Archives for category: Seaborne Trade

A well-known football manager once commented on the “bouncebackability” of his team after they had followed a defeat with a victory. This year and last, global seaborne trade growth, following a weaker performance in 2015, has illustrated its ability to bounce back strongly, and on the back of a range of positive trends is currently expected to reach close to 4% in full year 2017.

For the full version of this article, please go to Shipping Intelligence Network.

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The world of seaborne trade spreads across a wide range of commodities and goods. But in terms of growth, at any point in time some elements look overweight or underweight compared to their share of trade in total. And once distance by sea comes into the equation, things can be even more complex. This week’s Analysis examines the tale of the scales since the downturn of 2009.

 

For the full version of this article, please go to Shipping Intelligence Network.

By the late 1800s, the shipping industry had been transformed by the introduction of steam power and iron ships. Coal and grain were two of the most important cargoes, alongside timber, sugar, cotton and tea. While technology, the sheer scale of the business, and the global cargo mix, have of course all changed since then, dry bulk cargoes have retained a position at the heart of global seaborne trade.

For the full version of this article, please go to Shipping Intelligence Network.

In the metal and mineral bulk trades, as in the heavy metal music scene, a few very big names often end up dominating the headlines: metal has the likes of Metallica, Rammstein and Judas Priest; mining bulk has iron ore and coal. But in both cases, the triumphs and travails of the smaller names can often be just as riveting and indicative of the broader trends as those of the superstars…

Atlas, Rise!

The ‘mining bulks’ consist of the metallic and mineral outputs of the extractive industries (and substitutes such as scrap metal destined for blast furnaces) typically shipped in bulkcarriers. Seaborne trade in mining bulks is projected to stand at 3,415mt in 2017. Unsurprisingly, the ‘mining’ major bulks of iron ore and coal predominate in the forecast. Even so, ‘mining’ minor bulks (a range of commodities utilised primarily in metallurgy such as bauxite, manganese ore, nickel ore, copper concentrate and coke) still make up a respectable 22% of the projection. As part of the cargo creating demand for a bulker fleet of over 11,000 vessels, the mining minor bulks are no minor matter.

As for demand for the mining minor bulks, while there are numerous importers, China has been the main driver of seaborne trade growth. Since the start of the century, seaborne trade in mining minor bulks has increased at a CAGR of 3.4% whereas imports into China have grown at a CAGR of 16%. The disparities are just as apparent in specific areas such as bauxite/alumina (4.5% versus 21%) and other non-ferrous ores (8.5% versus 20%, with metals like manganese used in steel alloys). Indeed, China accounts for more than 50% of growth in seaborne mining minor bulk imports since 2000. Just as in shipping and seaborne trade generally, China has played a key role in mining minor bulk trade growth.

Reise, Reise

The picture is more complex on the supply side, with mining minor bulks sourced from a range of countries, none accounting for more than 9% of total exports. Developing countries are prominent. For example, the Philippines is projected to account for 75% of nickel ore exports in 2017, Guinea for 45% of bauxite exports and Chile for 38% of copper concentrate exports. Some developed economies like Australia are involved, but on the whole, trends in mining minor bulk further confirm the ongoing diversification of shipping trade networks, particularly between China and other developing economies.

Metal Meltdown

As the Graph of the Month shows, mining minor bulk trade can also be very volatile, another common feature of seaborne trade. Mining minor bulk volatility is in part due to political risk factors such as strikes and government policy. Indonesia accounted for 57% (65mt) of seaborne nickel ore exports in 2013; by 2015, it was exporting no nickel ore at all following the mineral ore export ban introduced to boost the domestic smelting sector.

So the mining minor bulks are in sense akin to more obscure heavy metal bands. They may be complex and often idiosyncratic but certain key themes are apparent: the impact of China, the emergence of new trade patterns and market volatility, each illustrating broader trends in shipping too. Have a nice day.

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“Going where the work is” has been a familiar mantra for many generations across the world, and the shipping industry is no different. Indeed, much of the world’s oil tanker and bulker fleet will be familiar with the sentiments of Simon and Garfunkel, wishing they were “homeward bound” but rarely getting “home where the music’s playing” as “every stop is neatly planned”!

Far And Wide…

Our analysis this week looks at the top shipowning nations and the trading patterns of their fleets, using data from our World Fleet Register and our vessel tracking system, Clarksons SeaNet. This analysis is based on the port calls and movements of the oil tanker and bulkcarrier fleet only (the “bulk fleet”); we will be taking a closer look at containership deployment in a future edition of Shipping Intelligence Weekly.

“Cross-Traders”…

Of the top ten owning nations, Greece, Norway, Italy and Denmark come out as the classic “cross-traders”. Ships owned by Europeans call at their “domestic” ports less than 15% of the time and rely heavily on trade routes involving Asia-Pacific countries. For nations like Greece (9% domestic port calls) this is a long-standing feature, achieving its number one shipowning status despite a global GDP ranking of 50 and a bulk seaborne trade rank of 47. The countries which Greek owned ships call at most often are China (14% by tonnage, 11% by number) and then the US (12%). Indeed for European owners generally, maintaining their share of global tonnage at an impressive 42% for the bulk fleet (45% for all ships) has come despite Atlantic trade stagnating at 3bn tonnes in the past fifteen years, while Pacific trade has more than doubled (to 8bn tonnes), a dramatic relative increase in trading outside Europe.

Sticking Close To Home…

At the other extreme, the Chinese and Japanese fleets come out with over 50% of calls at domestic ports, while the South Korean fleet sits at 38% (note the analysis includes some bunkering calls, notably at Singapore, but also elsewhere). Although China continues to be well serviced by international owners, its position as the world’s largest importer (25% of “bulk” cargo), second largest economy and number one seaborne trading nation means that 74% of Chinese fleet port calls are at domestic ports. In fact, 46% of total bulk Chinese port calls by tonnage (55% in numbers) are by domestic owned vessels, 24% by European owned ships and 24% by other Asian owned units. The growth of the Chinese bulk fleet (70% since the financial crisis) has begun to catch up with bulk trade growth (81%) but still lags significantly over a fifteen-year horizon (104% compared to 399% growth). Meanwhile, the US fleet comes in with 41% domestic port calls; this includes a large proportion of Great Lakes calls and Jones Act vessels.

500 Miles, 500 More…

So shipping is truly an industry that must go far and wide to find work. For European owners this is often a lot further than the “500 miles, 500 more” that Scottish brothers The Proclaimers sing, while for Asian owners their ships are more likely to be “Homeward Bound”. Have a nice day and safe travels home.

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In the last few decades, the shipping industry has generally been able to rely on seaborne trade as a fairly steady performer. However, the slowdown in volume growth since the financial crisis has focussed the industry’s thoughts on potential barriers to healthy long-term trade growth, so all eyes are on signs of a potential return to faster expansion in volumes…

Steady As She Goes

From 1988 to 2008 growth in world seaborne trade averaged an estimated 4.2% pa, a fairly robust level underpinning long-term demand for ships. Sure, the markets at times felt the impact of oversupply, but sustained weakness of demand growth wasn’t generally the problem. However, since 2009 the growth rate has slowed, averaging 3.2%, and just 2.8% since 2013. This still equates to significant additional volumes (1.8% growth in 2015 added 194m tonnes) but it’s still enough to get market players worrying.

Could Be Worse?

But should it? Maybe it depends on how you put the trend into context. Cycles can be long; Martin Stopford has famously identified 12 dry cargo cycles of more than 10 years back to the 1740s! The current cycle certainly feels like it has dragged on; it’s now more than eight years since the onset of the financial crisis. However, there are interesting historical comparisons. Between 1929 (the year of the Wall Street Crash) and 1932, the value of global trade dropped by 62% and didn’t get back to the same level until the post-war years. Now that really would have been a time to worry!

Getting Serious?

Today perhaps some of the anxiety is amplified by the seemingly wide range of factors that look threatening to seaborne trade’s supportive historical record. Protectionist tendencies, whether they be from the Trump presidency or the UK’s Brexit vote, slowing growth in China, ‘peak trade’, robotics and 3D printing: no-one really knows how things will pan out but everyone’s watching closely for anything to allay at least some of the fears.

Basket Case

So that brings us back to our old friend the ‘monthly trade basket’ (see graph and description). Six months ago we reported that this appeared to be showing a pick-up and this time round things are still looking positive. The 3-month moving average shows a generally upward trend since autumn 2015 with an average of 4% in the second half of 2016, hinting that the bottom of the demand cycle may finally have been passed. The current projection for overall seaborne trade in 2017 is still less than 3% with plenty of scenarios possible, but both market sentiment and the momentum right now feel a little more positive than that.

Feeling Any Better Yet?

So, while it’s quite right to try to assess the range of factors which appear to be lining up against a return to more robust levels of trade growth, it’s also far from incorrect to look for signs of a turn in the trend. Cycles in shipping can be long and sometimes it can take a while to identify them. That may not be helpful to hear but you can have a nice day trying…

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The car carrier sector has been yet another part of the shipping industry to have faced challenging conditions this year. The focus has largely been on demand side difficulties, with growth in global seaborne car trade appearing to have gone into reverse gear. It has been a rather bumpy ride, and today’s car carrier market indicators still seem to be flashing up plenty of warning signals.

Going Slow

Growth in global seaborne car trade has struggled to return to the robust levels seen prior to the global economic downturn, when car trade was one of the faster growing parts of seaborne trade. Given the strong link between economic growth, consumer demand and car sales, the car carrier sector has been highly exposed to sluggish world economic performance in recent years, and global seaborne car trade has still not yet returned to its 2008 peak of 21.3m cars, with average growth of just 1.4% p.a. in 2013-15. This year has seen further pressure on seaborne volumes, with car trade projected to have dropped 4% to 19.8m cars.

The key driver of this fall has been considerably lower imports into developing economies following the commodity price downturn. Car sales in these countries have dropped sharply, and seaborne car imports into the Middle East, Africa and South America are set to drop by more than 10% this year. While imports into North America and Europe, still the two largest markets for imported vehicles, have grown moderately (by 2% and 4% respectively), this has not been enough to offset declines elsewhere. Other factors have also dented volumes, with expansion of car output closer to demand centres leading to a disconnect between global car sales, which have continued to expand, and seaborne trade volumes.

Warning Lights

Largely as a result of the downturn in demand, car carrier market conditions have deteriorated further this year. Most car carriers still operate under long-term agreements, but guideline charter rates have fallen back to subdued levels, with the one year rate for a 6,500 ceu PCTC falling to $16,000/day in recent weeks, down 30% from the start of the year. Vessel idling has risen, utilisation of active capacity is under pressure, and waiting time between fixtures has increased, whilst a trend towards shorter-term and spot fixtures has also been apparent.

Making The Turn

In response to these pressures, owners have stepped up supply-side action. Scrapping has increased, and is projected to reach 0.2m car equivalent capacity this year, over four times the 2015 level and the highest since 2009, with fleet capacity projected to have declined by 0.3% in full year 2016. Meanwhile, only two ships have been ordered this year, after 42 contracts were placed in 2015.

Route Planning

Yet the road ahead still seems far from clear for the car carrier sector, with demand seeming unlikely to shift up a few gears in the short-term. In our annual Car Carrier Trade & Transport report, we look at the latest trends in detail. This year’s report is now available on the Shipping Intelligence Network. Have a nice day.

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