Wheat Auction, Palm Oil, Pak Energy Security, Electricity Tariffs, PTI Ban, GDP Growth Rate, US Default, Bakhmut Losses, China-Russia relations

TOPLINE

●     PASSCO plans to auction over 44,784 MMT of damaged wheat, with an estimated value of Rs 3.285 billion.

●     Palm oil spot prices have declined 13% in the last month.

●     Pakistan's energy security plan involves the arrival of discounted Russian oil via vessels at its ports in early June. Pak has requested assistance from the US in either constructing a gas pipeline for purchasing gas from Iran or covering the potential $18 billion penalty if the project remains unfinished by March 2024. Moreover, Pak's oil sector is seeking the reimbursement of Rs 10 billion in PDC which has been pending since 2008.

●     Nepra has approved an increase in electricity rates by Rs 1.25 per unit for the period of Jan-March.

●     Defense Minister Khawaja Asif stated that a ban on PTI is being considered. While, several prominent members of PTI, including Fawad Chaudhry and Asad Umar, have left the party.

●     NAC has approved a provisional GDP growth rate of 0.29% for fiscal year 2022-23, compared to 6.1% in the previous year.

●     The IMF Chief expressed that the US govt debt showdown was unnecessary for the world economy and believed a default could be avoided.

●     Russian Wagner mercenaries suffered heavy losses in the battle for Bakhmut with approx 20,000 troops killed. Meanwhile, the Chinese President expressed support for Russia's core interests, and the Russian PM signed agreements with China to strengthen their ties amid Western criticism during the Ukraine crisis.

COMMODITIES - CROPS, LIVESTOCK & HORTICULTURE

●     Pulses Import: Rs 17.3 billion was the import value of pulses in April 2023, up 119% from Rs 7.9 billion in April 2022, according to the PBS. [ET]

●     Diversifying Mango Trade: The Pakistan China Joint Chamber of Commerce and Industry (PCJCCI) emphasizes the need for collaboration between China and Pakistan to tap into the potential of the mango sector. To meet the evolving preferences of Chinese consumers, there is a shift towards prioritizing quality over price, requiring Pakistan to diversify its mango varieties and produce high-quality mangoes. The PCJCCI plans to establish a Pak-China Trade Portal and explore three-dimensional transportation channels to facilitate rapid delivery of mangoes, while also proposing the establishment of large warehouse supermarkets in major Chinese cities to cater to the growing demand. [ET] [The News] [The Nation] [Dunya]

●     Pak Army Land Request: Pakistan Army has asked the Punjab government to provide 30,000 acres of state land situated in Cholistan for the allotment to next of kins of martyrs, war wounded persons and deserving military personnel under Army Welfare Scheme. The document also showed that the military had proposed a “profit sharing mechanism” for corporate farming in Punjab. As per the formula, 20% of profits will be used for research while the remaining will be divided 50-50 between the army and the government of Punjab. [Daily Pakistan]

●     Auction of Damaged Wheat: Pakistan Agriculture Storage and Services Corporation Limited (PASSCO) plans to auction over 44,784 metric tons of damaged wheat, with an estimated value of Rs 3.285 billion. The wheat stock was affected by heavy rains and floods, and the damaged quantity will be sold through a transparent auction process, resulting in a differential cost loss of approximately Rs 37.476 million. [BR]

●     Palm Oil Spot Prices Plummet: Palm oil spot prices have experienced a significant decline, dropping 13% in the last month, attributed to increased palm output in Malaysia and Indonesia as well as Asian buyers reducing their inventories. Despite the decrease in international commodity prices, retail cooking oil prices in Pakistan have doubled in less than two years due to the devaluation of the rupee and higher transportation costs, and it is unlikely that retail prices will decrease despite the decline in international spot rates. [BR]

●     Sindh HC Notices on Wheat Movement Ban: The Sindh High Court has issued notices to the provincial government and other relevant departments in response to a petition requesting the lifting of a ban on inter-district movement of wheat, particularly in Karachi. The petitioners, including the flour mills association, argued that since Karachi relies on wheat supply from other districts and provinces, the ban has affected their operations and they are unable to meet the fixed procurement target set by the government. [The News]

●     Muhammad Abid's Wheat Challenge Triumph: A young man named Muhammad Abid walked 15 kilometers with a 50-kilogram wheat sack on his head/shoulders to win a Rs 100,000 cash prize. Abid, who used to work as a laborer at a food grain market, had made the claim to a commission agent in his village and was accompanied by friends and village mates who celebrated his journey. [The Nation]

AGRI-INPUTS, WEATHER, WATER & POWER

●     Heatwave Hits Northern Pakistan: The upper and central parts of the province are currently experiencing a heatwave due to a westerly wave, while the Meteorological department has predicted partly cloudy, warm, and windy weather for Karachi over the next three days. [Dawn]

●     Crackdown on Plastic Bags: During a meeting chaired by MNA Nuzhat Pathan, the parliamentary committee on climate change directed the Ministry of Climate Change to close down all plastic bag manufacturing factories and provide a list of shops and factories that have violated environmental laws. The committee also instructed the Environment Protection Agency to take strict action against shop owners using polythene bags in the federal territory and called for an effective media campaign to enforce the ban on plastic bags in the capital city. [Dawn]

●     Rawalpindi's Flood Relief Plan: The Rawalpindi district administration has implemented a flood relief plan to address the potential damage caused by flooding in Nullah Leh and other rain drains during the monsoon season. The plan includes the establishment of five flood relief camps, the declaration of 12 low-lying areas as sensitive and dangerous, and a ban on waste dumping and building material in the storm drains. Efforts will be made to shift affected residents to safe locations before the flood season begins. [ET]

●     Discounted Russian Oil: The Pakistani government's energy security plan includes the arrival of vessels carrying 100,000 tons of discounted Russian oil at Pakistan ports in early June. State Minister for Energy, Musadik Malik, stated that the oil would be transported from Oman to Pakistan within seven to ten days, where it would be refined and mixed with light Arabian oil to reduce the price. [BR]

●     Pakistan's Request for Gas Pipeline Support: Pakistan has reportedly requested the US to either allow it to build a gas pipeline for purchasing gas from Iran or assist in paying the expected $18 billion penalty if the project is not completed by March 2024. The request was raised by Petroleum Minister Musadik Malik during his visit to Washington, and while the request is under review by the US, experts suggest that the Biden administration may be cautious about aiding any country's commercial cooperation with Iran due to the strained US-Iran relations. [Dawn]

●     Pakistan Railways' Challenges: The Pakistan Railways has experienced a 20% decline in revenue due to the country's current economic situation, with both passenger train and freight revenue being affected. The decline in freight revenue is particularly notable, including the transportation of coal to the Sahiwal power plant. The National Assembly Standing Committee on Railways expressed concern over the situation and suggested analyzing the feasibility of transporting fuel, gypsum, and other materials via freight trains to boost revenue. [BR]

●     Investment Impediments: Qatar has urged the Pakistani government to address obstacles that are impeding its investment in the Energas LNG terminal. The consortium owning the terminal is seeking pipeline capacities from both the Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL), but the approval for pipeline capacity from SNGPL is still pending, and incomplete documentation related to the Third Party Access (TPA) is causing further delays. This issue is also affecting the Tabeer LNG terminal owned by Japan's Mitsubishi, which is awaiting resolution of the same issues before proceeding with its construction. [The News]

●     Nepra Approves Electricity Rate Increase: The National Electric Power Regulatory Authority (Nepra) has approved an increase in electricity rates by Rs 1.25 per unit for the period of January-March. This increase will provide about Rs 46 billion in additional revenue to the ex-Wapda Distribution Companies (Discos) to cover capacity charges, transmission charges, market operator fees, and other operational costs. The adjustment will be applied uniformly to all consumers except for lifeline users, and the increased rates will help clear outstanding bills owed to independent power producers (IPPs). [Dawn] [ET]

●     SNGPL Fertilizer Plants Granted Permission: The Economic Coordination Committee (ECC) of the Cabinet has granted permission to Sui Northern Gas Pipeline Limited (SNGPL)-based fertilizer plants, Fatima Fertilizer (Sheikhupura) and Agritech, to continue operating on indigenous gas without government subsidies until August 31, 2023. The decision was made during an ECC meeting chaired by Finance Minister Ishaq Dar, where discussions also took place on urea fertilizer requirements for 2023 and the participation of Sindh's Mangroves projects in voluntary carbon markets. [BR]

●     Security Incident at MOL Pakistan Field: Pakistan Oilfields Limited (POL) reported that the plant and field installations of MOL Pakistan Oil and Gas Company in Hangu district remained safe after an armed attack by militants on May 22. While six personnel lost their lives in the attack, the rest of the wells and production of hydrocarbons remained unaffected, with only a temporary curtailment of approximately 4 million cubic feet per day of gas and 24 barrels per day of oil from the targeted wells. [BR]

●     Revamping Pakistan's Refining Sector: Pakistan is preparing to introduce an oil refining policy for existing refineries, known as brownfield sites, which will offer incentives for them to upgrade their machinery with better technology. The policy aims to meet the country's increasing demand for petroleum products and will be accompanied by offshore sites for oil and gas exploration, as well as a new Greenfield oil refining policy to attract foreign investment in the petroleum sector. The government plans to designate the locations of new refineries as special economic zones and provide tax exemptions and incentives to foreign investors. [The News]

●     OGDCL & PRL Forge Partnership: The Oil and Gas Development Company Limited (OGDCL) and Pakistan Refinery Limited (PRL) have signed a Memorandum of Understanding (MOU) to establish a strategic cooperation relationship in the energy industry. The MOU outlines their commitment to explore potential areas of collaboration, including OGDCL's equity investment in PRL, and sets the framework for future negotiations and agreements between the two companies. [The News]

●     Pakistan's Oil Sector Seeks Reimbursement: The oil sector in Pakistan is seeking the reimbursement of Rs 10 billion in price differential claims (PDC) on petroleum products, which have been pending since 2008. The Oil Companies Advisory Council (OCAC) has requested the repayment of the outstanding amount, highlighting the prolonged delay and loss of value for the industry. The sector has urged the government to address this issue in the next budget to alleviate further burden on the industry, although the chances of recovery appear dim. [The News]

●     Illicit Goods Seized: Over the past 20 days, the Collectorate of Customs Enforcement in Karachi has seized Iranian smuggled petroleum products, smuggled vehicles, and various other illicit goods valued at approximately Rs 792 million. The operation led to the apprehension of 14 oil tankers transporting Iranian smuggled diesel and petrol, as well as the confiscation of non-customs paid vehicles and a range of other smuggled items. [BR]

●     Sindh's Updated Forest Conservation Policy: The Sindh forest department has released the amended Sindh Sustainable Forest Management Policy, removing provisions that promoted agricultural activity on forestland in riverine areas. The policy aims to bring back forest cover on all plantable areas, involving private sector investment and protection through public-private partnerships. The amended policy complies with international forest management standards and court orders prohibiting crop cultivation on reserved forestlands. [Dawn]

AGRI UPDATES & PAKISTAN POLICY

●     Contemplating Ban on PTI: Defense Minister Khawaja Asif stated on Wednesday that the ban on the Pakistan Tehreek-e-Insaf (PTI) party is being considered. He accused PTI leader Imran Khan of having heinous ambitions and attacking the foundation of the State, suggesting that the events of May 9 were pre-planned. Asif mentioned that if a decision is made to ban PTI, it will be referred to Parliament, and he warned against Imran Khan's attempts to negotiate after his failed gamble. [BR] [Dawn]

●     PTI Faces Prominent Member Departures: Several prominent members of the Pakistan Tehreek-i-Insaf (PTI), including Fawad Chaudhry and Asad Umar, have left the party following the violence on May 9. While Umar stepped down from his party office but remained associated with PTI, others, including Shireen Mazari and Fayyazul Hassan Chohan, quit the party entirely. The departures come in the wake of the arrests of former prime minister and PTI leader Imran Khan, with Umar calling for a transparent inquiry into the violence and the release of arrested party workers. [Dawn]

●     Provisional GDP Growth Rate: The National Accounts Committee (NAC) has approved a provisional Gross Domestic Product (GDP) growth rate of 0.29% for the ongoing fiscal year 2022-23, compared to 6.1% in the previous year. The growth rates for the agricultural, industrial, and services sectors have been estimated at 1.55% , -2.94%, and 0.86%, respectively, for the current fiscal year. [BR] [Dawn]

●     Bird Strikes Plague Pakistan's Airports: The Pakistan International Airlines (PIA) has reported a significant number of bird strikes, with 29 incidents occurring at domestic airports in the last five months, resulting in damage to seven planes. In a recent incident, Flight PK-310 from Karachi to Quetta was hit by a bird after takeoff, causing damage to the plane's engine blades and necessitating the passengers to be transferred to an alternative flight. [ET]

INTERNATIONAL – OVERVIEW & MARKET OUTLOOK

●     IMF Chief Urges Debt Resolution: IMF Chief Kristalina Georgieva expressed her view that the US government debt showdown was unnecessary for the world economy and believed a default could be avoided. She acknowledged the historical pattern of last-minute resolutions but emphasized the risks and uncertainties associated with the situation, while Blackstone CEO Stephen Schwarzman described it as a tense battle of wills and desires. [BR]

●     Oil Prices: Oil prices rose over 1% on Wednesday, after a large unexpected drawdown in US crude inventories and a warning from the Saudi energy minister that raised the prospect of further OPEC+ production cuts. Brent crude futures rose 90 cents, or 1.2%, to $77.74 a barrel by 12:29 p.m. EDT (1629 GMT). US West Texas Intermediate crude (WTI) gained 97 cents, or 1.3%, to $73.88. [BR]

●     Wagner Mercenaries' Heavy Losses in Bakhmut Battle: Yevgeny Prigozhin, the founder of Russia's Wagner mercenary group, revealed that around 20,000 Wagner troops were killed in the battle for control of Bakhmut in eastern Ukraine. Prigozhin also mentioned recruiting about 50,000 prisoners to fight in Russia's war in Ukraine, with approximately 20% of them losing their lives, along with a similar number of contract soldiers, in the city's battle. However, while Wagner and the Russian military claimed to have taken control of Bakhmut, the Ukrainian forces continued to fight for the city according to Kyiv. [Al Jazeera] [The Guardian]

●     US Presidential Race: Ron DeSantis officially launched his long-awaited 2024 presidential campaign, signaling he will lean into culture war issues as a central strategy to wrestle the Republican nomination from Donald Trump. The Florida governor held a Twitter Spaces event with its owner Elon Musk, which was beset by technical glitches as hundreds of thousands of listeners tried to tune in. [Bloomberg] [Bloomberg]

●     Solidifying Russo-Chinese Ties: Chinese President Xi Jinping has offered its support on Moscow's core interests. At a meeting with Russian Prime Minister Mikhail Mishustin in Beijing. Xi Jinping told the Russian Prime Minister that the two countries would continue to offer each other "firm support on issues concerning each other's core interests and strengthen collaboration in multilateral arenas. The Russian Prime Minister said relations between Russia and China are at an unprecedented high level. [ET] [MT] [RP] [DP] [Barron’s]

●     Russia-China Strengthen Ties Amid Ukraine Crisis: During a visit to Beijing, Russian Prime Minister Mikhail Mishustin signed several agreements with China, emphasizing the strong bilateral ties between the two countries despite Western criticism of their relationship amid the ongoing war in Ukraine. As Russia faces Western sanctions and seeks support, it is relying on China for economic cooperation, particularly in the areas of oil, gas, and trade, with energy shipments projected to increase and discussions on technological equipment supplies taking place between the two nations. [Dawn]

●     Iran Assigns Ambassador to Saudi Arabia: Iran has appointed Alireza Enayati as its ambassador to Saudi Arabia, marking a significant step in the thawing of relations between the two countries after more than seven years of severed ties. Enayati, a former ambassador to Kuwait and an experienced diplomat in Gulf affairs, will assume the role, following a surprise reconciliation agreement signed between Iran and Saudi Arabia in March. [BR] [Dawn] [ET] [The News]

●     Central Afghanistan Hit by Deadly Flooding: Flooding in central Afghanistan has resulted in the deaths of six people and the destruction of dozens of homes. The heavy floods, accompanied by the loss of agricultural land and damaged irrigation canals, add to the ongoing humanitarian crisis in the country, which is already grappling with food insecurity and the effects of climate change. [BR] [ET] [Geo]

PAKISTAN - REMAINDERS

●     Robberies in the vicinity of Northern Bypass cattle market frighten the public. [Dawn]