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Rising inflation is creating anxiety around the world as a significant increase in demand, following the easing of Covid-19 lockdowns, has been confronted by rising prices of energy and raw materials and notably supply bottlenecks. In many countries, these sharp consumer-price increases have evoked more or less similar responses from most central banks, by raising interest rates.

It is interesting to note the two banks, that loom largest over the global economy, the Federal Reserve and the European Central Bank have not.

The acceleration of price rises began in March, driving inflation rates higher than most central bankers had expected. By August, the annual rate of inflation in the G-20 largest economies—which account for about 80% of the world’s output—had risen to a decade high. The strong rebound in consumer demand has come much sooner than expected in the aftermath of an economic contraction caused by the pandemic. On the other hand, supply has struggled to meet that demand. Few manufacturers have invested in added production capacity as the majority expected a more subdued and more drawn-out recovery. The factories and many parts of the global transport network had and have been hindered by government restrictions on work and movement. In the U.S., according to the Bureau of Labour Statistics, consumer prices continued to rise, driving inflation rates to 5.4% and outpacing economists’ predictions for recovery amid continued demand for housing, vehicles and other goods. This is the largest surge in consumer prices in 13 years and it presents a new hurdle for the Biden administration. Meanwhile in Canada, consumer prices rose at their fastest rate in 18 years in late September, as the country continued to grapple with global supply chain issues. The annual inflation rate hit 4.4%, up from 4.1% in August, its highest level since February 2003. In the UK, the inflation rate has decreased in September, but the respite could be temporary. Consumer prices rose by 3.1% in the year to September, down from a nine-year high of 3.2% in August. The cost of living has been pushed up by the transport costs, with petrol and second-hand car prices rising sharply since the pandemic restrictions eased. Consumer inflation in Russia accelerated to 7.78%, its highest since February 2016, just days before the central bank’s policymakers are set to meet. Inflation is a sensitive issue in Russia as it “devours” the incomes already dented by the COVID-19 crisis along with a weak Rouble and makes an interest rate hike by the central bank look inevitable. Finally, China’s risk of stagflation has increased because of the record-high level of factory production inflation. Surging coal prices have forced factories to charge more for their products. China’s economic problems posed by elevated coal prices are accentuating the energy crisis, which helped push the producer price index (PPI) from 9.5% y-o-y growth in August to a new high of 10.7% in September.

Since January 2021, Commodity Research Bureau (CRB) Index has risen by 43.2% reaching to 255.5 points. Major commodities such as coal, crude oil, aluminum and natural gas have increased by more than 50% YTD. Specifically, coal has increased by 188.2% & by 300% Y-O-Y. The YTD increase in aluminum price is 54.1% and the Y-O-Y 64.5%. Natural gas price has increased by 99.7% YTD and by 70.9% Y-O-Y, while crude oil by 70.8% YTD and 108.7% Y-O-Y. In shipping front, the booming of the indices on both dry and container segment have pressed the market more and is creating more concerns about the global inflation rates. Although freight rate is statistically always considered as a marginal cost on the end-product price, the rising freight rates in both dry and containers, may no longer be. The BDI & FBX (Freightos Baltic Index) have increased by 245.7% and 201.1% YTD respectively. The BDI index closed the week at 4,410 points in contrary with the 1,374 in the beginning of 2021 and the FBX index is 10,215 points over the 3,552 points in January 2021

On the dry sector, although larger in size units were the main preference of buyers during previous weeks, now smaller size geared units seem to be this week’s main focus. On the Handysize sector, “Nina- Marie”- 36K/2012 Zchi sold for USD 17.5 mills, whilst the same age Electronic M/E “Nordic Malmoe”-36K/2012, Jinghua rumored sold for mid/high USD 16 mills. Also, the same aged Japanese vessel “Royal Justice” 37K/2012 Saiki, changed hands for USD 21mills. Finally, 2x vintage BWTS fitted, Ice Classed & Laker “Federal Danube” – 37K/2004 New Century & “Federal Elbe” – 37K/2003 New Century fetched USD 23mills in an enbloc deal. Interesting to note that Clients of JP Morgan bought 3 x Newcastlemax NB, LNG Dual fueled, 210K Qingdao Beihai basis delivery in 2023 for USD 75mills each.

On the secondhand tanker market, the volume of transactions has begun to rise, as a result of the freight market improving. 2 x Aframaxes “Advantage Avenue”-115K/2010 Samsung & “Advantage Arrow”-115K/2009 Samsung committed region USD 52mills enbloc to Norwegian Buyers. The MRI “Aiolos”-37K/2007 HMD changed hands for USD 8mills.