By Ulf Bergman
Macro/Geopolitics
The International Monetary Fund began the year with a few pessimistic statements regarding the outlook for the global economy from some of its leading officials, which led many to assume that the organisation was preparing the ground for a downgrade of its economic projections. The World Bank also followed suit with a downgrade of its forecast for growth in the year ahead. However, today’s release of the IMF’s World Economic Outlook provided an upgrade to the institution’s expectations for the year, compared to the previous projections published in October last year. The IMF is expecting the global economy to grow by 2.9 during the current year, an upward adjustment of 0.2 percentage points, amid resilience in the US economy and the reopening of the Chinese economy. While the fund is expecting growth to bottom out this year and accelerate next year, there are considerable downside risks, especially in the form of a stalled Chinese economic rebound.
However, fears of a weaker-than-expected Chinese economic recovery were somewhat allayed today with the release of the country’s official PMI for the manufacturing sector. The reading of 50.1 for the current month was higher than widely expected and was the first time the gauge was in expansionary territory since September.
Commodity Markets
The return to normality following the Chinese holidays did not boost the crude oil markets. The Brent futures retreated by 2.2 per cent on Monday as traders worried about the prospects of more interest hikes from some of the world's leading central banks during the coming week. After ending yesterday’s session at 84.50 dollars per barrel, the contracts have continued to give up ground amid losses of more than one per cent.
After last week’s substantial decline, the European natural gas futures began the new week with modest losses. The front-month contracts shed 0.6 per cent and settled just above 55 euros per megawatt-hour. However, the March contracts have surged by around eight per cent in today’s trading.
The thermal coal futures also recorded only minor moves on Monday after last week’s extensive losses. The Newcastle futures for delivery in March shed 0.2 per cent and settled at 257 dollars per tonne, while the contracts for delivery in Rotterdam declined by 1.1 per cent to 139 dollars per tonne.
The return of the Chinese buyers provided some support for the iron ore prices yesterday. The March contracts listed on the Singapore Exchange gained 1.4 per cent and settled at 128.14 dollars per tonne. However, the positive sentiment proved short-lived, and the contracts have recorded losses of nearly one per cent in today’s trading.
The base metals had a mixed day on Monday amid the conflicting signals of a stronger dollar and the end of the Chinese holidays. The copper and aluminium futures trading on the London Metal Exchange ended the day in the red amid a 0.6 per cent loss for the former and a 1.4 per cent decline for the latter. In contrast, the zinc and nickel contracts began the week with gains of 1.1 and 2.2 per cent, respectively.
An expectation of a rebound in Chinese demand for soybeans, as the world’s second-largest economy returns to normality, drove the oilseed’s futures higher during yesterday’s trading session. The contracts trading in Chicago gained 1.7 per cent and closed at the highest level for nearly two weeks. On the other hand, the wheat and corn contracts ended the day with only marginal gains.
Freight and Bunker Markets
The Baltic Dry Index ended its recent run of daily declines with a gain of 0.6 per cent on Monday. While the sub-index for the Capesizes remained in the red with a minor 0.2 per cent retreat, the freight rate indicators for the mid and small-sized segments were all in the black yesterday. The gauge for the Panamaxes advanced by 0.6 per cent, while the Handysizes gained 0.2 per cent. The Supramaxes proved to be the day’s winners, with their freight index advancing by 1.2 per cent.
The Baltic’s dirty and clean tanker indices remained on their recent downward path, with the former shedding 1.6 per cent and the latter declining by 1.7 per cent. In contrast, the freight rate gauge for the LPG carriers continued to impress with a robust daily gain of 7.3 per cent. The LNG freight rate index remained unchanged.
The drop in crude oil prices weighed on the markets for bunker fuel yesterday. VLSFO prices fell by more than two per cent in Singapore and Houston, while the losses were somewhat smaller in Rotterdam at 1.6 per cent. The trade in MGO saw losses of three per cent in Singapore and four per cent in Rotterdam, while prices remained unchanged in Houston.
The View from the Shipfix Desk
After giving up considerable ground from the high recorded during the second quarter of last year, soybean prices have been trending higher since October. Chinese buyers' renewed appetite for the oilseed has contributed to the gains. The prices have been volatile in the first few weeks of the year, but recent strength has made up for earlier losses. The end of the Chinese Lunar New Year holidays could also see additional upward pressure on prices amid a continued rebound in demand.
Chinese soybean imports are likely to rise in the coming months, as the volumes of forward-looking cargo orders have been trending higher recently. With almost all of January accounted for, the aggregate volumes for the month are well above what has been recorded during the same month in recent years. While Chinese cargo orders for soybeans loading in the US remain unseasonally robust, much of the recent surge is due to an increase in orders for cargoes loading on South America’s east coast.
Data Source: Shipfix