Archives for posts with tag: seaborne

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

Money, or even love if you prefer, are claimed to make the world go round. For the shipping world, however, it’s trade that sets things spinning. Those wishing to grasp the magnitude of world seaborne trade might want to consider that it is projected to close in on 11 billion tonnes in 2015. Examining the statistics in more detail sheds further light on its role in the world economy.

What’s In The Basket?

Seaborne trade is made up of a wide range of commodities. Tankers and bulkers carry a huge amount of the tonnage. This year, the 11.0 billion tonnes (bt) will include of 3.2 bt of major bulks, another 1.5 bt of minor bulks and 2.8 bt of crude oil and refined oil products. But there’s plenty of room for other cargo too. Manufactures take their place with 1.7 bt of containerised cargo (which punches further above its weight in value terms) and another 1.1 bt of other non-bulk dry cargo (some still ripe for containerization). More specialised shipping completes the set, with 0.6 bt of liquefied gas trade and chemicals trade combined. These components tell us a lot about the shipping model, and the last two SIW feature articles noted the role of China: importing industrial raw materials in bulk, and exporting manufactures on containerships.

Popular Concept

This year world seaborne trade is projected to represent 1.5 tonnes of cargo for each person on the planet, up from 1.0t in 2000. As economic growth continues in developing economies, populations typically contribute more to world seaborne trade on a per capita basis, and as they ‘catch up’ with western world levels this drives increased trade (and a higher ratio). Even if the ratio remains unchanged, the current projection of 8.4 bn people on the planet by 2030 would mean an extra 1.7 bt of seaborne trade.

Multiplier Effect

Then there’s the ‘multiplier’ effect. Over the last 5 years, for example, the growth in world seaborne trade has clocked in on average at 1.13 times more than the growth in the world economy. As globalisation has taken hold, international trade has typically grown more quickly than world economic output. Seaborne container trade, for example, has enabled the connection of distant producers and consumers, and also the component trade enabling multi-location manufacture connected by low unit cost shipping. Discovery of natural resources in locations other than economic growth centres also helps. In 2015, the world economy is expected to grow by 3.5% but world seaborne trade is expected to grow more quickly, by 4.1%.

Keep It Going Round

Since the decline in 2009, seaborne trade growth has been quite consistent, averaging about 4%. Without the huge fleet dwt growth of 55% in the period 2008-14, the market downturn might have been less severe. On Shipping Intelligence Network, monthly tables and our Seaborne Trade Monitor report provide regularly updated seaborne trade statistics. At a rough estimate, seaborne trade constitutes over 80% of the global total volume by all modes. That’s some achievement, and until the world comes up with an alternative, it will keep on making the world go around. Have a nice day.

SIW1163

The car carrier sector has for some time been seen as one of the fastest growing parts of world shipping. Rapidly growing seaborne trade volumes have driven the requirement for a robustly expanding supply of vessels at the large end of the car carrier fleet. But it hasn’t always been a smooth ride, and today it’s not clear whether the sector has enough drive to remain in the fast lane.

In The Fast Lane

In the period from 1996 to 2007, seaborne trade in cars expanded from an estimated 8.1 million to 22.5 million units, growing by a compound annual growth rate (CAGR) of 9.7%. This compares very favourably to almost any other part of world seaborne trade. Overall seaborne trade registered a CAGR of 4.0% over the same period.

Fittingly for the car sector, there have been a range of drivers. New centres of car production have emerged (particularly in the developing world), broadening the global network of seaborne car transportation, in some cases extending the average haul as well as increasing trade volumes. Meanwhile, new car consumers have been generated by economic growth in developing economies, particularly in Asia. In China, for instance, European cars prove popular driving long-haul car trade. Since 1996 Asian car imports have expanded by an estimated 287% (and exports from Japan, Korea and China by 97%).

Brakes Off…And On

The PCC (Pure Car Carrier, including Pure Car & Truck Carrier) fleet has responded eagerly to the challenge. The fleet has grown from an overall capacity of 1.35m vehicles at end 1996 to 3.76m vehicles today, total expansion of 175%. Today, there are 768 car carriers in the fleet, and 569 of them have capacity of 4,000 cars or more (74% of the fleet) with another 62 on order (55 above 4,000 cars). The average vessel size has jumped from 3,380 car units at end 1996 to 6,810 today.

So far so good, until the downturn when seaborne car trade really suffered. Volumes fell by 35% in 2009 (compared to 4% for seaborne trade as a whole) as western car buyers pulled on the handbrake. Since then volume growth has not been quite so speedy. 2010 saw a partial bounceback but growth of 5-7% in 2011-13, has been followed by a projected 2% this year, on the back of relocation of production limiting export growth from key exporters, new tax legislation in importing regions, sluggish European recovery and political disruption in several emerging importer nations. This has left a question mark over when growth might get back into top gear.

The Road Ahead

Still, PCC capacity growth for the next few years looks fairly moderate with the orderbook standing at 11% of the fleet. Trade is provisionally projected to grow by 5% in 2015, making up for some of the shortfall this year. But the bigger question is whether we can expect trade growth to maintain the robust levels seen historically in the longer term. Perhaps the road ahead isn’t as clear as it once was? Each year, in our Car Carrier Trade & Transport report, we look at the trends in detail, and this year’s report will be available on Shipping Intelligence Network in the next few weeks. Have a nice day.

SIW 1150

Eleven years ago in 2003, when China opened its doors and the steel boom got underway, the shipping community was suddenly presented with an ‘Aladdin’s Cave’ of cargo. Unlike Japan and Korea, China had not locked in the fleet of ships it would need. So the escalating imports of iron ore soon turned into a gold mine for shipping. With so much cargo and a limited fleet of ships, Capesize rates surged.

Unexpected Riches

Shipping has always done well out of “miracle” economies, but the Chinese growth surge which followed was special. In the next decade, Chinese industry, especially steelmaking, grew faster than anyone could possibly have predicted. In 2003 the Chinese government thought steel production would reach 300mt in 2010. Actual output in 2010 was 627mt. The effect on trade was profound. China’s seaborne imports quadrupled, reaching 2 billion tonnes in 2013, by far the most any country has ever imported in a year. The freight boom this triggered between 2003 and 2008 was also arguably the best in the industry’s history.

Even after the Credit Crisis in 2008, China kept expanding, with just one short-lived wobble in 2009. This growth helped cushion shipowners from a 1980s style meltdown that might otherwise have hit the bulk and container markets.

Unavoidable Evolution

But in the real world, economies move on and there are many signs that change is underway. China is a very big country, and some provinces are still poor, but across the economy activity is slowing. Industrial production growth fell to 6.9% year-on-year in August and the dollar value of export trade, which for many years grew at about 20-30% pa, only managed 8% in 2013.

The real change this year has been in steel and construction. Official statistics suggest that floor space under construction is down 17% year-on-year and house completion is down about 30% this year. Some Beijing analysts are predicting much lower house building over the next two years. Although iron ore imports are up by 18% year-on-year, steel production is only growing at 5%. Not a good omen. Meanwhile steel prices have slumped another 5-10% and steel exports are up 37%. All signs of market weakness.

Value-Added Production

Of course these trends could be cyclical, but China is a very different economy from 10 years ago. A new generation has grown up with computers, smartphones, cars, fashion and confidence. Environmental concern, which triggered the impending ban on high sulphur coal imports, illustrates the way these changes can trickle through into trade.

New Trend, Old Story

So there you have it. China’s sprint for growth is easing off and it is projected that imports will grow 5% this year. This is way below the 10-20% pa of the boom years. It happened to Japan and Europe in the 1960s and to South Korea in the 1980s and 1990s. So does that mean ‘Aladdin’s Cave’ is empty? Such a big cave with so many dark corners, makes it hard to say, but it’s a serious issue for investors. Have a nice day.

SIW1143