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The view in the deep ocean
Martin Stopford President,
Clarkson Research
CAPITAL LINK FORUM Cyprus 9th February 2017
Global Shipping Markets Current Developments & Outlook
1. Shipping cycles getting longer 2. Sea trade growth changing 3. Shipyard capacity management 4. The zero emissions agenda 5. Digital revolution is accelerating.
SHIPPING MARKET TODAY, MANY NEW CHALLENGES
1. Shipping cycles getting longer
In today’s simplistic business model, cycles are the drivers of change
The Shipping Market Cycle Today - 25% below 25 year trend
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Cla
rkse
a In
dex
$0
00
/day
The Clarksea index shows the average earnings of tankers, bulkers, containerships & gas
Clarksea Index $8567/day last week
25 year trend 25 year average $15,582/day
For 70% of the last 25 years the market was trading below trend.
Most of the money was made between 2004 and 2008
This trough has now lasted 8 years and 3 months. Its not
over yet
13-Feb-17 5 © Marecon Ltd wwww.maritimelectures.com © Marecon Ltd
Looks like the longest dry cargo cycle since 1845!
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1725 1745 1765 1785 1805 1825 1845 1865 1885 1905 1925 1945 1965 1985 2005 2025
If the dry market recovers in 2021 this cycle will have lasted
17 years
Cyc
le le
ngt
h in
yea
rs
Sailing ship era 1743 to 1870
Source: based on the MEFI index produced by Martin Stopford
Shows FIRST year of each cycle & length from beginning of peak to beginning of next peak
13-Feb-17 6 © Marecon Ltd
“Shadow” Surplus & Laid Up Tonnage estimate end 2016
-110
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1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Shadow surplus Tankers laid up Bulkers laid upM
illio
n d
wt
sup
ply
& d
eman
d
“Shadow” surplus is soaked up by slow
steaming today (18% fleet)
“Shadow” Surplus – tonnage in excess of
the dwt of ships needed to carry
trade at full speed
13-Feb-17 7 © Marecon Ltd
Tanker Orders, Deliveries & Demolition
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Deliveries 2015 Orderbook Demolition Orders
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February 2017 orderbook of
78m dwt 14% of the fleet
Orders placed in year
Big increase in counter-cyclical
ordering 2012-2016
13-Feb-17 8 © Marecon Ltd
Dry Bulk orders, deliveries & demolition
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Deliveries Orderbook (with slippage) Demolition Orders Demolition Fcst
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Big increase in counter-cyclical
ordering 2010-2015
2. Sea trade growth changing
The trend growth rate of trade on a slowing trend
13/02/2017 10
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IND
UST
RIA
L P
RO
DU
CTI
ON
% P
A
World ip % PA
Credit Crisis Dot.com
Crisis
VERY WEAK INDUSTRIAL
GROWTH SINCE 2009
S6: World Industry growth rate to September 2016 – very sluggish
Updated feb 2016
13/02/2017 11
Sea trade growth edges down - about 2.0% growth likely in 2017
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%
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%
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%
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%
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%
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%
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%
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%
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%
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%
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%
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% 3,4
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%
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%
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% g
row
th o
f tr
ade
in y
ear
forecast
Growth of sea trade 2000-2016 (annual % change)
In 1966 sea import trade was 1.8 billion tonnes – 10.2 billion tonnes in 2016
y = 2076e0,0309x
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Imp
ort
s –
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ion
to
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es
Total Trade, 10 billion tonnes
Source: data collected by martin stopford from various sources, mainly United Nations and UNCTAD
The bulkers & liners struggle with mature technology
5. The bulk & liner revolutions are over
6. Cargo owners have stepped away
7. Designers struggling to improve ships
8. Very big containerships disappointing
OECD share of imports half what it was 50 years ago
0%
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90%
1966 1976 1986 1996 2006 2016
OECD Imports Non-OECD Imports
OECD Imports
37%
Non-OECD Imports
63%
OECD Imports
77%
Non- OECD
Imports 23%
1. OECD now imports only 37% of cargo
2. China and Asia driving trade
3. Non-OECD 63% and maybe 75% soon
4. Non-OECD has six times the population
Sea trade growing but OECD losing market share
The future – another revolution desperately needed
9. Shipping investors need a new vision
10. World economy needs new services
Seaborne imports by region (% of world trade)
The Pacific Trade Issue
Australia Canada Brunai
Chile Japan Mexico Malaysia
United States New Zealand Peru Singapore Cambodia
Vietnam India Hong Kong China Laos Papua New
Guinea Indonesia Myanmar Russia Phillipines Taiwan South Korea
Thailand
TRANS-PACIFIC PARTNERSHIP (TPP) USA has pulled out
REGIONAL COMPREHENSIVE
ECONOMIC PARTNERSHIP (RCEP) Close to completion. Focus on the basic business of cutting tariffs, which are high in Asia. But issues about the China export machine and India sceptical
FREE TRADE AREA OF ASIA PACIFIC (FTAAP)
In 1966 only 13% of the fleet was flagged out. Today it is over 70%
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National Flag Foreign Flag
Move to offshore flag accelerates in
2000s boom
National flag fleet static
• 1.3 billion DWT of “flagged out” tonnage
• Over 70% of the merchant fleet is now registered offshore
• Up from 42% at the end of the 1980s (see chart)
• Shipping now a global business
Million dwt
3. Shipyard Capacity management
We need a better strategy for managing the supply of ships, but are not likely to get one
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% o
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Regional Shipbuilding Trends 1902-2015: different dynamics today
Korea
Japan Europe
other countries
GT 37.3%
GT 35.4%
GT 19.1%
GT 2.4%
China
China’s shipbuilding strategy has changed from “getting bigger” to “getting stronger” GT 5.8%
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Del
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olit
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T
Orderbook slippage
Orderbook April 2016
Deliveries
Series4
Stage 2 (Build & sell contracts for
new capacity)
Stage 1 (expand existing
capacity)
Stage 4 (Close 581uneconomic
shipyards)
Stage 5 (Slow production &
diversify in 423 active shipyards)
Del
iver
ies
bas
ed o
n o
/bo
ok
Stage 3: orderbook
slippage
World shipbuilding output & capacity 1994- 2017
In 2009 there were 992 active yards In 2016 there were 423 active yards
forecast
4. The Zero Emissions Challenge
Yamaha have a zero emission bike, but a zero emission cargo ship will need extreme technology
In 2066 seaborne trade could be 46 billion tonnes – or just 16 billion tonnes?
y = 2078e0,0308x
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Imp
ort
s –
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ion
to
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es
Source: data collected by martin stopford from various sources, mainly United Nations and UNCTAD
Low Carbon Shipping –some issues (not all mine!)
1. Shipping has recently decoupled from GNP due to slow steaming
2. No alternative to the big diesel engine at present.
3. Operating ships very slowly would help significantly but who wants it?
4. LNG will not do the trick for shipping on a COP21 pathway, since it is a carbon-based fuel.
5. Low carbon is more political than economic and regulators bodies will move very slowly.
6. The risk is that "by leaving it until 2050 we fail to achieve anything”.
7. IMO has data collection process for MRV. and EU developing separate data system.
8. So we will know more accurately what the true carbon position is.
9. Given current commercial structure, how will owners respond to the carbon challenge?
10. A levy on fuel seems likely outcome say in in 7-10 years.
11. Needs to be simple and global. Who gets the cash? Can it fund research?
5. How to harness digital technology
Are we smart enough to use the information & communications technology (ICT) revolution to revolutionize sea transport?
Who is smart?
1. Smart Shipping tackles a historic problem – the global
mobility of ships and limited ship-shore communications.
2. For centuries shipping has been restricted by this
“fragmented” business model which makes each ship a
small management unit.
3. Because companies only employ 1 or 2 people on shore for
each ship at sea, big shipping companies have limited
competitive advantage over small ones.
• Smart shipping can change this because now have the
technology to run a fleet of ships as a “transport factory”
(like a BMW car factory).
Why Smart Shipping is a better investment
Three ways change the business Model
1. Smart Ships – with much better QA & efficiency standards;
2. Smart Fleets – which manage the smart ships like a transport factory (e.g. a BMW factory).
3. Smart Global Logistics – which integrate the whole thing door to door
Massively more efficient satellite communications are removing the 5000 year old need to treat the ship as the business unit
6. Is the business model serviceable?
The End
A challenging time
![Martin Stopford Marine Money 24 Feb 2011[1]](https://img.pdfslide.net/doc/110x75/54e996e14a7959de428b4a49/martin-stopford-marine-money-24-feb-20111.jpg)
