The economic and commodities outlook from Geneva

While the metaphors highlight today’s tortuous trading environment, the fact that the Economic and Commodity Outlook session kicked off the dry Geneva conference on Friday with an empty seat on stage was somewhat apt – Shamika Sirimane, Director of the Technology and Logistics Division at UN Trade and Development, was… Trapped in traffic outside the WTO building of all places. She was able to take her seat next to moderator Sam Chambers, the magazine’s editor splashafter 10 minutes of discussion that was described as the spectacle of many other sessions that would follow that day.

The economic and commodities outlook from Geneva
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Saad Rahim, chief economist at Trafigura, was asked to kick off the proceedings, and give his view on where the global economy is headed over the next 48 months.

“The American economy is not only working at full capacity, but it is looking for new energies to work on,” Rahim told delegates, continuing to highlight other areas in which “pockets of growth” have been achieved recently.

The economic and commodities outlook from Geneva
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Rahim said that too many headlines focused too strongly on China’s troubled real estate sector, and that commodity import data showed that the health of the People’s Republic was more important than apartment sales. He pointed out that China recorded record demand for copper, aluminum, oil and gas last year.

“This is not an economy that is suffering in the way that I think the headlines and sentiment suggest,” Rahim said, noting that spending on infrastructure and manufacturing remains “very, very strong.”

The economic and commodities outlook from Geneva
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Likewise, Rahim said the Indian economy is showing strong growth, while some “green shoots” are emerging in Europe.

“So in short, I think we’re looking at a global economy that’s really healthy and starting to pick up steam, but we need a little more push from China to really move forward,” Rahim concluded. “If the Fed decides to cut anytime this year, I think That’s just kind of the catalyst for everything, too.”

As she sat on stage, Sirimane of the United Nations was immediately pressed to act by offering her views on the global economy.

“Global trade is resilient. It is steady, but slow,” she said, predicting that the volume of global merchandise trade will grow by between 2.5% and 2.6% this year, then rise to 3.3% in 2025, numbers that keep pace with the prevailing trend on Earth. Over the last 20 years with the exception of the downturn experienced during Covid.

Turning to maritime trade, the UN expects maritime trade to grow by about 2.1% over the period 2024-2025, below the average trend of 2.8% over 20 years.

The discussion then turned to some of the variables the dry bulk shipping community will face in 2024 such as diversions from the Red Sea and the Panama Canal.

Dr Roar Aadland, global head of research at brokerage SSY, said money transfers in the Red Sea add “a little spice” to an “already very tight” market. Overall, issuances in Panama and outside Yemen added 1.4% to overall ton-mile demand, according to SSY estimates.

“Every time we have infrastructure inefficiencies in supply chains, it is beneficial for shipping, including dry bulk,” said Christopher Rix, head of sustainability and research at the Danish Ship Finance Bank. Rex admitted that the recent growth in iron ore and coal shipments had surprised many.

Rex expressed concern about the potential “toxic cocktail” created by the massive debt from China’s real estate sector, and urged delegates to monitor square meter prices in major Chinese cities in the coming months.

SSY’s Adland then gave his ton and mile forecasts for various trades in one of the most photographed slides of the day. Adland said SSY is “fairly optimistic” about the prospects for dry bulk, forecasting overall growth of 3.5% per ton-mile in the market.

The economic and commodities outlook from Geneva

Optimistic about the outlook from a supply point of view, Rex of Danish Ship Finance warned that a very important changing dynamic is that global economic growth is creating less and less volumes of seaborne trade, not in terms of distance, but volume growth. As for the long-term outlook, Rex was less positive on anything from panamaxes and above while remaining “quite positive” on all sectors of smaller vessels carrying small volumes.

In the audience, Manu Ravano, co-CEO of brokerage giant IFCHOR Galbraiths, gave his own view on dry bulk markets next year, saying that for the next two years, at least, markets have favored larger ships.

Ten minutes were then spent on geopolitical play, with panelists invited to comment on what the November election results in the US might mean for the sector.

“I don’t think anyone this election season is going to get in trouble for being too anti-China,” Trafigura’s Rahim said, acknowledging that there are significant differences in degree between Biden and Trump. It is noteworthy that Rahim indicated that construction in the manufacturing sector in America increased by about 200% compared to what it was at the end of 2021.

“When we look at our growth forecasts, it is no longer just a China story,” Rahim said, highlighting the growth in commodity imports from countries such as India and Southeast Asia.

The UN’s Sirman said continued diversification of supply chains was good as long as it was based on sound economic reasons, not geopolitical reasons, and the risk was a loss of commercial efficiency as supply chains became longer and more intertwined.

“Unfortunately, I would say that human suffering, wars, cold wars, hot wars, proxy wars, sanctions, trade wars, anything that makes shipping more inefficient is good for us,” SSY’s Adland admitted.

Then the conversation inevitably turned to India, with panelists asking how much the world’s most populous country could replicate the Chinese import largesse seen so far in the 21st century.

The United Nations’ Sirman noted that India is now growing faster than China, but is much smaller than its eastern neighbor. Current GDP statistics show that the Indian economy is worth $3.5 trillion, a far cry from China’s $18 trillion economy.

SSY’s Adland warned that India is a resource-rich country, and it will take many years before shipping can expect a significant increase in raw material imports.

The Q&A that followed focused on digital transformation, Brazil, and risks from deflation in China.

Geneva Dry, the world’s leading freight forwarding conference, returns on 28 and 29 April next year with attendance tickets limited to just 800. Tickets are on sale here now.

The economic and commodities outlook from Geneva

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