A few years ago, Swedish furniture retailer Ikea declared we had reached "peak stuff" (and some of us started de-cluttering). Political leaders in some countries are looking inwards, focusing on sovereignty, improving the well-being of their citizens, with the economy and business playing not exactly second fiddle, but perhaps a more supportive role. Spotlight on the 1 per cent of people around the world and what they own, how their wealth has shifted over the past decade; this has brought feelings not just of inequality but unfairness to the surface. Then add in climate change… not forgetting President Trump’s trade tariffs.
So much to juggle with, at least in terms of what’s said. But are they doing as they say? Airlines are suffering as planes are grounded, business and holiday flights cut. This weekend the Khaleej Times reported that: ‘’Dubai Airports is currently reviewing its long-term master plan to ensure infrastructure development… responds to consumer trends. The exact timelines and details of next steps are not yet finalised.’’ The expansion of what was meant to be the world’s biggest airport stopped, Bloomberg reports.
In late May my ex-colleague Theron Mohamed wrote how the world’s biggest container shipping group ‘’AP Moller-Maersk warned the recent escalation of the trade war [with China] could push growth in global container trade to the lower end of its forecast of 1-3 per cent for 2019’’. It blamed its drop in ‘’container volumes on weaker international trade and American retailers bringing forward orders in anticipation of higher tariffs on Chinese imports’’. Baltic dry freight rates tell a very different story, rallying steadily all this year, admittedly from the very depressed levels that have dominated for much of the past decade, and are now two standard deviations above the mean regression over the period.
Another key indicator of global trade and economic demand is crude oil; futures contracts traded in New York the barometer. Although volume remains relatively high, open interest has been on the wane over the past 18 months and volatility below its long-term mean. Price action has also been subdued for four years, with prices falling from $77 a barrel in October and capped again around $65 this year. Certainly, no surge in demand here.
The wholesale price of beef, a product maligned by the climate change community and shunned by vegetarians and vegans alike, has dropped steadily from 2014’s record high at 172 US cents per pound to close to a dollar today. Close to its lowest levels in three years, we feel it’s probably on its way down again, towards 2009’s low around 80c. Note that these three markets have not been impacted by a strong dollar. In fact, since early 2018 the greenback has slowly but steadily strengthened against nearly all currencies.
The Dalian Commodity Exchange trades a vast array of interesting futures, one of which is low density polyethylene (C2H4). The most produced plastic in the world, this simple polymer is used for supermarket bags, kid’s toys, cosmetic packaging and even bullet-proof vests. Record open interest as prices sag badly means that producers are increasingly looking to hedge output. An excellent example of the ‘nudge’ concept, where a token charge at the checkout has brought out the thrifty in shoppers.
