The global economy remains under stress

2023 was a year of relatively low economic activity, with the exception of the U.S. In Asia China struggled to maintain economic growth at or near five per cent while Europe was mostly flatlining with growth hovering plus/minus zero per cent with the former economic growth engine, Germany, entering into a technical recession. In contrast, the U.S. Real GDP increased 2.5 per cent in 2023 compared with an increase of 1.9 percent in 2022.

This year does not look much different, with the World Bank and the international Monetary Fund remaining very cautious with global growth projected at 3.1 per cent in 2024, which is less than the 3.8 per cent average between 2000-2019. It would be lower were it not for the robust U.S. growth which continues to suck in imports, primarily from Asia. Europe is expected to growth marginally while both China and the U.S. are expected to weaken. Overall, not a picture of health and expectations that we shall see a rebound in the maritime sector this year.

The panic over the Red Sea Houthi attacks on vessels is all but over as ship operators are avoiding the route and opting for the round Africa voyage. The fears over the impact on the supply chain and inflation have subsided as container carriers, as expected, have brought in extra capacity, increased speed, and focused on west Mediterranean transshipment ports to return to their normal seven day services at the European ports of call. Freight rates have also declined following the initial panic surge which worked to the benefit of carriers. This reversed the financial losses that most lines suffered in 2023 with Quarter 4 earnings falling into negative territory for the first time since 2018 according to Alphaliner.

In general, ports are managing to survive the economic and political pressures although transshipment ports in the eastern Mediterranean are suffering with the shift of the large container ships to the western ports. North American ports are experiencing pre-emptive shifts of cargo from the East Coast to the West Coast against a background of the labour union negotiations on the East coming up imminently.

Looking forward, we remain in an uncertain environment with U.S. political chaos, the continuing war in the Ukraine and the populist political mood in Europe impacting consumer confidence and industrial expansion.