Well, it’s still the beginning of the year- I can say that for another week or so and I’ve made New Years resolutions to try to absorb more information and be open to diverse points of view. And it’s a time of new beginnings in Washington DC- which is always comment-worthy.
In the past, I’ve expressed my frustration when it comes to prognosticating markets which are driven by geopolitics. Always curious, I’ve tried to attend events (these days, courtesy of Zoom or Webex) with speakers who are experts on the geopolitical matters as related to markets (usually oil but sometimes in the dry side, for example where they get into the ongoing spat between China and Australia). And, in line with the above-mentioned resolutions, I’ve signed up and listened into a few broadcasts as the experts, and not-so-exerts, have returned from their Holidays. As the political temperatures ramped up, so too there seemed to be a flurry of experts out there opining. Yet my frustration still runs high, with so much of if this, then that, and hence thus….I am running out of what my friends at Grammarly (just kidding) would call “conditional clauses”. Simply put, there are so many possibilities, when unfathomable geopolitics is meshed in with more rational supply/demand micro-economics.
In one publication that I write for, I did a piece, about a week after Election Day 2020, with suggestions for what a new Administration might hold in store. At that time, the results of the election had been “called” so the coast was clear for writing such a column. As noted in a recent article here, offshore wind is going to be a big deal under the new U.S. Administration- with projects that have been on hold being brought back to life, and the pathway for quicker approvals of new projects likely to be streamlined. That was an easy one. Then there is Cuba, a trade opened up two Administrations ago, then impinged by the next Administration. Now, it’s likely to be opened up again. From where I sit as I write this (in Miami Beach, Fla), overlooking all the intra-Caribbean craft, mostly geared, there are expectations of ramped up activity. Further up the coast, in Jacksonville, there are also many smiles.
Then we come to international bulk trades- where I was taken to task for pointing to the irrelevance of the recent U.S. elections. My geopolitical boffin friends were calling and emailing with counter-arguments. But, as was explained to me when I was staring out, shipping is like a big jigsaw puzzle with so many pieces. Yes, China might take more grains from the U.S. but then the trade matrix will shift around- and the ton-miles may go up, or down. On the oil front- yes, perhaps Iran’s incremental oil barrels might come back on the map over 2021-2022, but then Libya and a few other “fragile” suppliers may crater. The demand side, offers a potentially huge recovery on the horizon if vaccine supplies find arms, if folks start driving, and even better- traveling for business, and for pleasure, on airplanes. The possibilities boggle the mind- at least, they boggle mine- each one bringing a “definite maybe” for freight market impacts.
But all of the above points to increased volatility in tanker and drybulk hires; this has already been borne out, to some extent, in the FFA markets. For investors active in the shipping sectors, I would suggest looking at the short term blips, and moving in and out quickly. So many pieces of the jigsaw puzzle will be in play this year- with every puzzle component bringing its own micro-economics and the ups and downs of that microcosm. Over time, the longer term factors will come into play. But not right away.
