Despite an easing of overall conditions (our ClarkSea Index averaged a healthy $24,119/day in 1H, down 38% y-o-y but still 40% above the ten year trend), most shipping sectors remain in positive territory. And while there has been an unwinding in container and bulk carrier markets, for any shipping portfolio weighted towards supporting energy markets, day rates have remained at very strong levels.
How’s Your Grades?
“Top marks” across shipping’s half year report are dominated by “energy” shipping. Our weighted crude & products tanker index was a robust $46,024/day in 1H, 116% above trend and only marginally below the 20 year highs of 2H 2022. In gas, the LPG sector has seen its strongest ever half year period (VLGC >$73,000/day, US export growth impacting) while LNG term rates (but not spot levels) remain strong (energy transition and energy security). And if you didn’t “drop out” during the prolonged downturn, the offshore oil and gas fleet is benefiting from improving utilisation (our North Sea PSV index was 73% above trend). Strong Offshore wind investment continues. Outside of energy, Car Carrier rates continue their “heroic” run for the moment: 275% above the ten year trend at $110,000/day. The dry bulk market moved 15% below the ten year trend (hopefully setting some groundwork for improvements next year). And after being the “star pupil” in last year’s report, as expected, the container market has “normalised” into a period of low freight: activity continues however, with newbuilding orders, fleet renewal needs, pockets of resilience in the charter market and all-time slow speeds.
Trade: Going The Distance
After contracting marginally in 2022 (particularly container, minor bulk), global trade has reverted to slow growth (“energy” trade still outperforming). China’s reopening has been helpful (although economic signals, and the prospects for stimulus, continue to be mixed) and while the “vulnerabilities” in the world economy we referenced at the start of the year remain we are projecting 2.3% growth to 12.2bn tonnes in 2023. The impact of geo-politics / distance remains supportive, with tonne mile trade growing at 3.9% on an annualised basis (nearly double the long term trend with an even stronger trend for tankers). With shipping hugely impacted by global events of recent years (Covid then the Ukraine war), disruption, complexity, geo-politics and energy security remain key trade themes.
Where’s The Demo?
The world fleet grew by 39m dwt / 1.7% in the first half to reach 2.3bn dwt / 1.54bn GT, slightly above trend but still continuing a theme of relatively restrained fleet supply growth. The value of the world fleet is approaching $1.4 trillion. Shipbuilding deliveries are increasingly focused on container and gas carriers. S&P activity remains well above trend, but demo levels have not increased as expected for the moment.
Extra Green
In our mid-year report five years ago, we advised “extra classes in green”. Complexities are building, with the introduction of EEXI / CII the latest step in shipping’s decarbonisation pathway. We estimate 44% of newbuild tonnage ordered in the first half was alternative fuelled (with methanol, 62 orders, catching up LNG, 86 orders: see our latest green tech tracker). Best holiday season wishes from Clarksons Research.
