Archives for posts with tag: Bulk Carriers

Every year, readers of the Shipping Intelligence Weekly are invited to submit their predictions of the value of the ClarkSea Index at the start of November the following year. The predictions are always illuminating, indicating how market watchers feel the shipping markets may pan out in the coming year, as well as shedding light on how well they have fared in avoiding potential forecasting ‘traps’…

Treading Carefully

So far in 2016, the ClarkSea Index has averaged $9,131/day, 37% lower than the full year 2015 average, with earnings in each of the sectors that comprise the ClarkSea Index down in 2016. Although there was a general consensus that tanker and LPG carrier earnings would come off this year, with accelerating fleet growth expected, some were hopeful that earnings in the bulkcarrier and containership sectors had bottomed out and would see some upside. Whilst these views on the tanker and gas carrier sectors appear to have played out broadly as expected, year to date average bulker and containership earnings currently stand 20% and 33% down on full year 2015 average levels respectively, and on November 4th the ClarkSea Index stood at $9,207/day.

Avoiding The Traps?

In the past, the ClarkSea Index competition has often indicated that participants expect the market to improve in the coming year. However, this year, many participants have avoided this potential ‘trap’, with just one third of entrants expecting (or perhaps hoping) that the ClarkSea Index would stand above the full year 2015 average on 4th November 2016. In fact, only 20% of entrants expected the ClarkSea Index to improve to $15,000/day or above at that point in time.

However, the majority of participants’ entries failed to avoid another ‘pitfall’ of forecasting, not expecting (or perhaps not wishing) that overall market conditions would deteriorate further. Rather expectations appeared to be that the ClarkSea Index would remain broadly steady. Overall, the average of the entries was $13,442/day, broadly in line with the 2015 average of $14,410/day, with around 70% of competition entrants predicting that the ClarkSea Index would stand between $11,000/day and $15,000/day on the first week of November.

Circumventing The Pitfalls

As those in shipping are all too aware, predicting how the markets as a whole will fare in the year ahead is a tricky task, especially when considering the often contrasting fortunes of the sectors that make up the ClarkSea Index. Throw the issue of timing that prediction to a single week into the mix, and side-stepping the various traps becomes even harder. The average of the predictions was more than $4,000/day away from the actual result.

So, the ClarkSea Index highlights the still very challenging market conditions, and although some of the optimism of previous competition entries was not so evident this year, it was still the case that the majority of predictions were too high. Nevertheless, the competition as always provided one winner. This year’s closest prediction was a forecast of $9,042/day, just $165 away from the actual value. Congratulations to the winning entrant; the champagne is on its way.

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Recent economic news has been dominated by events in two countries. Headlines have focussed on Greece and its ongoing bailout woes and possible ‘Grexit’, as well as on China and the slump in its stock market and the impact on the wider economy. In the shipping sector, trends in the development of the world fleet are equally tortuous and, once again these two countries play a leading role.

World Leaders

In terms of ownership Greek and Chinese ownership interests are amongst the most prominent on the planet. The Greek owned fleet at 314.3m dwt is the largest in the world, and Greek owners also account for the largest orderbook today (48.5m dwt). Chinese owners meanwhile account for the world’s third largest fleet at 199.6m dwt and until very recently accounted for the largest orderbook (today 45.9m dwt).

Greeks Buy Gifts

Greek owners have long been shipping’s great asset players. As the graph shows their fleet is currently growing by just above 5% y-o-y. The expansion of the Greek fleet has been partly driven by newbuild investment, with delivery of 56.6m dwt since start 2012, 14% of the world total. But their acquisition of secondhand assets has also been key. Since start 2012, Greek owners reportedly accounted for ‘net acquisitions’ (reported purchases less reported sales) of 35.5m dwt, not far below the level of their delivered tonnage – a useful way to grow the fleet.

Chinese Take Away

Chinese fleet growth stood at a heady 15.8% y-o-y back at start 2012, but today stands at 3.6%. What’s been going on? Since start 2012, Chinese owners have taken delivery of 61.3m dwt, even more than Greek owners, but they have been much less pronounced ‘net acquirers’ of secondhand tonnage (5.0m dwt). Chinese owners have also been demolishing ships backed by the state scrapping subsidy which also encourages newbuilding. This is another way to renew the fleet, but growth has slowed. However, the Chinese orderbook is equal to 23% of its fleet, so expansion looks set to return.

A Third Way?

A third economy never far from the news is Japan, and Japanese owners remain today the world’s second largest owner of tonnage with 249.9m dwt. Japan’s fleet growth has clearly slowed, from 7.4% at start 2012 to 0.9% today. In this period, Japanese owners have been ‘net sellers’ by a huge 38.0m dwt. But this year they are also very nearly the world’s leading ordering nation, placing contracts of 5.5m dwt, 15% of the world total, so despite being a clear secondhand asset divestor, their fleet should be on the way to faster growth in the future once again.

More Headlines

So, focussing on the developments in these fleets shows that there’s more than one approach to being a pre-eminent owner nation. And today’s fleet and orderbook suggest that, whatever the state of their domestic economies, owners from these three countries will retain their position in the headlines for some time yet. Have a nice day.

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