In 2017, sadly no research, articles or reports can be assumed as being accurate, writes Jeffrey Landsberg from Commodore Research.
The topic of ‘fake news’ has been all the rage this year, but for decades ‘real news’ has also been quite flawed and prone to creating inaccurate economic narratives. Separating fact from fiction allows savvy traders and shipping executives to create very lucrative opportunities to profit in the dry bulk shipping market (and the related equity and derivative markets).
The Chinese economy often finds itself a subject of flawed research and media coverage. For example, back in January we published a report that discussed how a major media outlet wrote about current “dampened electricity demand” in China but bizarrely only included 2015 data. The same data set that showed China’s electricity demand grew by 0.5% in 2015 (which was the only demand statistic used in that article) also showed China’s electricity demand grew by 5% in 2016. Eleven months of 2016 data was available when that very flawed article was published — but nevertheless only 2015 data was used.
Stunningly inaccurate work is often published by the largest and most respected global media outlets, and both ‘real news’ and ‘fake news’ must always be analysed very carefully whenever being consumed. In 2017, sadly no research, articles, or reports can be assumed as being accurate. What is also true in this day and age is that the predictions for what is to come next in China, the dry bulk shipping market, and various dry bulk commodity markets are often made by pundits who are not even fully aware of what is occurring at present. As we have also often examined in our research, predictions published by the Chinese government itself cannot simply be treated as gospel as well.
The fact that the Chinese government’s predictions must not be treated as gospel is a fact we like to discuss as it can easily be proven. One example is that the China Electricity Council last year predicted that the nation’s electricity consumption in 2016 would grow by 1 – 2%. As it would later announce this year, however, consumption in 2016 ended up growing by 5%. The China Electricity Council early this year also predicted that electricity consumption would grow in 2017 by 3%. After that prediction was released we opined in several of our reports that Chinese electricity consumption growth this year would easily exceed 3% — and so far this year the first seven months of data have shown that China’s electricity consumption has grown by approximately 6.9%.
Another popular but inaccurate narrative that makes the rounds every June and July (and occurred again this year) is that China’s steel production and demand are very weak in summer months. The pundits that make this claim year after year ignore what actually occurs in China. However, a look at seasonal historical data before this summer began showed very clearly that Chinese steel production usually comes under only a small amount of pressure every June, July, and August. As we advocated earlier this year, there was no reason to expect a large drop in Chinese steel production would occur this summer — but nevertheless that is what countless pundits were predicting. This year pundits have seen how that is not at all true (China’s steel production set a record this summer), but come next year the same inaccurate narrative will likely surface again before the summer of 2018 begins.
Overall, inaccurate economic narratives can often be found in various markets — but this remains wonderful for traders and shipping executives as it creates very lucrative opportunities to profit when knowing the truth. In the dry bulk shipping market (and the related equity and derivative markets) there is a great deal of money to be made whenever perception is not aligned with reality, and this year has shown such instances can occur quite often. ‘Fake news’ is unlikely to disappear any time soon, but the same degree of scepticism should also be adhered to whenever consuming ‘real news’.
This article first appeared in the latest issue of Maritime CEO magazine, published this week. Splash readers can access the full magazine for free by clicking here.