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Tuesday, 04 August 15
SHIPPING CYCLES - A CHESS GAME YOU DON'T WANT TO LOSE - CLARKSONS
 Ingmar Bergman’s classic movie The Seventh Seal is about a knight who, during the Black Death, challenges Death to a chess match, in the hope that while the game continues he can put off his demise. This grim epic could be seen as a metaphor for the daunting progress through long shipping cycles, as one risk-laden move in the toxic chess game follows another.
August 2007 – The Game Starts
Today’s cycle started eight years ago in 2007. It was an epic year. Capesize earnings averaged over $110,000/day and merchant shipbuilding investment reached a record $229 billion (excluding offshore). But there was good reason to be apprehensive. In August the first signs of the financial crisis hit Europe, as interbank investors grew paranoid about the vulnerability of their counterparties to CDO exposure, bringing Eurodollar trading to a halt. Meanwhile analysts were worried that the Chinese super-boom would peak out after the Olympic Games in 2008. So although dry bulk investors were still making money and ordering ships, the solitary chess game with destiny had already started.
Mounting A Comeback
Seven years later the chess game is still going on. The financial crisis got off to a more dramatic start than anyone anticipated. In 2008 as panic swept through financial markets and trade credit became almost unobtainable, the world economy, including China, came precariously close to meltdown. But fortunately this time the politicians eased through the crisis successfully. China mounted a heroic infrastructure programme which gave bulkers a very decent boom in 2009-10. Following this the market fluctuated, but reached decent levels in late 2011 and again in late 2013.
Not Deadly Or Distressed?
As recessions go so far the game with destiny has gone quite well. Since the end of 2007 Capesize earnings have averaged $32,300/day and the market has soaked up 490m dwt of new bulkers. In 2013, 104m dwt of bulkers were ordered. So someone in the industry believed bulkers would win their chess game.
But in 2015 the game changed. Capesize earnings averaged only $6,212/day in the first half. For the first time signs of real distress are apparent. After 8 years, dry bulk sentiment finally collapsed and bulker orders fell from 16m dwt in January 2014 to 0.05m dwt in June 2015. A helpful step towards market recovery, but it leaves the shipyards with a problem. Over the last 8 years bulkers were a third of shipyard workload (see inset pie chart). Although tankers and container ships are still being ordered, they show no sign of filling the gap left by bulkers.
Dance Macabre
So there you have it. Bulkers have finally made a meaningful move towards better times by cutting investment. But the game isn’t over yet. They still need a strong world economy and continued Chinese import growth. Meanwhile a new chess game with destiny is getting started, this time in the shipyards as they try to plug the bulker gap. Maybe the game’s not over yet. So if you want a nice relaxing summer, our advice is don’t watch The Seventh Seal.
Source: Clarksons | Hellenic Shipping News
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Friday, 03 July 15
SHIPPING CONFIDENCE EQUALS SEVEN-YEAR LOW - MOORE STEPHENS
Overall confidence levels in the shipping industry fell during the three months to May 2015 to a level equal to the lowest rating recorded in the p ...
Thursday, 02 July 15
TECHNOLOGY AND INNOVATION IN MINING 2015 - IXG
Information Exchange Group’s Technology and Innovation in Mining 2015- International Summit on Mining
Press Release: The inaugural editi ...
Thursday, 02 July 15
THE PERFORMANCE OF THE CAPESIZE SEGMENT PUSHED DRY BULK MARKET TO UPWARD LAST WEEK
COALspot.com: The Dry Bulk market continued its upward movement last week, with the BDI closing off on Friday (26 June) in excess of 800 points, wh ...
Wednesday, 01 July 15
Q4'15 AND Q1'16 FOB RICHARDS BAY COAL SWAPS ROSE W-O-W AND M-O-M
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q3' 2015 rose month over month and down week over week.
The Q3 swap was up US$ ...
Wednesday, 01 July 15
BEIJING HAS OFFICIALLY EXTENDED BY TWO YEARS ITS SUBSIDY PROGRAM TO SUPPORT LOCAL SHIPPING COMPANIES IN SCRAPPING THEIR OLD TONNAGE - INTERMODAL
Last week, Beijing has officially extended by two years its subsidy program to support local shipping companies in scrapping their old tonnage in w ...
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- Planning Commission, India
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- The Treasury - Australian Government
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- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- GAC Shipping (India) Pvt Ltd
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- Kumho Petrochemical, South Korea
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- Therma Luzon, Inc, Philippines
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- Gujarat Mineral Development Corp Ltd - India
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- Uttam Galva Steels Limited - India
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