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Shipping and the Macroeconomic Environment: What to Expect?

The global economy is heading towards monetary easing, expected to arrive in the following months. This could trigger a rebound in trade growth dynamics and demand across the board. In its latest weekly report, shipbroker Xclusiv said that “despite record high interest rates, the ECB, Fed, and BoE all left their key rates unchanged. While none forecast further increases, lowering rates soon remains unlikely due to ongoing inflation concerns. However, the IMF offers a brighter outlook, raising its global growth forecast for 2024 to 3.1% on signs of easing inflation. This positive revision reflects faster-than-anticipated inflation decline in many regions, reducing the risk of a severe global economic slowdown”.

Source: Xclusiv

According to the shipbroker, “IMF forecasts a faster-than-expected Russian economic expansion in 2024, driven by increased military spending under President Vladimir Putin. The GDP is projected to grow by 2.6%, surpassing the 1.1% predicted in October and slightly below the 3% estimated for 2023. This 1.5% upward revision represents the largest upgrade for any economy in the IMF’s World Economic Outlook update. However, these forecasts raise questions about the effectiveness of Western sanctions and the accuracy of the IMF predictions. High crude oil prices and the Red Sea crisis have significantly impacted the Russian oil trade. For example, India, a major importer of Russian Sokol crude the last one and a half year, has barely received any shipments in the past two months, replacing Russia with Iraq as its primary source. This suggests that sanctions and external factors may be hindering the anticipated economic boost from increased military spending”.

Meanwhile, “the Chinese property market, a crucial driver of the country’s economic growth and commodity consumption, faced another setback last week. A Hong Kong court ordered the heavily indebted China Evergrande Group, a major developer, to liquidate. Notably, many of Evergrande’s assets are pre-sold homes in mainland China that remain unfinished. While the full impact of Evergrande’s situation unfolds, the Chinese government is likely to prioritize completing and delivering pre-sold homes to minimize the ripple effect on other developers and the broader economy. This could potentially support ongoing demand for commodities. The property sector currently consumes a significant portion of China’s steel, aluminum, and copper. In 2024, steel demand from this sector is estimated at 268 million tons, representing 29.5% of total consumption. Similarly, property accounts for approximately 30% of China’s aluminum demand and over 20% of its copper demand. Regarding steel, China’s high production, stagnant domestic demand, and robust steel consumption in emerging economies are expected to keep steel exports strong and imports low in 2024. Forecasts predict exports to fall around 82 million tons, but this could be higher if current trends persist. However, aluminum and copper demand from the property sector are expected to decline in 2024. Consumer interest in completed home sales has waned over the past three years, and this trend likely continues through 2024. Despite this, it’s important to remember that China remained the top contributor to global copper demand in 2023, driven by strong consumption in the green energy sector”.

Source: Xclusiv

Finally, Xclusiv concluded that “in a surprising move, Saudi Arabia has scrapped its plan to increase oil output capacity. This major policy reversal comes from Saudi Aramco, the world’s largest oil producer, responsible for 10% of global supply. At the request of the energy ministry, Aramco has ditched its multi-billion dollar project to expand the Kingdom’s maximum sustainable production from 12 million barrels per day (bpd) to 13 million bpd by 2027”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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