Shipping and the Macro Environment

Shipping demand will be shaped by the macroeconomic environment as well, in the coming weeks and months, with monetary easing expected to play a significant role in that regard. In its latest weekly report, shipbroker Xclusiv said that “the Chinese economy expanded by 4.6% year-over-year in the third quarter of 2024, slightly below forecasts but still representing a solid growth rate. However, this marks the slowest growth since the first quarter of 2023, amid persistent challenges in the property sector, weak domestic demand, and trade tensions with the West. For the first nine months of the year, the economy grew by 4.8%, falling short of China’s full-year GDP target of around 5%. In an effort to bolster the struggling real estate sector, the Chinese government has announced plans to expand lending for “white listed” housing projects to Rmb4 trillion ($562 billion). This move aims to complete unfinished projects and restore confidence in the sector, which has significantly impacted the wider economy”.

“The People’s Bank of China slashed key lending rates to new lows at the October fixing, intensifying efforts to support a weakening economy. The one-year loan prime rate (LPR), the benchmark for most corporate and household loans, was cut by 25bps to 3.1%, and the five-year rate, a reference for property mortgages, was reduced by the same margin to 3.6%. Meanwhile, the European Central Bank (ECB) lowered borrowing costs by 25 basis points, bringing the key deposit rate to 3.25%. This decision aligns with market expectations and follows similar moves in September and June. The ECB’s action comes amid falling inflation rates in the Eurozone and increasing signs of a weakening economy”, Xclusiv said.

The shipbroker added that “regarding the energy market, the International Energy Agency (IEA) has released its World Energy Outlook 2024, which forecasts a decline in global oil demand in the coming decades. This decline is primarily driven by the growth of electric vehicles and alternative fuels, which will reduce oil use in road transport, aviation, and shipping. The IEA still predicts that global oil demand will peak by 2030 and then gradually decline, reaching 73 million b/d by 2050. This shift will lead to a surplus of oil supply and downward pressure on prices. Also, the IEA highlights the importance of policy measures in driving the transition to cleaner energy sources and predicts that OPEC’s market share will decline from 34% to 33% by 2030, due to rising non-OPEC production, particularly in the Americas. The IEA forecasts a significant overhang of supply in the coming decade, putting petrostates in a difficult position. In an alternative scenario with greater efforts to reach net zero goals, OPEC’s market share could be even lower, reaching 21.36% by 2050. OPEC has consistently rejected the IEA’s bearish forecasts, has recently cut its demand growth forecasts for 2025 and adopted a more cautious approach, including delaying plans to reintroduce voluntary production cuts”.

Meanwhile, Xclusiv added that “in the seaborne metallurgical coal market, the fourth quarter faces an uncertain outlook, largely influenced by China’s economic stimulus measures and steel demand. Supply-side concerns are not escalating, with end-users citing an oversupply of prime coal. Major buyer India has seen a slump in steel prices and demand, leading to lower coking coal inventories. Australian premium hard coking coal prices have fluctuated, with a recent rebound supported by China’s stimulus measures. The market’s reaction to China’s monetary stimulus policies has been positive, but its impact on downstream demand remains uncertain. Some Chinese traders and mills anticipate increased coking coal demand in October, but concerns persist about the sustainability of Australian coal’s price advantage over alternatives from Canada. India’s coking coal demand is expected to be limited due to subdued steel demand and recent investments in new blast furnaces. Overall, India is likely to remain a price taker and follow China’s lead in the seaborne metallurgical coal market”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide