Gas prices to hit record high, Russia's sea route could become new transport artery

The global gas market may face supply shortages, Russia calls on China to participate in cargo insurance for the Northern Sea Route, the Fed will wait until the second quarter of this year to cut interest rates… these are some of the prominent world economic news stories of the past week.

Russia's LNG-2 liquefied natural gas project in the Arctic. (Source: Novatek)

World economy

The global natural gas market could face supply shortages until 2026.

The Gas Exporting Countries Forum (GECF) predicts that the global liquefied natural gas (LNG) market will tighten until 2026, while demand is expected to increase by 1.5% this year and up to 22% by 2050.

The forecast was made by the Secretary-General of GECF, Mohamed Hamel, on January 22nd at a conference held in Trinidad & Tobago.

According to information on GECF's official website, the organization represents natural gas exporters including Qatar, Russia, and Trinidad & Tobago. Its members hold more than two-thirds of the world's gas supply.

In its annual report, GECF warned of record-high and volatile spot gas prices in both European and Asian markets. At the same time, the organization noted that countries are prioritizing energy security concerns over emissions reduction targets to combat climate change, with policymakers focusing on meeting people's energy needs.

Also at the conference on January 22nd, Oksana Dembitska, Senior Vice President for Gas Growth at energy giant BP, warned about excessively high LNG prices. She stated that this has led to a decline in gas demand, especially after the Russia-Ukraine tensions flared up, causing LNG prices to increase sevenfold.

Ms. Dembitska also stated that BP expects Europe to continue to be an important destination for LNG for at least another 20 years. This is supporting supply agreements for the region.

US economy

According to a majority of economists surveyed by Reuters , the US Federal Reserve (Fed) will wait until the second quarter of 2024 to cut interest rates , with the move more likely to occur in June than May. In addition, economists also believe that the Fed's monetary policy easing this year will be less than market expectations.

The average forecast from economists suggests the Fed's key interest rate will be between 4.25% and 4.50% by the end of this year, similar to last month.

On January 22, Lael Brainard, Director of the White House National Economic Council (NEC), stated that China 's lackluster economic recovery (5.2% growth in 2023) has not had a significant impact on the US economy due to the diversification of supply chains in recent years.

Speaking at an event hosted by the Brookings Institute, Brainard argued that other Asian countries and those closely linked to China's development would feel the impact more strongly.

Chinese economy

At a State Council meeting earlier this week, China stated it would further improve its capital market , paying more attention to maintaining a balance between investment and capital supply, strengthening the quality and value of investments in listed companies, and increasing medium- and long-term capital flows into the market.

The meeting stressed the need to strengthen market oversight to create a transparent environment. Authorities will intensify monitoring of the trading behavior of key investors, eliminate unusual trading practices, stock price manipulation, and other violations, and develop plans to penalize and prevent financial fraud.

Amidst a global economic slowdown, China has boosted foreign trade in several specific sectors . A ro-ro vessel carrying over 5,000 new vehicles began its maiden voyage last week from the port of Shenzhen in Guangdong province, southern China. The ship, chartered by Chinese electric car manufacturer BYD, has departed for the ports of Vlissingen in the Netherlands and Bremerhaven in Germany.

Automobile exports have emerged as a bright spot in China's foreign trade. With 4.91 million vehicles exported in 2023, the country is expected to become the world's largest automobile exporter.

European economy

On January 23, European Commission Vice President Valdis Dombrovskis, responsible for overseeing the European Union's (EU) economic affairs, stated that the bloc is facing the risk of rising consumer prices and slower growth due to disruptions in the transport of goods across the Red Sea.

Cargo traffic through the Red Sea has decreased by 22% in a month due to attacks by Houthi forces in Yemen targeting ships transiting this shipping route. However, the decline is expected to be even greater as shipping companies are having to reroute their vessels around Africa.

Energy prices in Europe are expected to rise in the near future , as more and more petroleum products and crude oil tankers are diverting away from the Red Sea and the Suez Canal.

According to global trade intelligence firm Kpler, at least six crude oil tankers are now taking a longer route around Africa's Cape of Good Hope instead of the Suez Canal, a diversion caused by Houthi rebel attacks, and transit times could be extended by up to 45 days.

*On January 23rd, on the Rossya 24 television channel, Yuri Trutnev, the Russian President's Plenipotentiary Representative in the Far East, stated that Moscow is discussing with China the possibility of encouraging the latter to participate in insuring cargo on Russia's Northern Sea Route (NSR) .

He believes the NSR will become the world's new transportation lifeline and could fully compete with the Suez Canal. However, many shipping companies are currently not using the NSR precisely because goods transported through it are not yet insured.

Russia surpassed Saudi Arabia to become China's largest supplier of crude oil in 2023.

According to customs data released on January 22, the world's largest oil importer purchased a record 107 million tons of crude oil from Russia in 2023, nearly 25% more than the previous year and equivalent to approximately 2.15 million barrels per day. This figure is higher than the less than 86 million tons purchased from Saudi Arabia. This marks the first time Russia has been China's largest supplier since 2018.

According to Bloomberg 's calculations based on customs data, China's imports of Russian oil in 2023 reached $60.6 billion, equivalent to an average price of approximately $77 per barrel, higher than the price ceiling of $60 per barrel imposed on Russian oil by the West.

* Germany's offshore wind development made significant progress in 2023 , with the number of newly installed wind turbines increasing by almost 50% compared to 2022. Accordingly, Germany installed a total of 745 new wind turbines with a total capacity of approximately 3.57 gigawatts that came online in 2023.

Looking ahead to 2024, industry associations forecast that Germany's offshore wind power capacity will increase by another 4 gigawatts.

According to a survey published on January 24 by credit risk analysis firm S&P Global, UK economic activity grew at its fastest pace in seven months in January 2024, despite the Red Sea situation adding pressure on production costs.

The S&P Global flash UK composite output index rose to 52.5 in January 2024 from 52.1 in December 2023, higher than the 52.2 forecast by economists polled by Reuters. This is the highest figure since June 2023 and well above the 50 mark, indicating that most businesses are reporting increased activity.

Japanese and South Korean economies

* Japan's exports rose to a new record high in December 2023, the largest monthly increase ever, driven by the first increase in exports to China in over a year and record sales to the United States.

The country's finance ministry said that exports from the world's third-largest economy rose 9.8% in December 2023 compared to the same period last year, reaching 9.8 trillion yen (US$65.13 billion). This figure was higher than the 9.1% increase predicted by economists in a Reuters poll and followed a 0.2% decline in November 2023.

Overall, in December 2023, Japan's trade balance recorded a surplus of 62.1 billion Yen, compared to a previously projected deficit of 122.1 billion Yen.

* Concluding its two-day meeting on January 22-23, the Bank of Japan (BoJ) kept interest rates at ultra-low levels , aiming to boost strong wage growth and stabilize inflation at 2%, while continuing its yield curve control policy.

The Bank of Japan (BoJ) maintained short-term lending rates at negative 0.1%, while allowing yields on 10-year government bonds to fluctuate between negative 1% and 1%. The bank did not adjust its asset purchase program.

* Data released on January 21st shows that in 2023, South Korea's kimchi exports reached a new record high , amidst the growing global popularity of Korean entertainment content.

According to data from the Korea Customs Service, kimchi exports increased by 7.1% to 44,041 tons in 2023, surpassing the previous record of 42,544 tons set in 2021. In terms of value, South Korea's kimchi exports last year increased by 10.5% compared to 2022, reaching $155.6 million. Kimchi is a traditional Korean side dish made from fermented cabbage.

* On January 24th, Korea Price Information, a price survey agency, released the results of its market price survey, showing that the cost of preparing traditional offerings for ancestral worship ceremonies in Korea has increased significantly this year .

Based on the standard for a family of four, the cost of preparing a ceremonial meal at a traditional market is 281,500 Won (approximately 220 USD). If purchased at large supermarkets, this cost would be 380,580 Won, 35.2% higher than at traditional markets. Shopping costs this year at traditional markets and large supermarkets have also increased by 8.9% and 5.8% respectively compared to last year.

ASEAN economy and emerging economies

* In 2024, the Indonesian government allocated 114.3 trillion Rupiah (equivalent to 7.6 billion USD) from the budget for food security, an increase of 13.4 trillion Rupiah compared to 2023. This expenditure aims to ensure the essential needs of a population of 278.8 million (as of 2023).

In the 2024 Approved Budget (APBN), this budget allocation is included as a priority expenditure for the year, along with budgets for education, social welfare, health, law, and defense.

* Imports into Malaysia are being delayed by up to two weeks as international carriers reroute cargo to avoid potential attacks in the Red Sea. This could mean Malaysians will have to pay more for imported luxury goods, such as wine and food, shipped from Europe.

According to data from Maybank Malaysia (MIBG), container shipping rates on the Asia-Europe route have increased by more than 600% since the conflict in Gaza broke out, leaving Malaysian importers with little opportunity to reduce costs. Economists believe that higher shipping costs, as well as delays and logistical disruptions caused by the Red Sea crisis, are unavoidable.

Official figures released by the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) on January 23rd show that Singapore's core inflation in December 2023 rose slightly to 3.3% year-on-year in 2022, higher than the 3.2% recorded the previous month.

Meanwhile, the country's overall consumer price index, or general inflation, was 3.7% in December 2023, higher than the 3.6% recorded in November of the same year.

For the whole of 2023, Singapore's average core inflation (excluding personal accommodation and transportation costs) was 4.2%, higher than the 4.1% of 2022.

Source: https://baoquocte.vn/kinh-te-the-gioi-noi-bat-19-251-gia-khi-dot-se-cao-ky-luc-tuyen-duong-bien-cua-nga-co-the-tro-thanh-huyet-mach-van-tai-moi-258671.html