Archives for posts with tag: global seaborne trade

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

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With tanker owners “on top of the world” and their dry bulk counterparts often feeling like they are “staring into the abyss”, 2015 was a year of contrasting fortunes across bulk shipping. However with global seaborne trade growth slowing to 2% (to reach 10.7bn tonnes) and the world fleet growing at 3% (to reach 1.8bn dwt), for many sectors it has been a case of the fundamentals working against them.

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Onwards And Upwards

The good news or the bad? Well let’s start with the good! There is no doubt who stole the show in 2015, with average tanker earnings up 73% y-o-y and VLCCs leading the way, up 120% with earnings spiking over $100,000/day. Low oil prices drove demand (total seaborne oil trade grew 4.8% to 2.9bn tonnes), supporting the best tanker market since 2008. Indeed, with a tanker fleet around 30% bigger than during the last market spike, the approximate earnings flow into the sector topped $42bn, the second highest year on record after 2008 ($46bn).

Sitting Pretty

Although tankers had a sparkling year, VLGCs managed to outdo even their stellar performance of 2014, with average earnings increasing to over $85,000/day! LPG was also the top performing trade, with an estimated 8% increase (with US exports up over 30% to around 16mt). The specialised products market made steady gains, as did the ro-ro, ferry and cruise markets. Elsewhere however, it was difficult to avoid a sinking feeling.

That Sinking Feeling!

Having spent the years since the financial crisis worrying about supply, dry bulk owners seemed to “get the message” with an 87% increase in demolition and an 74% drop in ordering. 93 demolished Capesizes represented an all time record, and bulkcarrier fleet growth of 2.7% was the slowest since 2003. However the reality of the “new economic normal” in China (where coal imports dropped 28% and iron ore imports managed just 1% growth) meant that seaborne dry bulk trade stalled at 4.7bn tonnes. Average earnings fell 28%, but in the final months of the year, earnings sat at OPEX levels and reached well publicised all time lows.

Buyers & Sellers…

Despite the rush to beat NOx Tier III regulations, newbuilding orders across tankers and bulkers totalled 65m dwt, down 32% year-on-year. Overall yard orders totalled 96m dwt ($70bn), down 21%, with busy ordering of large containerships in the first six months of the year. The average lead time for orders however dropped to 22 months and the immediate outlook is quiet. We reported 67m dwt of tanker and bulker sales in 2015, down on 2014, especially for tankers (-34%). Asset prices were relatively steady in tankers but unsurprisingly down 30-40% in dry, with buyers increasingly selective towards good spec tonnage. Greek owners again topped the asset play charts, involved in nearly 50% of all reported tanker and bulker deals either as buyers or sellers. Meanwhile, scrap prices nearly halved, as global steel prices fell.

Poles Apart?

So, it was a year of contrasting fortunes across wet and dry (we estimate the largest earnings differential on record!), but a tough year for most across shipping (look out for our review of the container market next week and our offshore review in Offshore Intelligence Monthly for more depressing numbers!). Perhaps 2016 may be a case of “opposites attract”, with those tanker owners sitting on the top of the world eyeing up a bottoming out dry cycle. Have a nice New Year!

In the nativity story, the three ‘Wise Men’ each come bearing a gift for the baby Jesus. Today, gifts are more likely to have been transported by containership than by camel, but the boxship market itself has still been subject to a number of demand-side ‘humps’ this year. Unwrapping these trends suggests three rather unwelcome ‘gifts’ that the containership market has received in 2015.

Gifts From The East

Prior to the last 7 years, container trade growth had been rapid, averaging 9.6% per annum in 1996 to 2007 – an astonishing performance given the average 4.1% per annum expansion in global seaborne trade in the same period. Box trade flourished, as further cargoes were containerised and manufacturing was rapidly outsourced from the west to Asia (particularly in the 2000s). Container shipping became the planet’s chosen (low cost) way for moving general cargo around. The first major blip in the story was in 2009, when box trade fell for the first time in the history of containerisation, dropping 10% on the back of the global economic downturn. 2015 currently looks set to be the worst year since then, with trade growth expected to reach just 2.5%.

Hardly Gold

Three key factors have driven slower trade growth this year. The first is the contraction of the key Far East-Europe trade, reflecting a combination of the weak euro, continued challenging economic conditions in some European nations, and a stark fall in Russian volumes. It seems that this year has also seen some inventory de-stocking, bolstering the downward trend. Peak leg Far East-Europe trade is projected to drop by 3.8% in 2015, limiting total expansion in mainlane trade to around 0.4% this year.

The second factor has been the slowdown in the estimated rate of growth in intra-Asian volumes. This is an important bloc of container trade (around 50m teu) and has been one of the fastest growing parts in recent years. This year, the turbulence and slowing rate of growth in the Chinese economy, combined with issues in other Asian economies, has seen the estimated rate of intra-Asian growth slow in 2015, with total intra-regional trade now projected to grow by 3.6% this year, down from 6.0% in 2014.

Looking Myrrh-ky

Thirdly, the collapse in commodity prices, including crude oil, has had a heavily deleterious impact on box volumes into economies particularly dependent on commodity exports for income. Notably, growth in box imports into economies in Africa and South America have slowed, and total North-South trade is now expected to grow by only 1.8% this year, whilst Middle Eastern imports are also coming under pressure.

Frankly Incensed

So the world of container trade has indeed received three ‘gifts’ this year, but the outcome for containership demand has not been a joyful story. The Christmas season is usually prime time for thoughts of presents shipped by container around the world, but it seems that the boxship sector may have to wait beyond this year’s festivities to find a brighter-looking star on the horizon.

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Events in the world economy appear to be leading to a bit of a change in fortunes for world trade. Having grown by 3.2% in 2014, current trade flow projections suggest that global seaborne trade growth in 2015 might not surpass 2.6%. However, a lot of the data available is based on annual projections, and analysis of monthly numbers might tell market watchers something more…

The World’s Shopping

Annual projections for seaborne trade growth provide easy to use demand side indicators. Monthly data can often provide a better understanding of the real dynamics but can be hard to work with, and trade data at that frequency is not always available. Additionally, there is generally a lag of a few months until monthly data is available, reducing its  ability to tell us what is happening today. However, monthly data can be particularly helpful in identifying short-term changes, with annual figures failing to show the different trends within the period.

Basket Case?

To try to capture this potential, the analysis here uses a ‘basket’ approach. With monthly data on some component trade flows of the world total unavailable, the index is based on the year-on-year growth rate of a basket of monthly trade flows in tonnes for a fairly wide range of key trade flows in the major seaborne trade commodities, including dry bulk, oil and products, gas and containers. In total, 55% of world seaborne trade featured in the basket in 2014. The aggregate here runs as far as June 2015; where a few elements of monthly data were unavailable, the missing values have been estimated based on year to date trends.

Immediately, the index shows that trade growth can be highly volatile on a monthly basis. In June the index stood at 3% but within the previous year it had been as high as 5% and as low as -6%. It also shows that today is largely not nearly as bad as 2009 when the index hit -11%. It also tells us that tricky periods are nothing new since then; in both September 2012 and March 2013 the moving average of the index hit the zero growth mark.

Tricky Selection

Nevertheless, 1H 2015 clearly saw a sustained period of slower growth, and the index averaged 0%. Both coal and iron trade have come under pressure, and China’s total seaborne dry bulk imports were down by 8%. Box trade expansion has also eased, facing headwinds from the European economy and slowing intra-Asian demand. But, from the moving average, it looks like the bottom of the cycle might have passed, or maybe things have been on the way back down again since April? Growth could have been on a downward trend from late 2014, or with hindsight since mid-2010 (since when the peaks in the index have been getting lower). That would fit well with the view of structural change in China.

Watch The Shopping List

In reality it’s hard to tell, and sometimes the volatility of monthly data can blur the picture too. But in general it helps put changes in better context, and with some hindsight see the turning points. Clearly keen analysts should watch their monthly shopping basket. Have a nice day.

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