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Brexit, trade war in focus

Leonhard Foeger | Reuters

Gold prices were steady on Wednesday, as investors awaited more clarity on the Brexit and the U.S.-China trade war, but a rally in the bond markets provided modest support to the bullion.

Spot gold was up 0.1% at $1,489.45 per ounce, as of 0441 GMT. U.S. gold futures rose 0.3% to $1,492.50 per ounce.

“Things are quiet on the trade war front, while the delay in Brexit is viewed as negative by some. But news is balancing itself and that is keeping the market steady,” said Michael McCarthy, chief market strategist at CMC Markets.

“Prices are swinging between $1,490 and $1,535. Until we break one of those two levels, we really do not a have a direction.”

Asian shares and U.S. stock futures took a hit after British lawmakers rejected their government’s proposed timetable for passing legislation to ratify its deal to exit the European Union (EU).

EU leaders should delay Brexit after Prime Minister Boris Johnson paused legislation on his deal following a parliamentary defeat, EU Council President Donald Tusk said on Tuesday, as Britain spins towards a possible election to break the impasse.

U.S. Treasury yields dropped on Tuesday as investors bought safe-haven debt after UK lawmakers voted against Prime Minister Boris Johnson’s extremely tight timetable to approve his deal for Britain to exit the European Union.

U.S. Treasury and gold are both seen as a safer investment during times of political and financial uncertainty. A rally in bond generally support the yellow metal prices.

On the trade war front, China and the United States have achieved some progress in trade talks, Vice Foreign Minister Le Yucheng said on Tuesday, adding that as long as both sides respected each other, no problem could not be resolved.

The two major economies have imposed a series of tit-for-tat tariffs over the past 15 months that have hit financial markets and stirred up global recessionary fears.

Meanwhile, Federal fund futures imply that traders see a 91.4% chance for a 25 basis point rate cut by the U.S. central bank in its month-end monetary policy meeting.

Indicative of investor interest, SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.5% to 919.66 tonnes on Tuesday from 924.64 tonnes on Monday.

Spot gold is biased to break a support at $1,479 per ounce, and fall towards the next support at $1,456, Reuters technical analyst Wang Tao said. 

Elsewhere, silver was up 0.1% at $17.54 an ounce. Platinum inched up 0.1% to $891.76 and palladium was steady at $1,754.80 per ounce.


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Kalmar and Port of Virginia continue long-standing cooperation | Brazil Modal

The new units will be delivered to Norfolk International Terminals (NIT), which is the port’s largest terminal and capable of handling the biggest vessels in the Atlantic trade. The next-generation Kalmar Hybrid Shuttle Carrier features a robust new mobile drive, a completely redesigned electrical system for the upper frame and spreader, a more spacious electric cabinet layout, and LED working lights as standard.

The Port of Virginia has been using Kalmar hybrid shuttle carriers since August 2015. Kalmar provides the port with support and servicing through a dedicated, local team of technicians with many years of experience and a comprehensive, local parts inventory.

The new shuttle carriers will play a key role in the ongoing conversion of NIT to a terminal that uses automated stacking cranes versus one that employs straddle-carriers. The conversion allows for higher container-stack density required for handling larger vessels.

“These shuttle carriers are another step in the evolution of NIT and of the growing capabilities at The Port of Virginia,” said John Reinhart, CEO and executive director of the Virginia Port Authority. “Because they are hybrids, they help us cut fuel consumption, reduce emissions and improve the overall sustainability of our operations. We’ve had a long partnership with Kalmar and have always found it to be an innovator of environmentally-responsible solutions that provides a high-level of service.”

“During the past two years, we have worked very closely with Kalmar on the development of this new technology,” said Rich Ceci, Senior Vice President, Technology & Projects. “We are confident in the capability of Kalmar: the team is exceptional and its commitment to support has been fantastic.”

Troy Thompson, Vice President, Sales, Kalmar Americas: “We are delighted to build on our exceptional partnership with Virginia Port Authority by helping them to boost container-handling capacity with our eco-efficient hybrid shuttle carriers. The dedication and commitment of our local Virginia-based service team was crucial in securing this repeat order. They have continued to exceed the customer’s expectations with on-the-job training and continued support to keep the fleet running at 90% or greater uptime.”

Source: Kalmar


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Bank of Namibia clarifies forex trading rules

WINDHOEK – The Bank of Namibia on Friday afternoon clearly pronounced itself on the issue of foreign exchange (forex) trading, reminding …


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Kalmar wins PEMA Innovation Awards | Brazil Modal

The award committee consisted of members from the following terminal operators: DP World, APM Terminals, PSA, Eurogate, Yilport, Terminal Link and HHLA, with each member individually scoring the proposals received from the participating companies.

The Kalmar T2E terminal tractor features the very latest in lithium-ion battery technology as well as a fully electric powertrain that produces zero emissions at source. It also offers a number of benefits for drivers that improve the driving experience, with smoother acceleration and more power at the top end compared to a diesel-powered machine, enabling drivers to feel more in control. Furthermore, the electric powertrain generates less noise, vibrations and heat – and importantly no fumes – making the cabin a much healthier and more comfortable working environment.

Kalmar FastCharge is a unique opportunity-charging solution for battery-powered machinery such as shuttle and straddle carriers that enables terminals to completely eliminate airborne emissions while also drastically reducing noise emissions. The solution is based on the same opportunity-charging technology used in electric buses and can be adapted to suit a wide variety of terminal setups. Charging takes place during the idle time in the equipment’s working cycle when it is stationary and waiting for its next job. The Kalmar FastCharge shuttle carrier has been piloted by DP World at its London Gateway terminal in the United Kingdom.

Both the Kalmar T2E and Kalmar FastCharge represent a significant step on Kalmar’s journey towards offering an electric version of every product in its portfolio by 2021.

Gina Lopez, Vice President, Terminal Tractors at Kalmar said:

“Innovation has always been at the heart of our business and driving innovation is a Kalmar value that we live and breathe every day. These solutions demonstrate not only our passion for innovation and commitment to shaping the industry, but also our focus on realising a sustainable future for the container handling industry.”

Henrik Häggblom, Vice President, Intelligent Horizontal Transportation Solutions, Kalmar, commented:

“We are exceptionally proud to be the first ever recipient of this award from PEMA in recognition of our commitment to supporting customers with their ultimate business need: how to move cargo in the most efficient and sustainable way possible.”


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Trump’s Trade Wars Aren’t All His or China’s Fault. The Next President Will Still Have to Address Global Economic Imbalances.

Even as U.S. President Donald Trump and Chinese President Xi Jinping announce and then cancel tariffs in a seemingly endless back-and-forth, it is a mistake to view the ongoing trade dispute as simply a spat between the two. It is not a Trump-Xi fight or even mainly a U.S.-China one.

In fact, when it comes to creating global trade imbalances, China is not the only—or even the worst—offender. Its current account surplus is no longer the world’s largest; the most recent data suggests China’s annualized surplus stands at about $130 billion, significantly smaller than Japan’s (roughly $180 billion) and Germany’s (roughly $280 billion).

The real problem is that, over the past two decades, it has become increasingly difficult for the world to fix its massive trade imbalances; the very mechanisms that created them also make them harder to absorb. That is because trade surpluses and deficits are mainly the result of domestic savings surpluses and deficits, which are themselves a result of domestic income inequality. Until such inequality is substantially reversed, high-saving countries will continue to use trade as a way to pass the effects of their distortions onto other nations, such as the United States. This makes global trade conflict nearly inevitable—regardless of who sits in the Oval Office. For the United States, the only way out may be reconsidering how willing it is to absorb everyone else’s excesses.

Contrary to conventional wisdom, today’s trade surpluses are not the result of exceptional manufacturing efficiency or unusually hard-working and high-saving workforces. In fact, the household savings rate in Japan, the country with the world’s second-largest trade surplus, has been roughly zero for the past 15 years. Instead, in countries such as Germany, Japan, and South Korea, large trade surpluses were the natural consequence of policies that, in the name of competitiveness, effectively lowered citizens’ purchasing power for the benefit of the banking, business, and political elite—and the companies they controlled.

Because its imbalances are so extreme, China is the most obvious case in point. By definition, a current account surplus is equal to an excess of domestic production over domestic spending on consumption and investment. With the highest investment rate in the world, perhaps in history, China ought to be running a current account deficit. However, because China’s consumption rate is so low, the value of everything China produces still eclipses the value of everything China consumes or invests domestically. To offload the excess income, it runs a trade surplus and invests in financial assets abroad.

For a long time, observers such as Kishore Mahbubani, the former dean of the National University of Singapore’s Lee Kuan Yew School of Public Policy, pinned China’s low consumption rate on Asian values that supposedly prioritized hard work and saving. That explanation is wrong. It confuses household savings with national savings, and while the Chinese are indeed hard workers, so are workers everywhere. China’s extremely high national savings rate, like that of all the major surplus countries, is not driven by the thrift of ordinary households but by the fact that the country’s workers and retirees earn a disproportionately low share of national income, which diminishes their purchasing power.

In fact, during the past two decades, the share of Chinese income earned by Chinese households has been the lowest of any country in modern history. That means that Chinese workers can consume only a small share of what they produce.

The corollary is that an unusually high share of income goes to Chinese businesses and to local governments—largely a result of direct and hidden subsidies for production that are paid for by ordinary households. Beyond sluggish wage growth relative to productivity growth, these hidden subsidies include an artificially depressed exchange rate, lax environmental regulations, and, most importantly, negative real interest rates that have the effect of transferring income from household savers to subsidize the borrowing of state-owned enterprises and local governments. Rather than being spent on new goods and services, the resulting profits are invested in financial assets abroad. Trade surpluses are the inevitable consequences.

China is not unique. For different reasons, Germany has also been a model of wage suppression to the benefit of business profits. Since the Hartz labor reforms of the early 2000s, suppressed wage growth has led to rising income inequality and has boosted the relative share of business profits, both of which automatically forced up the country’s savings rate and shifted Germany from a country with a small current account deficit to the nation with the largest surplus in the world.

Chinese and German workers’ woes may seem like primarily domestic problems, but in a globalized world, distortions in the way income is distributed in one country can be transmitted to others through trade. That matters especially to the United States, which plays a unique role in meeting the financial needs of the rest of the world.

Because the U.S. economy is the world’s largest and most diversified, and supports the most flexible and best-governed financial markets in the world, it has been the natural home for individuals, businesses, and governments looking to store wealth abroad that they cannot or will not invest at home. About half of the world’s excess savings tend to end up in the United States, with another quarter flowing to other economies with similarly open and sophisticated financial markets (such as the United Kingdom).

The United States, in other words, for decades has been a net importer of foreign capital, not because it needs foreign capital but rather because foreigners need somewhere to stash their savings. But inevitably that also means the United States has had to run trade deficits that have persisted for decades. From a net exporter in the 1950s and 1960s—when the United States shipped food, manufactured products, and capital to the rest of the world’s major economies, whose productive capacity had been destroyed by two world wars—by the 1970s the balance had started to shift.

By then, the advanced economies had been largely rebuilt, and the world was no longer short of productive capacity. On the contrary, it now needed additional demand to absorb all the goods and services being provided by the rebuilt economies of countries like Germany and Japan. As the American consumer became key, the U.S. trade surplus, through which it shipped savings to a world desperately short of investment, was transformed into a seemingly permanent U.S. trade deficit.

Trade theory tells us that these kinds of imbalances cannot persist indefinitely. Usually, automatic adjustments—including rising consumer prices, strengthening currencies, and soaring asset values for surplus countries and the reverse for deficit countries—eventually eliminate deficits and surpluses. The fact that certain countries have nonetheless run surpluses for decades, while others have run deficits, is evidence that the global trading system is not working as it is supposed to.

There is a cost to this failure. Surplus countries’ ability to export their excess savings and production abroad sharply reduces the pressure on them to rebalance income at home. What is more, in the race for competitiveness with surplus countries, deficit countries must also allow, or even encourage, downward pressure on their own wages. In this globalized system, rising income inequality is both the cause and a consequence of international trade competition.

The question, of course, is what a U.S. president should do. In standard economic theory, the financial inflows from the rest of the world should have added to Americans’ own savings and led to higher levels of domestic investment. But with U.S. financial markets already flush with capital (offered at the lowest rates in history), and American businesses sitting on piles of unused cash, that is not what happened. Instead, overall spending outpaced production, and American savings declined. This, too, was inevitable: If foreign capital inflows do not cause investment to rise—as was clearly the case in the United States—they must cause savings to decline.

Put another way, foreign savings displaced domestic U.S. savings. This happens in countless ways. For example, foreign capital inflows can bid up the prices of stocks and real estate, making consumers feel richer and encouraging them to spend more. Local banks, responding to a glut of cash, can lower lending standards to domestic borrowers in order to increase credit. Infusions of foreign capital can cause the dollar to appreciate, which encourages spending on foreign imports at the expense of domestic production. Factories that can no longer compete can fire workers, who begin to tap into their rainy day funds or borrow. The government may expand the fiscal deficit to counter the economic slowdown.

Put together, these actions drive down U.S. savings. Indeed, the widespread belief that persistently low savings over the past four decades reflected spendthrift American habits turns out to have been wrong. The United States does not import capital because it has a low savings rate—it has a low savings rate because it is forced to absorb imported capital.

This was not as much of a problem several decades ago, when the U.S. economy was much larger relative to the others in its trade orbit. During the Cold War, meanwhile, there was added incentive to fill this role because it gave the country increased geopolitical leverage. However, as the size of the U.S. economy shrank relative to those of its trading partners, the cost of playing the balancer rose, and it was always only a question of time before the country would no longer be able or willing to play its traditional role.

Once the United States was unable to continue absorbing so much of the world’s excess savings, the global system risked coming to a chaotic stop: Because no other country was large enough to play this role—and no country wanted to—there was no replacement. Trade conflict was inevitable. That is why the trade war with China ultimately has little to do with Trump’s personal animosities or reelection strategy. It simply represents the most visible part of a much deeper global imbalance.

Today’s trade war is not really a conflict between the United States and China as countries, nor is it even a broader conflict between deficit countries and surplus countries. Rather, it is a conflict between economic sectors. Bankers and owners of capital in both the surplus and the deficit countries have benefited from suppressed wages, rising profits, and increased mobility of international capital. Workers in the surplus countries paid for the imbalances in the form of lower incomes and depreciated currencies. Workers in the deficit countries paid for the imbalances in the form of higher unemployment and rising debt. Reversing inequality and other distortions in income distribution in both the surplus and the deficit countries is therefore the only durable way to end the trade war.

In the long run, future U.S. administrations will have to tackle income inequality either through tax reform or by tilting the playing field in favor of workers and the middle class—for example by reducing the costs of health and education, improving social infrastructure, raising minimum wages, or even strengthening labor unions. But before they can do that, they will have to fix the American role in the global imbalances by making it more difficult for foreigners to dump excess savings into U.S. financial markets. That could take many forms, but by far the most efficient would be a one-off entry tax on foreign capital inflows. Such a tax would eliminate the current account deficit by addressing it at its origin in the capital account surplus. It would have the additional benefit of forcing the cost of adjustment onto banks and financial speculators, unlike tariffs, which force the cost onto businesses and consumers.

The alternative is ugly. As the British economist John A. Hobson argued in 1902, the economic driver of European imperialism at the end of the 19th century was extreme inequality that reduced domestic spending and lowered the returns on financial assets invested at home. Europe’s capitalists needed to find places to dump their excess savings and production. They did so by force, securing export markets abroad and guaranteeing returns on high-interest loans with armies and gunboats. That ended in imperialist conflict and, ultimately, war.

Less than three decades later, the cycle repeated. In the 1920s, a new wave of globalized trade and capital flows coincided with soaring income inequality and rising debt. The party came to a halt between 1929 and 1931 and was followed by a vicious trade competition that also ended in war. In each case, a conflict between economic sectors—one in which banks and the owners of capital were able to benefit at the expense of the rest—was represented as a conflict between countries. It wasn’t a trade war then, and it isn’t now. Only when U.S. policymakers realize as much—and get ready to tackle income inequality—will they be able to head off the worst of the consequences.

This story appears in the Fall 2019 print issue.


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Ex-China freight rates go down on major routes | Brazil Modal

Freight rates for exporting containers from China slid on many routes in the week of Sept. 30 as transport demand was weak in the midst of National Day holidays. The Shanghai Containerized Fright Index (SCFI) stood at 715.97 points, down 1% from the previous week, according to the Shanghai Shipping Exchange (SSE).

The trade to Europe was in the middle of the slack season, while freight movement was even poorer than usual. Freight rates went down 2% to $581 per TEU. Likewise, those to the Mediterranean declined 2.7% to $722 per TEU.

Demand lowered for transport to North America due to a slowdown in the growth of the U.S. economy. Freight rates to the west coast came to $1,313 per FEU, down 1.1%, and to the east coast, $2,335 per FEU, down 0.5%.

Owing to rises in geographical risks, freights to the Middle East Gulf declined 1.3% to $512 per TEU. In contrast, those to Australia and New Zealand improved 15.3% to $1,064 per TEU thanks to seasonal growth in demand and void sailing made by carriers. Freight rates to South America picked up 2.3% to $1,811 per TEU for similar reasons.

Although containers movement to Japan fluctuated stably, freight rates to Kansai fell 4.3% to $232 per TEU and to Kanto, 4.2% to $226 per TEU.

Source: JIFFA


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China renews pledge to open markets, level playing field for foreign firms after US trade war deal …

China's Vice-Premier Liu He met US President Donald Trump during the latest trade war negotiations between Beijing and Washington.


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Rotterdam container placed on ‘Noah’s Train’ | Brazil Modal

The tour, which started on 4 December 2018, is a Rail Freight Forward (RFF) initiative, a collaborative venture of around 20 rail operators in Europe. RFF aims to achieve 30 percent of freight transport by rail by 2030; this is currently 18 percent. According to the initiators, if this objective is achieved it will save an annual 1 million trucks on the roads and will reduce CO2 emissions by 290 million tonnes. The campaign ‘Noah’s Train’ matches the Port Authority’s ambition to transform Rotterdam into a climate-neutral port.

Rotterdam’s contribution was painted by Nina Valkhoff, which means that ‘Noah’s Train’ is now complete and the containers will be distributed, separately, across the world. One container is going to the climate conference in Chile. The Rotterdam version will stay on Maasvlakte for the time being. One of the four sides of this steel cargo container is still blank and will soon be located at the car park of FutureLand, the Rotterdam port information centre, where it will be sprayed and covered with the sustainable wishes of Rotterdam’s youth. Young people can register for this via sends e-mail).


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Foreign trade with the United Kingdom is losing importance / United Kingdom only ranked 7th of Germany’s most important trade partners

Wiesbaden (ots) – The trend of a declining German
Trade in goods with the United Kingdom since
Brexit referendum continues. Like the Federal Statistical Office
(Destatis), the UK was in January
until July 2019 with foreign trade turnover (exports and imports) of
68.5 billion euros on rank 7 of the most important trading partners
Germany. Thus, the United Kingdom has over the
Last year 2018 another place in the ranking of the most important
Trading partner lost. In 2015 – the year before
Brexit referendum – the United Kingdom still ranked 5th.According to preliminary results of foreign trade statistics were
from January to July 2019 goods worth 47.1 billion euros
Germany exported to the United Kingdom and goods in value
of 21.3 billion euros from the United Kingdom
Germany imported. German exports fell by 4.6%
compared to the same period of the previous year, while the
Imports from the United Kingdom fell by 3.7%. Of the
Surplus in the foreign trade balance was thus 25.8 billion


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NYK Takes Delivery of First Scrubber-Fitted VLCC | Brazil Modal

Image Courtesy: NYK

The vessel was handed over on October 3 during a naming and delivery ceremony at the Kure shipyard of Japan Marine United Corporation.

With the scrubber, the 311,374 dwt unit is compliant with the International Maritime Organization’s (IMO) more stringent SOx emission regulation, which is scheduled to be implemented in January 2020.

The 339,5-meter-long ship will be about 23% more energy efficient, reducing CO2 emissions per unit of transport, exceeding the IMO EEDI phase 2 requirements that will become effective in 2020.

For further safety and optimal vessel operation, NYK has employed its integrated information and bridge system.


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