Market Update August 7th 2023
Freight trucking Yellow, which received a $700 million lifeline from the federal government during the pandemic, is now filing for bankruptcy three years later.
The company was struggling and negotiations between management and the Teamsters failed, leading to the closure of operations last month. Yellow announced on Sunday that it is seeking bankruptcy protection to wind down its business.
The closure of a 99-year-old company will result in the loss of approximately 30,000 jobs and could cause disruptions throughout the supply chains across the country.
The overall economy is doing well under “Bidenomics”, last quarter, the US experienced an acceleration in GDP growth from 2% to 2.4%. The country has managed to maintain a low unemployment rate of 3.6%, with job growth exceeding expectations and 372,000 new jobs created in June. Inflation also decreased to 3% in June, which is the lowest rate in the past two years.
Other nations such as France (4.5%), Germany (6.4%), and the U.K. (7.9%) are experiencing higher inflation rates comparatively. Additionally, U.S. wage growth is now surpassing inflation, which is good news for the economy.
Shipping News
The Times newspaper in the UK and other news outlets reported last week that Maersk Shipping had warned that global trade conditions are expected to worsen and last longer than anticipated, due to weak economic growth and customers reducing their stock.
The Danish transportation and logistics group has reported that worldwide demand for containers, which is usually an indicator of global trade conditions, could decrease by up to 4% this year, compared to the previous estimate of no more than 2.5%.
The inventory correction that began at the end of 2022 appears to be prolonged and is expected to last through the end of the year.
During the April to June quarter, Maersk loaded 6% fewer containers onto ships than the previous year and average freight rates halved. Despite this, the business is operating in a subdued growth environment following the pandemic fuelled years.
Freight rates have dropped this year due to a global economic slowdown, and hundreds of new container vessels ordered during the pandemic have started to come onstream, putting further downward pressure on pricing in the industry.
Interestingly, following this report, Drewry’s World Container Index increased by 11.8% to $1,761.33 per 40ft container last week.
And as China flexes its muscles claiming almost the entire South China Sea, including the Spratlys, which is also claimed in part by the Philippines.
Shipping prices could become even more volatile and liable to change.
Other Factors
Also reported is the fact that unprecedented high temperatures in Europe and across the US have affected crop yields, with many forecasting a significant drop in production with Europe still uncertain about the loss of the grain deal between Ukraine and Russia, meaning that grain and Sunflower oils will be in shorter supply pushing up prices.
Q4 is liable to be a very. uncertain for many, and with coconut prices at a low, waiting may be a bad move for many buyers hoping that prices will remain low.