Archives for posts with tag: Trade

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.

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Economic growth has always been partly about productivity gains, and the productivity of the world shipping fleet matters too. Leaps in productivity in the use of available capacity free up resources, in this case ships, to pursue new ends, and with them growth opportunities. But, by many measures, the shipping fleet has become less ‘productive’ in recent years.

Measuring Up

A classic way to measure fleet ‘productivity’ is to divide tonnes of trade by dwt fleet capacity to arrive at the average tonnes of cargo moved per dwt (in a year). On this basis, the global economic downturn in 2008-09 led to major productivity declines in shipping, with a falling ratio of cargo to capacity. World cargo fleet productivity dropped from a peak of 9.1 tonnes of cargo per dwt in 2004 to 6.5 in 2014. Global seaborne trade grew by 44% whilst world cargo fleet capacity expanded by 102%. This could be viewed as a historical blip, with long-term productivity gains arrested for a few years. But blip or otherwise, it has been significant.

Productivity Down

In the tanker sector, average fleet productivity dropped by 33% from 8.3 tonnes per dwt in 2004 to 5.6 in 2014 (with 66% more capacity but just 12% more trade), and operating speeds dropped post-downturn to manage this. However, this trend conceals an increase in longer-haul trade to Asia in recent years which has helped ‘real’ vessel demand. Market conditions this year have been stronger, so maybe fleet productivity has bottomed out. In the bulker sector, productivity also dropped significantly, down 29% from 8.8 tonnes per dwt in 2004 to 6.2 in 2014 (70% more trade, but 140% more capacity). Weak markets have reflected the ‘surplus’ present, accommodated by lower average productivity including slower speeds.

In the containership sector productivity changes have been highly visible with many services running with additional ships (at slower speeds) compared to the pre-downturn period. Fleet productivity fell by 25% from 10.0 tonnes per dwt in 2005 to 7.5 in 2014 (63% more trade but 116% more capacity). It appears to be rising again, though this hides the fact that large parts of the cargo growth have been on relatively short-haul intra-Asian trade, supporting the fleet ‘productivity’ factor, but not adding as much ‘real’ vessel demand as longer-haul growth.

Fuel For Thought?

Today, with bunker prices having dropped by up to 50% since last summer, there is debate on the merits of faster vessel speeds. This would make individual ships more ‘productive’ in one sense, but there’s still the same amount of cargo to go round, and a lot of ‘surplus’ capacity might be ‘unlocked’ by increased speeds.

So, the average world cargo fleet ‘productivity’ factor has dropped significantly since the downturn, with declines in each of the key sectors. Although changing trade patterns may be more or less supportive of ‘real’ vessel demand, seven years of downturn have left plenty of room for productivity gains when things pick up. But, at the same time, ‘surplus’ capacity must be handled with care. Have a nice day.

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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.

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As shipping market observers of a certain vintage will recall, 1980s Swedish rock band ‘Europe’ scored a huge hit with ‘The Final Countdown’. Following the global economic downturn, the European economy was facing up to a similarly fatalistic reckoning. Here we take a closer look at how things worked out in Europe, and the impact on seaborne trading patterns.

Not The Orient Express

When the economies of Asia even twitch, shipping market observers pay close attention and rightly so. China’s growth story has driven much of the expansion in seaborne trade in recent times, so when industrial production (IP) growth reportedly slowed to 6.9% in August, that made headline news. As has been well documented, industrial output growth in China and other Asian economies has driven rapid growth in imports of raw materials and also led to increased exports of manufactures to consumers in the West. Chinese and Indian IP combined is up by 99% on 2007 levels. Performance in Europe hasn’t got anywhere near those levels as its economies, particularly those in the Eurozone, have struggled badly since the crisis, but that doesn’t mean that it’s not worth taking a look at.

North And South

In fact, last year Europe was still close to China’s size as a seaborne importer, with volumes estimated at around 2 billion tonnes. But of course in terms of today’s economic performance, Europe is way behind. Industrial production in Europe, as the graph shows, is still below pre-recession levels and this has impacted strongly on bulk imports to Europe. In Northern Europe, IP in Germany, France and the UK combined is around 7% down on 2007 levels, and in Southern Europe things have been even worse, with IP in Italy and Spain combined down a whopping 27% on 2007. As a result, Europe’s coal imports in 2014 are projected to remain below 2007 levels at just under 200mt and iron ore imports are set to be well below 2007 levels at less than 130mt. Crude oil imports are projected to hit 8.4m bpd in 2014, 16% down on 2007.

Count The Boxes

But intriguingly, not all aspects of recent European economic activity are such bad news for shipping. Europe is a major importer of finished goods too, and in 2013 volumes on the Far East-Europe container trade started to expand again. In the first eight months of this year, European box imports from Asia were up by 8% year-on-year. Growing demand for manufactures, production of which has been outsourced far away, backed by inventory rebuilding, has left monthly box imports from Asia this year so far up 11% on 2007 levels, even if forecasters are suggesting that darker economic clouds are gathering once again over Europe.

Old Habits Die Hard

So, the economic crisis in Europe hit shipping hard, and the key drivers of trade are today elsewhere. But European consumers can’t kick old habits and they love a shopping trip. Industrial activity in Europe may well be weak, but in one arena at least, European activity has supported seaborne volumes. The ‘final’ outcome awaits but so far this year there’s been some counting up as well as down.

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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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In the well-loved sitcom Absolutely Fabulous, Jennifer Saunders, Joanna Lumley and company provide an apt demonstration that even totally dysfunctional families can muddle through pretty well in the end, and have fun doing it. Could these comedy characters be a possible role model for regulating the shipping family?

Step Change For Regulators

As shipowners struggle with a long recession, escalating fuel costs and tricky credit, it’s easy to see why changing regulations seem like yet another chaotic burden in an already dysfunctional world. And, to be fair, the regulatory framework has made life harder in the last decade. Regulation of emissions, carbon footprint and ballast water have propelled regulators into the heart of shipping economics, leaving many owners struggling with hard choices about how to meet the new rules.

A Real Little Scrubber

Sulphur emissions illustrate how tricky things have become. Ideally regulations have a well-defined timescale and global adoption, but the sulphur regulations have neither. Although the timetable cuts the 3.5% global sulphur cap for marine fuel to 0.5% in 2020, the implementation date could be 2025 if the IMO’s distillate fuel study indicates supplies may not be available. And the global cap is not global either. The “Emission Control Areas” (ECAs) in North America, the Baltic and the North Sea have different rules. From next January ships trading in ECAs face a 0.1% sulphur cap.

Unquantifiable Options

More complexity is added by the options for getting down to 0.1%. One is to use eye-wateringly expensive distillate fuel; another is LNG; and the third is to install a “scrubber”. Since distillate fuel costs about 50% more than MFO, that’s unattractive, but LNG is unlikely to be much cheaper and scrubbers can cost in the region of $2-4m each.

Undecided Or Indecisive?

Luckily, the immediate decision is not too difficult because most ships will not spend long in ECAs. For example, a ship trading between Rotterdam and New York sails about 3,400 miles on the high seas, and around 20% of the distance is in ECAs. However, with more diverse trading the average over the year should be less, say 10%? From January 2015 a bulker sailing 300 days a year at sea, with 10% in ECAs, would spend an extra $0.2m a year on distillate fuel. Is it worth fitting a scrubber to save $0.2m pa? For bulkers no, but for ferries, offshore units and the like trading full time in ECAs, it might be. But when the global sulphur cap drops to 0.5% in 2020 the annual fuel bill will jump by over $2m, which would pay for a scrubber in a year or two, so that’s when the big step change in scrubber installation will happen. Unless, of course, the IMO defers to 2025.

Fabulous Future, Darling

So there you have it. Fuzzy regulations, but for most the economics are not too tricky. Intra-ECA ships should scrub up soon, global traders “wait-and-see”, and Transatlantic traders follow the ‘Ab Fab’ strategy – mix up a distillate cocktail and have a bit of fun! Have a nice day.

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Energy is shipping’s biggest single market, accounting for 43% of the cargo moved in 2013 – 4.3 billion tonnes. Oil is still the big dog, with 2.8 billion tonnes of cargo and the coal trade has now reached 1.2 billion tonnes. Which leaves gas as the junior partner in the energy triangle with 307 million tonnes of trade in 2013, of which 244 million tonnes was LNG and an estimated 63 million tonnes was LPG.

The Crown Prince Of Energy

LNG may still be the junior partner in tonnage, but it is widely seen as a future “seed corn” trade for the maritime business. This positive perception rests on two foundations. Firstly there are enormous reserves of “stranded” natural gas located so far from the world’s major consumer zones that sea transport is the only way to bring the product to market. Secondly natural gas is a clean fuel, in an era which is becoming increasingly preoccupied with reducing emissions of carbon and other pollutants into the atmosphere.

Fight For The Title

But it’s not all plain sailing and LNG is up against some tough competition – coal and oil – and in the three way fight for market share which lies ahead it has a few strategic disadvantages. Oil, the ultimate portable energy source, has the land and air transport fuel market nailed down. In this market the need to maintain LNG at a temperature of -162°C makes competition extremely difficult, and creates limitations to the wider use of LNG as a transport fuel.

The other major market is power generation and here LNG is on firmer ground. Once the storage and re-gasification facilities have been installed, LNG is the ideal clean fuel. The problem is that in this market coal is a long established and devastating competitor. Coal is generally much cheaper than gas and more widely available. In contrast gas supplies are more limited, requiring major investment, and are often located in “difficult” geopolitical areas.

Speedy Growth

Despite these disadvantages, the LNG trade has turned in a spritely growth performance. Since 1984 imports by countries east of Suez have grown by a CAGR of 5.8%, and by 6.5% west of Suez (despite a slowdown in 2012-13). Compared with the growth of the oil trade when it developed more than a century ago, this is super-fast. 44 years since the first LNG shipment by sea to Asia, global trade in 2013 reached 532m cbm, or 244m tonnes, with a fleet of 31m dwt. For comparison, after 44 years seaborne oil trade only reached 55m tonnes and the tanker fleet was just 9.5m dwt (in 1928). This is a reminder that although LNG has not been an easy ride, things take time and LNG’s growth path is pretty dynamic (though not without its problems – in the 1980s one third of the fleet was laid up).

Trending But Tricky

If current growth trends continue, LNG trade could reach one billion tonnes in the 2030s. It is easy to believe that there will be demand in an energy hungry world for this clean fuel, despite its limitations. But in the meantime LNG is a niche player, trading luxury fuel to price sensitive markets. Which makes it tricky, even for the big boys. Have a nice day.

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When the shipping market boom of the 2000s came to an abrupt end with the onset of the financial crisis in late 2008, vessel earnings underwent a severe and well-documented downturn. Almost six years on, it may seem there have been ups and downs since then, but for the shipping markets as a whole, to what extent has this been the case?

Cashflow Crunch

Since the onset of the downturn in Q4 2008, although residual asset values have survived relatively well (see the analysis in SIW 1134), vessel cashflow has struggled. The graph makes this clear, showing the quarterly average of the Clarksea Index since the start of 2007. Following the huge recalibration of earnings in late 2008, the average of the ClarkSea Index in Q1 2009 stood at $11,516/day. After five and a half years of painful downturn, in Q3 2014 (to 22 Aug), the average was $10,900/day, just 5% different. Are we back to square one?

Well, although it is the case that there have been some interesting moves in the markets since end 2008, the average value of the Clarksea Index has moved within a quite narrow band. The quarterly average of the index peaked $5,522/day above the ‘post-downturn’ average (since end 2008) and has dipped as far as $3,078/day below the average. Across this period, the average divergence of the quarterly average from the post-downturn average has been just $1,864/day, with 14 of the 23 quarters seeing the index within $2,000/day of the average ‘line’.

Bouncing Up (And Down)

The post-downturn period can be split into phases. In Phase 1, late 2009 through to mid-2011 the index ‘bounced’ from its post-crash trough on the back of Chinese government stimulus driving the bulk markets and the rapid reactivation of boxships idle in the immediate aftermath of the downturn. During this phase the quarterly index averaged 19% ‘above the line’. But in the face of hefty supply side growth it wasn’t to last and during Phase 2 (2012 and 1H 2013) the gains ebbed away and the quarterly index remained resolutely between $8,623 and $10,767/day, averaging 20% ‘below the line’.

Great Expectations?

Phase 3 in 2H 2013 was relatively short-lived. Big bulkers and tankers staged a rally in late 2013, a year in which investors seemed to have started to scent the bottom of the market (leading to 2,818 new ship orders in all, up from 1,506 in 2012). In Q4 13 and Q1 14 the quarterly index values were ‘above the line’ by $1,089/day (9%) on average.

Still At Square One (Or Not?)

But in Q2 and Q3 14 the index averaged 12% ‘below the line’, and has now moved within a $4,650/day range for the last 15 quarters. On 22 August the index stood at $11,249/day, more or less where it was in Q1 2009. Analysts point to improving fundamentals, and some sectors are seeing traction, but in overall terms we’re still waiting for take off from market conditions too close to subsistence for many. Despite resilient asset prices, helped by itchy investors and low interest rates, industry cash flow has remained within a narrow band for the last six years. Here’s hoping for a lucky number 7!

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While the expanding role of Asia (especially China, see SIW 1132) in seaborne trade has grabbed headlines in recent years, developments in the US, still the world’s largest economy, have also had a significant impact. In a short space of time, changes in the US energy sector have dramatically altered global trading patterns in a number of commodities, significantly impacting the pattern of volume growth.

Putting On A Spurt Of Energy

For much of the last three decades, US oil production has been in decline, falling on average by 1% a year since 1980 to a low of 6.8m bpd in 2008. Yet technological advances have since led to huge gains in exploitation of ‘unconventional’ oil and gas shale reserves. In the space of just six years, the US managed to raise oil output alone by an astonishing 60% to almost 11m bpd, a new record.

Making An Oil Change

This has led to huge changes in US energy usage and import requirements. Crude oil imports have almost halved since 2005, and since 2010 have fallen on average by 11% p.a. to 260mt last year. Exports of crude oil from West Africa in particular have had to find a home elsewhere (unsurprisingly, many shipments now go East). Since US crude exports are still banned, US refiners have taken advantage of greater domestic crude supply to produce high volumes of oil products, especially for shipment to Latin America and Europe. Lower US oil demand since the economic downturn has also contributed, and seaborne product exports reached 120mt in 2013, up from 70mt in 2009. Alongside global shifts in the location of refinery capacity and oil demand growth, these trends have transformed seaborne oil trade patterns.

The impact could be similarly profound in the gas sector. As US imports of gas, mostly LNG, have dropped (on average by 34% per year since 2010), plans to add up to nearly 100mtpa of liquefaction capacity by 2020 could mean the US eventually emerges as a major LNG exporter, potentially accounting for 15% of global capacity (from 0.5% currently). Meanwhile, LPG shipments are continuing to accelerate strongly, rising by more than 60% y-o-y so far in 2014 to 6mt.

Miners Under Pressure

There has also been an impact in the dry bulk sector. Lower domestic gas prices have pushed the share of coal in US energy use to below 20%, leaving miners with excess coal supplies. US steam coal exports jumped to 48mt in 2012 from 11mt in 2009, contributing to lower global coal prices (cutting mining margins) and higher Asian import demand.

So What Next?

So the effects of the changing balance in the US energy sector have been far-reaching, and there remains scope for more shifts to occur as trade patterns continue to adjust to changes in commodity supply and prices. While the firm pace of expansion in US oil and gas output may start to slow, any change to existing export policies could have further impact. What is clear already, in terms of seaborne trade growth, is that the focus has shifted away from US imports, for decades a key driver of the expansion of global volumes, towards the country’s developing role as an energy exporter.

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In the classic movie The Seven-Year Itch, hero Richard Sherman is left sweltering in his Manhattan flat as wife and kids head for the beach. A daunting prospect, until Marilyn Monroe turns up in the flat below. That’s where the fantasy starts as Richard exercises his “seven-year itch” in an amusingly unlikely relationship with the charismatic Monroe.

Shipping’s Seven-Year Fantasy

2014 has been a hot summer in Europe and shipping investors have been getting the seven-year itch themselves. Although the Lehman Brothers collapse in September 2008 triggered the meltdown in rates, the seeds of the crash were sown exactly seven years ago on 10th August 2007. On that date the European banks became so suspicious of each other that the interbank market seized up. To celebrate, seven years later shipping investors are busy indulging their seven year itch with the residents of the flat below – not Monroe, but the equally attractive Asian shipyard representatives. 174m dwt of orders in 2013 and 66m in 1H 2014 show what a good time they’ve been having.

Cashing In At The Top

But how did the investors’ last big fling in August 2007 (273m dwt of orders were placed in full year 2007) turn out? Surely this was a bit of a disaster? Actually things did not turn out quite as badly as seemed likely when the market crashed. For example, a Suezmax resale costing $105m in August 2007 would have made around $57m trading since then, after OPEX (see chart). If this cash was used to pay down the vessel, the balance in August 2014 is $48m, compared with a market value of around $41m. Of course this does not take account of waiting, slow steaming and mishaps. But even allowing for these, it’s not the disastrous story veterans of the 1980s expected.

Off To A Good Start

Getting an investment off to a good start is vital and that’s what helped the 2007 investments shown in the chart. The accumulated cash flow of six August 2007 resale purchases shows that 50% of the cash was generated in the first year; 25-30% over the next 18 months; and very little in the last 4 years. For example the Cape generated only $6m between Dec 2010 and August 2014.

But the good news is that thanks to financial easing and near zero interest rates, residual values have remained firm. In 1985 a Panamax bulker delivered at a cost of $25m had a market value of around $8m. Today a Panamax bulk carrier ordered a couple of years ago at a cost of $29m has a resale value of $31m – it’s actually made money. So although the cashflow has been reminiscent of the 1980s, asset values this time round are a very different story.

7 Years On – Is the Cycle Over?

So there you have it. What looked like a disastrous shipping recession has turned out to be surprisingly benevolent, at least compared with the traumas of the 1980s. With shipyard credit available on a grand scale and not much in the secondhand market it’s a no-brainer – head east and you’ll find Marilyn standing over a subway ventilator. But don’t forget this is only a summer fantasy – the wife and kids will be back soon. Have a nice day.

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