The Silly Season

We poor economists (yes, I continue to feel sorry for us) are debating the appearance of green shoots, where the recession might be and the state of the stock market. Shipowners, especially in the bulk sector and individual German KGs, are facing bankruptcy, terminal operators are staring at volume reductions of 10%-20% in throughput as well as pressure to reduce costs from ship operators.

And let us not forget the containership operators, those mighty scions of myopic management, that lemming-like jointly ordered an excessive amount of capacity in the face of solid economic data that a recession was soon to be at hand. They followed this with another lemming parade into disastrous freight rate levels that are now threatening the existence of a number of companies, large and small.

And what is to be done? Firstly blame everyone else and shift the cost problem to the suppliers with a mixture of humility, bravado and threats. We have seen some terminal operators refuse to provide discounts on existing rates, and despite dire threats of a “walkout” by the liner operators, the UK government resisted the lobbyists when it came to light house fees.

A report that wholesalers and retailers in the US were nearing the end of their inventory stock caused the stock market to drop. From a trade point of view this should have been a moment of joy. Lack of inventory leads to new orders which leads to shipments – one of the first solid green shoots.

Aggressive stimulus spending by governments helped the world avoid a second Great Depression with China, India, Germany, France and Japan reporting a mix of strong growth or an end to the recession. With economic and export growth showing signs of stabilisation, green shoots indeed are a fact. The roots of growth in Q3 may herald the end of the recession. Stay optimistic.