Readers of the Shipping Intelligence Weekly are invited each year to predict the value of the ClarkSea Index one year ahead in the first week of November. The predictions are always interesting, giving a good idea of how market watchers see the market developing. Furthermore, in many years the range of estimates has provided an insight into the optimistic nature of the participants.
Looking On The Bright Side?
The 2015 ClarkSea Index competition generated what initially appears to be a fairly bullish set of predictions compared to the actual value of $13,070/day on 6th November 2015. The average of the forecasts stood at $15,429/day, 18% above the actual index on the date in question, and around 80% of the entries exceeded the actual value. This suggests that participants were willing to look on the bright side, thinking that the markets might improve from the 2014 average of $11,743/day. But given the highly disappointing outcome in some sectors this year, were the predictions in reality way too positive?
A Mixed Bag Or Worse?
Well, the uptick in the ClarkSea Index in the third quarter of 2015 might help put this in perspective. The index exceeded $18,000/day in July, bolstered by ongoing strong earnings in the tanker and LPG sectors, and a slight increase in earnings in the bulkcarrier sector compared to the preceding months (although average bulker earnings were still at relatively low levels). If the index had remained at around the $18,000/day level recorded in July, just 18% of the competition entries would have ‘overestimated’ compared to the 80% based on the actual outcome.
The reality is that few might have guessed how the index developed as the year progressed. As the graph shows, the index recorded a notable increase in Q4 2014. In 2015, there was a similar rise in the third quarter, but the index has come off significantly since the peak of $18,383/day recorded in mid-July. The fall has largely been driven by weaker tanker earnings, as well as a return to lower bulker earnings and declining gas and, in particular, containership earnings.
Timing Can Be Everything
Moreover, the year to date average of the ClarkSea Index is up 29% y-o-y, possibly further justification for some of the optimism amongst the forecasters. In the first 45 weeks of the year, the ClarkSea Index averaged $14,610/day, just 5% below the average of the predictions received; 44% of guesses were in the $13,000-15,999/day range. So perhaps this optimism was not as misplaced as it appears at first glance. But timing is everything, and the participants who envisaged an improvement in the market failed to predict that the upside wouldn’t last.
We Still Have A Winner!
So, the progress of the ClarkSea Index has meant that the vast majority of predictions were below the actual value on 6th November. So maybe it doesn’t pay to be optimistic? Whether the case, every competition has a winner, and this year the winner was just $18 away from the actual outcome. Congratulations to Mr Jeffry Permana of PT Andhika Lines with a forecast of $13,052/day. Have a nice day Jeffry, your champagne is on its way.