Dear Members and Followers of the ICOA,
The holiday period is starting soon in Europe, so sellers in India might face a quieter period from July through the end of August. After record exports in May of more than 90.000mt of Castor oil, and June with 60.000mt, there might be the impression at some parties that there is a new boom for Castor oil worldwide. It’s our opinion that it is more a temporary concentration of exports with lower demand in later months. In May we have seen preponed and postponed vessels leaving India with Castor oil, and June was much influenced from an expected new disturbance in the supply chain.
After Corona, the blocking of the Suez Canal, and the continuous attacks of Houthis on container and tanker vessels passing through Bab-el-Mandeb – The Gate of Tears, or better known as entrance into the Red Sea, we face now some challenges in the US, which are influencing the worldwide logistics and sea freight rates. One is the increase of import duties for certain products from China will come into force in August the other one is the expected strike of port labors in the US. A six-year labor agreement between the International Longshoremen Association (ILA) and United States Maritime Alliance (USMX), which covers ports from Maine to Texas, is due to expire on September 30th. The ILA represents approximately 45,000 port workers, while the USMX speaks for terminal operators at 46 ports. Negotiations between the two parties began a year ago but stalled after a few weeks. ILA president Harold Daggett has repeatedly stated that the union will not continue working under the current contract. Similar negotiations for the West Coast port laborers were taking 13 months before an agreement was reached in September last year. A 32% pay increase was agreed over a period of 6 years, plus a $70-million bonus for continuing to work in the early months of the COVID pandemic. We can expect a similar expectation for a similar result from workers on the East Coast.
For the import duty increase already many materials were ordered in China to reach the US before the deadline. This has already created an early peak in shipments. The potential strike of course would influence the Q4/2024 business in the US especially for consumer goods for Thanksgiving and Black Friday by end of November. So, we see a further rush in shipments from China to the US to reach before the strike might start. This should continue until early/middle of August 2024. Containers are already tight in Asia as shipping lines deliver empty equipment with priority to China and is leaving other ports in this area underequipped. Shippers in India already see the effect and do have difficulties in receiving empty containers. Sea freight rates are increasing and even leasing rates for containers have increased meanwhile by more than 30%. If containers will not be returned to Asia on time due to strikes at US ports, we might see a shortage of equipment until Q1/2025. Do not forget transit times are currently longer.
The economy in the EU is going well under current circumstances but is not back on track to figures we have seen in 2019. The recuring interruption of supply chains and higher prices for sea freight and energy, combined with higher inflation and interest rates, does not allow us to go back easily to normal after COVID.
Here the current figures of the EU from the spring forecast in May 2024 – the figures are dived into EU as total and the area with Euro currency:
The registration of new cars is still about 30% lower compared to the period 2015 – 2019. The residential construction business is still down – there is a higher demand, but for investors the market is currently not attractive enough in several EU countries. Exports are still below 2019 exports, due to cost increases in the EU. We see slight improvements – we are no longer in recession. As you can see in the chart above, there is an improvement expected for 2025. 2026 is expected to become slightly better than 2025 due to the European Central Bank. Early this year it was expected that the economy would go back to normal in 2025 – this will most likely not happen. We have now to monitor the results of the French legislative election next weekend and its effect on the European economy and community.
Kind regards,
Joerg Kramberg
Sales Manager – Castor International
*The opinions expressed in this newsletter are solely those of the author and do not necessarily reflect the views of The International Castor Oil Association. *