emirates Green Building Council (EmiratesGBC) and the Middle East Facility Management Association (MEFMA) hosted an event to discuss the exponential implications of waste, under the theme ‘From Supper to Site: Rethinking Waste’.

Moderated by Habiba Al Marashi, EmiratesGBC co-founder and treasurer, and founder and chairperson of Emirates Environmental Group, industry professionals from various sectors gathered for two different panels, ‘Rethinking Supper: Food Waste’ and ‘Rethinking Site: Construction Waste’, where they had the opportunity to share their respective experiences with regards to food and construction waste, how they are managed and whether there is room for improvement within the industry.

Both panel discussions encouraged industry professionals to participate and learn from others about the current situation with waste, propose various possible solutions that could be implemented, and acknowledge the limitations, in terms of both food and construction waste.

During the session, industry experts agreed that in order to eliminate the issue of food wastage, the roots should be tracked down to the stakeholders; and agreed that both the government and industry can play significant roles in finding solutions to mitigate food loss, through various means, including the enforcement of additional legislations and regulations and award recognitions to encourage best practice on waste management.

Middle East employment freeze looms as economic confidence plummets The latest Global Economic Conditions Survey from ACCA and IMA has found that more half of firms are either cutting or freezing employment, while only 14 per cent are increasing investment in staff. Responding to the findings, Faye Chua, ACCA head of business focus said,“Emerging markets are besieged.

Revenues for commodities firms have collapsed since mid-2014. And business confidence in China has fallen to its lowest level since our records began.

With emerging economies continuing to struggle with low commodity prices and many businesses on a spending lock down, the outlook for the global economy is becoming increasingly gloomy.”

Regulating Fire Safety in the UAE Construction Sector

Over the past few years, a spate of serious building façade fires has triggered a global debate on the quality of fire safety regulations and standards for buildings, particularly in high-rise buildings.

From China to France and Germany to the UAE, whilst the specific causes of these fires were all very different, according to Knauf Insulation, they all have one thing in common: the construction products used on the facades played a key role in the fire’s development.

The authorities in the UAE and the region

have an important and urgent task ahead of them, according to Barry Lynham, Group Director of Strategy and Communication at Knauf Insulation and President of Fire Safe Europe, who will address the 6th Annual Fire Safety Technology Forum in the UAE. Held under the Patronage of His Royal Highness Lieutenant General Sheikh Saif Bin Zayed Al Nahyan, UAE Minister of Interior and Deputy Prime Minister, this year Barry Lynham the event is themed ‘Innovation for High Rise Resilience’.

“Whilst our ‘high rise’ constructions in Europe are dwarfed by the super high rise buildings of the UAE, our challenge is far from small, and we have an enormous common task: to regulate for resilience and ensure the long-term safety of high-rise buildings. By partnering with organisations such as Fire Safe Europe and a wide range of construction and fire safety experts and industry partners, Knauf Insulation has been supporting policy makers across Europe to remedy dangerous discrepancies in fire safety regulations and ensure that fire safety codes for buildings and testing protocols for construction products are rigorous and performance based.

I am looking forward to bringing this experience to the UAE and learning from colleagues in the region,”says Lynham.

IHC and UPS co-host private sector frontiers roundtable series Under the patronage of UN Messenger of Peace and Chairperson of International Humanitarian City (IHC) HRH Princess Haya Bint Al Hussein, wife of HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, IHC and UPS hosted the second session of the Private Sector Frontiers Roundtable Series.

The series aims to strengthen the role of the private sector in humanitarian assistance as well as build sustainable partnerships with several sectors across the UAE. Each session addresses the role of a different

economic sector to offer recommendations aiming to overcome challenges and pilot initiatives.

As an outcome of the session, IHC and UPS will enrol additional participating companies to commit to partner in various ways in establishing a plan to safeguard the region from future pandemics. Through their engagement with IHC, UPS will support humanitarian relief and response through a variety of avenues by supporting innovation, education, in-kind contribution and multi-sector engagement in preparedness activities.

MAY 2016 11

Alstom and Qatar Rail unveil the design of Lusail Citadis tram Alstom and Qatar Rail unveiled the design of the Citadis tram of Lusail, which will circulate on the 4-line tramway network. The design of the Lusail tram, with its front shaped like the bow of a vessel, is inspired by the Dhows, traditional boats of the area. The tram’s blue tones also reflect the sea, inviting passengers to climb aboard and take a cool break

Amazon buying an airport might not be so outrageous

12 MAY 2016

from the heat of Qatar. The interior design echoes the architecture of the area, incorporating touches of yellow that recall the Lusail flower.

The Citadis tram for Lusail is 33 meters long in single unit, and can accommodate 207 passengers in ‘common’ and ‘family’ classes. It can be coupled to double its capacity. The tram features the latest

The rumour that Amazon is thinking about buying Frankfurt Hahn Airport appears to have mediocre veracity.

The German newspaper Sueddeutsche Zeitung mentioned that the RhinelandPalatinate Government may have had discussions with Amazon about the sale of the airport, which is around 60 miles / 100 kilometres west of Frankfurt, but other sources suggest all of the interested parties are Chinese.

Certainly, the asset is not universally attractive. Originally

technologies such as the permanent magnet motors which reduces energy consumption.

The Lusail tramway will be powered via APS - a 12 year proven technology for catenaryfree operation - on all the lines at-grade. The solution, which is able to operate in harsh climatic conditions without compromise on performances, allows to preserve aesthetics of city centres.

owned by Fraport AG, the airport was sold to the local Lander Government, which marketed it to low-cost airlines as an alternative to Frankfurt Airport.

This has not been a total failure, with RyanAir becoming a notable customer. However, passenger volumes have fallen steadily since 2007, from four million to 2.6 million in 2015. The cargo business has also suffered, with the departure of Etihad leading to a sharp fall in cargo volume from 2011’s 286,000 tonnes to 2015’s 79,660 tonnes.

Yet, such an airport going

cheap could be useful to someone with the volumes to support it. Amazon has already moved to create its own fleet for operation in the US, although here the ground operations are provided by Air Transport Services Group. What is certain is that Amazon has substantial airfreight operations across the continent of Europe and, bearing in-mind Amazon is creating both a forwarding and airfreight capability, such a physical asset would not be illogical.

Source: Transport Intelligence Author: Thomas Cullen

Qatar Airways partners with AIG to offer travel insurance

Significant milestone achieved at Barakah Nuclear Energy Plant The Emirates Nuclear Energy Corporation (ENEC) today announced the completion of the construction of the concrete dome for the Unit 2 Reactor Containment Building (RCB), another major achievement in the development of the UAE’s

nuclear energy programme.

The dome is the final structural component of the vast Reactor Containment Building, which now measures more than 70 metres in height. The RCB houses the nuclear reactor, and is a critical structure in the nuclear plant’s

defence-in-depth barriers.

When the four reactors are completed, the UAE’s peaceful nuclear energy program will provide approximately 25 per cent of the UAE’s electricity needs, and save up to 12 million tonnes of greenhouse gas emissions each year.

Qatar Airways has entered into an agreement with the American International Group (AIG) to offer Travel Guard insurance to all Qatar Airways customers booking flights and holidays from selected GCC countries. AIG’s Travel Guard programme offers three levels of insurance coverage, and is designed to suit the individual needs of each customer, including the highest level of medical expense coverage, trip interruption, travel delays, lost baggage, emergency travel services and more. Qatar Airways customers in Qatar, United Arab Emirates, Bahrain and Kuwait can benefit from the value-added programme for all their business and leisure travel, and will receive an online certificate when they choose to buy the insurance cover.

Later this year, the Travel Guard offer will be extended to Qatar Airways passengers from selected point of origin, in Europe, the United States, India, Australia, Malaysia, Thailand and parts of Africa. Travel Guard provides 24-hour assistance and comprehensive coverage to customers in more than 100 countries across the globe.

MAY 2016 13

CEB’s profit climbs 414 per cent in 2015

The Philippines’ leading carrier, Cebu Pacific (PSE: CEB), recorded a net income of USD 95.4 million (AED 350399430) in 2015, a growth of 414 per cent from the previous year, propelled by robust

6 million + passengers at Abu Dhabi International Airport in Q1 2016 Abu Dhabi Airports has reported a 9.5 per cent increase in passenger traffic during the first quarter (Q1) of 2016 at Abu Dhabi International Airport (AUH), compared to Q1 in 2015. Between January and March this year, 6,044,025 passengers travelled through AUH, compared with 5,521,110 during the same period last year. Aircraft movements rose to 42,204, representing 1.5 per cent growth on the 41,585 movements recorded in Q1 2015.

The top 5 destinations for Q1 were: Bangkok, London Heathrow, Jeddah, Doha and Delhi. India continued to top the charts in terms of country routes, with the highest passenger traffic figures of 1,082,527, up 26.9 per cent when compared to Q1 of 2015. Italy saw a huge increase in traffic with figures up 62.3 per cent on the same period last year, making it the 10th busiest country route in Q1 of 2016.

14 MAY 2016

passenger and cargo revenues, and lower operating expenses.

The Cebu Pacific Air group’s total revenues went up by 8.7 per cent to USD 112 million (AED 411370400), on

the back of sustained growth in passenger volume on key domestic and international destinations. The airline’s improved presence in emerging markets, supported by a conservative fleet expansion plan, also contributed to the upward trend.

CEB flew a total of 18.4 million passengers in 2015, up 8.9 per cent from the 16.9 million passengers flown in 2014.

The record numbers boosted passenger revenues to USD 926.6 million (AED 3403355470), an increase of 6.2 per cent year-on-year.

Cargo revenues likewise posted an upsurge of 10 per cent to USD 75.9 million (AED 278776905_, while ancillary revenues increased by 19.6 per cent.

GE partners with the Egyptian Electricity Transmission Company

GE has announced that it has signed a contract worth approximately USD 250 million (AED 918237500) with the Egyptian Electricity Transmission Company (EETC) to provide the company’s advanced grid solutions technologies to substations located in Mostathmereen, Beni Suef Industrial, Ismailia East and Temay Alemdeed.

These four Gas-Insulated

Substations (GIS) will help connect seven gigawatts (GW) of power to the national grid, which is the equivalent to the electricity needs of more than 6.5 million Egyptian homes.

This will be crucial to reinforce Egypt’s network during periods of peak demand.

This contract is part of the Protocol of Cooperation signed during the French

Presidential visit to Egypt, highlighting the importance of this project to Egypt’s energy sector. As part of the contract, GE will also supply a digital data protection system, network management system and telecommunication technologies, which will help connect the substations to the National Energy Control Center and improve the network’s stability.

COUNTRY REPORT - QATAR

Diversification well underway A drive to encourage entrepreneurship in Qatar is gaining pace, as efforts to streamline the start-up process yield results

D

eveloping small and mediumsized enterprises (SMEs) lies at the heart of Qatar National Vision 2030, the development plan guiding the country away from its reliance on hydrocarbons and toward a knowledge-based economy.

With the first SME programmes now firmly established, experts hope to see efforts stepped up to make business education a priority at schools and colleges.

16 MAY 2016

Targeting funding One of the institutions playing a key role in supporting SMEs, particularly those founded by new graduates, is the Social Development Centre (SDC), which aims to promote employment opportunities and youth empowerment.

“The main goal will be to encourage entrepreneurship among young people, so they can act as ambassadors for private sector development,”Abdulla bin Ibrahim Al Ajail,

executive director of the SDC, told OBG. The centre offers a mix of financial and technical support ranging from promotion and consulting to marketing and training at its Tanmia for Small and Medium Enterprises facility. The SDC is currently directing its assistance programmes at small-scale, or “micro”, entrepreneurs and those between the ages of 18 and 40, as well as home-based businesses, with the centre’s funding arm, Rasameel, offering interest-free loans of up

COUNTRY REPORT - QATAR

centre’s mission of developing the next QR100m ($27.5m) companies in Qatar.”

To provide a boost to start-ups in specific industries, the centre has developed specialised incubators, such as QBIC Tourism, guided by Qatar Tourism Authority, and Digital and Beyond, powered by Ooredoo, which offer entrepreneurs sector-specific support and access to industry experts.

In financing terms, QBIC also has a fund for direct incubation of applicants that reach an appropriate level of business development. Subsidised workshop space is also made available to entrepreneurs looking to develop light manufacturing businesses.

To date, the results of the two initiatives appear promising. The SDC has financed approximately 105 projects since 2009, having been given a target of around 20 new projects a year and a funding portfolio of QR8m-9m ($2m-$2.5m). QBIC, meanwhile, has received some 1200 applications and incubated 52 start-ups since its launch in 2014.

“We’ve invested QR1.9m ($521,798) in our successful applicants, which have in turn generated nearly QR6m ($1.65m) in revenue,” Al Mudahka said.“This is a reflection of the opportunities that exist for start-ups to generate tangible economic value.”

to QR500,000 ($137,400) for applicants who meet its criteria.

An at-home incubation programme has also been launched, which allows microbusinesses to channel their products into local markets and souqs.

Many of the centre’s clients run microbusinesses, which usually have 15 staff or less, and a turnover of under QR10m ($2.75m). As these businesses are often family-run and are rarely capital intensive, they are traditionally seen as lower risk.

Nurturing entrepreneurship Qatar Business Incubation Centre (QBIC), an initiative co-founded with Qatar Development Bank (QDB) and the SDC, supports small businesses in their early days through a two-step training programme, offered twice yearly. QBIC also offers workspaces, training, marketing and follow-up guidance, with financial support from QDB. LeanStartup, QBIC’s initial 10-week flagship programme, focuses on supporting entrepreneurs through the launch stage of their businesses and includes a“Demo Day”, where candidates are given the opportunity to pitch their ideas. Once applicants are ready to take

Cultivating a start-up culture

Old harbor, Doha City, Qatar

their business to the next stage, they move to the four-day LeanScaleup programme.

According to Aysha Al Mudahka, CEO of QBIC, the business ideas put forward have been broad-based, ranging from digital solutions to tourism.

“The variety in age and gender of applicants and the quality of their ideas has been a huge positive for broader SME development in the country,”she told OBG. “We’re well on our way to achieving the

The entrepreneurial environment in Qatar has significant room for growth, though much will likely need to be done to encourage more Qataris to participate.

The country has a relatively small number of SMEs for the region, contributing just 16% to GDP, as per regional media reports, compared to 33% in Saudi Arabia and 60% in the UAE. Businesses face a complex operating set-up with several organisations and programmes involved in SME development.

Representatives believe much would be gained by bringing players under one roof.

“Streamlining activities is a necessity when looking at a sector of this nature, given that each organisation within the ecosystem has a different focus,”the SDC’s Al Ajail told OBG. Education and training also has a key role to play in developing a new enterprise culture, according to Al Mudahka, who would like to see young Qataris given more opportunities to learn about the business world.

-www.oxfordbusinessgroup.com

MAY 2016 17

New logistics facilities With billions invested in new transportation infrastructure and a host of mega-projects necessitating huge movements of goods and people, Qatar’s logistics sector is growing rapidly

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he sector is expected to maintain a strong upward trajectory in the coming years as the state recently established new warehousing and logistics facilities for a growing portfolio of businesses, including small and medium-sized enterprises (SMEs). An in-depth industry report from September 2013 identified lack of supporting warehouse infrastructure as one of the most serious shortcomings in

18 MAY 2016

Qatar’s transport and logistics sector, with industry leaders stressing that development of warehousing zones is critical for overall transport and trade growth.

It takes a village The logistics industry is moving quickly to meet demand, with the recently established Logistics Village Qatar (LVQ) offering much-needed facilities for the segment, with

its parent company, the Gulf Warehousing Company (GWC), reporting strong growth of late. GCW has a majority stake in seven logistics firms in Qatar, the UAE, Saudi Arabia and Nigeria, and its Qatari assets include LVQ, a 60,000-sq-metre open yard, and cold, hazmat and bulk storage facilities. To improve multi-modal logistics and warehousing, the company completed construction of LVQ in April 2013. Spanning

COUNTRY REPORT - QATAR

The company projects Qatar’s third-party segment will account for 15% of total logistics activities by 2016.

Small companies, big promise With the government’s development strategy focused on SME development and promotion, logistics growth is also being driven by state support. Indeed, in June 2014 the Ministry of Economy and Commerce (MEC) announced it had worked with the Ministry of Municipality and Urban Planning to earmark three sizeable tracts of land to be used to establish new logistics facilities for SMEs. Parcels of 498,000 sq metres, 499,000 sq metres and 517,000 sq metres have been reserved for the project, which will provide open and cold storage, with priority given to SME tenants. The announcement came in the wake of a report published by the state’s SME task force, which included members from the MEC, the Ministry of Finance, the Ministry of Transport, Ashghal (the Public Works Authority), and the Qatar Chamber of Commerce and Industry.

The report found that storage and logistics options for SMEs were insufficient, with new facilities set to bolster local industry and help control inflation, as well as reduce transportation costs.

HIA Cargo

Qatar airways cargo above Frankfurt airport

a 1m-sq-metre site in Al Wakrah, it includes 330,000 sq metres of warehousing, 100,000 sq metres of truck parking and a maintenance workshop, a 44,000-sq-metre container depot, 47,000 sq metres of laydown area and an auction yard, and 43,000 sq metres of residential and recreational facilities. GWC has reported phenomenal growth in recent years, with gross annual profits rising nearly six-fold, from QR32.82m ($9m) in 2010, to

QR191.19m ($52.4m) in 2013. Total profits expanded by 60.4% year-on-year (y-o-y) during the third quarter of 2014, and by 40% yo-y between January and September, to QR34.71m ($9.5m) and QR102.38m ($28m), respectively. In 2013 GWC officials expected strong growth in the third-party logistics segment, as the number of logistics firms increases, leading to a reversal of the tendency to keep operations in-house.

Dedicated air cargo growth will also help control costs, thanks to the December 2013 launch of Hamad International Airport’s (HIA) $1bn Qatar Cargo Complex. With an area of over 290,000 sq metres and seven facilities, the complex has a cargo capacity of 1.4m tonnes per year, set to rise to 2.5m tonnes when HIA’s next phase of expansion is completed. It houses the world’s largest cargo terminal buildings, with an air cargo handling system that can accommodate 1005 unit-load devices and 5000 consignment cages.

Much like the state’s warehousing and logistics facilities, the cargo complex has already reported strong growth. In December 2014 HIA’s COO, Badr Al Meer, told industry press that HIA’s cargo volumes expanded 14% y-o-y each month since opening, bolstered by Qatar Airways’ transition to a fully automated terminal. www.oxfordbusinessgroup.com

MAY 2016 19

Focus on renewable energy Under the aegis of Qatar National Vision 2030 (QNV 2030), the government has pledged to generate 2% of energy needs via renewable sources by 2020

20 MAY 2016

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ith innovation and proposed projects extending all the way to the expansive Qatar Rail Development Programme (QDRP), a multibillion-dollar effort comprising construction of a light rail transit (LRT) system in Lusail City, the Doha Metro, and a long-distance passenger and freight railway network, connected to the

wider GCC railway via Saudi Arabia and Bahrain.

In 2014 the government moved ahead with establishing a unique solar energy programme, to be integrated into the QRDP, with the potential to generate enough renewable energy to fuel a small power plant.

Qatar solar technologies Qatar Solar Technologies (QST ec), a joint venture between Qatar Solar, a subsidiary of Qatar Foundation for Education, Science and Community Development’s solar investment company, SolarWorld AG, and the Qatar Development Bank, was established to

COUNTRY REPORT - QATAR

wafers, cells and modules, and producing 6.5 GW of solar modules, or enough solar energy to power a large city.

QST ec is now building a 150-MW solar module facility and 1.4-MW solar farm at its Ras Laffan site, with both due to start operations in 2015. One of the first projects slated to benefit from new supply of its solar technology will be the multibilliondollar QRDP.

Solar Railways

manufacture materials needed for a viable solar energy programme. The company has also worked with Qatar Electricity and Water Company to build an 8000-tonneper-annum (tpa) polysilicon plant in Ras Laffan Industrial City, under a $1.1bn deal announced in May 2012.

The facility is the state’s first solar-grade polysilicon facility. According to reports from the company, its first silicon products, produced by the factory’s two polysilicon trains, were made available in December 2014. Polysilicon is a critical ingredient in photovoltaic (PV) panels, which convert sunlight directly into electricity, and a readily

Power plant in Qatar

available domestic supply bodes well for Qatar’s future renewable energy plans.

With a total area of 1.2m sq metres at its Ras Laffan site, enabling long-term production to expand to 45,000 tpa, the company reports its factory will eventually be able to integrate downstream facilities into its production line, manufacturing solar ingots,

In July 2014 QST ec signed a memorandum of understanding (MoU) with the Qatar Railways Company (Qatar Rail), to explore installing solar panels on the state’s rail network. Up to 80 MW of power could be generated if fully implemented, according to QST ec authorities, with the first stage of the agreement expected to study the feasibility of installing ground and roof-mounted PV panels on the proposed 3m-sq-metre rail depot facility, to be constructed near the new airport.

“This is a long-term agreement that demonstrates the very essence of QNV 2030, and we look forward to working closely with Qatar Rail to develop sustainable solar energy solutions,”Khalid Al Hajri, chairman and CEO of QST ec, told local press. The MoU came after a lengthy feasibility study, with development of a solar project a key part of Qatar’s efforts to build one of the most energy-efficient railways. The ultimate goal is a four-star rating on the Global Sustainability Assessment System (GSAS.) GSAS consists of six certification levels to measure a project’s environmental impact, lifespan and sustainability (see Construction chapter). A railway that obtains a cumulative final score below zero does not meet the baseline, and will be denied certification. Certification is achieved when the final score is greater than or equal to zero, with GSAS rail projects receiving a rating of between one and six stars. Criteria include wastewater load, energy delivery performance, water consumption, materials, support of the national economy and solid waste management.

No timeline has been specified for the solar rail project, and officials did not say whether a working system would be installed prior to Lusail LRT’s launch in 2018, or the Doha Metro’s soft launch in 2019.

-www.oxfordbusinessgroup.com

MAY 2016 21

COUNTRY REPORT - QATAR

Qatar - A leading fertiliser exporter

prices. Its main export markets are Southeast Asia, North America, Australasia and Southern Africa.

Suppliers

QAFCO also has interests in a number of suppliers, including a stake in Gulf Formaldehyde Company (GFC), a joint venture with United Development Company, Qatar Industrial Manufacturing Company and asset management firm Amwal. GFC supplies urea formaldehyde, a vital ingredient in the production of urea. QAFCO sells via the combined Qatari petrochemicals, chemicals and fertilisers marketing company, Muntajat, to over 45 countries. Pricing remains an issue. Ammonia and urea headed in different directions in 2014, with urea prices falling and ammonia prices rising.

The strong dollar – in which fertilisers are priced – may also impact global demand There is also a in 2015, along with generally surge in supply of lower agricultural prices and ammonia and urea weakening growth.

Located at the heart of a region that has seen double-digit growth in fertiliser production capacity in recent years, Qatar is now one of the international leaders in exports of these products, which remain vital to global food security

A

ccording to the figures from the Gulf Petrochemicals and Chemicals Association (GPCA), the GCC accounted for approximately one-quarter of global urea trade by volume in 2013 and 12% of global ammonia trade, with 90% of the region’s output exported. Qatar accounts for a considerable slice of this industry.

Its leading fertiliser manufacturer, Qatar Fertiliser Company (QAFCO), is“now the largest exporter of urea in the world, with a 15% share of total supply”, QAFCO’s chairman, Abdulaziz bin Ahmed Al Malki, told OBG. The long-term future is likely to see demand for QAFCO’s products continue to rise. International Fertiliser Association figures suggest a global population of 9.3bn by 2050, requiring a 60% increase in food production.

History QAFCO was founded in 1969 as a joint venture between the government and private shareholders, such as Norway’s Hydro, which had a 25% stake. The rationale was to develop a downstream industry for the local oil and gas sector – a sector that has grown considerably in size and range since.

QAFCO is now 75% owned by Industries Qatar and 25% by Yara International, Hydro’s demerged fertiliser

business and the world’s top producer of ammonia, nitrates and NPK (a blend of nitrogen, phosphorus and potassium). QAFCO’s first facility, QAFCO 1, began production in 1973, as new capacity with five more trains being Capacity to change added in subsequent years.

There is also a surge in supply comes online, QAFCO 2 came on-line in of ammonia and urea as new with 30 ammonia 1979, followed by QAFCO capacity comes online, with 3 in 1997, QAFCO 4 in 30 ammonia projects and 25 projects and 25 2004, QAFCO 5 in 2011 and urea projects moving forward urea projects QAFCO 6 in 2012. Each train in North America alone, has two production units, one according to agriculture moving forward for ammonia and the other industry publication Capital in North America for urea, and all six have the Press, leveraging on shale capability built in to switch and gas. According alone, according to oil production from one product to the GPCA, the GCC’s to the other, based on agriculture industry fertiliser capacity will pass prevailing market conditions. the 66mtonnes-per-annum publication Capital mark by 2018, thanks to According to company figures, total production a number of large-scale Press, leveraging capacity is 10,241 tonnes per projects in the pipeline. on shale oil and gas Given the circumstances, day (tpd) of ammonia and 14,531 tpd a rethink is under way. In of urea. Figures quoted by October 2014 QAFCO announced that it Reuters in October 2014 would be switching more of its production put total annual output at to niche, environmentally friendly 5.6m tonnes of urea and products, with the EU and other Western 3.7m tonnes of ammonia, markets in mind. These would likely with the firm recording command lower volume but higher prices, a profit of around $1bn offsetting some of the potential downside in 2013, despite volatility in mainstream sales. in international fertiliser -www.oxfordbusinessgroup.com

QAFCO is now

75% owned by Industries Qatar

22 MAY 2016

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COVER STORY

trends The big chill:

Cold Chain logistics

The heat is on food and pharma companies to keep refrigerated freight frosty.

With its capital-intensive equipment, strict temperature requirements, and energy dependence, the cold chain has always been a demanding logistics segment. Lisa Terry of www.Inboundlogistics.com identifies the top 10 trends

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he cold chain logistics sector is grappling with additional challenges - from increases in the sensitivity, quality standards, and volume of many of its goods, to continually mounting regulations.

The cold chain also faces many of the same issues challenging the entire supply chain: serving the global market, driving out costs, becoming more strategic, and addressing capacity and resource constraints, all while managing the exacting needs of the sector›s precious cargo - primarily food and pharmaceutical products.

Here are 10 trends impacting the cold chain, and some strategies manufacturers and logistics service providers use to adapt and thrive.

24 MAY 2016

COVER STORY

MAY 2016 25

COVER STORY

increased focus on quality, health, and 1. Cold chains are becoming more integrity. To win the repeat business of fickle global. and demanding consumers, manufacturers Increasing interest in healthful food, and a must ensure an optimal experience with the growing middle class in locations such as brand. For cold chain products, that means China, are pushing cold chains to globalize. avoiding the changes in texture and taste Consumers now demand higher-end products, such as Alaskan salmon, that must that occur when a shipment strays outside recommended temperatures, as well as travel extended distances and ship quickly decreasing the amount of processing for to ensure freshness and quality. proteins such as fish.

«Food is travelling around the world “More premium products as more manufacturers are coming into the market manage their supply with a shorter shelf life, greater chains globally,» says This intensified sensitivity to temperature, Doug Harrison, president focus on quality and a much different level of and CEO of VersaCold, a Vancouver, B.C.-based cold and the consumer demand,” says Harrison.

This intensified focus on chain third-party logistics experience means quality and the consumer (3PL) provider. These experience means refrigerated manufacturing plants are refrigerated warehouses across the food becoming more specialized warehouses cold chain must maintain to a specific product or as many as five different label, and they ship their across the food temperature zones. goods more widely.

Pharmaceutical «Demand for fresh cold chain must manufacturers, too, are dealing food is growing, and maintain as many with more sensitive products, that requires increased such as customized treatments innovation to overcome as five different for rare diseases. These capacity and infrastructure temperature zones products often include more constraints, and mitigate high-value active ingredients disruption risks to that offer shorter shelf lives and carry strict ensure quality delivery,» adds Tim Smith, temperature requirements. Many drugs executive vice president, sales and business must be maintained at temperatures lower development, for Lineage Logistics, a cold than 77 degrees F, while some require 35 to chain 3PL based in Colton, Calif. Meeting these demands without driving up inventory 46 degree cold chain transportation.

Another fast-growing drug category is or cost places added pressure on each controlled room temperature. These drugs element of the supply chain. are safe at room temperature, but must be In pharmaceuticals, added product maintained there during transport using specialization and sensitivity means they temperature-assured containers, such as are more often being shipped globally to reefers, to avoid the spikes that can come in reach their markets. Logistics practices must ambient containers. comply with each country›s regulations and maintain the strictest requirements, driving 3. Regulation is on the rise. many drug makers to raise practices across Globalization and an increase in the number their supply chain. of food safety and pharma counterfeit «Many shippers are concerned about incidents are prompting governments to maintaining control of products in transit,» tighten regulations on production and says Jeff Luthman, vice president, life supply chains. Establishing preventive science solutions, for Indianapolis 3PL MD measures and harmonizing regulations Logistics. are major issues for the food and pharma industries.

2. An increasing focus on quality and For years, pharmaceutical mandates in product sensitivity. most countries required products to be In the food industry, the big trend is an

26 MAY 2016

COVER STORY

MAY 2016 27

COVER STORY

maintained within manufacturer-established the additional requirement of refrigeration and compliance. At Nestlé Canada, this has guidelines only in storage. But in November meant corporate-wide adoption of Lean 2013, the European Union (EU) guidelines principles, and a more strategic approach on Good Distribution Practice for medicinal to working with supply chain providers, products for human use went into effect, including cold chain (see sidebar page 136). extending temperature requirements to «We are throwing much more rigor into transportation, and expanding coverage to how we select service providers,» says include over-the-counter drugs.

Greig Jewell, director, Lean value stream, In the EU, about 80 percent of pharma supply chain operations, Nestlé Canada. products now require temperature«We operate a supplier-facing supply chain controlled transportation. Anticipating now, involving not just our packaging and similar regulations in the United States— ingredients, but also our service providers and considering the potential for exporting such as VersaCold.» these drugs—many pharmaceutical In the past, the company manufacturers are adopting asked suppliers about this approach in the United capabilities and rates. «Now States, too.

Pharmaceutical we ask, ‹Are we aligned The phasing-in of manufacturers, transactionally on the rules stemming from physical flow of goods? Are the U.S. Food and too, are dealing we aligned strategically on Drug Administration›s with more sensitive how we want to operate? prevention-focused Food Can we work together to Safety Modernization Act, products, such accomplish everything we passed in 2011, is triggering as customized need to?›» Jewell says. investment in solutions to Driver shortages and document every step in the treatments for capacity constraints are food supply chain. Products rare diseases. hitting the cold chain such as produce must be especially hard. Operating traceable all the way back These products a refrigerated fleet to the point of origin. Recall systems must be reliable often include more requires significant capital investment, specially trained and efficient, not only to high-value active drivers, increased liability, rapidly comply with more and a greater risk for close stringent regulations, but to ingredients that inspection. limit the scope by isolating offer shorter shelf Many of MD Logistics› specific batches of product. customers, for example, Getting out ahead lives and carry require one- or multi-day of such regulation is a strict temperature inspections of a carrier›s common theme across equipment to ensure it cold chain logistics. requirements is in compliance. «It›s Manufacturers are challenging to find qualified full truckload building more stringent practices into their carriers in this controlled environment,» requirements, and 3PLs and other providers notes Luthman. are investing in additional credentials.

Cold chain operators are eager to find Atlanta-based cold chain 3PL Americold, for new strategies to reduce costs. In retail, example, plans to have 14 sites certified by requirements for smaller, more frequent the Safe Quality Food Initiative by the end orders are driving the use of multi-cell of 2015, and Lineage Logistics is aiming for trailers—refrigerated trailers in which certification across all of its business units insulated curtains are hung at intervals by 2020. to create different temperature zones.

This approach enables a cold chain 3PL 4. Market pressures drive demand for to include frozen and chilled goods in the supply chain efficiency. same shipment.

The need to operate a Lean supply chain is But consolidating into a multi-cell even more acutely felt when every step faces

28 MAY 2016

trailer isn›t always possible. Because of the space and handling costs of managing the insulation, it works best for dedicated equipment rather than a common refrigerated carrier.

Using multi-cell trailers is «process intensive,» says Jason Deloach, senior director of engineering at Americold, which has received a growing number of RFPs requesting this service. «There must be space on the dock to stage and load product in a temperature-oriented order,» particularly for multi-stop routes. Even if the trailer isn›t full, the strategy still delivers savings over three separate shipments on three appropriately cooled trailers, with the associated labor, DC slots, and waiting times, he adds.

5. Manufacturers are outsourcing more processes to 3PLs. Shipper demand for efficiency, visibility, and product freshness is driving cold chain 3PLs to add a wide range of value-added services.

For example, a trend toward case picking drove Americold to invest in new designs and racking systems, along with automation, in its warehouses. That’s easier to justify in facilities built for specific products, such as plant-attached DCs, says Deloach. In its public DCs, the 3PL takes a flexible approach to accommodating the needs of various products and manufacturers.

Another service that shippers request is postponing food processing. Products are held in cold chain warehouses, then prepared and packaged for shipment just in time to fulfill specific orders. That might include bringing frozen seafood up to a chilled temperature for processing.

“Keeping product ‘white’ – postponing labeling and putting it into true consumer packaging until the delivery destination – generates capital cost and inventory savings,” says Harrison.

In addition to domestic retail and food services, shippers increasingly ask Lineage Logistics to prepare proteins for export. One service in demand is highpressure processing, a post-packaging, non-thermal pasteurization method of killing microorganisms. The process enables companies to use a clean label – one without a long list of preservatives – and extend shelf life.

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One cold chain service on the horizon is an X-ray of product packages to ensure safety and accuracy prior to export, a service Lineage is discussing with some customers.

6. Cold chain is experiencing some mode shifting.

Fuel price fluctuations and globalization have driven some cold chain operators to shift modes from truckload to intermodal, or from air to ocean. Other factors contributing to mode shift include truck driver and capacity shortages, and sustainability initiatives. But makers of chilled and frozen goods must balance the additional time these modes may take with speed-to-market requirements.

While air is the predominant choice for pharma transport, some shippers have shifted to steamship as the ability to manage and track locations and temperatures in containers has improved. But unlike over-the-road, where a qualified carrier repeatedly uses the same trailers for the same customers, «once the container is offloaded and returned to the steamship line, there is no guarantee it will be used again» for that manufacturer›s shipments, notes Luthman.

This makes it challenging for the 3PL to inspect and qualify containers.

7. Sustainability initiatives are driving investment.

Cold chain operators are looking for new ways to balance the energy-intensive requirements of perishable products with the desire to reduce resource consumption.

Americold, for example, works with utility companies, and closely monitors power consumption and calculated CO2 equivalent emissions for its facilities.

Reading, Pa.-based 3PL Penske Logistics is testing compressed natural gas (CNG) for tractors with customers including Wegmans and Kroger. Other service providers are using electric vehicles, especially for drayage.

But refrigerant is a more challenging obstacle than fuel. In warehouses, operators including VersaCold have shifted from freon to ammonia, but the compound›s volatile properties make it unsuitable for trailers.

«Using CNG on the trailer side is still in its infancy,» says Mark Smith, area vice president at Penske Logistics.

30 MAY 2016

Improvements in insulation are increasing energy efficiency to some degree, but onboard fleet management systems may deliver even bigger savings.

«Drivers are no longer responsible for setting temperatures,» explains Smith.

«Conditions can be controlled remotely, so fuel utilization is much improved. It›s also less likely the driver will turn off the reefer to save fuel, so the system decreases claims and issues such as lost sales.»

8. Packaging is evolving to meet new needs.

For pharmaceutical manufacturers, a big

challenge comes in balancing packaging and transportation costs, says MD Logistics› Luthman. For small parcels moving through the ambient supply chain, the 3PL can choose 24-, 48- or 72-hour packaging, but the more insulated the package, the higher the cost. It›s also essential—especially for international shipments—to have partners who can ensure shipments are re-iced if a delay occurs.

Food manufacturers are turning to newer disposable packaging designs to ensure integrity for more sensitive products. Reusable containers are also seeing increased use in both food and

COVER STORY

Nestlé Canada uses GPS-enabled sensors on inbound ocean, rail, and truck freight. The devices include real-time alarms for zone, route, intrusion, and temperature. «When importing, it›s critical to know the product›s location, safety, and quality,» says Jewell.

This rise in demand for real-time temperature and location status is sharply driving demand for IT infrastructure that can analyze and deliver data where and when it›s needed. That infrastructure will be further challenged in pharmaceutical logistics as serialization regulations take hold in 2017, requiring tracking of all serial numbers in a shipment down to the unit level.

“The serialization element will affect cold chain, not only marking the integrity of the product, but requiring 100-percent accuracy with information flow to the customer so products don›t spoil,” says Luthman. While serialization will provide benefits, it will also add complexity and cost to the supply chain, he notes.

pharmaceutical logistics to reduce waste, and some companies are embracing greener packaging materials.

9. Technology investment remains critical.

Like all supply chains, cold chain operators must continually upgrade technology to ensure efficiency, integrity, and safety. This includes both back-end IT infrastructure and front-end devices to gather and report key shipment data in real time.

Cold chain carriers have invested considerably in on-board equipment built into refrigeration units to track temperature

and location, and to make this data available to 3PLs and shippers in real time, offering increased visibility and the opportunity to prevent or mitigate loss. Some shippers use removable sensors to independently track the temperature of their cold cargo, usually for high-value goods and international shipments.

Some food manufacturers have built this capability right into their packaging.

MillerCoors, for example, uses temperaturesensitive ink to show when products are at optimal temperature. These inks are also used on milk cartons to indicate the temperature has fallen out of safe range.

10. Customer habits persist as the cold chain›s weakest link.

The biggest obstacle for many cold chain operators is the one part of the supply chain they don›t control: The moment products are placed in the consumer›s shopping cart or tendered to a healthcare provider.

Despite considerable expense and effort to move the item across hundreds of miles through multiple hand-offs, a product that sits too long in a cart, a hot car, or a poorly regulated freezer can degrade in quality, a condition that often gets blamed on the manufacturer.

As part of its Lean initiative, Nestlé Canada conducted research on how consumers perceive value for brands such as Drumstick and Parlour ice cream, including how open they might be to paying more for packaging that offers additional insulation.

Ensuring pharmaceuticals, food, and other chilled goods retain their integrity and safety remains a moving target for cold chain operators. Globalization, tightening regulation, and changing consumer demand continue to alter the scope of the task, while driving the need for technology, efficiency, and security.

-www.inboundlogistics.com

MAY 2016 31

MANUFACTURING

Manufacturing

top quality As the focus in the country turns to the manufacturing sector, GSC talks to Abdallah Massaad, Group CEO of RAK Ceramics, about how the company will execute its present and future to manufacture more from its facility in Dubai

T

he early 1990’s marked an era of evolution for the manufacturing sector in the UAE. Its development was strongly linked to the construction boom driven by the population explosion which, in turn, drove demand for ceramic, cement, aluminium, and other building materials.

Fundamental changes took place across the Emirates, and natural resources were available to promote and support the manufacturing sector, including the minerals of Ras Al Khaimah.“Ceramics were an imported product in the region at that time, but in 1989, RAK Ceramics was established by H H Sheikh Saud Bin Saqr Al Qasimi, member of the Supreme Council and Ruler of Ras Al Khaimah, who aspired to have

32 MAY 2016

MANUFACTURING

MAY 2016 33

MANUFACTURING

We are known for our wide product range and our ability to produce bespoke ranges for both small and large scale projects, enabling our clients to bring their ideas to life.

the best machinery, latest technology, and to produce the best products possible for sale in the world. Since then, every year we have added capacity and demand continues to grow,” says Abdallah Massaad, Group CEO of RAK Ceramics.

Today, the UAE has an established global manufacturing sector that is attracting billions of dollars of investments from public and private investors, and RAK Ceramics has played a role in the development of this sector. RAK Ceramics has 25 years of ceramics’ expertise under its belt, and their products feature in some of the most iconic buildings in the world - from The Burj Al Arab and Atlantis, The Palm in Dubai, to

34 JUNE MAY 2016 2015

The O2 Arena and Wembley Stadium in London, UK. “We are known for our wide product range and our ability to produce bespoke ranges for both small and large scale projects, enabling our clients to bring their ideas to life. In 2015, we continued to add to our growing list of prestigious projects and our products were used in more than 160 projects worldwide,” he says, adding,“The government of Ras Al Khaimah was and still is a major supporter for RAK Ceramics’ growth and development.

The members of the ruling family, who established RAK Ceramics, led by the vision of H H Sheikh Saud Bin Saqr Al Qasimi, ruler of the emirate of Ras Al Khaimah,

strongly believed in the development of the manufacturing sector.”

RAK Ceramics is based in an area that has expanded at a phenomenal rate.

Manpower is accessible in the UAE, particularly from the Indian subcontinent, as well as worldwide. The UAE has great infrastructure, and some of the world’s best airlines and ports, which enables everyone to access world markets.“We are uniquely positioned to export to the entire GCC with no barriers, and each of these factors have contributed to our success,” he says proudly With 13 plants at its headquarters in the UAE (10 tiles, two sanitaryware and one tableware) covering a land area of 2.5 million sq metres, RAK Ceramics also has plants in India, Bangladesh and Iran. RAK Ceramics is one of the largest ceramics’ manufacturers in the world, and has a

MANUFACTURING

global production capacity of 110 million square metres of tiles, five million pieces of sanitaryware, 24 million pieces of tableware and 600,000 pieces of faucets per annum.

Specialising in high-quality ceramic wall and floor tiles, gres porcelain, and bathware, RAK Ceramics uses more than 8,000 production models, with new designs being added every week to its portfolio. Tiles are manufactured in a variety of sizes, from 10x10 cms up to 135x305 cms, the widest range offered in the ceramics field.

In Gres Porcelain, the company produces thousands of models in glazed and unglazed porcelain. RAK Ceramics is a pioneer in introducing hi-tech innovations that are a breakthrough in the industry, and a wide range of technologies are used at the company’s state-of-the-art plants.

The RAK Ceramics Bathware range

includes close coupled, back to wall and wall hung water closets, bidets, and wash basins; pedestal, wall-hung, semi-counter and counter top wash basins in a variety of sizes; acrylic bath tubs; shower trays; urinals; water closets for customers with special needs; fire clay kitchen sinks, specially designed junior collections and exquisite designer faucets from KLUDI RAK, with advanced water saving technology.

“At RAK Ceramics, we invest in the latest, state-of-the-art technology and the best machinery in all of our factories, both in production and across our business processes. The launch of Maximus Mega Slab has redefined the world of tiling - a gigantic 135x305 cm slab, produced using SACMI Continua+ Technology – Maximus Mega Slab is the largest slab manufactured in the region. RAK Ceramics is the only

manufacturer in the region to have installed this new technology, and is charting new territory. Maximus Mega Slab is RAK Ceramics’ most versatile product yet, and is enabling the company to compete in new markets,” he explains.

Operations To support the seamless integration of its business processes, RAK Ceramics uses SAP ERP, an enterprise resource planning system, which incorporates the key business functions of an organisation, allowing for global monitoring of sales and distribution, management accounting, supply chain, logistics, purchasing and payroll management.

RAK Ceramics employs 8,000 people in the UAE, and 15,000 people worldwide.

RAK Ceramics operates a fleet of 78

MAY 2016 35

MANUFACTURING

vehicles, including 23 trailers, 17 ten-tonne pickup trucks and 38 three-ton pickup trucks.

The company selects only the finest raw materials to manufacture its tiles.

“Generally, there are four stages of the manufacturing process from start to finish.

Kaolin, quartz and feldspar are ground together with fine clay in drum mills, and water is added to achieve a thin slurry. This is carefully cleaned of any remaining foreign particles using sieves and strong magnets.

The prepared mass is air-dried in spray dryers and granulated,” he explains.

The granulate is transported in bin containers to ultra-modern SACMI presses, and is compressed using a pressure of up to 1,500 tons. After compressing, the tile will undergo further air drying, designed to remove any remaining moisture at a slow rate in order to prevent cracking. The tile design is then applied using the most advanced digital technology.

“Following the design stage, the tiles are fired in computer-controlled kilns from SACMI. Depending on the type of tile, the firing temperature can be as high as 1,250 degrees centigrade. In the final stage, the tiles – depending on the intended product – undergo further finishing processes such as grinding, polishing and brushing, before finally undergoing stringent quality checks for size, symmetry and dimensional accuracy,” he says.

36 MAY 2016

RAK Ceramics’ vision is to be the world’s leading ceramics lifestyle solutions provider. In 2014, a Value Creation Plan was implemented to support this vision and set the priorities for the next three to five years. The Value Creation Plan is aimed at streamlining the business by investing in core businesses, and exiting non-core, and core but non-strategic businesses.

“Continued implementation of the Value Creation Plan will be the immediate focus for 2016, along with a strong focus on managing revenue growth with capacity expansions expected in Q1 2016, such as the completion of our sanitaryware expansions of 22 per cent in the UAE and 52 per cent in India respectively. Plans will also be put in place for the next phase of capacity expansions,”informs Massaad.

RAK Ceramics’ future growth has been marked by continued acquisitions in core businesses and the company now owns 100 per cent of its subsidiaries in Iran and India. RAK Ceramics also began the process of fully acquiring the minority stakes in its European Joint Ventures in Germany and the UK, all of which will give the company greater control over its global operations.

3rd ANNUAL MENA PHARMACEUTICAL COLD CHAIN FORUM ~ Maintaining product integrity through stakeholder intimacy~ 24 - 25 MAY 2016 | RAFFLES DUBAI | UNITED ARAB EMIRATES

INDUSTRY OVERVIEW:

INDUSTRY OVERVIEW:

What topics will the 3rd Annual Forum cover?

Industries and Sectors:

What regulators expect from the other stakeholders in the cold chain

Ministry

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International Standards and where the region is today?

Pharmacy Chains, Shipping, Transport and Logistics

Collaborative approaches between airlines and airport authorities

Distribution Houses, Airports and Customs, Airlines,

Pharmaceutical

Health,

Food

Manufacturers,

&

Drug

Healthcare

Authorities, Providers,

Companies, Third Party Logistics Companies (3PL’s),

Innovative technologies to minimize temperature excursions

Storage and Warehousing Companies, Supply Chain

Integrated solutions for Good Distribution and Storage Practices

Systems,

Solution Providers, Temperature Controlled Packaging Temperature

Monitoring

Systems,

GPS

Manufacturers, Data Loggers

www.menacoldchain.com Silver Sponsors

Associate Sponsor

Exhibitors

MCI Middle East, United Arab Emirates, Tel: +971 4 311 6300, Fax: +971 4 311 630, E-mail: conferences@mci-group.com

SUPPLY CHAIN TECHNOLOGY

g n i o G

big on all fronts

38 MAY 2016

GSC talks to J Sivan, Senior Consultant, Transportation and Logistics Practice, Frost & Sullivan about the pros and cons of Big Data.

What we’ve found is it’s usually a few short term challenges followed by many long term solutions

SUPPLY CHAIN TECHNOLOGY

In logistics, which are the areas generating big data?

The logistics industry can benefit from utilising vast data generated by the entire logistics chain of operations, which is likely to result in process improvement, better service delivery, minimisation of costs, and optimal usage of the supply chain network. By adopting the Big Data related IT infrastructure, and employing data scientists, companies can gain by strengthening their competitive advantage and become industry leaders.

The logistics industry is interconnected with overall economic activity. As the user industries transform and benefit from big data, it provides the logistics service providers an opportunity to take advantage of the changing technological

environment by aligning with the changes in the user industries, including aligning their business processes and IT infrastructure. This will strengthen internal database management systems, and help companies to take wellinformed logistics related business decisions.

As the benefits from applications of Big Data cut across many industry sectors, such as agriculture, manufacturing, healthcare and financial services, due to strong linkage between them, logistics service providers can help them optimise costs. Examples include intermodal transportation to minimise time to market, route optimisation, customer retention, and improved service delivery based on changing customer needs.

MAY 2016 39

SUPPLY CHAIN TECHNOLOGY

What challenges do industries face when incorporating Big Data solutions into the daily running of operations?

individual companies, and their relationship with logistics service providers.

There is no one-size-fits-all solution here, mainly because of the diverse nature of processes and supplier networks among various manufacturing and service sectors.

Thus, the requirement varies, depending on the specific needs of a sector. It also depends on the extent of globalisation and complexity of network of suppliers and customers of

Tell us about typical process, if any, for organisations to integrate the Big Data solution into their existing system. What are the initial challenges they might face?

40 MAY 2016

The typical integration process includes aligning IT with overall management goals, upgrading IT infrastructure, and enhancing capability by hiring human resources, such

as data scientists and data management administrators. Teething problems can include lack of understanding of potential cost savings, and lack of internal capacity to handle Big Data related hardware, software and human resources.

A threat of cyber security and hacking may de-stabilise the smooth functioning of the company, loss of valuable data on transactions and sensitive details on existing client base. The technical challenges faced

SUPPLY CHAIN TECHNOLOGY

include hardware and software compatibility; training existing resources to adopt a new IT environment within the company; and the lack of commitment from management in adopting the new technologies due to high cost and associated risk.

Companies need to adopt to the changing technological environment, and employees should accept changes in the system to reap the benefits of big data. Both the business units and the IT department must accept

and support substantial change. To complete a Big Data implementation, there must be a mutual understanding of the challenges, as well as a joint commitment of knowledge and talent.

What are the benefits that can be obtained by adopting a Big Data solution?

Big data applications provide opportunities to integrate and consolidate all data provided by the network, and take a

holistic approach in strategic decisionmaking, including capacity planning, route optimisation, last mile delivery and warehousing. Customer service and experience can be enhanced based on feedback and complaints on a real time basis. It strengthens existing systems for identifying and developing new products and services. Intermodal transport mode can result in optimisation of delivery time and improve operational efficiency.

MAY 2016 41

42 MAY 2016

SUPPLY CHAIN TECHNOLOGY

What is your perspective on local organisations moving in this direction?

The GCC and Middle East region is transforming into a key global logistics centre due to its strategic location, to meet requirements of freight associated with Europe-Asia trade, and transhipment goods for landlocked central Asian countries.

China-Europe rail linkages are also expected to be modernised and strengthened to reduce delivery time. Thus, the region has the potential to become a major logistics hub in the world. As companies in the region expand their services to other regions, it will become necessary for them to adopt latest technologies, and investment in big data related infrastructure and platforms.

Is this something that only well established companies can explore?

From the investment perspective, what about SMEs?

Big Data infrastructure is beneficial for both large and medium sized organisations, considering there are multiple data sources provided by social media, website traffic, manufacturing process, details relating to raw materials, production and distribution, RFID tags and bar codes. As the regional transportation infrastructure is modernised and interlinked with international transportation corridors, logistics companies in the region are expected to increase investment in technologies that are likely to improve efficiency and reduce costs associated with administrative delays, such as customs clearance and cross border movement of freight within the region. As global logistics companies take the lead in adopting to new technologies, companies based in the region are likely to increase investment in big data related infrastructure.

Investment related to big data can be broken down to three major areas, namely IT infrastructure upgradation, investment in software that are capable of handling large volume of data generated by multiple sources, and enhancing the capability of existing resources, or hiring specialists to handle large volume of data generated by these sources.

What would you say is the most prominent risk that can affect companies getting into Big Data?

Initial investment in appropriate Big Data infrastructure, and effective data collection

underpins the usefulness of Big Data solutions. Data needs to be reliable and secure, while also being accessible on a realtime basis. Constant connectivity is the key to ensuring this access to data; however, the assurance of connectivity is uncertain across most parts of Asia, particularly beyond major urban centres.

A lack of routing diversity is a prominent issue of existing systems. As a result, companies are often forced to build and maintain their own connectivity infrastructure. Lack of appropriate skills and knowledge is also of concern. Generally, ICT skills are tough to find, particularly in data analytics. In addition, as an emerging field, the skills that are needed for Big Data solutions are not formally recognised, and it is not usually clear what qualifications are required to undertake specific roles. For Big Data to be most effective, the integration of all existing data sources and operational procedures of a company is required.

This entails the coordination of legacy systems, many of which utilise independent systems and data sources, thereby creating ‘information silos’.

There is often a reluctance to alter existing systems, either because of a substantial investment that was made, or a belief that one should not try to fix something that is not broken. For Big Data solution customers, there is still a measure of uncertainty in terms of what they must manage, and what providers must offer. In particular, while an increasing number of analytics providers have emerged, they all require appropriate infrastructure to underpin their respective solutions.

Companies are reluctant to invest in solutions with uncertain parameters, especially when the initial costs are high, and the potential for locking exists. While certainly a consideration, this is not yet a decisive factor for early adopters; however, its impact is likely to grow.

In addition to the costs associated with building connectivity infrastructure and integrating systems, companies are reluctant to invest in Big Data solutions due to the lack of viable business models. The cost of Big Data solutions is high, and they are incurred at the outset; however, revenues and savings are more difficult to show as they are often associated with a longer term of revenue flows.

MAY 2016 43

AIR CARGO UPDATE

Market analysis

air cargo

44 MAY 2016

AIR CARGO UPDATE

IATA’s February air cargo overview identifies that it has been a turbulent time for air freight, but moving forward the scenario may not be as bad as it seems

A

ir freight volumes fell sharply in annual terms in February, although the comparison is complicated by the one-off boost to air freight a year ago, following the disruption at seaports on the US west coast. Middle Eastern airlines are the only group to have seen robust annual growth in volumes this year to date.

Ongoing structural headwinds continue to point to a year of just modest growth for the industry as a whole. The industry-wide freight load factor was just 0.5 percentage points above its all-time February low, keeping intense pressure on yields and revenues.

Annual comparisons are difficult at this time of year Global air freight volumes fell by 5.6 per cent year-on-year in February 2016 – the biggest annual decline in three years. That said, the timing of Chinese New Year can

CHART 1

complicate annual comparisons at this time of the year. Moreover, the boost to air freight at the start of last year, following the disruption to seaport activity on the west coast of the US, is an additional complicating factor for the annual comparison this time around.

Looking at total freight volumes flown in both January and February helps to look through such potential distortions. The broader picture here is not stellar, and the global economic outlook remains fragile. But equally, the picture is not too disheartening either. Indeed, total freight volumes in January and February 2016 were 1.6 per cent lower than in the same months in 2015, but they were still 6.3 per cent higher than in 2014. This translates into annual growth of 3.1 per cent over the past two years – a relatively solid growth rate by the post-global financial crisis (GFC) standards (annual freight growth has averaged just 1.7 per cent since the start of 2011).

Air freight volumes at the start of each year

Industry FTKs (sum of January and February each year, billion) 35 30 25

20 15 10 5 0

MAY 2016 45

CHART 2

Air freight growth vs. global export orders

Underlying demand drivers remain subdued…

Looking ahead, ongoing headwinds continue to point to another year of just

CHART 3

46 MAY 2016

modest growth in 2016 as a whole. Indeed, the broader global trade backdrop remains subdued; world trade volumes grew by two per cent in 2015 as a whole, slower than the

International FTK growth by carrier region of registration (year to date)

estimated pace of global GDP growth (recall that in the decades before the GFC, it was considered normal for world trade to grow at around twice the pace of global output).

Admittedly, annual trade growth may pick up sharply over the coming months, as the annual comparison is flattered by the downward trend in volumes seen during the first half of last year. It would not be surprising to see annual world trade growth in the region of five per cent during Q2 2016. However, the key point is that the upward trend in world trade volumes stalled over the final quarter of 2015, and overall growth in global trade volumes remains modest.

Moreover, the export orders component of the global Purchasing Managers’ Index – a closely watched business survey – fell back sharply into contractionary territory in February. All told, the long-standing historical relationship between export orders and growth in air freight volumes appears to rule out a surge in freight volumes anytime soon.

…and low loads are keeping yields under pressure Industry-wide available tonne kilometres increased by 7.5 per cent year-on-year in February, and the total load factor came in at 41 per cent. This was a whopping 5.7 percentage points lower than it was in February 2015, and just 0.5 percentage points higher than the all-time February low seen in 2009.

Low loads are keeping intense pressure on industry yields and revenues. Middle Eastern carriers lead the way once again - international freight volumes fell by 6.4 per cent in year-on-year terms in February, although once again, the spike in volumes a year ago means it makes more sense to focus on year-to-date developments.

In a similar fashion to the wider industry, international freight volumes were 2.2 per cent lower during the first two months of 2016 compared to last year, but were 6.6 per cent higher than the start of 2014. Middle Eastern airlines once again led the pack, with year-to-date FTK growth of 6.8 per cent, over four times that of the next fastestgrowing group. However, such growth was only half as fast as that registered during

AIR CARGO UPDATE

the same period in 2015, and coincides with a marked slowdown in annual network expansion growth by the main carriers in the region over the past six months or so.

FTKs flown by Latin American airlines edged up by 1.5 per cent, relative to the first two months of 2015. The ‘Within South America’ market remains under firm pressure, reflecting challenging economic conditions in the region (Brazil – the region’s biggest economy remains mired in its worst recession in 25 years). But volumes on the North-South America route are holding up better.

European airlines were the only other group to see freight volumes expand in yearon-year terms over the first two months of 2016. That said, FTKs only grew by 0.6 per cent over the period, and the bigger picture is that international FTKs carried by European carriers have tracked sideways over the past two years. In fact, they remain only slightly ahead of their pre-GFC level in 2008. Recent falls in business surveys, not least in Germany – the region’s largest economy – underline the fragility of the economic situation. …as Asia Pacific and North American carriers nurse hangovers from a bumper

start to 2015 North American and Asia Pacific carriers were the biggest beneficiaries from the boost to air freight during the US west coast seaport disruption last February. The bumper period in 2015 was always going to be a difficult act to follow, particularly as trade data indicate that eastbound air freight on the Pacific route declined throughout the rest of last year once the seaport disruption ended. This was borne out in the latest traffic data, with FTKs flown by North American and Asia Pacific airlines 3.8 per cent and seven per cent lower this year to date, respectively.

The trade backdrop for Asia Pacific remains particularly weak. According to the Netherlands CPB, trade to and from the Emerging Asia region contracted in month-on-month terms throughout the second half of 2015. Moreover, more recent data show that Chinese export values plunged by over 25 per cent year-on-year in February.

The comparative strength of the US economy may help to support inbound freight volumes for North American carriers over the rest of this year. North American freight volumes rose strongly in seasonally

CHART 4

adjusted terms over the final months of 2015 and into this year, relating largely to a sharp rise in imports of electrical machinery by air from Europe. By contrast, though, outbound freight is struggling with the strong US dollar.

Additional long-haul capacity weighing on African load factors Freight volumes carried by African airlines also fell in annual terms during the first two months of 2016, although it must be noted that African carriers carry just 1.5 per cent of industry volumes (see detailed table). The largest economies in the continent – Nigeria and South Africa – are highly dependent on energy industries, and have been hit hard by the slump in global commodity prices over the past 18 months or so. Meanwhile, available capacity has surged on the back of long-haul route expansion, particularly

by Ethiopian Airlines. This combination has pushed the African international freight load factor down to just 25.9 per cent in February – fully half the level of Asia Pacific carriers.

-© International Air Transport Association, 2015 . Air Freight Market Analysis February 2016. All Rights Reserved.

International freight load factors by carrier region of registration

MAY 2016 47

INNOVATION

Precious cargo protection Emirates SkyCargo launches new protection solution for temperaturesensitive cargo, finds GSC

T

ransport for pharmaceutical products just got affordable and environmentallyfriendly. Emirates SkyCargo has launched a nextgeneration version of its innovative protection product for valuable temperaturesensitive cargo. Called White Cover Advanced, it utilises DuPont’s patented Tyvek material made of high density polyethylene to form a tough protective barrier against varying external temperatures and direct sunlight. The special material

48 MAY 2016

is water resistant to prevent moisture damage, while, at the same time, breathable, thereby reducing condensation and dryness. It is also environmentally friendly and is 100 per cent recyclable.

The White Cover Advanced is an enhanced offering to Emirates SkyCargo’s existing White Cover solution. While the White Cover is used in the carrier’s cool chain solutions for perishables, such as vegetables and fresh fruits, the White Cover Advanced offers additional protection for packaged pharmaceutical shipments in Controlled Room Temperature (CRT) range and in insulated packaging.

Weighing no more than three kilograms for Emirates’ largest passenger aircraft pallet, the special sheet completely encloses the shipment and allows for cooling during transportation and cold storage. Application is also very

INNOVATION

efficient, taking two people no more than eight minutes to wrap a pallet.

“The pharmaceutical industry moves products worth over US$ one trillion (AED 3.67 trillion) annually. Temperature changes during transportation can pose a serious threat to the integrity of these sensitive products. They must be kept within different control room temperature (CRT) bands, in accordance with the revised EU Good Distribution Practice. The White Cover Advanced, with its silver-coating technology, provides a reliable and affordable means of protecting these products from temperature spikes during air transportation,” explains Henrik Ambak, Senior Vice President, Emirates’ Cargo Operations Worldwide.

Emirates SkyCargo is a pioneer in the use of specialised covers to protect temperaturesensitive cargo, and has worked with DuPont in

Emirates SkyCargo’s White Cover Advanced is an affordable and environmentally-friendly solution for protecting pharmaceutical products during air transportation

developing applications of its Tyvek material in the air cargo industry.

The cargo carrier’s range of advanced protective techniques and solutions in transporting perishable products include: Cool Chain Premium, Cool Chain Advanced and Cool Chain Standard, each of which is designed to meet specific requirements of customers. This includes the Emirates SkyCargo Cool Dolly, a special piece of equipment that transports cargo from the aircraft to cool storage areas, while maintaining temperatures of as a low as -20 degrees Celsius. The cool chain portfolio is supported by Emirates SkyCargo’s extensive temperature controlled handling facilities at both its freighter terminal in Dubai World Central’s (DWC) at Al Maktoum International Airport, and its Cargo Mega Terminal in Dubai International Airport.

MAY 2016 49

GUEST COLUMN

Doha’s meeting failed. Oil crash next?

T

Hussein Sayed, Chief Market Strategist at FXTM, gives his perspective on what’s expected from the market

he long awaited summit between OPEC and non-OPEC oil producing countries in Doha ended without an agreement, failing to strike a deal to freeze output at January levels. Mohammed Bin Saleh Al-Sada, Qatar’s energy minister, said in a press conference,“We all need more time for more consultations and talks.”The disagreement has been mainly due to Tehran’s resistance to the idea of an output freeze, as it attempts to recover its lost market share after being freed from the Western sanctions.

However, Saudi Arabia is not willing to compose a deal without Iran’s participation, which could ignite the market share war.

Oil prices had rallied by more than 60 per cent from January lows, on prospects that an agreement to freeze production will be reached. There’s no doubt that oil prices are due to crash in the Asian trading session, but the question will be, by how much? Five per cent, 10 per cent or more than 15 per cent? The burden will also be felt in all major financial assets, including equities, fixed income, and FX markets. One will be looking for stocks to fall across the globe, yields on sovereign debt to decline, and emerging and commodity market currencies to tumble.

Meanwhile the major beneficiary will be the safe haven Yen. Will US earnings offset oil prices crash?

Oil prices will be the main driver of headlines ahead, but as more than a fifth of S&P 500

The burden will also be felt in all major financial assets, including equities, fixed income, and FX markets.

50 MAY 2016

companies due to release their first quarterly results, this cannot be ignored. The trick of beating Wall Street’s expectations is still working, and stocks are responding positively, albeit US earnings are in recession for the third consecutive quarter. Financials rallied by more than four per cent in the past week as major banks such as JP Morgan, Bank of America, Well Fargo, and Citi all beat expectations. However, if oil prices plunged heavily, this trick will be less likely to work.

Goldman Sachs and Morgan Stanley, the biggest US investment banks, are among the companies to announce first quarter results.

ECB Meeting: Do words matter anymore?

Since the ECB last met in March, the Euro had appreciated by more than 2.5 per cent. Although the measures taken at that meeting exceeded markets expectations by cutting interest rates, adding monthly bond purchases, and providing more cheap loans to Eurozone banks, that was not enough.

The central bank will be meeting again, and while no change is expected in monetary policy this time, traders will turn their attention to the official announcement.

The wave of recent criticism from German politician’s over the bank’s loose monetary policy might find a response. However, Euro traders will be looking for more signals on whether there’s a will for loosening the monetary policy further, but most probably, the focus will shift to government fiscal reforms rather than monetary actions.

Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/ or a guarantee and/or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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May 2016 Issue 26

ENHANCING THE BUSINESS OF LOGISTICS

Qatar gears up New logistics facilities

The Big questions On Big data

Gulf Warehousing On a growth trajectory

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5/2/16 5:50 PM

TECHNOLOGY

Enhancing the ease of business transactions Dubai Trade reports significant growth in 2015, with a five per cent growth in online transactions.

GSC explores

48 MAY 2016

L

ast year, 2015, has been a good one for Dubai Trade, as it has revealed substantial growth in the number of companies registered and the value of transactions. There were 113,354 companies registered with Dubai Trade, with over 19.5 million transactions during the year, five per cent up on 2014. Dubai Trade’s secured its ePayment gateway ‘Rosoom’, recorded 1.1 million transactions amounting to AED 1.2 billon (US$ 326,712,888).

In line with its vision to enable seamless trade, Rosoom has adopted the second generation of the e-dirham system as an additional payment mode, adding to its security and flexibility. Through its portal, Dubai Trade is also offering access to more than 820 integrated electronic services, covering a wide range of services, from manifest and cargo handling, through to invoicing and payments for different users, including traders, shipping lines, forwarding agents, hauliers and Free Zone licencees.

HE Jamal Majid Bin Thaniah, Chairman of Dubai Trade, says,“Consistency and commitment have always been part of our success. We have adopted the most innovative technologies to stay ahead in the world of trade and be ready for any new challenge. Our courses and programmes

TECHNOLOGY

rogressive P e d a r T i a b Du 15 Growth in 20 16,800

s registered new companie

19.5

on milctili ons Transa

internationally accredited by the Chartered Institute of Logistics and Transport.

In 2015, 132 e-Services training sessions were carried out with 1,532 candidates. More than 260 individuals were also officially certified by attending The Certified Trade and Logistics Professional (CTLP) programme. The year also witnessed the launch of the Certified Customs Broker (CCB), a professional course that provides an insight into customs laws and regulations in the region. Five sessions have been held with 65 graduates.

Meanwhile, Dubai Trade’s annual flagship event, the E-Services Excellence Award, announced a new theme and categories for smart services to encourage the use of mobile services alongside an innovation award to highlight the most innovative project in trade and logistics developed by companies based in the UAE. To encourage innovation and trade and logistics processes, it also launched the Innovation and Idea Hub for staff.

Eng Mahmood Al Bastaki, CEO of Dubai Trade, said,“We encourage our people to develop their capabilities and come up with creative ways of reaching our goals, and believe employee engagement can contribute growth to our success. Dubai Trade is a role model, and has expanded to 1.1 new markets by replicating our million services in Algeria. We will soon e-Payment transactions unveil an electronic trade window that integrates all DP World Sub Continent terminals in India.” growth Dubai Trade intends to continue to work on projects to further sional program Trade and Logistics Profes *CTLP: The Certified enhance and streamline trading course r Broke s Custom **CCB: The Certified processes, such as improving the functionality of its portal to enhance the customer experience. Upgrades to other services are also being developed. The Land Transportation Management System will also be offered soon for freight forwarders and shipping lines to match cargo transportation requirements and maximise truck availability. A new Warehouse Booking System, providing an on-demand warehousing platform connecting companies that need warehouse space with warehouse operators, is also in the pipeline.

5%

260

more than

820 e-Services

s *CTLP graduate

65

s **CCB graduate

have also encouraged the sharing of our expertise, reinforcing Dubai’s position as a vital trade hub and business leader.”

Dubai Trade provides high-quality training programmes to support the trade and logistics community as well as portal users. It was voted ‘Training and Education Provider of the Year’ for the third consecutive year, as well as being

4%

MAY 2016 49

DEVELOPMENT

Fuelling future growth Milaha wins feedering contract extension with Muntajat to export over 150,000 TEU petrochemicals from Qatar, finds GSC

54 MAY 2016

E

xtending their previous twoyear contract, Milaha has signed a one-year feeder agreement with Qatar Chemical and Petrochemical Marketing and Distribution Company (Muntajat), to transport up to 150,000 TEUs of petrochemical exports from Qatar. The contract was signed during a ceremony attended by H E Sheikh Ali bin Jassim Al Thani, Chairman of Milaha’s Board of Directors, Abdulrahman Essa Al-

Mannai, President and Chief Executive Officer of Milaha, and members of the executive management of both companies.

The contract, which goes into effect from April 1, 2016 and is up to March 31, 2017, states that Milaha will support Muntajat in the optimisation of vessel sizes to improve operational efficiency and reduce the number of weekly calls required at the port of Mesaieed. Milaha has also introduced fixed berthing windows in Doha, thereby reducing the possibility of delays at Doha Port and improving schedule reliability for Muntajat at Mesaieed.

Said Al Thani,“Milaha is proud of its longstanding partnership with Muntajat.

Our strong cooperation, firm commitment,

DEVELOPMENT

vessels, berthing priority in Jebel Ali Port in Dubai, co-loading from CT7, and fixed berth windows in the network to accommodate timely and efficient operation in Mesaieed port,” added Al-Mannai.

Milaha takes delivery of biggest lift boat in Qatar

HE Sheikh Ali bin Jassim bin Mohammad Al Thani, Chairman of Milaha

and effective communication have been the key to our successful collaboration with leading Qatari firms for over 30 years. The extension of our feeder partnership with Muntajat is in line with our vision to establish strategic and long-term partnerships with local companies to contribute towards Qatar’s economic growth.

Our core operations around Qatar provide optimal flexibility in response to any sudden changes in the business environment.”

“Milaha will continue to serve Muntajat in the best manner possible. We are confident that our fleet will fully satisfy the requirements of Muntajat in exporting petrochemicals from Qatar to the rest of the world. In line with our promise of continuous service enhancements, we will support optimisation with larger

Abdulrahman Essa Al-Mannai, President and Chief Executive Officer of Milaha

Milaha has taken delivery of a new lift boat, which will be deployed offshore, particularly in support of field maintenance efforts. Al-Mannai and Vivek Seth, CEO of Halul Offshore Services, attended the launch and naming ceremony of the vessel at the Bohai Shipyard in China.

Named the ‘Milaha Explorer,’ the newbuild will be the biggest lift boat to be owned by a Qatari company, with a large deck area and variable load capacity, as well as the ability to accommodate 300 persons on board. The lift boat’s capabilities will help enhance the company’s diverse portfolio of offerings to the offshore oil and gas sector, particularly in support of its clients’ brown field operations.

Said Al-Mannai,“We are delighted to add the ‘Milaha Explorer’ to our fleet, which allows us to partner ever more closely with leading global energy companies to meet their diverse needs, now and in the future. We are optimistic about continued growth opportunities despite the current challenges in the oil and gas sector, and this newbuild lift boat will enable us to further strengthen our position in the region and beyond.”

Seth agreed, saying, “We have ordered a particularly large lift boat to address the growing demand for these types of assets, both in the region and the world. We believe that this strategic asset will help augment our status as a partner in the life extension of mature fields and enhanced field maintenance services.”

‘Milaha Explorer’ was built by Bohai Shipbuilding Heavy Industries Company Ltd at its yard in Liaoning Province in China, and was designed by the China-based Tianjin De-Sail Machinery Equipment Company Ltd.

MAY 2016 55

GROWTH REPORT

Growing fast and strong GWC records 15 per cent year-on-year in net profits, finds GSC

G Sheikh Abdulla bin Fahad bin Jassem bin Jabor Al Thani, Chairman of GWC

56 MAY 2016

WC (QSC) has a lot to be proud of, having concluded its first quarter of 2016 with a solid rate of growth – 15 per cent in its net profits, achieving QAR 46.5 million, as compared to QAR 40.4 million by the end of the same period in 2015. The company’s revenue streams had an equally consistent rise, with total revenues peaking at QAR 220 million at the end of the quarter, a 14 per cent increase from the first quarter of 2015.

The company’s assets continued to develop, with total assets reaching QAR 3.078

billion by the end of March 2016, compared with QAR 2.981 billion at the end of December 2015, representing a three per cent growth.

“Every effort has been taken to ensure that the company moves in line with the direction taken by the nation, so we may continue to grow organically within the currently provided environment, directly serving its needs,” states GWC Chairman Sheikh Abdulla bin Fahad bin Jassem bin Jabor Al Thani, adding,“Our commitment to the diversification of the economy and the tenets of the Qatar National Vision 2030 provide us the direction needed as we strive to achieve our purpose, remaining the provider of choice for logistics solutions in Qatar, and thereby ensuring our shareholders the best possible returns.”

On the operational side, the RLIC West Side Service Area (WSSA) facility was completed

GROWTH REPORT

on schedule, and made operational in Q1 2016, offering 15,000 sq metre warehouse with specialised HAZMAT logistics specifications, in addition to open yard, bulk, and ISO Tank storage in the remainder of the facility. The Logistics Village Qatar Phase V development at the LVQ is nearing completion, and will offer a new 17,500 square metre distribution centre, two accommodation buildings, and a mosque by the end of Q2 2016, with a second, 28,000 square metre warehouse to be launched by the end of August 2016.

The GWC Bu Sulba Warehousing Park, meanwhile, has achieved several important milestones, completing 40 per cent of construction operations at the site, while boasting an impressive safety record at the site to boot. The company has recently awarded one of its contractors, for ‘One Million Man Hours

From left: Jeo Aricatt; Senior HSE OfficerAl Bader, Sunil Cerejo; Senior Project Manager-Al Bader, and Naji Nassar; Senior Director of Commercial Services-GWC

without Lost Time Injury’, ensuring GWC’s commitment to the highest standards of Quality, Health, Safety, and the Environment.

For its continued commitment to excellence in performance and service provision, the company was recognised by a number of international transport sector parties in the first quarter of 2016; as International market research consultants Frost and Sullivan named GWC ‘Leading Domestic Logistics Service Provider of the Year 2016’ for the second year in a row during their seventh annual GIL Global Best Practices Awards.

“GWC values performance at every level of the organisation, and it is therefore gratifying to note that our company has fulfilled our vision of providing the most comprehensive solutions, backed by a robust infrastructure, on our way to becoming the logistics service provider of choice,”Al Thani concluded.

MAY 2016 57

ANALYSIS

58 MAY 2016

ANALYSIS

Iran’ future prospects Frost and Sullivan has found that Iran’s petrochemical industry provides unbridled growth opportunity for development across its value chain

Tehran at night, Iran

T

he lifting of over a decade long sanctions on Iran has attracted huge international interests onto Iran. A huge domestic market, characterised by a 79-million strong population, adds to Iran’s geographical advantageous location in the Middle East, which, in turn, gives it access to strategic maritime passages, making it a viable market for global access, and hence increased investment potential.

Development of the petrochemical value chain is one of the most promising avenues that is expected to significantly add value to its nonoil economy.

“Abundance of feedstock, relatively suitable infrastructure, low cost of production, and access to skilled labours are key factors that make Iran interesting for investors in the petrochemical space. The country’s natural reserves of Ethane, Propane and Naphtha are sufficient to set up new petrochemical complexes within the next ten years,”opines Ali Mirmohammad, Senior Consultant and Business Development Manager - Iran, Frost and Sullivan. He further adds that,“the Government is adopting a foreign policy approach to not only strengthen local capabilities, but also to increase non-oil exports to more than USD 50 billion based on downstream verticals derived from petrochemical and mining industries”.

MAY 2016 59

ANALYSIS

In the past, over 75 per cent of foreign investment on an average went to upstream oil and gas projects. Today, the country plans to divert more of the foreign investment into downstream projects. As far as petrochemical capabilities are concerned, development of downstream projects is a key factor to significantly reduce dependency on an oil-based economy.

Iran Vision 2025 provides the desired impetus According to Iran vision 2025, the country plans to emerge as the largest producer of petrochemical products along the value chain in the region. Plastics, rubbers, paints and resins, fertiliser and pesticides, chemicals and solvents, fibres and textiles, medicines, cosmetics, composites and detergents are the various downstream petrochemical products that the country proposes to focus for development in the next 10 years.

Iran requires at least USD 70 billion of financial resources to develop the entire petrochemical industry to achieve its vision of 2025. Such an investment is expected to catalyse growth in exports of its petrochemical industry from less than USD 12 billion in the year 2015 to over USD 40 billion by the end of 2025.

Capacity augmentation aimed at strengthening position as an export base In the post sanction era, the country proposes to attract foreign investment to resume over 60 halted petrochemical projects that shall increase the current production capacity of 58 million tonnes (FY2015) to 130 million tonnes per annum in the next five years. In addition, the Government has further proposed 36 new investment opportunities, which, when implemented, have the potential to increase the total production capacity of petrochemical products to over 180 million tonnes per annum by the end of 2025.

“Creating value-added opportunities along the entire propylene industry value chain is one of the primary focus areas for the Government for the next 10 years with

60 MAY 2016

regard to the petrochemical sector. Potential to convert Iran as the largest exporter of propylene based products in the Middle East and North Africa is foreseen. Importing high technologies and catalysts to produce various grade of Polypropylene, such as pharmaceutical and food grades are other key policies in the post sanction era”, said Ali.

Government policies, support and incentives To boost investment in the petrochemical industry value chain, the Government has offered many incentive plans, such as offering discounts on natural gas; long term tax-exempt savings plans as well as 25-years guaranteed feedstock supply agreements.

Development of petrochemical downstream projects in industrial cities near feedstock is another priority by the Government. In all industrial cities, the Government is expected to provide required facilities, land and utilities.

Moreover, to localise strategic technologies and boost R&D, the Government aims to offer preferential support to know-how based enterprises across the country.

Further, through its Sixth Development Plan (FY2015-2020), the Government proposes strategic downstream development plans, aimed at removing project financing constraints and in eliminating technology obsolescence. The development of effective

marketing and distribution systems are also key policies that are expected to be implemented. The Government plans to pursue the following key priorities in the petrochemical vertical during the sixth Development Plan period: Attracting over USD 70 billion in resources (both foreign and local finance) in order to run 62 halted petrochemical projects requiring about USD 33 billion , as well as for 36 new proposed projects with total Capex of USD 35-40 billion . This will allow the country to surpass the total production capacity to over 180 million tonnes per annum.

Increasing the export of petrochemical products from USD 12 billion to over USD 40 billion and increase the export of relevant consumer goods three-fold.

Boost investment in petrochemical downstream industries by developing industrial cities near feedstock provinces such as Bushehr, Khuzestan, Kermanshah, Ilam and Kurdistan provinces.

Quick development of railway and maritime transportation networks and facilities.

“The country also plans to develop infrastructure such as power plants, desalinated water plants, and road and rail transportation. Besides these, the Government is also cognizant of taking necessary measures to support industry growth through appropriate import duty restructuring, ensuring minimal bureaucratic processes in investment and project financing, as well as developing new free trade economic zones,”noted Ali.

Access to advanced technology and financial resources hold the key to growth “Sustained and planned development of the entire value chain for the petrochemical industry, with focused development of downstream markets, is expected to bring significant value addition to Iran’s economy, and is likely to support reduction in the country’s unemployment rate. Lifting of sanctions is expected to usher huge opportunities for the country through access to advanced technologies and international financial resources.

This is expected to significantly boost Iran’s image in the global petrochemical industry landscape even as its exports grow,”Ali concluded.

     

                                                                      

                                                                               