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Affinity Policy Comment 2 October 2023

Roll On Q4!

Central banks across major developed economies delivered what looked like a last gasp set of rate hikes in September, while economies in both Latin America and emerging Europe were on track for continued easing.

September saw nine of the central banks overseeing the 10 most heavily traded currencies hold rate setting meetings, though just three - Sweden, Norway and the European Central Bank - hiked rates, by a cumulative 75 basis points. The US Federal Reserve, the Bank of England as well as Australia, Canada and Japan all opted for no change. New Zealand's central bank did not meet.

September's moves compare to two hikes across four meetings in August, traditionally a quieter month for monetary policy decisions, and take the 2023 YTD tally for G10 central banks to a total of 1,150 basis points across 36 hikes.

Still, markets have seen some seismic shifts in recent weeks after being forced to adjust to the 'higher for longer' mantra propagated by major central banks. Diverging rate trajectories were on full display in emerging economies where 16 out of the 18 central banks in the Reuters sample held meetings in September.

Latin America and central and eastern Europe are at the forefront of the easing cycle, with Brazil, Chile and Poland lowering benchmarks, taking the cumulative amount of rate cuts to 200 basis points for September, and the annual total of cuts to 420 basis points across eight moves lower. Hungary also reduced one of its rates, the one-day deposit rate, by 100 basis points to 13  per cent last week, aligning it with the main base rate which it left unchanged. However, the recent jump in oil prices has added to uncertainty over how fast the easing cycle could progress.

On the other hand, a select number of central banks in emerging markets were still in hiking mode. Turkey, which is struggling with inflation pressures and a currency that is sliding from one record low to the next, delivered another bumper 500 basis points rate hike. Russia raised its benchmark by 100 basis points while Thailand also hiked rates in surprise decision, taking the monthly tightening tally across developing economies to 625 basis points in September and the total in the year to date to over 3,475 basis points through 30 hikes.

In other news, the US Congress passed a stopgap funding bill late on Saturday, averting a government shutdown that threatened to further damage the US credit rating, exacerbate market volatility and delay key economic releases. Still, concerns that political polarization in Washington is weakening fiscal policymaking could linger.

Meanwhile, looking east, the World Bank has cut its growth forecast for China into next year to 4.4 per cent, down from the 4.8  per cent figure the institution forecasted in April, as Asia's largest economy keeps struggling with a brewing property crisis that threatens to harm prospects for its economy.

A 4.4  per cent expansion in 2024 would mean that China's growth would not be as strong as it was before the pandemic. Official statistics show the Chinese economy grew around 6  per cent to 7  per cent annually in the late 2010s before slowing to 2.2  per cent in 2020 due to the pandemic. The growth rebounded to 8.4  per cent in 2021 but slowed again to 3  per cent in 2022 as the government's strict zero-COVID policy damaged business activities. For this year, the World Bank projects a 5.1  per cent expansion for the country.

"China's past growth, largely driven by investment in infrastructure and property, has left firms and local governments burdened by debt, as saturated infrastructure yields diminishing returns and an oversupply of housing reduces property prices," the report noted.

Once the largest developer in the country, for instance, China Evergrande Group is now struggling under heavy debts accumulated over the years, while a sales slump has hit its cash position following a government crackdown on the sector. Estimates on the real estate sector's contribution to China's GDP range from a quarter to a third, including surrounding industries that prop up the property space.

The World Bank's report also noted that a 1  per cent reduction in China's growth is associated with a cut in regional expansion by 0.3 per cent. Overall, for developing economies in the APAC region, the World Bank now expects growth to remain strong at 5  per cent in 2023, but that the momentum might ease in the second half of this year.

And despite China's troubles, the institution sees bright spots in Southeast Asia, with global inflation expected to ease. In the region, it noted that the combination of services reform and digitalization is creating new opportunities, with the "diffusion of digital technologies" set to improve economic performance. The region’s GDP should expand by 4.5  per cent in 2024, the Bank said.


Affinity Research LLP

what we do

  • Carbon

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    Contact: Rahul Khanna
    [email protected]

    LNG

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Contact: Stuart Morrison
    [email protected]
    +44 (0)20 3142 0144

    Carbon

    Using tailored analytics platforms, we offer client-specific advisory and trading services across the global carbon markets. Contributing to hedging strategies, sustainability reporting and financing requirements, our aim is to assist clients in managing their financial exposure to the approaching energy transition.

    Contact: Hugo Wilson
    [email protected]
    +44(0)20 3142 0121

    Containers

    Our specialised Container team in South America arranges freight & logistic solutions primarily for the mining and perishable industries.

    Contact: Andrea Meza Allemant
    [email protected]
    +51 99 115 2393

    Dry Cargo

    Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
    For Atlantic business please contact Hans Bredrup
    For Pacific business please contact Rahul Khanna

    Contact: Hans Bredrup
    [email protected]
    +56 99 887 3036
    Contact: Rahul Khanna
    [email protected]

    LNG

    Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
    We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.

    Contact: Joni Mackay
    [email protected]
    +44(0)20 3142 0133

    Newbuilding

    Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.

    Contact: Nick Wood
    [email protected]
    +44(0)20 3142 0111

    Offshore

    Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.

    Contact: Tor-Øyvind Bjørkli
    [email protected]

    Research

    Our research department combines real time market information with econometric modelling and the latest technology. 

    Contact: Sevita Kondyliou
    [email protected]
    +44(0)20 3142 0182

    S & P

    Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.

    Contact: Tom Morrison
    [email protected]
    +44(0) 20 3142 0128

    Tankers

    Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators. 
    Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.

    Contact: Tim Gurdon
    [email protected]
    +44(0)20 3142 0142

    Valuations

    We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.

    Contact: Stuart Morrison
    [email protected]
    +44 (0)20 3142 0144

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