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Despite record high interest rates

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.

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.

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.

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.

S&P Activity:

Dry:

The dry bulk S&P market is off to a hot start in 2024, with signs suggesting a very promising year so far. Since the beginning of the year a total of 100 dry bulk vessels have found new owners, almost double compared to the same period of 2023. Supramax and Handysize sectors are staring with 31 and 19 sales accordingly y-t-d, with almost half of the sales belonging to the age group 11-15 years old, while Capesize sector is also very high on buying charts with 13 sales. This week we witnessed an unusually strong buying appetite activity on Newcastlemax and Capesize sectors, with a total of 8 Newcastlemax and Capesize vessels having changed hands. The Scrubber fitted Newcastlemax "Qing May" - 206K/2012 SWS and "Lan May" - 206K/2011 SWS were sold for USD 73 mills enbloc to clients of Winning. The Capesize "Xin Hang" - 178K/2010 SWS found new owners for USD 26.5 mills. Greek buyers acquired the Kamsarmax "Scarlet Robin" - 82K/2016 Oshima for USD 28.3 mills basis 1 year BBHP, while the Panamax "Oinoussian Virtue" - 76K/2008 Shin Kasado was sold for USD 13.9 mills to Greek buyers. The Supramax "Solar Africa" - 58K/2011 Tsuneishi Cebu was sold for high USD 17 mills to Japanese. Last but not least, the Handysize "Alliance" - 34K/2012 Samjin was sold for low USD 12 mills to Greek buyers.

Tanker:

The tanker sector's beginning of the year is almost similar to 2023's start, with around 65 vessels (>=10,000 DWT) having changed hands. Small/ Chemical tankers (>=10,000 DWT), Aframax/LR2 and VLCC sectors dominate the tanker S&P activity so far with 14, 13 and 11 sales respectively. Vintage vessels (16-20 years old) are starring on the tanker S&P activity since the start of 2024, with almost 50% of the sales belonging to that age group. The VLCC "TRF Horten" - 298K/2018 HHIC changed hands for USD 102 mills. Moving down the sizes, the Scrubber fitted Suezmax "Front Odin"- 157K/2010 Jiangsu Rongsheng was sold for USD 46 mills to clients of NGM. Chinese buyers acquired the LR2 "Afra Rossi" - 116K/2010 HHIC-PHIL for USD 45.5 mills, while the Scrubber fitted Aframax "Koro Sea"- 106K/2008 Namura was also sold to Chinese for USD 39 mills. The Ice Class II MR2 "CSC Brave" - 46K/2007 Jinling found new owners for USD19.3 mills. Finally, the Ice Class 1A Chemical tanker "Patara" - 17K/2007 Tuzla Gemi was sold for USD 13.5 mills.

Xclusiv Shipbrokers Inc.