The State of Global Shipping in Three Charts
Freight rates pick up, sparking optimism
The sector has struggled with overcapacity, price wars and freight rates far below break-even levels. Now, thanks to the improving global economy, industry executives and analysts say the worst may be over, at least for container and dry-bulk ship operators. Early hints of a recovery in the oil-tanker business are starting to emerge.
“Shipping is more than alive and kicking. There is a spring in the air and there is a spring in the world economy,” said Singapore Minister of Transport Khaw Boon Wan.
Among other signs of life: The cost to transport a container in the benchmark Asia-to-Europe route rose to $965 in May, up 55% from a year earlier. At the port of Singapore, which the industry uses to gauge trade flows, container volume rose 5% in the first quarter from a year earlier. And demand for container capacity cut the percentage of idle ships to 3.5% in the first three months of 2017, compared with 6.5% in the previous quarter.
Industry experts expect the market to turn around this year. Demand is forecast to grow about 3%, compared with a 1% growth in capacity. This has been spurred by Chinese iron-ore imports, which rose 11% year-over-year in March to 95.5 million metric tons, the second-largest monthly amount on record. Imports of the thermal coal used in power plants also are up sharply, and so far this year, capesize daily rates have averaged around $11,000, triple the rate in early 2016.
Used tankers have been decreasing in value over the past 12 months, with the price of a five-year VLCC falling to $58 million in May from $68 million a year earlier.
However, a combination of low tanker prices and old ones being retired to scrapyards has prompted a buying frenzy, with 69 new and used VLCCs bought in the first five months of this year, compared with only eight last year, a sign that prospective owners expect a recovery.
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