It has been a half year of robust cross-market strength for the shipping industry, with our ClarkSea Index up 6% y-o-y ($25,498/day, 43% above the ten year trend) and the bulkcarrier and container sectors joining “energy” shipping in positive territory. Underlying volume growth and major disruption to trade patterns have again been supportive, alongside supply constraints in some key markets.
How’s Your Grades?
In last year’s report we gave “top marks” to “energy” shipping, and the tanker market, supported by low fleet growth and redistribution of Russian oil flows, has again performed robustly averaging $44,431/day (+98% on 10yr trend). Our chemical tanker index rose to an encouraging 43% above trend. In the gases, VLGC rates came off from record highs in 2023 (still a “healthy” $49,985/day), while our LNG short term rate fell below trend amid softer gas prices and as the market absorbed tonnage while waiting for projects to come on line in the years ahead. Offshore oil and gas markets continued to strengthen (PSV +109% on trend), as did day rates in offshore wind markets. The bulker market increased 47% on 1H 2023, with our weighted average at $15,828/day, 25% above trend, after a surprisingly strong Q1. But the biggest change in dynamic has come in containers, where a market that was expected to be oversupplied has tightened dramatically, first as Red Sea re-routing added to demand (+12% in “TEU-miles”) and then by improving volumes (~10% higher than at the start of the year), an earlier “peak season” and increasing congestion. Freight on some routes is now close to Covid-19 records; charter rates have lagged but are now 55% above trend. Car Carriers have eased slightly from all time highs with concerns about tariffs.
Trade: Growth & Disruption
After increasing by 2.4% last year, we are again seeing above trend volume growth and project trade will reach 12.6bn tonnes (+2.3%). China has been especially supportive, although inventories have grown in some bulk commodities. Significantly, we expect the strongest growth in tonne-miles (+5.1%) for >10 years and, while some of this is from underlying long-haul Atlantic exports, the majority of this distance “kicker” is from geo-politically driven disruption events.
Supply: Finding Yard Slots
In last year’s report, we asked “Where’s the Demo?”; a continuing theme with just 5.3m dwt of demolition reported. Combined with an uptick in shipyard output, the fleet has grown slightly above trend (+1.8% but with wide variations across segments) to 2.4bn dwt (1.6bn GT). Our newbuild price index increased 5% in 1H to the same levels as 2008 on a nominal basis with investors looking closely at yard reactivations (China) and yard costs. Despite a good flow of newbuild orders, especially in tankers and gas with interest in containerships picking up, the total orderbook grew only 4%. S&P activity has remained elevated ($26bn, >65m dwt, +3% y-o-y); asset prices are high in most segments.
Going Green
We estimate that GHG emissions will tick up in 2024 (see our Green Tracker), heightening the pressures on regulators, while newbuild orders with alternative fuels dipped to 41% of tonnage. So despite the challenges and uncertainty of trade disruption, cross market strength in a hugely cash generative period for the shipping markets. Enjoy the summer.
