The price of coal has jumped from a year ago, lumber futures have tripled to a new record, steel has been on a roll, and corn and soybeans have staged their own rallies during the pandemic.
Commodities traded in global markets have been on a tear, which means no rest for the ships needed to transport raw materials. The cost of hauling them has jumped more than 50% this year, fueled first by a manufacturing rebound in China and now accelerating elsewhere as countries rebuild stockpiles depleted during lockdowns.
The rally isn’t over, analysts said. Freight rates to carry boatloads of commodities like grains, iron ore and coal — known as dry bulk — are expected to remain high this year and possibly into 2022, according to a report Wednesday from Bloomberg’s Isis Almeida, Rachel Graham and Annie Lee.
“The industrial sector is now building inventory,” said Burak Cetinok, head of research at Arrow Shipbroking Group.
Manufacturing indexes of purchasing managers reflect that view, rising in March across Asia, the U.S. and much of Europe. What’s also promising is that services industries are picking up, too. The IMF’s latest economic outlook released Tuesday predicts an 8.4% rise in goods and services trade this year, an upgrade from its January forecast for an 8.1% bounce, after an 8.5% drop in 2020.
“Commodity prices, particularly for oil, are expected to firm up further in the months ahead,” the IMF said.
That spells little relief from the higher freight costs and the congestion along snarled trade lanes. Some 90 bulk carriers were stranded in the Suez Canal after the container carrier Ever Given got stuck in one of the world’s most important shipping channels. The blockage lasted for only six days, but added to the overall tightness of the dry bulk market.
What’s more, the fleet of bulk ships isn’t expected to grow, with very few orders on the books. President Joe Biden’s economic stimulus and infrastructure packages also bode well for base materials.
“We are quite positive for this year and next year,” said Lars-Christian Svensen, chief commercial officer at Golden Ocean Group. “Dry commodities have been a bit dormant for the past few years, but they’re taking off at the moment.”
— Brendan Murray in London
The International Monetary Fund upgraded its global economic growth forecast for the second time in three months, while warning about widening inequality and a divergence between advanced and lesser-developed economies. World output will expand 6% this year, up from the 5.5% pace estimated in January, the IMF said in its World Economic Outlook. That would be the most in four decades of data, coming after a 3.3% contraction last year that was the worst peacetime decline since the Great Depression. The IMF also upgraded its forecast for trade, predicting a 8.4% boost in 2021.
Today’s Must Reads
- Hollowed ground | An estimated 150 million people around the world slipped down the economic ladder in 2020, the first pullback in the ranks of the middle class in almost three decades as recoveries in the developed world mask painful setbacks from India to South Africa.
- Tax turnabout | France signaled a sharp acceleration in international talks with the U.S. to overhaul global corporate tax rules and resolve the thorny issue of how to levy the profits of tech companies like Facebook and Google.
- Exchanging views | The U.S and Vietnam will work through differences over the Southeast Asian country’s currency and timber practices, U.S. Ambassador to Vietnam Daniel J. Kritenbrink said during a Hanoi briefing.
- Depot dearth | Canada is in danger of running out of warehouse space by the end of the year, thanks to the boom in e-commerce sparked by the pandemic.
- Engine trouble | Traffic through Egypt’s Suez Canal was briefly halted on Tuesday, just two weeks after a giant container ship ran aground and blocked the waterway that’s vital for global trade.
- Drinking problem | Lawmakers from U.S. whiskey-producing states asked the Biden administration to negotiate an immediate end to all tariffs on American spirits, weeks before European Union and U.K. duties on bourbon are set to double.
- Back on deck | U.S. cruises could resume by mid-summer with restrictions, the government said Tuesday after Carnival, the largest operator, threatened to relocate ships to other ports. Singapore now accounts for one-third of global cruise travelers, a testament to the nation’s ability to contain the coronavirus and resume operations at a time when many other countries are still struggling.
- Face palm | Palm oil suffered another blow as Sri Lanka banned imports of the world’s most-consumed cooking oil and told planters to get rid of all the tropical trees in the country.
On the Bloomberg Terminal
- Beats the rest | Higher truckload rates and limited driver availability should spur demand for J.B. Hunt’s brokerage, truckload, dedicated and intermodal segments, Bloomberg Intelligence says.
- Nut case | A peanut price-fixing class action targeting Archer Daniels Midland and other top shelling companies crept closer to a conclusion, when a federal judge in Virginia approved settlements worth $58 million with Birdsong and an Olam International subsidiary.
- Use the AHOY function to track global commodities trade flows.
- Click HERE for automated stories about supply chains.
- See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
- Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.
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