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It was a rough start for 2014 in the dry bulk market. Demand rate last January flunked based on the average time charter rate released by BIMCO and It negatively affected the level of freight. There was an 8.8% drop in some commodities. And at the end of January, IMF adjusted its estimates for global economic development. Japan, US, Spain, UK, China and India received an amazing achievement. Thus, a little change for the remaining quarters of this year is expected.

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On Feb 2014, China announced upgrading and promoting a more balanced growth of foreign trade which gave a positive news to the market trend. For the past years, China showed weakness in the market. They are slowly coping up on their loss after Oct 2008 which reached below 5% Official PMI, they ended Feb 2014 with a 10% Official PMI and an estimated 9.5 HSBC/Markit PMI. This is a big improvement for the country but not good enough in the market.

 

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On one of Peter Sand’s statement, Chief Shipping Analyst at BIMCO, he said “A strong shipping market support from China is vital to pave the way back to a future sustainable market. Past contributions have been enormous. If the future holds more of the same, we will continue to see improvements in the fundamental balance between supply and demand”. This simply implies that the dry bulk market trend is still in the process of recovering and with China’s economic development plan, this would strengthen not just China, but the rest of the world.

 

However, As the dry bulk market recovers from the issue, a new controversy developed. United States and Europe’s rate climbed down due to oversupply. From .7% in February, Europe went down to .5% on March which some expert says it was the lowest point on the cycle. US, on the other hand, reached the lowest point of inflation on 2013 and is expected to change in 2014 and 2015. In addition, tensions from different parts of the world affected the industry. Economic development was harder to reach. Politics took a big part of the pie.

 

US imports from China grew rapidly but it did not meet the  pace of growth rate. From January and February of this year, growth was at 0% when imports are 4x higher than exports. There was a small amount of increase from 2009 but it still is not balanced. No rapid improvement from the past years have been recorded which gives a negative remark on trading industry.

 

In Japan, Japanese Yen depreciated to 18% but corporate earnings increased. Imported goods from Japan increased but growth was low. Japanese officials should have taken advantage to add the extra earnings to the wages to promote a more stable economy or add more employment to the people to keep the balance.

 

In Russia, crime increased which affected trade rate.

 

France, on the other hand, came in at 31 month high. European imports surpassed US to China’s export with a 4.6% rating.

 

There are more positive results from other parts of the world. More jobs arise from different parts of the continents and gave more opportunities to most citizens and shipping took a big part on the result.

 

On April 2014, employment continues to increase on the Eurozones which keeps the economy stable. Hiring more workers meant shipping and trade industry are on great shape and continues to rise.

 

Peter Sand, says “The World is economically interconnected to a large extent. Improvements in Europe should better the economy in China by spurring exports. Likewise, the Chinese transition into becoming a more consumer driven economy should also lift European exports to China. The fundamentals work when higher economic growth lifts trade and benefits shipping”. In China, last April, due to low index for the last 4 months, employment also decreased which gives additional pressure to the government.

 

Europe is taking the lead in giving employment. According to Chris Williamson, a chief economist at Markit, “The return to job creation across the region is also a very encouraging news in respect of companies believing that the recovery has legs and is looking increasingly sustainable.”

 

It is clear that employment and trading has to be balanced to sustain economic growth. These two won’t work without each other. Companies should hire more people to balance the demand in the market. As each country focuses on economic growth, so is the need for employment.

 

Morgan Philips Executive Search – Supply Chain, Logistics & Procurement

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