Alan McCarthy’s “Trend Analysis for Selected Tankers and Dry-bulk Carriers 4 th Quarter 2016”, comes at no better time. A summary first and then the full and in depth situation/findings:
Charts for values & earnings 20 year history and depreciation schedules are available on request.
At the start of a new year, it is always tempting to look forward with predictions for the future. Looking at past trends is not a reliable forecasting method, but it is, nevertheless, helpful to identify long-run trends and market fundamentals that underpin future seaborne trades.
The basics of fleet supply and demand are only one factor in market predictions. Global seaborne trade in ton miles is a significant measure of demand for shipping services and that, in turn is driven by global GDP growth primarily in the OECD countries and the emerging economies, notably China and India. As 2017 opens with very significant political
uncertainty which may affect both relationships between states and perhaps an increase in protectionism, the ‘dismal science’ of economic prediction becomes even more a subjective enterprise.
The drastic reduction in new ship ordering in 2016 will undoubtedly slow the increase in fleet sizes in 2017 and 2018. But past experience has shown us that the global ship-owning community is its own worst enemy when it comes to maintaining a balance between fleet supply and demand. Hungry shipyards, especially those that are state sponsored and vital to a nation’s economy will offer increasingly attractive prices and payment terms which, in the past, owners have found difficult to ignore. New ship prices are now low, and this may tempt new orders during 2017 if the perception is that the supply/demand balance is stabilising.
One additional uncertainty for 2017 is the IMO convention on Ballast Water Management becoming effective in September. With no clear method of financing the cost other than from cash flow or equity, there is some thought that this may lead to an increase in scrapping activity of mid-aged and older tonnage if the cost of installation with its
associated trading downtime, is comparable with scrap value.
This quarter’s Trend Analysis therefore looks at the fleet changes between 2015 and 2016, and comments on the current fleet status for pointers and guidance to what 2017 and 2018 may hold.
We look forward to your comments.