The best one can say at this time is that worldwide economic markets are volatile, with no certain way to predict what will be the immediate and long-term fallout from civil unrest in Ukraine, Russian grab of Crimea, economic slowdown in China and falling stock markets. With the potential for more unrest in the world as the US and Russia sanction each other, the best advice seems to be to hold steady and wait for the various disturbances in trading and prices to settle down. For traders playing in the short-term price fluctuation game, where the goal is to reap fast profits, the current world situation is actually more of a plus than of concern.
Mid-March indices were already showing the impact of the various political and economic instabilities, with the FISE down by 4%, Eurofirst down 4.2%, Shanghai down 2.8%, Nikkei down 3.2% and the S&P down 1.9%. The commodities picture was also interesting, with iron ore trading off by 10.3% and cooper by 9.2%. Brent crude oil was trading down by 3.6% but gold was trading up by 3.1%–with many more worried about China’s slowdown than what will happen between Russia and Ukraine, at least from an economic perspective.
A continuing slowdown in China will have a greater impact on global economic markets because it has set the tone for the supply and demand of a wide range of commodities and international investing. And it is true that there are not only a few forecasters anxious that China’s GDP for 2014 will fail to meet its target of 7.5% annual growth.
On the other hand, the shipping industry is not affected so much by short-term volatility in political and financial markets. Capesize spot rates are averaging $21,000 per day, with a 3-year charter paying over $25,000 per day. A 5-year old capesize is valued at $45.8M, an increase of 12.3% from the beginning of this year. Shippers look forward to improved earnings and stabilizing markets, despite the large stockpiles of iron ore and a government-imposed restructuring of China’s steelmaking and mining industries to comply with new environmental and output quota regulations.