It's all about vessel supply, and this time shipping is limited in its ability to destroy its own peak markets through excessive ordering of new ships.
That's the take in a market note from investment bank Jefferies, whose lead shipping analyst, Randy Giveans, is projecting orderbook-to-fleet growth across most sectors at below 10-year averages, with especially compelling numbers in dry bulk.
"In recent decades, all shipping cycles started due to vessel supply shortages and ended as a result of aggressive ordering and vessel supply surpluses," Giveans told clients.
"Regulatory, financial and structural limitations will help limit newbuilding ordering and prevent a new wave of oversupply," leading him to argue "the current shipping up cycle will be sustained in the coming years".
Of course, for some segments, such as tankers, the notion of an up cycle is still more theoretical than proven as rates skid along at trough levels.
But for dry bulk and containerships, the rally has been on since late last year, intensifying through 2021. Bulker owners have seen their best rates in more than a decade, while boxship operators explore new highs.
Jefferies compares the current overall orderbook-to-fleet ratio at less than 9%, with 195m dwt on order, to an average of 20% or 325m dwt over the past decade.
The numbers are even more striking compared with a peak market in 2009, when the orderbook was 52%, or 627m dwt.
That period was especially enticing for bulker owners, who placed orders representing almost 70% of the fleet, or 330m dwt.
Record rates
In comparison, the current figures are 6.2% and 58m dwt.
"Overall, the current supply picture is the best it has been since the turn of the century, with dry bulk being the most attractive," Jefferies reported.
"As such, we believe dry bulk fleet growth will remain below 2% in the coming years, which will likely further support stronger rates."
Giveans makes New York's Genco Shipping & Trading and Greece's Star Bulk Carriers his top picks in the sector.
While containerships have had more recent ordering amid record-setting rates, with 48% of total capacity ordered in the year's first half, Giveans notes that most deliveries are not until 2023 or 2024, thus paving the way for more strength through 2022.
The fleet is to grow by only 3.8% in 2021 and 3.3% next year, compared with average annual growth of 7.4% over the past 15 years.
Jefferies likes Danaos, Global Ship Lease and Zim as top picks.
Unlike their dry brethren, tankers have been slow to recover from the demand destruction of Covid-19 and the effects of destocking from a world oil glut.
But for crude tankers, Giveans expects current-year fleet growth of 3.2% and then 3.4% in 2022 to fall below the 15-year average of 3.8%.
Product tankers are to see a bigger dip, with growth of 3.4% in 2021 and 2.4% in 2022 falling well below the 15-year average of 6.1%.
Jefferies' top picks are International Seaways and Euronav on the crude side, and Scorpio Tankers and Ardmore Shipping in clean products.
