Archives for posts with tag: seaborne

Environmental concerns are increasingly to the fore in world political economy, with the global energy mix and questions of “peak demand” for different fossil fuels receiving increasing attention as a result. While there is clearly still much uncertainty around this topic, it is worth exploring how shipping continues to develop alongside the changing dynamics of the global energy mix.

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

Advertisements

Powered by ongoing innovation, drilling activity and infrastructure projects, the US energy revolution seems to be continuing apace, with the country likely to become a consistent net crude oil exporter within a few years. But as the recent FID at the 15.6 mtpa Golden Pass LNG plant in Texas suggests, seaborne LNG trade is being significantly affected by the shale boom in the US’s vast interior too…

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

Across the global seaborne trade spectrum, crude oil is generally seen as a fairly mature element, and average growth of not much more than 1% p.a. across the period since the financial crisis appears to back that up. But in that period there have also been dynamics at play which have had a major impact on tanker demand patterns, and on closer inspection it has not been the slow lane all the way either…

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

 

Global seaborne trade has nearly doubled since the turn of the century and in the consensus view, looks likely to continue on an upwards path in the long term. One important element of this trend is rising per capita trade as the world becomes wealthier. But where, exactly, might further per capita seaborne trade growth come from? The concept of an economic ‘tipping point’ and a few examples can be helpful here.

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

With seaborne transportation accounting for the vast majority of the world’s international trade, the importance of the shipping industry to the mechanics of the world economy is generally fairly evident. But putting it into context in actual annual value terms, how does the magnitude of the shipping business compare to the size of some of the world’s economies?

Big Traders

There are a number of ways to attempt to put the annual impact of the shipping industry into the context of the wider world economy. One is to examine the value of seaborne trades. Seaborne iron ore trade totalled 1.3bn tonnes in 2015. At an annual average ore price of around $50/t, that equates to a value of $68bn. That’s about the size of the GDP of Kenya. However, that’s dwarfed by seaborne crude oil trade. At 37.4m bpd last year, at an average oil price of around $52/bbl, that’s an annual value of $717bn, almost equivalent to the GDP of Turkey (the world’s 18th largest economy). On the container side, taking port handling as an interesting metric, last year there were an estimated 664m TEU lifts at the world’s box ports. Average handling charges vary significantly, but if they worked out at $150/TEU that’s an economy of just under $100bn, almost the size of the GDP of Angola.

Of course the value of global seaborne trade must be huge. The WTO estimates the value of all global trade at $16.5 trillion, and almost 85% by volume moves by sea. Seaborne trade is probably a little skewed to relatively cheaper goods but even allowing for, say, 50% of the total value, that’s still over $8 trillion, heading towards the size of China’s economy!

Adding The Value

Another way to put shipping’s magnitude into context is to take a look at the value of the assets. Between 2007 and 2015 the average annual level of investment in newbuildings was $127bn. That’s bigger than the GDP of Hungary. Alternatively, taking the value of the fleet today, $904bn, and allowing for, say, another 15 years of trading (the average age by tonnage is around 10 years), would equate to a per annum value of $60bn, still bigger than the economy of Panama.

Call In The Revenue

But perhaps the clearest way to mirror GDP is to check the annual earnings of the vessels, just as GDP measures economic production. In 2016’s challenging market conditions, the ClarkSea Index has averaged $9,733/day (which would total aggregate earnings of $77bn in a full year across the c.22,000 vessels in the main volume sectors), but back in 2007 it averaged over $33,060/day (across over 15,600 vessels). Across a year that’s earnings of $189bn. Almost as big as the economy of shipping’s favourite investor nation, Greece!

A Big Whole

Shipping is just one of a wide range of economic activities on the planet. Sometimes its impact can be hard to put into context. But in terms of ‘economic magnitude’, elements of the shipping industry can be as big as the whole of one of the world’s larger economies, especially in a good year. Have a nice day!

SIW1231 Graph of the Week

In the recent passing away of Muhammad Ali, the world lost perhaps its greatest ever heavyweight boxer. Amongst his many famous catchphrases was “Float like a butterfly, sting like a bee!”. This week’s Analysis takes a look at something else that floats – the world’s major shipping fleets. How do the largest shipowning nations perform when it comes to punching above their weight?

Greeks Bearing Goods

SIW 1223 pointed out that Greek owners as a whole command a powerful ‘sting’ when one compares their share of the world fleet to their country’s share of global seaborne trade. Greek owners, the classic ‘cross-traders’, punch substantially above their weight, accounting for 16% of the tonnage (in GT terms) in the world fleet whilst Greece accounts for below 1% of world seaborne trade. And as a whole, the top 10 owner nations are highly potent, accounting for 70% of global tonnage, twice as much as their estimated share of world seaborne trade in tonnes (35%). Stinging like a bee indeed!

Heavy Hitters

Aside from the Greek owners, the top 10 contains a couple of other owner nations who hit particularly hard. In GT terms, Norwegian owners are the world’s seventh largest with about 4% of the fleet. This is about 8 times more than Norway’s share of world seaborne trade. Not far away, Danish owners (with one very prominent owner in particular) account for 3% of all tonnage, whilst Denmark accounts for less than 1% of trade.

Powerful Punchers

But these owner nations aren’t the only power punchers. A number of shipping’s other traditional big hitters also punch well above their weight. Japan accounts for 4% of world seaborne trade but as the second largest owner nation, 13% of the fleet (a ratio of 3.3). Meanwhile, German owners account for 8% of the fleet and Germany 2% of seaborne trade (a ratio of 3.8). Italian and Singaporean owners also seem to punch above the trading weight of their respective countries.

Down The Weights

But not everyone in the heavyweight division offers such a stinging punch. China, the ultimate trading powerhouse, accounts for 16% of seaborne trade, but despite being the world’s third largest owner nation, accounts for only 11% of the world fleet (a ratio of 0.7). The US accounts for 5% of world tonnage but 6% of trade (a ratio of 0.8), while South Korean owners only just punch their weight with 4% of the world fleet and Korea accounting for 4% of volumes.

Tale Of The Tape

Nevertheless, despite the fact that three of the world’s largest owner countries don’t hit too far above their weight, as a whole the top shipowning nations account for twice as much of global tonnage ownership as they do in terms of total world seaborne trade. The modern seaborne transportation system, the framework of asset ownership and the global nature of the shipping industry has afforded owning communities this opportunity. If you want to pick a fight in terms of ship ownership, be careful to watch out for the weight of the punch of your opponent! Have a nice day.

SIW1226

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.

SIW1189