By Ulf Bergman
Macro/Geopolitics
Chinese growth during last year’s final quarter proved more resilient than most economists had expected. However, the 2.9 per cent year-on-year growth in the past three months contributed to the full-year GDP expanding by the least since the 1970s. The Chinese economy grew by three per cent during 2022, well below the country’s original official target of 5.5 per cent. The stronger-than-expected growth during the fourth quarter provides some reassurance for the coming year and the expected economic rebound. However, by Chinese standards, the reading was low and, combined with weak consumer confidence in the country, highlights the challenges ahead for the world’s second-largest economy.
Commodity Markets
A renewed focus on weak global growth rates weighed on crude oil prices on Monday as optimism over a rebound in Chinese demand moderated. The Brent futures ended last week’s winning streak and declined by one per cent, settling at 84.46 dollars per barrel. Today’s session has begun quietly, with only marginal price moves.
European natural gas prices saw a sharp declines yesterday. The front-month futures declined by more than fourteen per cent and settled at 55,45 euros per megawatt-hour, the lowest level since the middle of September 2021. Unseasonally high inventory levels and a robust inflow of seaborne LNG contributed to the falling prices. The contracts have also continued to slide during today’s early trading amid losses of around two per cent.
The substantial drop in natural gas prices weighed on European demand for thermal coal yesterday. The front-month futures for delivery in the Rotterdam area retreated by 6.1 per cent over the day and settled at 159 dollars per tonne, the lowest closing price since February last year. The Newcastle futures for delivery in February also came under pressure, with the contracts ending Monday’s session 2.4 per cent lower at 326 dollars per tonne.
Reports that the Chinese authorities will increase the supervision of iron ore trading after recent gains weighed on prices yesterday. The February futures trading on the Singapore Exchange fell by 4.9 per cent and settled at 119.40 dollars per tonne. The contracts have staged a partial comeback in today’s trading with gains of nearly one per cent.
The base metals began the new week with a mixture of gains and losses. The copper and zinc futures trading on the London Metal Exchange recorded marginal losses after last week’s gains, with the former shedding 0.9 per cent and the latter declining by 0.6 per cent. In contrast, the aluminium contracts extended their recent winning streak with gains of one per cent. Nickel, last week’s laggard, recovered some of the recent losses with gains of 1.6 per cent.
The trading in agricultural commodities at the Chicago Board of Trade was closed yesterday due to a public holiday.
Freight and Bunker Markets
By recent standards, the Baltic Exchange’s dry bulk freight indices had a quiet day yesterday. The headline Baltic Dry Index remained unchanged as the larger segments recorded modest gains, while the smaller vessels saw their gauges continuing to retreat. The sub-index for the Capesizes advanced by 0.9 per cent, while the freight rate indicator for the Panamaxes edged up by 0.2 per cent. On the other hand, the indices for the Supramaxes and the Handysizes continued to retreat, with the former declining by 1.9 per cent and the latter shedding 2.4 per cent.
The Baltic’s wet freight rate indicators also had a mixed day, with the gauges for the dirty tankers and the LNG carriers remaining unchanged. In contrast, the clean tanker index fell by 5.4 per cent, while LPG freight rates fell by 2.4 per cent.
Despite crude oil prices retreating by nearly one per cent yesterday, VLSFO prices advanced by more than one per cent in the world’s top ports yesterday. MGO also moved higher on Monday, with gains of 1.6 per cent in Singapore and 1.2 per cent in Rotterdam.
The View from the Shipfix Desk
European coal prices have been on a downward trend since the end of November. The February futures for delivery in the North-Western parts of the continent have declined by 44 per cent since then, as demand has weakened amid lower natural gas prices and well-filled inventories. Initially, there were fears that the loss of the Russian exports would lead to power shortages in Europe during the winter. However, a mainly milder-than-usual winter, combined with robust seaborne imports of LNG and coal from alternative sources, have eased such fears.
The loss of the European market for the Russian coal miners has forced them to find new markets for their output. China and, to a lesser extent, India have become increasingly important markets as a result. The publicly available cargo orders for Russian coal exports have been trending lower in recent years. At the same time, the proportion of orders for discharge in China and India has been rising. The data for the current month suggest that Russian exports of coal to China will remain robust in the near term. Order volumes for January are already matching those of the whole of December. Hence, assuming a degree of linearity for the remainder of the month, the monthly total may be the highest in nearly two years. However, it is also important to note that this does not include off-market and long-term transportation arrangements, which could suggest that totals are even higher.
Data Source: Shipfix