“Field of Dreams” is a film about the crazy things sane people do. Kevin Costner plays a farmer who hears a voice telling him to build a baseball field on his farm. “If you build it, they will come”, it says. So he stops farming and builds the field. Initially it’s the bailiffs who come, but then mysteriously the field fills with old-time baseball heroes, so all is well. It’s an inspiring, if fanciful, movie
Field of Faith
There is a parallel between Costner’s single-minded (or mindless?) commitment to his ludicrous dream, and the conviction shipping investors must have. Logic says the chance of a new Capesize making serious money in the near future is about the same as Babe Ruth sauntering out of Kevin’s cornfield. But the whisper “if you build them they will come” is not always ludicrous. A previous Analysis article argued that containership investment makes its own market because, once the ships are there, the cheap transport ‘pump primes’ new trades. So boxships are candidates for shipping’s “Field of Dreams”, and maybe products tankers are too.
Make Ships, Make Money
Oil products are different from most bulks because they are semi manufactures. Refineries churn out vast quantities of many different products, and matching refinery runs to global demand is a challenge in which shipping in-vestors now play a big part, as the trade data shows.
For many years products trade grew slowly. Between 1964 and 1973 it rose by 2.7m bpd, but in the next decade to 1983, there was no growth. By 1993 it had edged up another 1.8 m bpd, but generally owning products tankers was a dull business. Then every-thing changed. Babe Ruth came sauntering out of the cornfield and since then trade has doubled.
New Player, New Game?
Change on this scale demands an explanation, and there are several. One is the growing importance of the non-OECD countries. Thirty years ago the OECD economies, with their 7 oil majors, dominated trade. But today the non-OECD countries dominate and their diversity creates more product imbalances. Another development is the entry of oil traders into the shipowning and chartering business. In the 1990s traders discovered that if they had ships as well as cargo, they could earn a ‘double dip’ margin on the trade. Trading cargo because you’ve got the ship turned conventional logic on its head and expanded the framework of products trade.
Home Run or Just Run?
So there you have it. The trade surge has made products the doyen of the languishing tanker business, as proved by the 290 tankers 10-60,000 dwt on order. It’s an interesting pitch, but the challenge of understanding the subtle movement of diverse oil product cargoes is tough for traders and nearly impossible for analysts. Like Kevin Costner, it’s just a matter of following the voice and hoping that when you build the ships, the new trades will come. Sleep well and have a nice dream.