Shipowners set sail in 2019 in robust if cautious mood, with some hopes of better times to come — especially in the tanker sector.
The past few months have seen significant turbulence, with stock markets plunging and geopolitical risks increasing.
The rise of protectionism and the trade war between the two largest economic players in the world have done little to steady nerves.
But the maritime industries saw enough in 2018 to give a sense of optimism that the industry’s internal supply-and-demand balance has improved.
A just-published Moore Stephens survey of shipping confidence showed 60% of those questioned expected tanker rates to improve in the next 12 months, while almost 40% of those asked expressed hope that dry bulk owners will be able to raise their prices.
This contrasted with only a quarter of respondents believing there would be better times ahead for containership operators.
It is certainly not surprising that the tanker sector is the most upbeat.
Christmas 'miracle'
There was a Christmas “miracle” for product carriers, with the Baltic Clean Tanker Index hitting a seven-month high last month.
Admittedly, a range of seasonal factors played their part — as did China lifting export quotas on its state-owned refining companies — but underlying trends are also strong.
The larger dirty tanker sector has also been on an upswing, helped by a huge fall in the price of crude over the year despite increasing demand.
A number of brokers, including Braemar ACM, have recently increased their freight rate forecasts for tankers over the next two years.
Other analysts remain worried about the impact of 35 new VLCCs entering the market in 2019, plus the effect of new Opec oil production cuts.
The dry bulk outlook remains much trickier, although recent soaring demand in Chinese steel plants for iron ore and in Indian power stations for coal produced a better end to 2018.
The Baltic Dry Index stands at around 1,280, just about a midpoint between the catastrophic 10-year low of 290 in February 2016 and the ecstatic 2,330 high of December 2013. Surely it will bounce higher in 2019?
Container operators are still caught in the crossfire of historic overbuilding of tonnage combined with a stubborn refusal to scrap ships.
They have also been key victims of the US-China trade war, which has badly dented sentiment on the previously buoyant Pacific trades.
Shipowners of all types had entered 2018 amid synchronised economic expansion in developed and developing countries.
This time last year, Goldman Sachs Research described world trading conditions as better than ever.
This did not take into account that US President Donald Trump would act so punitively in his attempt to decrease imports from China.
There was also perhaps an underestimate of the likely scale and volume of Federal Reserve hikes in interest rates.
One of the major issues of this coming year will be the preparation for the introduction of the low-sulphur fuel requirements from the IMO, which will come into effect in 12 months time
Meanwhile, the positive impact of US federal tax cuts has started to fade and there is grumbling background talk about a maturing global economic cycle and even a threat of recession.
With added scepticism about the future earning power of the tech giants, it is little wonder equities took a December beating on Wall Street after the highs hit in September 2018.
Feeling the heat
It was also difficult in the City of London and Frankfurt, while the Shanghai Composite Index of leading equities hit a four-year low.
China’s GDP slowed to 6.5% in the third quarter of 2018 — its lowest level since the financial crisis of 2008/2009.
But despite this turbulence, there are still good times to come. World economic growth will likely be slower, from the 3.8% expected for 2018 to 3.5% in 2019.
And Trump downplayed the trade war last weekend, saying talks with Chinese counterpart Xi Jinping are “moving along very well”.
Still on the pure maritime side, there are also expectations of higher financing, fuel and regulatory costs.
One of the major issues of this coming year will be the preparation for the introduction of the low-sulphur fuel requirements from the IMO, which will come into effect in 12 months' time.
Are shipowners ready with scrubbers or will the refiners be prepared with enough of the lower-sulphur fuel supplies?
There is plenty to think about for the maritime industry, but shipowners tend to be naturally upbeat and rarely complacent. Cautious optimism is a good message for the new year.
