An economic resurgence of China has been enough to propel the container and dry bulk markets forward. In its latest weekly report, shipbroker Allied Shipbroking said that “China’s surging economic activity has been the main story thus far in the year, with the increased industrial output and revamped consumption in the country having been the main primer in the stellar performance seen in many shipping sectors such as that of dry bulkers and containerships”.

According to Allied’s George Lazaridis, Head of Research & Valuations, “both Industrial output and Retail sales have soared in recent months, while the vast number of stimulus packages being unleashed onto the global economy have also helped China produce strong export figures for the first two months of 2021. On this footing many have predicted China’s GDP growth level to breach the 8% mark and possibly even reach close to 9% (considerably above the modest target of just above 6% set by Beijing). Yet, given the imbalance that is taking shape in the global economy and trade, with China being the only major economy that has seemingly managed to pull out of the pandemic up to now, it might not be all smooth sailing for global trade just yet. The first two months of the year have been a big shot in the arm for many shipping markets”.

“Containerships have been big winners so far, having capitalized significantly from the disruptions noted in industrial production across the globe (opening up new supply chains to plug up the shortages being left behind). Though with this increased appetite for finished goods from “the World’s Factory” (pre-pandemic, China accounted for 28% of the world’s manufacturing), imports of raw materials have been quick to follow suit. Iron ore was one of the main commodities to make the initial leap (though since then has scaled back), while close in pursuit have been other major and minor bulk commodities which have taken a similar course. Yet the impressive freight rate rally of late has been driven only part by the exceptional demand figures being noted”, Lazaridis said.

Meanwhile, “in the case of the dry bulk market, all this has been in the making for some time now. Due to several years of high volatility, unpredictable shock events and the subsequent poor earnings they produced, the dry bulk fleet has remained relatively stagnant over the past couple of years, with minimal growth having been noted and one of the lowest order books on record (compared to the active trading fleet). This has primed the market for a considerable windfall to be had under such demand growth levels.

What’s more is that all of this has taken place without the U.S. or Europe having shown signs of an economic recovery, something that many believe will soon follow once these economies start to lift their pandemic lockdown restrictions. That is also likely to be the point that we will see the effects and the major dividends of the massive stimulus packages that have been unleashed”, Allied’s analyst added.

Lazaridis concluded that “given all this therefore, it would seem that a big market bonanza is still in front of us to be had. This would however be an over simplistic way to be looking at the market developments that have unfolded over the past few months. For the moment we are still seeing a market primarily feeding off a number of “mammoth” cash injections. Where these to fail in supporting key parts of the global economy moving forward, then this market recovery with its soaring freight rates could fizzle out just as quickly as it came to fruition. 2021 would likely miss such a fizzle, though if it were to materialize the strains would surely start to surface during the latter half of the year. For the time being, things are still set on a fair course and many in the market have already started to feel it. The hope is that this market “rocket” still has ample fuel left in its tanks”.

Source: Shippingnews