On the macro front, OECD stressed last week that global economy is still facing mounting challenges. In particular, growth has lost momentum, high inflation is proving persistent, confidence has weakened, and uncertainty is high. The aforementioned factors forced the Paris-based intergovernmental organisation to lower its global GDP projections for the months to come. In particular, global GDP growth is now projected to be 3.1 percent in 2022, around half the pace of 2021 during the rebound from the pandemic, and to slow further to 2.2 percent in 2023, well below the rate expected prior to the Russia-Ukraine war. In terms of global trade, there are signals that trade growth is set to slow.
In sync, World Trade Organisation expressed concerns that trade growth is likely to decelerate in the closing months of 2022 and into 2023, according to the latest WTO Goods Trade Barometer released this Wednesday. The current reading of 96.2 is below both the baseline value for the index and the previous reading of 100.0, reflecting cooling demand for traded goods. The drop in the goods barometer is consistent with the WTO's trade forecast of early October, which predicted merchandise trade volume growth of 3.5 percent in 2022 and just 1.0 percent in 2023 due to several related shocks including the war in Ukraine, high energy prices, and monetary tightening in major economies. Following an expansion of 4.8 percent in the first quarter, merchandise trade posted a 4.7 percent year-on-year increase in the second quarter. For the second half of 2022 materially lower pace of circa 2.4 percent is needed in order for the forecast to be realised.
This downward trend of the merchandise trade volume growth has become apparent in both the dry bulk and container shipping markets. During the second half of the current trading year, the container market has remained on the path towards “normalisation”, according to BIMCO. The Shanghai Containerized Freight Index (SCFI), which represents spot freight rates for loading in Shanghai, has fallen another 49 percent during the last couple of months and now lingers 74 percent below its peak of early January 2022. The index for average freight rates for all containers loading in China, the China Containerized Freight Index (CCFI), has also continued to fall and is now 40 percent lower than two and a half months ago, and 54 percent lower than at its peak reached in February 2022. The SCFI is back to levels last seen in September 2020. In parallel, the time charter rates and second-hand prices for ships have followed the freight rates downwards. Compared to two and a half months ago, average time charter rates and average second-hand prices are down 64 percent and 33 percent respectively, as quoted by the key shipping industry body BIMCO.
In a similar vein, Baltic Dry Indices too held their course steady towards “normalisation”, reverting closer to their trailing decade average values. In particular, the general Baltic Dry Index ended today at 1324 points, tick less than the respective average value of the 2016-2020 period and tick above the 1301 points that the leading dry bulk index averaged in the second day of December during the five-year period ended in December 2015. For this week though, Panamaxes tried to resist to the aforementioned downward spiral, being the only segment reporting gains. With the Atlantic basin in the front seat, the BPI TCA concluded today at $14,564 daily. Handies trended sideways during the forty-eighth week, with the Atlantic losing some steam. Supras and Capes ended the week in the red, after dropping by 1.7 and 5.8 percent on a weekly basis respectively.
Just before this week’s closing, stock exchanges were looking for answers to the US jobs data at the same time as dry bulk was focusing on China’s mounting bills of the draconian zero-Covid policy. In reference to the former, US stock indices moved south on Friday, as higher-than-expected job additions in November reignited investor concerns about the Federal Reserve continuing on its path of aggressive monetary policy tightening. On the other hand, Baltic indices were idly watching China’s attempt to gradually ease zero-Covid policy, awaiting for a substantiation to a broader extent of these measures to earn their attention.
Data source: Doric