Archives for category: OECD

As Norway celebrates 50 years of Nor-Shipping, it’s a good time to think about where shipping might be in another 50 years. In 1965 several shipping innovations were becoming reality. The first VLCC was near completion, Malcolm MacLean was finalising arrangements for the first transatlantic container service, Japan was emerging as the leading shipbuilding nation and sea trade was 1.7 billion tonnes.

Amazing Performance

When we look at the growth of sea trade since 1965, two things are apparent. The first is the speed of growth, as sea trade grew faster than the world economy. Between 1950 and 2015 world GDP grew by 3.7% per annum, but sea trade grew by 4.7%. Trade is now almost 11 billion tonnes a year, which works out at around 1.5 tonnes of imports for every man, woman and child in the world.

The second point is the bumpy trajectory (see graph). There was a spell in the 1970s and 1980s when trade did not increase significantly for a decade, thanks to a deep recession in the world economy and a sharp decline in the volume of oil traded by sea. This is a timely reminder that the shipping industry operates in a volatile environment.

The Next 50 Years

Looking ahead, the shipping industry faces a daunting task. One problem is judging how fast trade will grow. If global sea trade just increases in line with growth in population, which is heading for 10 billion in 2065, imports would reach 15 billion tonnes in that year (Scenario 1). But the imports per capita trend trebled from 0.5 tonnes per person in 1965 to an estimated 1.5 tonnes in 2015. If the upward trend continues, imports might reach 2.2 tonnes per capita by 2065 and trade 22 billion tonnes (Scenario 2). But today although the OECD countries import around 4 tonnes per capita, non-OECD imports are around 1t per capita. If they were to reach OECD levels, global sea trade would hit a total of 37 billion tonnes in 2065 (Scenario 3). Bewildering Forecast Range

So in 50 years’ time trade could be anything between 15 and 37 billion tonnes. And there are other scenarios, for example the phasing out of fossil fuels which could radically alter even this wide range. In terms of investment, on a very rough calculation, this means the industry could be spending between $1.5 and $4.5 trillion on new ships over the 50 years at today’s prices. How will shipping handle this? Since 1965 the focus has been on bigger ships, tight overheads, and an aggressive market offering little reward for innovative investment. But as the non-OECD driven world develops, with tougher targets for fuel and emissions, changes will be needed, and maybe a rethink.

Maritime Magic Carpet

So, if shipping is to play as big a part in the global economy in the next 50 years as it did in the last, it needs a new injection of maritime magic. The digital revolution, now global, offers shipping companies a unique opportunity to integrate the management of their high cost assets, improving productivity and offering new ways to manage them that tighten up the whole transport chain. Who knows, maybe that’s just the magic that’s needed. Have a nice day.



Seven years into the recession, the tanker market is blazing away, with VLCCs earning over $50,000/day and Aframaxes not far behind. It’s an amazing development which leaves investors pondering whether this is, in Churchill’s famous words, “not the beginning of the end, but maybe the end of the beginning”. Analysts now wonder if it’s worth the risk of going out on a limb and calling “turning point”.

Potential Paradigms

Whatever the outlook, it’s worth pausing to enjoy the moment – and, perhaps, reflect that nothing like this happened in the 1980s. So something has obviously changed, but over the long-term it’s hard to see what it is. Since 2007, the tanker fleet has grown much faster than seaborne oil trade. We know from experience that when there’s an underlying surplus, spikes rarely last more than a few months and paradigm shifts making “this time different” are rarer than hen’s teeth, if not impossible.

Disappointing Demand

Let’s start with the crude oil trade, which fell by 6% from 38.4m bpd in 2007 to about 36.3m bpd in 2014. OECD oil demand has declined since 2007, with North America down 8%; Europe down 12% and Japan down 13%. So there’s not much joy there. Add an extra 4.6m bpd of oil production in North America and seaborne crude imports dropped by 2.1m bpd. Of course, non-OECD imports have increased, as has products trade, but overall the oil trade has only increased 2.8%, from 55m bpd in 2007 to 56.5m bpd in 2014. A tonne-mile approach pushes the growth up to 7.9%, but that’s still only 1.1% pa.

The Flighty Fleet

Meanwhile the tanker fleet has been buzzing. At the end of 2007, when the credit crisis was just getting started, it was 383m dwt, but since then it has grown by one third (126m dwt) to 509m dwt. Of course, macro statistics are always a bit fuzzy, but an increase of less than 10% in trade and 33% in ships tells a pretty clear story that there is probably lots of ‘surplus’ tonnage tucked away.

A Logical Disconnect?

Such a surplus should surely “cap” rates. But clearly this is not happening, so what’s going on? There are a few explanations. Firstly, seasonality; global oil demand was 2.1m bpd higher in Q4 2014 than in Q2. Assuming most of that is translated into trade, that’s a 4% increase which, over a short period is enough to get things started. Add to that the surge in speculative cargoes held at sea, and demand is motoring. Finally, throw in the reluctance of owners to speed up, and the limited growth in the crude tanker fleet in recent years, and the recent rates look more convincing.

Cyclical Or Structural?

So, simple numbers don’t always give you the whole answer, but there’s never any harm in looking at the big picture. If the simple interpretation is right, things might ease off. But the real dilemma is probably the underlying surplus. Are today’s speeds the ‘norm’ for the future? With bunkers at $300/tonne, the answer is “maybe”. But given time, it could well become a key question. Have a nice day.