Teniz Capital Headquarters in Almaty, Kazakhstan
Almaty, KAZAKHSTAN, August 26th. – A combination of the reduction in the production of fuels in Russia along with new geopolitical uncertainties in the Middle East region poses a new layer of risks for the economy of Kazakhstan in terms of the agricultural sector amid the upcoming autumn harvesting season.
This is according to a new analysis conducted by Teniz Capital Investment Banking, whereby the current disruption in the market of fuels goes beyond the energy sector. Although the high price levels in the international oil market will be beneficial for exports from Kazakhstan, higher input prices might push up the cost structure of operations for farmers.
The report is entitled “Fuel Shortages in Russia: Risks for Kazakhstan’s Wheat Market and Diesel Fuel Balance” and can be downloaded here.
“It is wrong to look at the fuel shortage only in terms of an energy market problem. There is a possibility that it can have some impact on the dynamics of inflation and agriculture production as well as trade flows in the region,” says Zhasulan Ospanov, Independent Director of Teniz Capital Wealth Management. “It is true that Kazakhstan starts this phase with a strong economic position, but ensuring sufficient diesel fuel for harvest will be key.”
The problems plaguing Russia’s refinery industry are still there. Early forecasts indicate that Russian crude oil processing fell to about 4.1 million barrels per day in June and that gasoline output was still down by about 25% compared to last year. Meanwhile, the rising tensions between the U.S. and Iran have created some uncertainties for oil markets, oil shipping through the Strait of Hormuz, freight rates and fertilizer prices.
This creates a mixed scenario for Kazakhstan’s economy, which benefits from high oil prices but has an adverse impact on its agriculture due to higher diesel prices and fertilizers, as well as the unreliable supply of fuel from Russia.
The report is one of Teniz Capital Investment Banking’s ongoing research on macroeconomics and capital markets with respect to Kazakhstan and Central Asia. Not only that, but the company is also very actively involved in the capital market operations of the region, having managed placements of securities worth more than KZT 510 billion (approximately $1.116 billion USD), and having issued debt securities worth over KZT 538 billion (approximately $1.177 billion USD.)
Amongst the recent deals concluded by Teniz Capital are debt capital markets mandates from the Ministry of Finance of the Republic of Kazakhstan, Samruk-Kazyna, KTZ, BSTDB, and Bank RBK.
In this respect, the timing of events is very sensitive. Pavlodar refinery in Kazakhstan will undergo maintenance from 18 September to 17 October during the peak time for harvest in northern areas of Kazakhstan, where wheat is grown. In this situation, the stability of the fuel balance of Kazakhstan depends to a large extent on the stocks of diesel fuel accumulated until September and special fuel allocations for agricultural producers, as well as fuel imports from Russia.
“The planned maintenance of the Pavlodar refinery makes the situation even more complicated given that regional fuel markets are now tightening,” said Ospanov. “The industry should carefully watch the fuel inventories, cross-border fuel movements, and allocations by the government as these will decide the future balance of fuels in Kazakhstan for months to come.”
In addition, the fuel deficit is gradually turning into a problem of the entire region and not only Russia. For instance, Uzbekistan has significantly increased its gasoline imports as a response to shortages at home. Kyrgyzstan continues to be one of the most vulnerable fuel markets in the region, which imports more than 90 percent of its gasoline supplies from Russia.
Apart from fuel availability, the report indicates that a delay in harvesting due to shortage of diesel will eventually impact the quality of wheat as well as the competitiveness of exports. While optimistic expectations about the harvest in the south of Russia remain intact in order to ensure supply of grains, the main threat remains in the form of delay in harvesting and high logistics costs.
Read the full analytical report here: https://backend.tenizcap.kz/storage/1k8ITJV4NdzGq3uIblfs6aZryhD9O5eyj5Md3Q5y.pdf
About Teniz Capital Investment Banking
Teniz Capital Investment Banking is one of Kazakhstan’s leading independent investment banking firms, providing strategic advisory, capital markets expertise, macroeconomic research and investment analysis for institutional and corporate clients.
Established in 1997, Teniz Capital manages a team of over a 100 professionals, working from offices in Almaty, Astana’s AIFC, and Abu Dhabi. It focuses on cross-border transactions and specializes in infrastructure, energy, and technology deals.
SAFE HARBOR STATEMENT
This press release and the research report referenced herein are provided for informational purposes only and do not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States or any other jurisdiction where such offer or solicitation would be unlawful.
This analysis does not constitute investment advice, a personal recommendation, or an invitation to buy or sell any financial instrument. The information contained herein should not be relied upon as the sole basis for any investment decision. Investors should conduct their own independent research and consult with qualified financial, legal, and tax advisors before making any investment.
This material is not intended for distribution to, or use by, any person or entity in the United States or to U.S. persons, or in any jurisdiction where such distribution or use would be contrary to local law or regulation. Teniz Capital and/or its affiliates may have positions in securities mentioned herein. Past performance is not indicative of future results.
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- Teniz Capital Headquarters in Almaty, Kazakhstan
