Glimmer of Hope

Container manufacturing is at a standstill in a world of millions of empty containers. Twenty to thirty percent of freight rail wagons have been sidelined on both sides of the Atlantic as port throughput gets smaller and smaller.Container terminal operators are offering storage space where six months ago they were penalising cargo owners for leaving their boxes too long.

Every international institution is forecasting a sharp drop in trade for 2009 with global negative GDP growth. Many do not project a recovery until well into 2010 or early 2011.

Yet, as President Obama has recently stated, there is a glimmer of hope. Suddenly some of the surviving banks are reporting profits, we see mortgage interest rates beginning to drift down and small business loans have re-appeared. The Chinese have entered the bulk market and are buying iron ore in significant quantities.

This economist believes that there are three critical benchmarks on which to base our forecasts. These are unemployment, credit availability and a return of consumer confidence. Certainly these will not come together at the same time in the US and Europe but once the US begins its recovery, Europe and Asia will follow quickly.

As credit slowly and hesitantly returns to the market we will see companies begin to re-invest which in turn will slow the level of unemployment growth. It will also herald a return of confidence which in turn will bring the consumer back to the shops. Expect unemployment to bottom out by Q3 as the global stimuli packages begin to become effective.

Trade will rebound by the latter part of 2009 and grow in 2010 as the mix of inventory run down and consumer spending come together. Shipowners and operators will continue to bleed into next year due to the overhang of excessive capacity, but an intelligent management of the fleet should help to increase freight rates.