URSABLOG: One Swallow Does Not A Summer Make

Yesterday evening, as we sat on the balcony of the flat we will be moving into later this month, coronavirus restrictions permitting, the sun was easing into a typical Athenian spring sunset. Out before us spread the roofs and top stories of apartments as far as the eye could see, with the setting sun glinting off the steel of the solar hot water tanks studded along the skyline. To the south-west lights on the silhouettes of the cranes of the container terminal at Perama were coming on, and the profile of Salamina, and further out, Aegina was fading into the inky purple night.

As darkness took over the sky, the birds of the neighbourhood were noisily settling down for the night. They have to be noisy because there is a lot of competition: dogs on balconies, conversations, laughter, shouting and delivery scooters from the street, televisions blaring out from various apartments at differing levels of the buildings around, and the other white noise of the city blending in with each other. The sparrows flitting from building to branch, the wood pigeons counting ‘18’ to each other (the Greeks amongst you will know what I mean), and the normal city pigeons seeking out their last bit of food or sex before they turned in for the night. Seagulls cruised around on the confused thermals, and in the middle distance the swallows were diving and swooping around, feeding off the insects, or just expressing joy at being in their summer accommodation.

There is an English expression: one swallow doesn’t make a summer, which is the usual British  grumbling way of saying: don’t take anything for granted. Of course, with the British summer being an oxymoron, changing within minutes from bright sunshine to wet and windy and back again, it is no wonder that the weather is such a common topic of conversation. Every time that someone from the UK calls me, especially if they don’t know me well, there is the ritual of small talk about the weather. It is not so much curiosity about the weather here in Greece, but their assumption that we share their fascination about British weather. Hint for future callers: I really don’t care. If they do condescend to ask me about weather here they exclaim jealousy if the weather is good (most of the time), but shock if it happens to be grey, or even worse raining. Yes, surprisingly, it does rain here sometimes, but not as you know it.

Life here is not one long continuous summer, but from now on it mostly is until, well, when it decides to stop, October or November time. And here, although swallows may come too early here (as they did this year), it does mean that summer is coming, and this means all the joys that come with it, as time becomes meaningless in the warm evening air. We can count on it.

The slowing down of infection from coronavirus has led to various countries around the world, including Greece from Monday, to gradually lift the restrictions imposed. Let’s hope the Greek sun and sea will between them combine to diminish the effects of the deadly virus, and we can get back to normal as quickly as possible.

As restrictions are eased, we are easing looking for signs that the economy will grow too, and trade, the lifeblood of shipping, will increase and flow. We are on the lookout for our swallows, the signs that summer, or better times, is coming. And rather than look at the sky, we look at data, or news, to give us hope.

I have long stopped looking at most coronavirus news, mostly because it is frustrating, confusing and irritating. Looking for facts in these times is harder than ever. It is all very well having an opinion, but everyone has them, and they are not very helpful as signs for growth. Opinion will always be limited by the type of data you have access to: an optimist will feed off good news, a pessimist off bad news, a Trump supporter off Fox News, the CEO of a listed dry bulk carrier owner off whatever he can use to keep the share price up. The latter, in the shape of John Michael Radziwill of GoodBulk gave us a masterclass this week. I summarise an article from Splash 24/7 this week:

-         He is optimistic about a 2H rally this year leading to a sweet spot next year (whilst most of us can’t see beyond the second half of May)

-         The capesize orderbook is low for 2021/2022 and scrapping had been picking up, (well at least until the demo yards shut down)

-         Vale will no longer use 25 ore carriers that had been converted from VLCCs (I am happy about this because it will save lives, not because they are the equivalent of 40 normal capes, and this decision is about three years too late – an astonishing and dangerous lack of corporate courage from Vale)

-         He thinks coal demand is finally picking up from India and China (tell that to my chartering guys)

-         Grain demand (or agritrade as it is apparently called) looks good too as the trade war eases (has it?) and South America can provide supply despite the spread of coronavirus (which sounds like wishful thinking combined with ignorance of the trade itself)

But let’s not kill the summer before it starts:

“Message to owners: Let’s not screw it up again please. No newbuildings. There are enough secondhand ships. If you need to find one you can call me I will happily sell one to you and we can all make a lot of money together.”

I hope sensible shipowners will resist the temptation to call Monaco for a ship that may not fit their requirements, and invest in a newbuilding of a ship they do want when they decide the time is right. Far be it from me to put a damper on Mr Radziwill’s optimism by ruining his summer, but the summer, and the market, is for everyone not just eloquent and clever CEOs.

The article concludes by him advising his peers, rather weirdly I think, ‘to hold their nerve’ and “synthesise well, decide well.” If we could all synthesise well (whatever that actually means) and decide well, then I very much doubt that we would be bothering with the normal stuff of trying to be a functioning flesh and blood human-being, unlike of course, Mr Radziwill.  

He does say something else interesting however:

Come the second half of the year when economies restart, dry bulk ships ought to be the “arteries to a recovery”, Radziwill suggested, as China, the US and possibly Europe too would kick in varying forms of infrastructure stimulus.

I was hoping for this too, but one swallow does not make a summer. Even if excavator use in China is up 13.7% per cent (following it must be said a 22.4 per cent drop in January and March), and sales of excavators rose 12 per cent year on year in March (following a 51 per cent drop in February) there is no sign of the massive stimulus in infrastructure that came following the financial crisis in 2008, or after the SARS epidemic in 2003. Fixed investment, notes Harry Lu, an economist from Macquarie Group, is returning to 2 per cent growth from a 20 per cent decline: “Don’t expect a double-digit increase as Beijing isn’t ready to launch a massive stimulus programme.”

Indeed, the hope of China spending its way out of crisis is receding as the realpolitik of China in 2020 dawns. Despite trying to double GDP from 2010 to 2020, a target set out by the politburo before Xi Jinping became president in 2013, the current leadership is, according to Julian Evans-Pritchard, senior China economist at Capital Economics “less concerned about reaching the doubling of GDP target slightly later than planned and more concerned about the risks to political and financial stability caused by the Covid-19 shock and sharp rise in unemployment.” There is also the matter of the huge debt overhang in China created by previous stimuli: double-digit growth can eradicate some of that, growth at 5.5 per cent, and much, much less now, exacerbates the problem. Another English expression for you: ‘When you’re in a hole, don’t dig.’

Priorities have changed for all of us in the time of coronavirus, let alone the Chinese Communist Party. We cannot, it seems, rely on the same knights in shining armour to rescue us this time around. Where the rescue will come from is, at this stage, somewhat obscure, and it will probably come from a variety of unconnected sources as restrictions ease and economies open up.

If prices of secondhand bulk carriers - which have resolutely refused to follow the freight market down - and the paucity of sales are any guide, then owners are expecting recovery to flow through the ‘arteries of recovery’ and are in no rush to head for the exits. Although one swallow may not make a summer, the summer will come. And in the meantime, let’s look after ourselves and those close to us, and enjoy those magical moments that, because of the coronavirus, have made us more aware of the precarious and precious beauty around us.

Simon Ward

www.ursashipbrokers.com