SHIPPING MARKET OUTLOOK 1.2 World Economy Sea Trade normal long-term growth path of consolidating a diverse group of countries into a financial In our last report in Spring 2012 we noted that union,the immediate consequence is that in economic activity in the major trading areas of 2012,GDP in the European Union is not both the Atlantic and the Pacific had edged expected to grow and the outlook for 2013 down to a point where,in the first quarter of remains weak. 2012,it was hovering on the brink of recession. icensed to The The events of the summer have done nothing to In the United States the story remains change our view that a spell of low economic somewhat better.GDP grew by 1.7%in 2011 growth lies ahead.After the "bounce back" and forecasters are predicting an increase of 2% recovery in 2010 and a fairly good year in 2011 in 2012.But as noted above,this is a weak when world GDP growth reached 3.8%,the performance for an election year and the broad economic trends are now generally on a banking crisis remains unresolved.Japan is also downward path,with world GDP projected to expected to turn in a better performance in grow at only 3.5%in 2012 (see Table 1.1). 2012,as the country slowly recovers from the This projection includes zero growth in the tsunami. Kong Polytechnic University. European Union and relatively slow growth in Asia. Above all else,the major concern in 2012 has been the slower growth of the Chinese This economic slowdown is very much economy.There are growing concerns that the dominated by the "two speed"character of the economy is moving into a more mature phase, Distribution world economy today.The OECD countries are during which the headlong growth of the steel experiencing a very severe slowdown,now industry and its massive imports of iron ore will reaching the standards of a technical recession ease back.For analysts trying to get to grips is restricted: in Europe and Japan.Although the United with China,the problem is that for such a large States is doing a little better,its growth economy,with a complex blend of command performance has remained fragile and management and market forces,it is hard to please disappointing,especially in the six months gain a balanced perspective on what is really leading up to a US election,traditionally a time happening.Can the delicate balancing act of when the government focuses on stimulating developing the less productive inland provinces, economic activity. whilst drifting workers from other provinces to the prosperous coastal states,be maintained?It The main focus in Europe during the last six is a difficult call. months has been the struggle to manage the acknowledge Euro zone crisis.There is continued uncertainty The weaker growth in several of the other Asian about whether the southern states,particularly countries,such as South Korea and India in Greece,will remain within the Euro zone,or particular,adds to the concern that Asia may revert to their old currencies.But this is just a not be able to support the world economy the source symptom of the continuing credit crisis which during this difficult period. remains one of the principal active consequences of the great economic boom in Pulling all this together,the depressed the last decade. conditions in the North Atlantic continue to be offset by brisk but slower growth in the Pacific As many economists predicted at the outset, area and the result is continued positive growth financial easing would eventually run into overall for sea trade.Our projection for total difficulties over the inability of sovereign states growth of 4.3%in full year 2012 is somewhat to meet their obligations.The resulting slower than during the boom years,but it is still escalation of financing costs has left the a positive contribution to demand.Projected European "authorities"with the challenge of trade growth by sector in 2012 currently stands supporting these countries,whilst at the same at:4.2%for the dry bulk trades,2.7%for oil time satisfying themselves that adequate steps trades and 5.5%for container trades.Better,as http://www.clarksons.nel 01/11/2012 06:20:04 15304 are being made to resolve their problems.While the saying goes,than a poke in the eye with a some might regard this as no more than the blunt stick. Clarkson Research Services 10 Autumn 2012Clarkson Research Services 10 Autumn 2012 SHIPPING MARKET OUTLOOK In our last report in Spring 2012 we noted that economic activity in the major trading areas of both the Atlantic and the Pacific had edged down to a point where, in the first quarter of 2012, it was hovering on the brink of recession. The events of the summer have done nothing to change our view that a spell of low economic growth lies ahead. After the "bounce back" recovery in 2010 and a fairly good year in 2011 when world GDP growth reached 3.8%, the broad economic trends are now generally on a downward path, with world GDP projected to grow at only 3.5% in 2012 (see Table 1.1). This projection includes zero growth in the European Union and relatively slow growth in Asia. This economic slowdown is very much dominated by the "two speed" character of the world economy today. The OECD countries are experiencing a very severe slowdown, now reaching the standards of a technical recession in Europe and Japan. Although the United States is doing a little better, its growth performance has remained fragile and disappointing, especially in the six months leading up to a US election, traditionally a time when the government focuses on stimulating economic activity. The main focus in Europe during the last six months has been the struggle to manage the Euro zone crisis. There is continued uncertainty about whether the southern states, particularly Greece, will remain within the Euro zone, or revert to their old currencies. But this is just a symptom of the continuing credit crisis which remains one of the principal active consequences of the great economic boom in the last decade. As many economists predicted at the outset, financial easing would eventually run into difficulties over the inability of sovereign states to meet their obligations. The resulting escalation of financing costs has left the European "authorities" with the challenge of supporting these countries, whilst at the same time satisfying themselves that adequate steps are being made to resolve their problems. While some might regard this as no more than the normal long-term growth path of consolidating a diverse group of countries into a financial union, the immediate consequence is that in 2012, GDP in the European Union is not expected to grow and the outlook for 2013 remains weak. In the United States the story remains somewhat better. GDP grew by 1.7% in 2011 and forecasters are predicting an increase of 2% in 2012. But as noted above, this is a weak performance for an election year and the banking crisis remains unresolved. Japan is also expected to turn in a better performance in 2012, as the country slowly recovers from the tsunami. Above all else, the major concern in 2012 has been the slower growth of the Chinese economy. There are growing concerns that the economy is moving into a more mature phase, during which the headlong growth of the steel industry and its massive imports of iron ore will ease back. For analysts trying to get to grips with China, the problem is that for such a large economy, with a complex blend of command management and market forces, it is hard to gain a balanced perspective on what is really happening. Can the delicate balancing act of developing the less productive inland provinces, whilst drifting workers from other provinces to the prosperous coastal states, be maintained? It is a difficult call. The weaker growth in several of the other Asian countries, such as South Korea and India in particular, adds to the concern that Asia may not be able to support the world economy during this difficult period. Pulling all this together, the depressed conditions in the North Atlantic continue to be offset by brisk but slower growth in the Pacific area and the result is continued positive growth overall for sea trade. Our projection for total growth of 4.3% in full year 2012 is somewhat slower than during the boom years, but it is still a positive contribution to demand. Projected trade growth by sector in 2012 currently stands at: 4.2% for the dry bulk trades, 2.7% for oil trades and 5.5% for container trades. Better, as the saying goes, than a poke in the eye with a blunt stick. 1.2 World Economy & Sea Trade Licensed to The Hong Kong Polytechnic University. Distribution is restricted; please remember to acknowledge the source. http://www.clarksons.net 01/11/2012 06:20:04 15304 Licensed to The Hong Kong Polytechnic University. Distribution is restricted; please remember to acknowledge the source. http://www.clarksons.net 01/11/2012 06:20:04 15304