Archives for posts with tag: conteinerships

As Analysis in SIW 1,395 illustrated, vessel speed dynamics have been a notable part of the shipping market story over the last decade or so. With another full year of average vessel speed data to examine, it’s a good time for an update, focussing in on the trends last year in particular but also re-visiting the broader importance of tracking vessel speeds…

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

The container shipping sector derives many of its characteristics from the dual but separate nature of the freight and charter markets, and 2018 so far has seen some distinctly ‘two-tier’ trends in the box shipping space, with freight and charter rates experiencing a clear difference in performance. What has caused that to happen, and how likely is it to be sustained?

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

In June 2016, the ‘Neo-Panamax’ locks at the Panama Canal opened to commercial traffic, enabling a much larger proportion of the world’s fleet to transit the canal. Nearly two years on, official dimension restrictions at the Neo-Panamax locks are being amended, with an even greater share of the fleet theoretically capable of passing through the canal from 1st June onwards.

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

Across the spectrum of seaborne trade, crude oil and containers could hardly be more different. The former is the classic raw material commodity, whilst the latter represents the shipping of all sorts of manufactured end products. Yet in 2017, total seaborne trade in each stood less than 170 million tonnes apart, with a combined volume of 3.8 billion tonnes accounting for 33% of overall global seaborne trade.

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

Just prior to Halloween, the UN announced that levels of CO2 in the atmosphere reached new record levels of 403 ppm in 2016. The shipping industry remains a broadly efficient transportation solution in terms of emissions per tonne of cargo, but the news will only increase the focus on what new action may now be necessary, against the spectre of substantial fleet growth over the last decade.

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

In the high jump ‘the scissors’ was one of a number of techniques eventually superseded by Dick Fosbury’s ‘Flop’, which saw the American athlete win the gold medal at the 1968 Olympics in Mexico City. The container shipping market has seen a bit of ‘flop’ of its own in recent years but today a return to the ‘scissors’ appears to be providing some helpful support at last…

The Flop

It has been clear to market watchers that containership earnings have spent most of the period since the onset of the global financial crisis back in 2008 at bottom of the cycle levels. The Analysis in SIW 1,245 illustrated how cumulative earnings in the sector in that time proved a bit of a flop, and notably so in comparison to those in the tanker and bulker sectors. However, it’s fair to say that things have started to look a little bit better recently.

Jumping Back

The first building block was that the freight market appeared to bottom out in the second half of last year, with improvements in box spot rates on a range of routes backed by careful management of active capacity. In the first quarter of 2017, the mainlane freight rate index averaged 64 points, up 42% on the 2016 average. However, containership charter rates remained in the doldrums into 2017, with the timecharter rate index stuck at a historically low 39 points at the end of February, before the market picked up sharply during March taking the index to 47 (though since then market moves have been largely sideways). This change in conditions was partly supported by liner companies moving quickly to charter to meet the requirements of new alliance service structures, but how much were fundamentals also driving things?

Well, the start of some upward movement at last was to some extent in line with expectations, with demand growth expected to outpace supply expansion this year, and no doubt accelerated charterer activity helped too. However, the market received additional impetus from recent sharp shifts in supply and demand.

Doing The Scissors

The lines on the graph (see description) show y-o-y growth in box trade and containership capacity; this is where the scissors come in. In 2015, capacity growth reached 8%, and remained ahead of trade growth until Q4 2016 when the lines crossed. In 2017, with capacity declining by 0.1% in Q1, backed by historically high demolition, and trade growth, notably in Asia, pushing along nicely, a big gap between the two lines has opened up. Demand is projected to outgrow supply this year (by c.4% to c.2%), but not by quite as much as seen so far. Full year expectations may be a little more restrained, but it’s still a helpful switch.

Going For Gold

So, in the case of the recent changes in containership earnings, maybe a bit of extra heat from the charterers’ side helped, but it looks like fast-moving fundamentals have offered some support too. Perhaps it all goes to show that old methods can sometimes be as good as new ones, and right now boxship investors should be happy to forget the ‘flop’ and focus on the return of the ‘scissors’.

SIW1269:Graph of the Week

The fundamental lying beneath the shipping industry is cargo and its journey, and in many cases the cargoes are the world’s key commodities. In 2014, prices across a range of commodities took a sharp dive, but over the last year or so they’ve started to improve again. So, what do the trends in the prices of the commodities underlying the shipping markets tell us about the shape of things today?

Oiling The Wheels?

Most followers of commodities will be aware of the oil price downturn, with the price of Brent crude falling from an average of $112/bbl in June 2014 to reach a low of $32/bbl in February 2016. However, it has since improved, to an average of $52/bbl in March 2017, with the key driver the implementation of oil output cuts by major producers. Despite this recent price rise, in this case the underlying commodity price trend does not appear to be supportive for shipping, with seaborne crude oil trade growth subsequently slowing, having risen by an average of 3.9% p.a. in 2015-16, and tanker markets easing back. On the other hand, rising oil prices might start to help support an improved offshore project sanctioning environment, though the stimulation of increased shale production in the US poses a risk to its seaborne imports.

Bulk Bounce

On the dry bulk side, the iron ore price fell from $155/t in February 2013 to reach a low of $40/t in December 2015 but has since recovered robustly to an average of $87/t in March 2017. Meanwhile, the coal price fell from $123/t in September 2011 to a low of $50/t in January 2016 but has since improved firmly to an average of $81/t in March 2017. In China government policies and domestic output cuts drove shipments of ore (up 7%) and coal (up 20%) in 2016, helping to support international prices. Demand growth has continued in the same vein in 2017, with ore and coal imports up 13% and 48% y-o-y respectively in the first two months. Average Capesize spot earnings recently hit $20,000/day, and some industry players have appeared cautiously optimistic about the possibility of better markets.

Spending Power?

What does all this mean for the third main volume sector, container shipping? Well, in this case, the previous downward pressure on commodity prices had been felt in the form of pressure on imports into commodity exporting developing economies faced with reduced income and spending power. This had a clear negative impact on volumes into Latin America, Africa and eventually even the Middle East; overall north-south volume growth fell below 1% in 2016. Although it’s early days yet, the recovery in commodity prices should suggest a gradual improvement even if the benefits lag commodity pricing, and the positive impact might not be evenly paced across the regions.

From The Bottom Up

So, it appears that commodity prices have now departed the bottom of the cycle. Alongside the impression of a generally firmer background, inspection of the underlying drivers suggests a mixture of messages for shipping, less beneficial in some instances, but in many ways more positive for volumes. As ever, it’s interesting to take a look at what lies beneath…

SIW1267:Graph of the Week