Fighting in Sudan stalls exports of gum arabic + ship financing remains competitive

Sudan’s exports of gum arabic have come to a standstill since fighting between rival military factions began there last month,Bloomberg reports. The commodity is a key ingredient in various pharma and cosmetics products and foodstuffs, and the interruption to supply is raising concerns of a potential global shortage. Sudan supplies about two-thirds of the world’s gum arabic and the outbreak of fighting has meant that stocks are now immobile at warehouses and production sites, exporters told Bloomberg. “More than 50k tons, which is around half of Sudan’s annual production, cannot be exported due to the war,” exporters said.

Background: Fighting between the Sudanese Armed Forces and the Rapid Support Forces erupted in mid-April following months of tensions surrounding military build ups and disagreements on how to effect transition to a civilian-led government and a unified military. An internationally brokered ceasefire that went into effect late on Monday has brought some respite to the fighting; nevertheless, residents reported sporadic fighting in parts of Khartoum on Tuesday, Reuters reported.

Shipping finance is showing positive signs despite global monetary tightening, with lenders, banks, and credit funds seeking to expand their portfolios and offering favorable terms for projects, according to ship financing platform Oceanis. While financing volumes for each individual vessel have been flat as asset values rose over the past quarter, margins have been under “severe downward pressure” amid the competition, Oceanis writes.

Which markets are favorable? The competition between lenders is exceptionally strong in the rebounding tanker markets, and the less liquid dry bulk and container markets are also seeing competitive terms, according to Oceanis. Tanker markets experienced volatility in 1Q 2023 but have recently rebounded, while dry bulk markets “seem to have finally bottomed out over the past two months” and container markets are also showing signs of recovery but there remain concerns about long-term earnings.