Archives for category: trade growth

“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 world of seaborne trade, distance forms a crucial element in terms of determining how much demand for vessel capacity is created by trade volumes. One interesting measure of this is the estimated average haul of global seaborne trade. However, since the turn of the millennium, the historical trend isn’t quite as easy to follow as one might imagine.

Back Where We Started?

Across the period 2000-15, estimated global seaborne trade increased by 70% from 6.4bn tonnes to 10.8bn tonnes. Over the same 15-year period, the total in terms of tonne-miles jumped 71% from around 31,300 to 53,500 billion tonne-miles. As a result of these very similar growth rates, the ‘average haul’ of each tonne of seaborne trade didn’t move too much across the period as a whole, inching up from 4,926 to 4,944 miles. That’s on average an upward trend of just 1.3 miles per year! However, through this period there were clearly elements of seaborne trade which were being stretched, but others where the average haul was shrinking.

Down Then Up, And Again!

In 2000-02 the overall average haul declined. Crude trade volumes were falling, particularly on some of the longer-haul trades from the Middle East and West Africa. The average haul of dry bulk trade was declining with a firm rise in  Australia-Far East coal volumes. In containers, the fastest growth was being seen on some of the intra-regional trades. However, in 2003-06, average haul rose again, almost back to 2000 levels, with firm increases in the average haul of iron ore and grain trade on the back of growing exports from the Americas to the Far East.

Then, in 2007-09 things turned again and average haul headed downwards once more. This included a drop in the average haul of coal trade on the back of a rise in short-haul Asian imports. The average haul of container cargoes also fell in 2007-08, partly driven by a strong increase in short-haul intra-Asian trade. Finally, in 2010-15 overall average haul increased once again, with a firm rise in the average haul of crude oil, underpinned by Chinese import growth, leaving us almost exactly back where we started in 2000.

Tonnes And Tonnes

So, across the whole of seaborne trade, the statistics actually tell us that it’s the expansion in volumes which has accounted for the lion’s share of the additional seaborne tonne-miles in the last 15 years. But trade patterns in individual cargo types do change, and no-one should rule out the possible impact of new longer trades; there are still parts of the global trade matrix to fill out further.

No Surprises?

However, so far this century, despite short-term fluctuations, average haul has not really changed too much. Maybe we shouldn’t be too surprised given the relatively fixed origin of many of the commodities moved by sea? The recent trend is upwards, but intra-regional trading blocs are becoming more cemented. Perhaps the best approach is to follow the advice of many a wise shipowner in challenging times: keep the cargo moving (and don’t worry about how far it’s going!).

SIW1234 Graph of the Week

This week, containership fleet capacity has passed the 20 million TEU mark, another milestone in the rapid rise to prominence of the sector. Down the years, much of the capacity expansion has been driven by the delivery of larger and larger units at the big end of the fleet. However, the important role that smaller ‘feeder’ ships play in the container shipping network should never be overlooked.

Little And Large

Investment in containership newbuildings this year so far looks very different to the pattern seen in 2015. There was very limited investment in new boxships in 1H 2016, with just 75,000 TEU of capacity ordered compared to 2.2 million TEU in full year 2015. 1H 2016 saw 36 units contracted, and all were 3,300 TEU or below in size. This follows 104 orders for units below 3,000 TEU (‘Feeders’) in 2013, 85 in 2014 and 94 in 2015. This represents a limited, but steady flow of orders for small containerships, but, as the graph shows, the main focus in recent times has been elsewhere (especially in capacity terms). Only with a hiatus in the ordering of larger ships does the feeder element look particularly pronounced.

However, to casual observers, investment in feeder capacity might seem obviously warranted. The global liner network requires the integration of ships of all sizes, and clearly the focus of investment in recent years has been the big ships. Over 80% of capacity ordered since start 2010 has been for ships 8,000 TEU and above. But in reality it maybe hasn’t been hard to see why there has been a limited focus on investment in small and medium sized containerships. Timecharter earnings for smaller ships have languished at bottom of the cycle levels; the one year rate for a 1,700 TEU unit has averaged just $6,215/day since the end of 2008.

What’s Required?

Nevertheless, there appear to be clear drivers for future requirements. The orderbook below 3,000 TEU is limited, equivalent to 10% of fleet capacity compared to 33% above 8,000 TEU, and modern units are scarce. Demolition has picked up pace; 724 boxships have been sold for scrap since start 2012, about 70% of them below 3,000 TEU. And the feeder fleet has largely been shrinking since 2H 2011, with capacity below 3,000 TEU expected to see no real growth this year or next. Furthermore there are limits to network flexibility and the further cascading of larger ships into the feeder arena. The share of intra-regional deployment accounted for by ships 3,000 TEU and above has been fairly flat at just below 30% for some time. If extra intra-regional capacity is needed, that’s likely to mean demand for smaller units.

More On The Way?

So, it’s a broad landscape, and many market players foresee the likelihood of further activity in the feeder sector. Expectations remain of further limits to cascading and improved intra-regional trade growth (about 4% projected for intra-Asia in full year 2016). Improved charter rates, attractive pricing and available finance would help the investment case further, but the fundamentals for future requirement look supportive. Additional ordering has been on the agenda for a long while but things have taken their time. But in the box sector, sometimes the best things do (eventually) come in small packages.

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