Home Commodities The economic and commodities outlook from Geneva

The economic and commodities outlook from Geneva

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As metaphors go to highlight today’s tortuous trading environment, the fact that the Economic and Commodities Outlook session kicked off Friday’s Geneva Dry conference with an empty seat on stage was rather apt – Shamika Sirimanne, director of the UN Trade and Development’s division on technology and logistics, was snarled up in traffic just outside the World Trade Organization building of all places. She was able to take her seat alongside moderator Sam Chambers, the editor of Splash, 10 minutes into the debate which had been billed as a scene-setter for much of the other sessions that were to follow that day.

Saad Rahim, chief economist at Trafigura, was asked to get proceedings underway, giving his take on where the global economy was headed for the next 48 months.

“The US economy is not just firing on all cylinders, it’s finding new cylinders to fire on ,” Rahim told delegates, going on to highlight other areas where “pockets of growth” have materialised recently.

Rahim argued that too many headlines had focused too strongly on China’s troubled property sector and that commodity import data showed there was more to the health of the People’s Republic than apartment sales. China last year recorded record copper, aluminium, oil and gas demand, he pointed out.

“That’s not an economy that is suffering in the way that I think the headlines and sentiment suggest,” Rahim said, going on to point out that infrastructure spending and manufacturing remain “very, very strong”.

Likewise, Rahim said the Indian economy was showing strong growth, while in Europe some “green shoots” were emerging.

“So long story short, I think we’re looking at a global economy that is actually quite healthy and that is starting to pick up steam, but we need a little bit more push from China to to really get going. And if the Fed does decide to cut at any point this year, I think that just sort of turbocharges everything as well,” Rahim concluded.

Taking her seat on stage, Sirimanne from the United Nations, was immediately pressed into action with her views sought on the global economy.

“Global trade is is resilient. It’s steady, but slow,” she said, forecasting the world merchandise trade volume with increase somewhere between 2.5% and 2.6% this year, picking up to 3.3% in 2025, figures that are very much on trend with the past 20 years with the exception of downturn experienced during covid.

Turning to seaborne trades, the UN body is forecasting maritime trade will grow around 2.1% over the 2024-2025 period, below the average 2.8% 20-year trend.

Discussion then turned to some of the variables the dry bulk shipping community are faced with in 2024 such as diversions from the Red Sea and the Panama Canal.

The Red Sea diversions adds “a bit of spice” in a market that’s already “quite fundamentally tight”, said Dr Roar Adland, global head of research at broking house SSY. Overall, the issues in Panama and off Yemen have added 1.4% to overall ton-mile demand, according to SSY estimates.

“Each time we have infrastructural inefficiencies in the supply chains it is good for shipping, including dry bulk,” said Christopher Rex, head of sustainability and research at Danish Ship Finance, a bank. Rex admitted that the growth in iron ore and coal shipments experienced recently had caught many by surprise.

Rex voiced concern about the potential “toxic cocktail” brewing from the immense debts from the Chinese real estate sector, urging delegates to keep an eye on the square metre prices at key Chinese cities in the coming months.

SSY’s Adland then gave his ton-mile projections for various trades in one of the most photographed slides of the day. SSY is “fairly optimistic” on prospects for dry bulk, Adland said, forecasting a 3.5% overall total ton-mile growth for the market.

Bullish about prospects from a supply viewpoint, Rex from Danish Ship Finance warned that a very important changing dynamic was that global global economic growth is creating less and less seaborne trade volumes, not in terms of distances, rather volume growth. For a longer term outlook, Rex was less positive on anything from panamaxes and and above while remaining “quite positive” for all the smaller ship segments carrying minor bulks.

From the audience, Manu Ravano, co-CEO of broking giant IFCHOR Galbraiths, gave his own take on the dry bulk markets in theyear ahead, saying that for the next two years, at least, the markets favoured the larger ships.

A good 10 minutes was then spent geopolitical game playing, with panellists invited to comment on what the results of November’s elections in the US will mean for the sector.

“I don’t think anyone in this election season is going to get in trouble for being too anti-China,” said Trafigura’s Rahim, conceding that there were significant differences in degree between Biden and Trump. Remarkably, Rahim pointed out that construction in the manufacturing sector in America has gone up by almost 200% from where it was at the end of 2021.

“When we look at our growth projections, it’s no longer just a China story,” Rahim said, highlighting growth in commodity imports from the likes of India and Southeast Asia.

Sirimanne from the UN said that the ongoing diversification of supply chains was all good so long as it was based on sound economic reasons, not geopolitics, the risk being the loss of trade efficiency with supply chains getting much longer and more tangled.

“Unfortunately I would say, human suffering, wars, cold wars, hot wars, proxy wars, sanctions, trade wars, really anything that makes shipping more inefficient is good for us,” conceded Adland from SSY.

Geneva Dry, the world’s premier commodities shipping conference returns on April 28 and 29 next year with delegate passes being limited to just 800. Tickets are now on sale here.

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