Next week the shipping industry gathers in Hamburg for the 30th SMM trade fair, always a key event for shipyards and equipment suppliers. This week’s Analysis reviews market developments since the last SMM four years ago and the market context behind the focus on the innovation needed to drive the vital maritime green transition while shipping continues to transport 85% of global trade.
2018: Green Shoots
Back at SMM in 2018, the shipping industry was only beginning to pick itself up “off the floor” and newbuild order volumes were slowly returning after the “drought” of 2016. Unlike today, the biggest success story was Cruise (and for the European yards involved). And for many suppliers, opportunities around Ballast Water (24% of tonnage had a system fitted, 67% today) and the IMO 2020 sulphur cap (407 vessels were scrubber fitted, >4,600 today) were growing. Decarbonisation targets were agreed by IMO (April 2018) but some of the clarity around IMO 2030 short term measures was lacking and ordering of alternative fuelled vessels limited.
2020: Managing Disruption
As we profiled in our Covid-19: Shipping Market Impact Assessment series, at the time of the postponed SMM, an initial economic “shock” (seaborne trade fell 7% in Q2-20) was starting to be replaced by rebounding volumes (e.g. container, dry bulk) and congestion levels supportive of surging freight (container freight up fivefold to record highs in 2021). Despite lockdowns / supply chain disruption, yards and suppliers were generally resilient and able to meet production commitments. And as policymakers and corporates looked to post Covid-19 planning, emissions targets moved even further “centre stage”.
In 2021, global newbuild contracting reached its highest tonnage levels since 2013, supported by all time high containership orders (4.3m teu) and strong charter markets (our overall day rate index, the ClarkSea, averaged $38,330/day this August, up threefold on 2018). Although newbuild ordering has eased in 2022 (still 10% up on 2018), there have been record orders in LNG (with energy security in focus). Prices are up 25% on 2018 (to their highest since 2009). The orderbook is still only 10% of the fleet (lower in tankers / bulkers), shipbuilding output is down 16% (but will trend upwards from 2023) and the active yard count lower. The world fleet is up 13% by GT: average age has crept up 1.7 yrs.
Alongside the overall ordering increase, investment in alternative fuel is growing* (record 37% of orders, 60% by tonnage, ytd). Dual fuel LNG leads the way (>298 orders ytd, 38% of all orderbook tonnage) alongside orders for methanol and battery hybrid (smaller vessels). Ammonia “ready” orders are increasing (>71 orders ytd). Energy Saving Technologies (ESTs), and associated retrofitting opportunities for suppliers / repair yards, are also trending upwards (driven by the pending EEXI / CII and a record fuel bill). Despite current economic headwinds, inflationary pressures and a now softening container market, our long term analysis suggests growing opportunities for suppliers / yards as fleet renewal requirements and the fuelling transition accelerate. Timing may be “lumpy” as the industry manages cycles, technology uncertainty & regulatory risk, but huge investment is needed. Enjoy SMM!