Roaring commodity demand pushes shipping rates higher

The commodity market in Africa is currently facing a number of challenges amidst a roaring demand for commodities and increasing shipping rates. Nick Kwolek, Founder of Kwolco, provided insights on the current situation during a recent interview with CNBC Africa. Kwolek highlighted the impact of the commodity super cycle that is currently underway, leading to a significant increase in commodity prices across various sectors including minerals, metals, and agriculture. The rise in food, energy, and metals prices is being compounded by a shipping crisis, resulting in higher break bulk and container rates. This surge in prices is putting pressure on consumers across the continent, with no signs of easing in the near future. Kwolek also touched upon the recent conflicts and security concerns in countries like Ethiopia and Uganda, as well as the looming drought in the region, which are further adding to the challenges faced by the commodity market. The blockades in supply routes from Djibouti to Ethiopia are exacerbating the situation, leading to potential humanitarian crises due to the inability to sustainably import essential commodities such as sugar, rice, and cooking oil. The scarcity of dollars in the region is also making trading more difficult, as traders struggle to secure the necessary currency for transactions. Despite these challenges, Kwolek mentioned the African Union Agenda 2063 and the African commodity strategy as long-term strategies aimed at addressing these issues. The strategies focus on promoting self-sufficiency in food commodities and enhancing value addition to raw materials within the continent. While progress is being made in terms of investment and self-sufficiency, the impacts of these strategies are expected to be more long-term. Looking at the shipping industry, Kwolek provided an update on the current scenario. While both container and break bulk rates have increased since the onset of the COVID-19 pandemic, there has been a sharp correction in break bulk shipping rates recently. This correction is expected to have a cascading effect on container rates, eventually easing supply chain pressures and potentially lowering prices for consumers. Kwolek anticipates a correction in the shipping industry in Q1 to Q2 next year, which could help alleviate some of the current challenges in the commodity market. Overall, the commodity market in Africa is facing a complex landscape with multiple factors at play, from rising demand and prices to shipping disruptions and geopolitical tensions. Navigating these challenges will require concerted efforts from stakeholders across the region in the coming months.