Archives for posts with tag: Price

Bulkcarrier owners could be forgiven for feeling just a little bit dizzy at the moment. The unprecedented growth in China’s steel industry over the last decade has for years provided an adrenaline-infused experience in dry bulk trade. But with both Chinese steel production and iron ore imports registering a decline in the first half of 2015, is the playtime over?

Down To Earth With A Bump

It’s no surprise that the recent wobbles in China’s economy have been leaving dry bulk’s thrill-seekers with a nasty headache. Construction activity has slowed, and total steel use dropped by 5% y-o-y in the first five months of the year. Steel production has declined by a less severe 1% y-o-y, but this is still an unpleasant change of direction for those accustomed to average output growth of more than 10% per annum over the last ten years.

Round The Roundabout Again

Yet these worries over China’s steel industry are not new. According to China’s annual estimates, steel output growth in 2014 slowed to 1%, from 14% in 2013. However, iron ore imports increased in 2014 by a massive 15% to 914mt. Almost heroic growth in Australian iron ore production flooded the global iron ore market with cheap ore, displacing some higher-cost domestic Chinese ore production. Ambitious production expansion in Australia is still underway, and exports from the country are up 9% so far this year, but total Chinese seaborne imports are down 1%. So what has changed?

Balance Shifts On The See-Saw

This year seems to have proved a tipping point in the iron ore market. Weak Chinese demand is contributing to record low iron ore prices (dipping below $50/tonne in April). In 2014, the rapid drop in prices boosted China’s overall import demand, but no such positive effect is visible this year. Instead, the extent of the price drop has squeezed out a number of small iron ore miners across the world, and Chinese imports from many smaller suppliers have been depressed this year. And while Chinese miners have clearly reduced domestic production, there are questions over how much more capacity (particularly state-owned) will be cut.

Swings In Need Of A Push?

The unsettling thought for the dry bulk market is that the excitement of the Chinese ride could be coming to an end. Despite the price drop, most major ore miners are forging ahead with expansion plans. If China’s steel usage has peaked, miners will be fighting for market share in a shrinking demand arena. And if Chinese ore output proves resilient to price pressures, this could leave those expecting a resumption of firm iron ore trade growth with only a severe case of vertigo.

While global growth in low-cost ore production could still boost imports later this year, there is certainly no longer a consensus that China’s steel industry has considerable long-term growth potential. Faced with this ominous scenario, bulker owners will be hoping that the current weakness in China’s iron ore imports is only a temporary downward swing. Time will tell, but for some the playground which once spurred great excitement might be starting to lose its appeal.

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Over the hill; past its peak; long in the tooth: like a worn-out old racehorse, the North Sea E&P sector is sometimes discussed in disparaging terms. In recent years however, it has been making something of a comeback, gaining ground when it comes to exploration and at least holding steady-ish when it comes to production. The question is, can this pace be sustained in the current oil price environment?

Saddling Up

The UK and Norway have long been the front-runners when it comes to offshore activity in the North Sea. In the 1970s, an average of 187 offshore wells were spudded per year in UK and Norwegian waters. As the graph shows, in the years 1970-76, more than 50% of these were exploration wells. Production was low (0.85m boepd in 1975), as few of the discoveries made since the first find in 1965 had been developed. But then in 1976, Brent started up, with Ekofisk following in 1977. During the course of bringing these and other large fields onstream, appraisal and development drilling raced ahead of exploration; from 1990, the number of exploration wells drilled each year began falling too. Field operators were now focusing on production over exploration. The two countries’ offshore production peaked in 2002 at 8.64m boepd from 337 fields. This year was also the nadir for exploration drilling: of 503 wells spudded, just 32 (6.4%) were exploration wells.

Second Wind

Oil companies therefore found total production falling just as reserves were being replaced at the slowest rate since North Sea exploration began. The more prudent then applied the spur to exploration once more, even as they tried to stop production decline using EOR. Exploration in the years 2003-14 in the central North Sea met with some notable successes, like the giant Johan Sverdrup discovery in 2010, with 2P reserves of 2.2bn bbl oil and 394bn cf gas. Operators also began venturing into the mostly unexplored Barents Sea and west of Shetlands waters. Hence, in 2014, 27% of wells spudded in UK or Norwegian waters were for exploration, a share similar to the late 1980s. Production, meanwhile, fell by only 0.8% y-o-y, versus the average y-o-y decline over 2002-14 of 3.9%.

The Final Furlong?

The area’s offshore sector was thus moving at a relatively good pace. However, 2014 exploration campaigns and most incipient development projects were conceived in a more robust oil price environment than the present: E&P economics in frontier areas like the Barents Sea are highly uncertain while the oil price is less than $80/bbl. Perhaps then, with oil company spending cuts, the recovery in exploration will be stopped in its tracks and production decline may resume. On the other hand, some smaller operators are taking advantage of low rig and OSV day rates to increase exploration. Falling EPC costs could also help to reduce development project breakevens, flogging North Sea E&P onwards once more. And if the oil price were to return to $100/bbl+, then there is the potential for further upside.

So there you have it. The weaker oil price has made some oil companies pull on the reins, but there is still potential for the second burst of North Sea E&P activity to run on, in the right conditions. The area may no longer be the fiery colt of offshore E&P, but it probably has some way to run yet before being put out to pasture.

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Price ratios are a classic indicator used in a range of industries where assets depreciate over time. In the shipping sector, they can often tell us something about the perceived health of the market, and in particular about what investors are really willing to outlay to get their hands on assets that are on the water today compared to investing in a new vessel.

A Classic Ratio

One classic shipping market indicator is the ratio of the 5 year old price of a ship to the newbuild price of a similar vessel. On the basis of a 25 year lifespan, a 5 year old ship, depreciating on an even basis, would be worth around 80% of the newbuild price. However, if investors feel that the market is strong enough, they may be willing to pay a premium to get their hands on a secondhand vessel to operate in the market today. Conversely, if the earnings environment looks weak, investors may take a more negative view of the value of the existing asset.

The graph shows the 5yo/Newbuild price ratio for a VLCC tanker, a Panamax bulkcarrier and a 2750 TEU containership over time. Immediately apparent is that during the boom shipping market of the mid to late 2000s, the featured ratios stood well above the 80% line, and at times above 100% for all three vessel types, with the Panamax bulker ratio as high as 170% in late 2007. Since the downturn in 2008, the ratios have fallen. From one angle, it could have been worse; there was a period when all three ratios exceeded 80% (Mar 10-Jun 11). However, in general the ratios have been depressed, and there have been clear phases (Oct 08-Mar 09, Aug 12-Apr 13) when they have all been below 80%.

Ups And Downs

So what do the ratios tell us today? Tanker earnings have had a strong run since late 2014 but even so the VLCC price ratio stands only a little above 80%, maybe indicating that investor positivity is mixed with caution. Meanwhile, the bulker market is in severe recession and the Panamax price ratio has fallen from 95% during 2014 to 65%, showing how investors’ optimism has drained.

Lower Levels

The containership ratio, however, is on the up, with earnings recently improved. But it still stands at just 54%, perhaps indicating investors’ caution and relative preference for new tonnage. At boxships’ higher speeds, the difference in fuel efficiency between new and older tonnage is more marked, though the ratio was higher in the 2010-11 period when fresh interest arose in a sector that ‘looked cheap’.
Reading The Classics

So, price ratios are classic indicators, and as if it needed emphasising, today’s ratios show that the shipping markets aren’t perceived by investors to be close to full health yet. Overall sale and purchase volumes in the year to date are a little way behind last year’s levels, and the price ratios today might give an indication as to investors’ actual feelings about assets on the water. But markets change quickly, so just like classic cars which get taken out once in a while, it’s the same for classic indicators – and market watchers should probably take another reading soon. Have a nice day.

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Successful investors are always looking to get on the right side of an uneven bet, and the shipping market has had an uneven look to it so far in 2015. There has been some improvement in earnings, and the Clarksea Index has risen to around 30% above its 2014 average. However, the upside has not been spread equally across the sectors at all, and the same could be said of trends in capacity growth.

Uneven Territory

Looking at the key markets, the LPG sector has continued to be a star performer, and tankers have had a great run in the year to date too. Containerships have seen charter earnings increase from historical lows, but poor old bulkers continue to see rock bottom levels. It’s an uneven picture to say the least. However, one factor that appears to be more even is the volume of capacity entering the fleet.

Flattening Out

Shipyard output looks fairly steady, with the 6-month moving average of deliveries averaging around 7-8m dwt per month for about a year and half now. As a result fleet growth has slowed from the c.9% level seen in 2010-11, and today the projection is for a fairly steady rate of growth in total cargo fleet capacity, with expected expansion of 3.5% this year and 4.1% in 2016. Is this good news? A high level view may suggest that, with a fair wind on the demand side, more moderate supply side growth at least should not make the underlying market surplus any worse. However, looking in more detail it is clear that the rate of capacity growth is highly uneven across sectors too.

Speeding Up

Supply growth in the key cargo vessel sectors can be split into three. In the fast lane we have those sectors where fleet growth is expected to speed up in 2016. LPG carrier capacity growth already looks rapid (VLGC capacity is projected to grow by 18% this year) and will accelerate again next year. Crude tanker fleet growth will also speed up (VLCC capacity is projected to expand by 6% in 2015). What sort of ‘landing’ might that bring for these markets? Capesize bulker fleet growth will ramp up to 5% in 2016 (as if this sector needed any more pressure), and after a few years of shrinkage the 1-3,000 TEU boxship sector will at last see some (much needed) expansion (1%).

Slowing Down

Supply growth in other sectors looks set to remain relatively steady in 2016 compared to 2015, but there are also a number of sectors where it is projected to slow in 2016. LNG carrier and Handy bulker supply growth will start to recede. Notably, expansion in the large (8,000+ TEU) boxship sector will begin to slow (20% in 2015 to 13% in 2016) whilst the medium-sized boxship fleet will staunchly continue to decline (by 2% in 2016).

So, market earnings are uneven today and despite the big picture suggesting that capacity growth will remain moderately steady across 2015 and 2016, delving into the detail suggests that supply-side impetus will be uneven from one sector to another. Some sectors might be start to feel fresh pressures whilst others might breathe a sigh of relief. Those aiming to get on the right side of the bet should look closely. Have a nice day.

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The North Sea is home to a dispersed mass of steel and concrete, namely: 509 active fixed platforms with a combined weight exceeding 8 million tonnes; 1,440 subsea structures; 9,370 active wells and their completions; and over 45,000km of pipeline. Under the provisions of the OSPAR Convention, field operators will be obliged to decommission and clean all this up one day. And that day is approaching.

Diamonds And Rust

Decommissioning entails plugging wells, removing platform jackets, topsides and subsea structures, and, ultimately, complete site remediation. Oil companies in the North Sea are now having to contemplate this process at fields as recoverable reserves approach depletion. Since first oil in 1967, approximately 54.1bn bbls of oil have been produced in the area. However, production in 2015 is forecast to stand at just 2.86m bpd, compared to the 2000 peak of 5.9m bpd. The value of offshore field infrastructure consists in its ability to assist in the extraction of oil and gas; for the 47% of fixed platform tonnage installed on North Sea fields that began production more than 25 years ago, the point at which this is no longer the case is getting closer. But only 88 platforms in the area have been decommissioned so far, and for good reason.

Worth Fighting For

Decommissioning can be money and time-intensive. The decommissioning of the Brent facilities is expected to take ten years. Even small projects are expected to take two years and more than $300m in CAPEX. Hence, operators are trying to stave off decommissioning through enhanced oil recovery (EOR) to extend field life, or by tying new field developments to existing structures. For example, while the 12 wells on Heimdal are being abandoned, the platforms are being kept to process gas from Vale and other fields.

However, it is thought that in the current oil price environment, OPEX is encroaching on profits at a rising number of fields. Operators striving for fiscal discipline are between the hammer and the anvil: either run fields at a loss, or shut fields down and book the decommissioning costs.

Pain And Pleasure

This choice might be painful for oil companies but there is potential upside for many vessel owners. Drilling rigs and well intervention vessels will be needed to plug many of the wells. Crane vessels, self-elevating platforms and heavy lift vessels will be needed to remove and transport topsides and jackets (indeed, part of the rationale of the “Pioneering Spirit” is that it is one of very few units capable of lifting massive structures like the 42,500t topsides of the “Gullfaks A” gravity base platform). MSVs, DSVs and ROV Support vessels can be used to assist throughout decommissioning and will be especially important for removing subsea structures and for site remediation, when dredgers will also have a part to play. These various vessels will need to be assisted throughout the process by OSVs and utility support vessels.

Oil companies active in the North Sea might prefer not to charter all these vessels just to exit dead fields. But sooner or later (quite possibly sooner) they will have little choice. This could potentially benefit many different owners, with decommissioning becoming an important driver of North Sea vessel demand.

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The AHTS spot market in the North Sea is notable for the speed in which rates can shift, responding rapidly to supply and demand pressures. In 2014 alone the spot charter rate for an AHTS 18,000+ bhp fluctuated dramatically from a high of £170,165/day in August to a low of £5,819/day in the last week of the year.

Blame It On The Weatherman

Rig moves are the key AHTS demand driver in the North Sea. Pressures that affect the volume of these, along with the supply of units in the North Sea, dictate the number of available units, which in turn determine AHTS spot fixtures rates.

The largest peak in spot rates in the last three years occurred in August and September 2014. It was the result of a temporary removal of some North Sea units for work on exploration campaigns in the Russian Arctic. This caused a drop in the supply of vessels, that was eventually compounded by numerous rig moves, dropping availability and lifting spot rates.

Conversely, during December, a short three months after the September peak, AHTS spot rates in the region had fallen below £10,000/day for the first time since 2010. During the month, North West Europe was battered by a large weather depression resulting in strong winds and high seas, suspending many rig moves and forcing AHTSs to compete with PSVs for supply duty charters, bringing down the spot rates for both AHTSs and PSVs.

Rollercoaster

The price of Brent crude has fallen over 50% since June 2014 to below $50/barrel at the time of writing. As oil companies seek to rebalance their budgets in a new oil price world, exploration budgets have been cut. One of the ways in which drill rigs are utilised is the drilling of exploration and appraisal wells, demand for which has suffered in Q4 2014, negatively impacting AHTS demand in this period.

The drop in oil price has also damaged hope that exploration campaigns in expensive, harsh, Arctic environments will take place. Previously, these campaigns have taken vessels from the North Sea fleet, protecting the market from oversupply. Notably, Statoil has handed back three licenses offshore Greenland and announced that it will slow Arctic and Barents exploration to control CAPEX.

Oversupply in the North Sea can be demonstrated by the increase in the average number of vessels available. This rose steadily in 2012 and 2013, and by 39% in 2014 to an average of 13.1 vessels. This increase in supply has contributed to poorly performing spot rates in most of 2014, aside from the late summer spike. Increasing levels of supply and weaker demand indicators have forced some vessel owners to lay-up more ships in an effort to prevent oversupply impacting spot rates further, even laying-up units built as recently as 2014.

C’est La Vie

Clearly the volatile North Sea AHTS market is highly susceptible to short term demand pressures such as the weather and the whim of oil companies that dictate when rig moves occur. However, there are longer-term supply and demand forces at work, which although often obscured by dramatic short-term changes, can influence spot rates just as strongly.

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SIW1155In the famous novel a young Oliver Twist pleads in vain with Mr Bumble at the workhouse “Please Sir, I Want Some More”. In early 2014, containership owners would have been looking for the opposite of the young Oliver – anything but more of the prevailing conditions. Yet once again challenging markets prevailed, and by the end of the year boxship players had probably “had enough”.

Anything But More

After five years in the doldrums, 2014 was essentially more of the same for the liner sector. With the global economic downturn having cut harder into demand in the box sector than almost anywhere else, half a decade on and containership operators were still found wrestling with the need to find ways to absorb potentially surplus capacity. The fully cellular containership fleet expanded by around 6% to 18.2m TEU in full year 2014, and trade growth in the same ballpark was not enough to push the market balance back into a more positive direction.

Fed Up Yet?

Box freight market conditions remained extremely volatile with liner companies in an ongoing battle to manage incoming capacity. Average spot freight rates for the year were up a little (7%) on the Far East-Europe route but down a little (3%) on the Transpacific. Few liner companies (except the market leader) made substantial profits, although towards the end of the year falling bunker prices at least started to reduce liner company costs.

If anything, the story was even worse on the charter market. Earnings remained depressed for yet another year, with only limited gains on historically low levels. Cascading of capacity from the mainlanes, allied to idle capacity, kept the pressure on charter owners, although later in the year there was some relief in the Panamax sector where unexpectedly robust redeployment onto intra-regional trades and a declining fleet provided more substantial support for rate levels than in other size sectors. Panamaxes also bucked the trend against generally falling asset prices in the boxship sector, with end year 10 year old secondhand prices up over 20% on end 2013 levels.

Ready For A New Twist?

So, if everyone has “had enough” and can’t take any “more”, what might change? Well, the industry consensus suggest things are getting a little tighter now. Plenty of capacity has been absorbed by slow steaming (with no sign yet of lower bunker prices changing things, though this needs to be watched carefully), much less capacity is idle (around 1.3% of the total fleet today) than in previous winters and the orderbook looks much more manageable at 18% of the fleet. Demolition remains historically high, with 0.4m TEU scrapped in 2014. Meanwhile, port congestion, most obviously on the US West Coast, may start to soak up significant amounts of capacity.

More And More

This might be enough to convince some investors that there’s no more (pain) to come and it’s time for a change in fortunes. But at the same time, liner companies still have plenty of big ships scheduled for delivery (and look set for another spending spree, placing orders for a new wave of ships of 20,000 TEU and above). Whatever the view of the optimists, extra capacity to be added, allied to economic headwinds in a number of parts of the world, will certainly pose challenges for the sector. Containership market players will have to artfully dodge the obstacles if they don’t want to be asking why they have had more of the same this time next year. Wish them luck. Have a nice day.

In the hit Disney movie ‘Frozen’, Olaf is a snowman who lives in a world of cold but dreams of experiencing the heat of the summer. The shipping markets have been, in the main, fairly icy in the years since the economic downturn, but during that time shipping market investors have intermittently dreamt of sunnier times and turned up the heat, so how ‘frozen’ up has the shipping market really been?

Taking The Temperature

Like the eternal winter in the film, the shipping markets have been fairly iced up in recent years. The ClarkSea Index has traditionally been a good way of taking the temperature of industry earnings, measuring the performance of the key market sectors. Since Q4 2008 it has averaged $11,933/day, compared to $23,663/day in the period from the start of 2000 to the end of Q3 2008. However, earnings aren’t the only ‘hot thing’ in shipping. Investment in ships can blow hot and cold, and funds invested in newbuild and secondhand tonnage give an idea of the ‘heat’ generated by investors. To take this into account, the analysis here has created the ‘Shipping Heat Index’, which reflects not only vessel earnings but also the level of investment activity.

Generating Some Heat

The graph shows quarterly ‘Earnings’ and ‘Heat’ indices together, and illustrates a number of points. Firstly it shows that in the post-recession period (relative to the average before the downturn) the ‘Shipping Heat Index’ has stood at a higher level (an average 63% of pre-recession ‘heat’) than the ‘Earnings Index’ (an average of 50% of pre-recession levels). Whatever the state of the markets, shipping investors have dreamt of greater warmth and invested in capacity, often attracted by counter-cyclical opportunities at historically low prices, or the perceived benefits of new ‘eco’ tonnage.

Twin Peaks

Secondly, it is clear that the ‘Shipping Heat Index’ has had two discernable peak periods in the post-recession era. In 2010 and early 2011 it stood well above the ‘Earnings Index’, peaking at 95 in Q1 2010 compared to the latter’s 67. It did the same in 2013 and 1H 2014, peaking at 89 in Q4 2013 (compared to 56). In these periods investment in capacity surged, with investors generating heat even if earnings looked a bit more frosty.

Freezing Up

Thirdly, in Q4 2014 the relative position of the two indices has switched for the first time since Q4 2008. The Q4 value of the ‘Shipping Heat Index’ stood at 53 with the ‘Earnings Index’ at 59. The ClarkSea Index topped $16,000/day in November, with tanker earnings surging and gas carriers still performing strongly. Meanwhile, the investment scene has frozen up a little, with newbuild ordering now a lot slower than in 2013 and early 2014.

Don’t Melt!

So, even when shipping markets appear ‘frozen’, investors can still generate ‘heat’, and even in icy conditions snowmen dream of summer. With earnings rising, dreamers might be tempted again next year. The only danger is that too much heat can lead to a spot of melting if you’re not careful! Merry Christmas.

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In the outrageously camp film The Spy Who Shagged Me, made in 1999, super-spy Austin Powers battles with the forces of darkness in the form of Dr Evil. The doctor’s most outrageous tactic is to invent a new Time Machine which allows him to travel back to the 1960s where he steals Austin’s Mojo, leaving the unlikely sex symbol spy totally “shagless”. “Crikey!”, he expostulates, “I’ve lost my Mojo”.

Big Boy Boost

Over the years, investors in the VLCC market have shared an equally debilitating experience. The first of these miracles of modern shipping appeared in 1967. Over 1,000 feet long and carrying 2 million barrels of oil, they were the last word in efficiency, delivering Middle East oil to Europe and Japan, who were rebuilding their economies, for less than $1 a barrel. As US domestic oil production fell in the early 1970s it boosted imports even more, and to meet this demand Saudi Arabia increased output from 2.8m bpd in 1967 to 9.7m bpd in 1977. The VLCC market went mad. Investors queued to order 4 million barrel ships and the VLCC fleet grew faster than any other shipping fleet in history, from zero in 1967 to 193m dwt in December 1979.

Mighty Mojo Missing

Unfortunately, around that fateful date in the late 1970s, VLCCs, like Austin Powers, lost their Mojo. The problem was not Dr Evil and his Time Machine; it was two oil crises in quick succession. The first in 1973 pushed oil to $10/barrel, and after the second crisis in 1979 oil reached $30/barrel, by which time it was changing hands for 15-20 times more dollars than a decade earlier. These developments in the oil market triggered a double barrel downer for VLCC demand. First, a long and deep recession in the world economy undermined long-haul imports, and secondly a major round of oil saving technology cut demand even more (for example power stations switched from oil to coal, a massive structural change in oil’s market). By 1986 Saudi Arabia’s production had dropped by two-thirds to 3.6m bpd and VLCCs were in deep trouble. The fleet dropped 37% to 110m dwt in 1988, surely some form of record.

20 Years Out In The Cold

For twenty years from 1983 to 2003 the VLCC fleet struggled along in a grim and Mojo-less world. Then in 2003 a big dose of Chinese medicine got the fleet kick started again. Long-haul imports by the big three of Europe, USA and Japan were topped off by China and the Asian tigers, and from 2003 to 2013 the VLCC fleet grew at 4% pa. But since 2007 demand has been sapped by high oil prices, increased US production, a credit crisis, and a deep OECD recession. As a result crude oil tonne miles have only increased by 5% in total since 2007.

Dr Evil’s Wicked Way

So there you have it. Although it’s not the 1960s, Dr Evil is still at work on the VLCC fleet’s Mojo. Of course today’s Mojo surgery is not as dire as the 1980s, but the flagging crude demand growth since 2007 and brisk fleet growth have created spare capacity. Luckily some of it is soaked up by slow steaming, so when he’s in the mood, our hero can still enjoy a nice little spike. But sadly Austin’s still very short on stamina. Have a nice day.

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In the early 1990s when shipping emerged in a fragile state from the traumas of the 1980s, raising finance was a problem. The shipping banks had taken a battering in the 1980s, and the US financial crisis had taken out the American banks. ‘Basel 1’ made getting a loan over $25m difficult, syndications were rare and the capital markets were unapproachable.

$200 Billion? No Way

Against this background, estimates that the shipping industry would need to raise $200 billion to finance investment during the 1990s seemed an impossible mountain to climb. In fact these estimates of future investment requirement, based on the need to replace the ageing fleet and allow for expansion of the key tanker, bulkcarrier and containership fleets, proved to be on the low side. During the decade investments in new ships added up to about $340 billion. And of course, miraculously, the money appeared. Syndications, club deals, capital market transactions, the German KG market and a few new banks filled the gap.

$1.4 Trillion? No Way

But history repeats itself and today the old problem of “where will the money come from?” is back on the agenda with a vengeance. This time the numbers are bigger. On our rough estimate, the cost of financing the shipping industry over the decade from 2014 to 2023 could be around $1.4 trillion. That’s a massive step up from the 90s (the chart shows investment from 1990 to 2013, with estimates to 2025). But the business has changed dramatically since the early 1990s when it was mostly about tankers, bulkcarriers and containerships. In the coming decade only half the investment (about $760 billion) is to finance the replacement and expansion of these core fleets.

New Investment Era

The other half consists of sectors which, in the early 1990s, had little impact (partly, perhaps, because there weren’t many statistics). Two market segments which look likely to generate a lot of value-added over the coming decade are LNG tankers and cruise ships. These are not newcomers; they have been around for years. But the changing world economy seems likely, in different ways, to boost investment in these segments very substantially, and together they account for about 20% of the projected investment.

The other big segment of potential investment for the shipyards is offshore. In the early 1990s that was, like the proverbial dodo, an extinct entity, with little business on offer. But the relentless pressure on energy supplies, both oil and gas, and the focus on mobile facilities, suggests this might account for as much as 30% of future shipyard investment.

Spend, Spend, Spend

So there you have it. Shipping needs the investment, but where will the money come from? Most analysts agree there’s a tidal wave of cash sloshing around the world, looking for a home with a good story. Unfortunately shipping’s financial story remains a bit patchy, but the reassuring lesson of the 1990s is that there’s always someone who will find a way to do the business. Who will it be this time? Well, that’s the trillion dollar question. Have a nice day.

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