US economic outlook until November: cloudy with a chance of escalating trade wars

South China Morning Post
Marco Vicenzino

US economic outlook until November: cloudy with a chance of escalating trade wars
Positive sentiment in the US stock market fails to account for continuing unrest in the run-up to the presidential election, a second wave of Covid-19 infections and tensions with the European Union and China

July 1st, 2020

Despite the recent return of stock market volatility and diminishing hopes that easing lockdowns would lead to a quick recovery, the US market has generally remained disconnected from post-pandemic political realities. Initial positive sentiment has been reinforced by several factors, including the unexpected drop in unemployment and the creation of 2.5 million jobs in May.

Furthermore, according to the New York Federal Reserve, companies’ outlook is at a decade high and manufacturing in New York State stabilised in June. Other reports also point to an apparent stabilisation in US economic activity.

Until recently, there has also been a general sense of security that stimulus packages will continue as needed. After all, they command broad public support and bipartisan backing – to varying degrees – particularly as November’s presidential election approaches. Introducing a massive infrastructure package to spur economic growth – focusing on improving roads, bridges and digital networks, particularly 5G – would further energise markets.

However, pressure has been mounting in the White House and among congressional Republicans to wind down current unemployment benefits by the end of July as they are seen as a “disincentive” for work, even as Democrats call for their extension until early 2021.

A compromise is likely that will provide the necessary flexibility to ensure a basic safety net as the full extent of the pandemic’s damage becomes apparent in the coming weeks.

Overall, positive sentiment is still premature and the durability of its foundations questionable in the longer term. The general environment may shift as the third quarter unfolds.

 the recent return of stock market volatility and diminishing hopes that easing lockdowns would lead to a quick recovery, the US market has generally remained disconnected from post-pandemic political realities. Initial positive sentiment has been reinforced by several factors, including the unexpected drop in unemployment and the creation of 2.5 million jobs in May.

Furthermore, according to the New York Federal Reserve, companies’ outlook is at a decade high and manufacturing in New York State stabilised in June. Other reports also point to an apparent stabilisation in US economic activity.

Until recently, there has also been a general sense of security that stimulus packages will continue as needed. After all, they command broad public support and bipartisan backing – to varying degrees – particularly as November’s presidential election approaches. Introducing a massive infrastructure package to spur economic growth – focusing on improving roads, bridges and digital networks, particularly 5G – would further energise markets.

However, pressure has been mounting in the White House and among congressional Republicans to wind down current unemployment benefits by the end of July as they are seen as a “disincentive” for work, even as Democrats call for their extension until early 2021.

A compromise is likely that will provide the necessary flexibility to ensure a basic safety net as the full extent of the pandemic’s damage becomes apparent in the coming weeks.

Overall, positive sentiment is still premature and the durability of its foundations questionable in the longer term. The general environment may shift as the third quarter unfolds.

In particular, should there be continuing social unrest coupled with the not unusual uncertainty that often accompanies a US presidential election year, specifically the September-October period leading up to the election.

There are other unpredictable variables at play that could fuel increasing uncertainty for the longer-term US economic outlook.

Topping the list is the future course of the Covid-19 virus and its economic impact. That is, whether a second wave  will occur – for some, it may have already arrived. Economic deterioration could accelerate should a more dangerous mutation of the virus make its way to the northern hemisphere in autumn.

Overall, consumer spending remains low and it is still unclear for how long this will persist. Despite May’s positive job-related news, unemployment numbers are still far above those at the height of the 2008 recession.

A key question about the millions of Americans who applied for unemployment is how many of these jobs are permanently lost, and the ensuing fallout. For example, a vicious chain reaction could be triggered by an avalanche of unpaid rents in both commercial and residential real estate sectors.

Other factors that must be taken into account include the strains imposed by stimulus packages on public finances in the long term. Then, there is the reality of the unofficial economy’s impact on the wider society, including its potential spillover into the official economy.

It is increasingly clear that the severity of the 2020 lockdown in so many parts of the world will outweigh that of the 2008 crisis. Will it ultimately lie closer to 2008 or the 1929 Great Depression, or linger somewhere in between?

The bottom line is that until there is an effective vaccine or treatment, uncertainty will continue for the foreseeable future.

Developments internationally, particularly the increasing possibility of trade wars, further cloud the longer-term US outlook. A spat between the US and the European Union on multiple fronts is brewing.

The most recent round involved the breakdown of multilateral talks on a framework for taxation on the digital industry. US authorities see attempts by European countries to tax American tech giants as discriminatory and have threatened retaliation on sectors ranging from food to automobiles.

Other matters stoking the transatlantic flames include the gas pipeline from Russia to Germany and the threat to withdraw US troops from Germany, due to Berlin’s failure to comply with Nato’s mandated 2 per cent of gross domestic product defence spending.

These issues are not restricted to the Trump presidency and will continue to loom large even with a change of administration.

Then, there are prospects of an intensifying US-China trade war, particularly with mixed messages emanating from the White House, such as White House adviser Peter Navarro’s suggestion that the US-China preliminary trade deal was “over”, which roiled markets. US President Donald Trump quickly rebutted that statement and markets rebounded.

Political and economic developments can be expected to continue clouding the longer term US outlook en route to the November election.

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Benin to allow foreign Armed Security Teams on board ships

Benin informed that all ships bound for a port in the country are required to have an Armed Protection Team (APT). Failing that, the vessel must receive a protection service by the Benin Public Forces at the entrance to Benin’s territorial waters. The associated fees will be paid at the port of call.

Any ship bound for a port in Benin with an armed protection team on board, will have to send through its ship agent, a request for permission to enter Benin’s territorial waters with its own armed onboard protection team.

The application for entry into Benin’s territorial waters is a form that must be completed online and sent to the Director of the port of call at least 72 hours before the vessel arrives.

Howver, authorization to enter Benin’s territorial waters with an armed protection team on-board, is not equivalent to authorization for weapons storage in Benin. The ship must leave Benin with all the weapons of its armed protection team on board.

In this aspect, any ship which is authorized to enter Benin’s territorial waters is subject to an arms verification. The APT’s weapons are then placed under seal. This operation is carried out at the quayside by a team from the Beninese Armed Forces under the authority of the Maritime Prefecture.

When the ship is about to sail, the Armed Forces team shall unseal all the onboard armed protection team’s weapons.

What is more, ships without an on-board armed protection team who intend to enter the port directly and not stay on the roads, are escorted from the reception zone to the pilot station and into their berths.

In addition, vessels with no on-board armed protection teams and which have to stay on the roads, will go directly to the berths which are assigned to them by the semaphore. Their team of Navy Fusiliers will board as soon as they are in berth.

The armed protection provided by the Armed Forces is as follows:

  • As soon as the vessels drops anchor, if it has not stayed on the roads and has not received a direct escort, National Navy Fusiliers board to ensure its protection until it berths;

  • Upon its departure, the vessel is escorted by the National Navy to ensure its protection until the vessel has reached cruising speed whether or not it stayed on the roads on arrival.
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Nigerian Pirates Release Kidnapped S. Korean Fishermen

Five South Korean fishermen who were kidnapped from the purse seiner Panofi Frontier in the Gulf of Guinea have been released, according to South Korea’s ministry of foreign affairs. 

The abductees were recovered from their captors on Friday at a location in Nigeria. They are reportedly healthy and are in the care of the Korean embassy. When they are ready, they have been provided with the option to travel to Ghana, where their vessel is homeported. the ministry said. One Ghanaian abductee from Panofi Frontier was also released, and he has been transferred to Ghanaian authorities. 

The Ghana-flagged Panofi Frontier was attacked and boarded on June 25 at a position about 60 nm to the south of Cotonou, Benin. According to the ICC IMB, the pirates departed in the direction of Nigerian territorial seas – a common pattern for abductions in the Gulf of Guinea. In coordination with the shipowner and with regional governments, South Korea’s foreign ministry launched an effort to secure their safe return.

24 other crewmembers were left on board and were not harmed, IMB reported. 

According to maritime security consultancy Dryad Global, the Panofi Frontier boarding was the seventh reported incident off Cotonou so far this year. This represents an increase in activity relative to last year, and Dryad assesses that the perpetrators of the most serious incidents likely come from Nigeria. 

The Gulf of Guinea is easily the most active region in the world for serious maritime piracy, especially kidnapping. According to the IMB, the number of seafarers reported kidnapped in the Gulf of Guinea increased by more than 50 percent in 2019, reaching a total of 121 victims. The count represented 90 percent of maritime kidnappings reported worldwide during the year.

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ReCAAP: Piracy on the Upswing in Asian Waters

The number of piracy and armed robbery incidents reported in Asian waters has more than doubled in the first half of 2020 compared to last year. There were 51 incidents reported from January to June this year compared with 28 for the same period in 2019.

The half-yearly statistics were released by the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) Information Sharing Centre on July 16.

The center’s executive director, Masafumi Kuroki, said that it is concerned with the nearly two-fold increase in the number of incidents in Asia, even though most were at a “low severity level.” “Small crimes, if not addressed, can embolden criminals to commit more serious acts,” he said.

Most of the incidents in the Singapore Strait this year occurred in the hours of darkness and involved bulk carriers, although tankers and tug-boats were also targeted. Items stolen include engine spares, scrap metal and steel construction material on barges. The number of incidents in the Straits of Malacca and Singapore has climbed steadily from one in the first half of 2016 to two in the following year and five in 2018.

While the reasons behind the increase in incidents of armed robbery are not clear, Kuroki said that there was a need for ships to enhance vigilance and for law enforcement to strengthen surveillance and patrol.

The number of incidents of piracy and armed robbery reported in Asia waters were the lowest in more than a decade in 2018, with 76 incidents. This increased slightly to 82 last year.
Reports of incidents are collated from designated government agencies of ReCAAP’s 20 member states, which include Singapore, India, the Philippines, Japan, Australia and the United States.

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13 Crew kidnapped from tanker off Benin

The 2007-built 11,300 dwt chemical tanker Curacao Trader was attacked by pirates off the coast of Benin in West Africa on July 17.

According to the ship’s manager Alison Management, 13 out of 19 Ukrainian and Russian crewmembers onboard the vessel have been taken hostage by the pirates. The ship was adrift with limited manpower following the attack. Nearby vessel Frio Chikuma sailed to the ship in an attempt to provide assistance.

“Alison Mangement wishes to advise that its prime concern remains the safety and recovery of its abducted crews and no effort shall be spared to achieve their soonest possible release,” the company said in a release.

Ship registration information shows the vessel is owned by UK owner Lomar Shipping.

Last week, ICC International Maritime Bureau’s (IMB) released its latest piracy report saying The Gulf of Guinea off West Africa is increasingly dangerous for commercial shipping, accounting for just over 90% of maritime kidnappings worldwide.

So far this year, 49 crew have been kidnapped for ransom in the Gulf of Guinea and the rates are accelerating, with 32 crew kidnapped in the past three months alone.

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Are tired crews more vulnerable to piracy attempts?

Asian piracy watchdog concerned that seafarer fatigue may be a factor in the growing number of attacks in the world’s busiest waterway

Fatigued crews practising lower levels of vigilance could be a factor leading to a steep rise in the number of armed robbery incidents that took place in the Singapore Strait during the first half of 2020.

Masafumi Kuroki, executive director of the Singapore-based Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP), said on Thursday that there there was no concrete evidence to link the coronavirus pandemic to the increase in incidents in the Singapore Strait and elsewhere in Asia.

But he said crew fatigue as a result of prolonged work periods at sea could not be dismissed as a factor.

“It is possible that fatigued crews are tired and not keeping a vigilant watch,” he said, while stressing that this was his personal opinion as Singapore-based ReCAAP was not a research organisation and could not make professional determination on the matter.

Kuroki said ReCAAP was especially concerned about the Singapore Strait, which recorded a total of 16 incidents during the first six months of the year.

The majority of these events took place in the Eastbound lane of the traffic separation scheme in the hours of darkness.

Three tankers and seven bulk carriers were among the ships that reported they had been boarded by robbers who attempted to make off with engine spares or scrap metal. In several cases the perpetrators were armed with knives.

Increased vigilance and policing

Kuroki said that it was imperative that crews on ships transiting the Singapore Strait maintain a vigilant lookout at all times.

ReCAAP, he added, was calling for increased surveillance and policing by the countries on the strait.

“The arrest of criminals is very important for deterrence,” Kuroki said, adding that while the severity of the incidents taking place in the Singapore Strait remains low, it is still a reason for concern.

“Small crimes, if not addressed, can encourage criminals to commit larger crimes in the future.”

Only one incident that took place in the Singapore Strait led to arrests.

In March three attackers, armed with a crowbar and pipes, boarded Shipping Asset Management’s 57,200-dwt SAM Jaguar (built 2013).

A quick-thinking crew detained them in the engine room until they could be handed over to an Indonesian navy patrol boat.

“I hope that this kind of arrest will continue in the future,” Kuroki said.

He noted that in 2015 there were 99 boarding incidents in the Singapore Strait. After Indonesian authorities made a number of arrests, incidents dropped to only two the following year.

ReCAAP figures for the first half of 2020 released in Thursday indicate that piracy and armed robbery increased throughout Asia during the period, with a total of 51 incidents reported across the region.

This figure was almost double the number of 28 incidents reported for the corresponding period in 2019.

Kuroki said that there were different reasons for increases in different locations. He cautioned that while Covid-19 had led to severe economic hardships, there were no causal relationships that allowed the increase to be linked with the pandemic.(Copyright)

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Crew Kidnappings Soar in West Africa

Crew kidnappings and violent attacks on vessels in the oil-rich West Africa region have soared in 2020, with 77 seafarers taken hostage or kidnapped for ransom since January, according to the ICC International Maritime Bureau’s (IMB) latest piracy report.

The Gulf of Guinea off West Africa is increasingly dangerous for commercial shipping, accounting for just over 90% of maritime kidnappings worldwide. Meanwhile, ship hijackings are at their lowest since 1993, the report said.

“Violence against crews is a growing risk in a workforce already under immense pressure,” says IMB Director Michael Howlett. “In the Gulf of Guinea attackers armed with knives and guns now target crews on every type of vessel. Everyone’s vulnerable.”

Just a fortnight ago, pirates attacked BW Offshore’s Sendje Berge FPSO offshore Nigeria, and kidnapped nine Nigerian nationals were kidnapped. Initial reports indicated that explosives were used during the attack.

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Two attacks against ships in Singapore Strait last week

ReCAAP ISC informed of two incidents of armed robbery against ships in Asia. Both were CAT 4 incidents that occurred onboard ships while underway in the eastbound lane of the Traffic Separation Scheme (TSS) in the Singapore Strait.

The first incident involves the Panamanian-flagged reefer vessel Frio Olympic, approximately 5.8 nm northwest of Tanjung Pergam, Pulau Bintan, Indonesia in the eastbound lane of the TSS in the Singapore Strait, on 2 July.

While the reefer vessel was en route to Dalian, China, an unknown number of perpetrators were sighted on deck. The master raised the alarm and the perpetrators escaped immediately.

Then, the crew conducted a search on board and discovered that four boxes of spare parts were stolen. There was no confrontation with the crew.

The incident was reported to Singapore Vessel Traffic Information System (VTIS). The ship confirmed no assistance was required and resumed her voyage. A safety navigational broadcast was initiated. The Republic of Singapore Navy’s (RSN) Maritime Security Task Force (MSTF), Singapore Police Coast Guard and the Indonesian authorities were notified.

The second incident involved the Marshall Islands-flagged bulk carrier Cardinal, approximately 7.7 nm northwest of Tanjung Tondang, Pulau Bintan, Indonesia in the eastbound lane of the TSS in the Singapore Strait.

While the bulk carrier was en route from Singapore to Qingdao, China, on 28 June, four perpetrators were sighted in the engine room workshop.

Upon being sighted, the perpetrators escaped via the emergency steering room to the ship’s stern deck.

A thorough search on board the ship was conducted twice with no further sighting of the perpetrators.

The markings found on ship railings at the stern indicated that the perpetrators had escaped using hooks and ropes. There was no confrontation with the crew and nothing was stolen.

The ship resumed voyage. The ship’s CSO reported the incident to the Singapore Port Operations Control Centre (POCC). A safety navigational broadcast was initiated. The RSN, Singapore Police Coast Guard and the Indonesian authorities were notified.

The report contains also reports of another two incidents outside Asia, in which a total of 14 crew members were kidnapped. Both incidents occurred on 2 July.

The first incident occurred on the FPSO ‘Sendje Berge’ while anchored at Okwori field offshore, Nigeria and the second incident on the general cargo ship Kota Budi while drifting in the Gulf of Guinea.

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Pirates Attack Second Vessel in Gulf of Guinea Kidnapping Five Crew

A cargo vessel was the latest target of pirates in the waters off Benin. This attack came just one day after reports of an even more brazen attack on a vessel in the oil fields in the Gulf of Guinea.

In the latest incident, security firm Dryad is reporting that heavily armed individuals boarded Pacific International Lines’ 27,379 DWT general cargo vessel the Kota Budi. Five Chinese nationals working as crew members, including possibly the master, were reportedly kidnapped from the Singapore-flagged vessel. Fifteen additional crew members remain aboard the vessel unharmed.

The attack took place around midnight local time on July 2. The Koti Budi at the time was reported to be approximately 150 miles offshore from the port of Cotonou, Benin after a call in the Nigerian port of Warri. 

Dryad is reporting that this is the seventh incident in the area in 2020. A total of 78 people have reportedly been kidnapped this year in incidents off West Africa. Dryad reports that kidnappings are 26 percent higher this year.

In a statement, Pacific International acknowledged the attack saying it was working with local authorities.

One day earlier, BW Offshore reported that its vessel the FPSO Sendje Berge was attacked by pirates near Nigeria and that nine crew members had been kidnapped. Dryad Global termed that incident as unique within the wider realm of offshore incidents in the region. Dryad says the manner and tactics used during the attack on the Sendje Berge were more consistent with attacks perpetrated by militants than pirates in the West African region. 

The area has been notorious for pirate attacks in recent years. The International Chamber of Commerce’s International Maritime Bureau (IMB) in its 2019 annual piracy report highlighted “an alarming increase in crew kidnappings across the Gulf of Guinea.” According to the IMB report, the number of crew kidnapped in the Gulf of Guinea increased more than 50 percent to 121 sailors in 2019. The report said it those incidents equated to over 90% of global kidnappings reported at sea.

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Pirates kidnap nine Nigerian nationals in offshore attack

According to reports, another Nigerian pirate accident took place in the Gulf of Guinea; This time, pirates attacked the FPSO Sendje Berge and kidnapped nine Nigerian nationals.

Specifically, BW Offshore issued a statement informing that at 4:20 a.m. local time its FPSO Sendje Berge was attached by pirates offshore Nigeria, and nine Nigerian nationals were kidnapped. Dryad reports that three vessels approached the target with one acting as a decoy while the other two assaulted and boarded the Sendje Berge. The vessel was located on the Okwori field in Nigeria under contract to Addax Petroleum at the time of the assault.

The remaining people onboard are safe and no injuries have been reported. For the time being, the company is collaborating with the local authorities and the Nigerian Navy.

Following the incident, Dryad Global reports that the incident is “unique” within the wider realm of offshore incidents within West Africa. Dryad says the tactics used, including reports of explosives with possibly grenades and RPGs, is more consistent with attacks perpetrated by militants than pirates in the West African region.

In addition, the kidnapping of foreign personnel by groups involved in militancy is not unusual for the Niger Delta according to Dryad, but offshore operations are less frequently the target. According to Dryad’s calculations, 72 people have been kidnapped in the region so far in 2020, represented a 50 percent increase in incidents versus the prior year.

In line with a growing concern over the continued attacks against ships in the Gulf of Guinea, Risk Intelligence has recorded almost 100 maritime security incidents across the region in 2019 to date, around one third of those involved tanker vessels of all types.

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