Ocean Freight Comments
Transportation and Export Report: Jay O’Neil, O’Neil Commodity Consulting: What is wrong with the shipping markets? Why have they not financially turned the corner and embarked on a path of better profitability? Well, the only thing really wrong with the shipping industry is itself, much much like the old Pogo cartoon quote”We have met the enemy and he is us”.
Apparently, the shipping industry has an internal distain of profitability as they just can’t stop ordering new vessels. Following the market boom of 2007 the shipping industry underwent a war time building program and by 2012 the world vessel fleet had outpaced cargo demand by 35 percent. However, for the last couple of years the market has declined to levels meant to encourage scrapping and consolidation. So as soon as it appeared that conditions may be rebalancing and a degree of profitably might return, the vessel owners quickly ran out to further expand their fleets. As the Peter, Paul and Mary song goes “When will they ever learn”?
This year it is anticipated that global seaborne trade will grow by about 5 percent and the total world vessel fleet will increase by about 11-12 percent on top of the existing oversupply. This is obviously not a good way to rebalance things and will not lead to the improved market conditions that vessel owners and their banker’s desire.
The last quarter of the year is usually positive for vessel owners, but for now it looks like owners are just trying to get vessels chartered for the holidays and will wait to see what happens in 2015. Although I hear that a Panamax to South Korea for February was bid $39.00/MT and offered at $41.00/MT. This does not look to bullish all in all.
Below is a recent history of freight values for Capesize vessels of iron ore from Western Australia to South China:
The charts below represent January-December 2013 annual totals versus year-to-date 2014 container shipments to South Korea.
