The dramatic decline of the world economy has quickly manifested itself in the dry cargo market, with steep declines in charter hire rates and in bulk freight rates. Space for liner cargo, however, is still scarce in certain trades with rates remaining buoyant. The forecast for liner breakbulk and container volumes in 2009 in trades between U.S. and emerging markets such as South Africa will depend on whether commodity prices will rebound, and on the continued strength of the U.S. dollar relative to the currencies of emerging economies.
While the mining sector only makes up approximately 6 percent of South Africa’s GDP, the rand’s exchange rate against the dollar is closely linked to commodity prices, and has weakened sharply following the recent declines in commodity prices. A sustained weakness of the rand will lead to a drop in U.S. exports to South Africa, but this is not reflected yet in cargo volumes. One reason for this could be the amount of infrastructure construction taking place ahead of South Africa’s hosting the 2010 soccer World Cup.
South Africa supplies a variety of steel products and raw materials to the U.S., and a weak rand and strong dollar should help these imports. That hasn’t happened because the soft U.S. steel market has resulted in a sharp drop in imports of raw materials such as ferroalloys.
The threat of piracy off East Africa also poses a risk. The shipping community and authorities must act to stamp out this fast-growing cancer that has exposed our industry not only to these pirates but also to terrorists, rendering unarmed vessels defenseless against attacks.