Economic growth has always been partly about productivity gains, and the productivity of the world shipping fleet matters too. Leaps in productivity in the use of available capacity free up resources, in this case ships, to pursue new ends, and with them growth opportunities. But, by many measures, the shipping fleet has become less ‘productive’ in recent years.
A classic way to measure fleet ‘productivity’ is to divide tonnes of trade by dwt fleet capacity to arrive at the average tonnes of cargo moved per dwt (in a year). On this basis, the global economic downturn in 2008-09 led to major productivity declines in shipping, with a falling ratio of cargo to capacity. World cargo fleet productivity dropped from a peak of 9.1 tonnes of cargo per dwt in 2004 to 6.5 in 2014. Global seaborne trade grew by 44% whilst world cargo fleet capacity expanded by 102%. This could be viewed as a historical blip, with long-term productivity gains arrested for a few years. But blip or otherwise, it has been significant.
In the tanker sector, average fleet productivity dropped by 33% from 8.3 tonnes per dwt in 2004 to 5.6 in 2014 (with 66% more capacity but just 12% more trade), and operating speeds dropped post-downturn to manage this. However, this trend conceals an increase in longer-haul trade to Asia in recent years which has helped ‘real’ vessel demand. Market conditions this year have been stronger, so maybe fleet productivity has bottomed out. In the bulker sector, productivity also dropped significantly, down 29% from 8.8 tonnes per dwt in 2004 to 6.2 in 2014 (70% more trade, but 140% more capacity). Weak markets have reflected the ‘surplus’ present, accommodated by lower average productivity including slower speeds.
In the containership sector productivity changes have been highly visible with many services running with additional ships (at slower speeds) compared to the pre-downturn period. Fleet productivity fell by 25% from 10.0 tonnes per dwt in 2005 to 7.5 in 2014 (63% more trade but 116% more capacity). It appears to be rising again, though this hides the fact that large parts of the cargo growth have been on relatively short-haul intra-Asian trade, supporting the fleet ‘productivity’ factor, but not adding as much ‘real’ vessel demand as longer-haul growth.
Fuel For Thought?
Today, with bunker prices having dropped by up to 50% since last summer, there is debate on the merits of faster vessel speeds. This would make individual ships more ‘productive’ in one sense, but there’s still the same amount of cargo to go round, and a lot of ‘surplus’ capacity might be ‘unlocked’ by increased speeds.
So, the average world cargo fleet ‘productivity’ factor has dropped significantly since the downturn, with declines in each of the key sectors. Although changing trade patterns may be more or less supportive of ‘real’ vessel demand, seven years of downturn have left plenty of room for productivity gains when things pick up. But, at the same time, ‘surplus’ capacity must be handled with care. Have a nice day.