In the 1989 film Back to the Future II, Marty McFly and Doc Brown travelled forwards in time to 21st October 2015. While the film’s view of future technology has in many cases proved surprisingly accurate, today’s lack of hoverboards, flying cars and pizza hydrators suggests some were way off the mark. Such mixed success will likely seem very familiar to anyone attempting shipping market predictions today.
This Is Heavy, Doc
It is well documented that the incredible volatility in the shipping markets makes them very difficult to predict, even to seasoned market watchers, and so it can often be easier to try to predict the fundamentals. While Back to the Future II successfully predicted the broad trend towards the more widespread role of technology in everyday life, even the ‘big picture’ macro trends in the shipping industry can be hard to get totally right.
Not much seems ‘bigger picture’ than the world economy, and here forecasters have certainly revised their opinions over time. Taking the IMF’s views as a reasonable benchmark, it is clear how the projection for world economic growth in 2015 has moderated, from 4.0% in April 2014 to 3.1% in October 2015, as the outlook for global expansion has softened. The world also notoriously got it wrong on the oil price outlook. Throughout much of 2014, most expectations for oil prices in 2015 were for an average of above $100/bbl. But the crash in prices in late 2014 led to a major adjustment in future expectations, with most forecasters now projecting average prices in full year 2015 of around $60/bbl or below.
Time Circuits, On!
Pinning down forecasts for the big shipping aggregates can also be hard. Views of world seaborne trade in 2015 have recently changed significantly. In early 2015, the expectation for growth this year was 4.0%. However, following dramatic changes in imports of coal and iron ore into China, as well as a gradually more depressed outlook for container trade, the latest forecast for world seaborne trade growth in 2015 stands at 2.5%.
Speeding Up To 88mph
Even on the supply side, it can be hard to forecast with absolute precision. In early 2014, the estimate for growth in the world cargo fleet in 2015 (in terms of GT) stood at 3.5%. In early 2015, this rose to 4.2% as the likely outlook for deliveries and demolition changed, but with scrapping accelerating and then slowing again the outlook has changed once more. Today, the projection for growth in the cargo fleet is 3.9%, hopefully a fairly accurate figure with three-quarters of the year gone.
You Mean We’re In The Future?
So, what does this all tell us? Macroeconomic trends are notoriously hard to predict. Today, with the consensus outlook increasingly fragmented, the margin of error in forecasting seaborne demand is also significant. And even then the supply side can be tricky to pinpoint too. So, while forecasts of the fundamental balance do provide a helpful indication of expectations for future market trends, these should always be handled with caution. Marty and Doc might well be amongst the first to agree that the future doesn’t always turn out how you might expect. Have a nice day.