Dr. Martin Stopford, image (c) Marine Money
Dr. Martin Stopford of Clarkson Research Services, economist and author of the renowned textbook Maritime Economics, compares shipping to a game of 3D poker. “Like poker,” he claims, “the shipping market has simple rules, but in practice is endlessly complex.”
At Marine Money Week 2012 in New York City, Stopford guided investors through the past few decades of shipping markets, highlighting their volatile and cyclic nature, and presenting his insights into current market trends.
Stopford traces boom and bust cycles back to 1967. In 1972, Stopford, among other analysts, predicted tanker markets would be dead for the next 3 years. Instead, 1973 became a “super boom,” lasting 6 months until shipowners ordered 120 million deadweight of tankers against an existing fleet capacity of 197 million deadweight, hence busting the market with vessel oversupply.
Another 8 to 10 years passed before the tanker market recovered from its self-inflicted ordering fiasco. In the 1980’s, distressed markets resulted in the best vessel deals. During that time, Stopford witnessed a newbuild Panamax bulk carrier that cost $30 million to the owner sell two weeks later to the bank for $8 million.
The 1990’s presented a disappointing period of weak returns followed by the super boom of the 2000’s. As was the case in previous cycles, high charter rates in the 2000’s led to a fat order book, which brings us to the current shipbuilding investment bubble. Tanker supply is more stable than bulker supply, Stopford notes, but whereas the market delivered about 30 million tonnes per year consistently in the boom when single-hulled tankers were being replaced, 40 million tonnes were delivered last year.
Stopford draws comparisons between post-Lehman tanker earnings and 1990’s markets but warns investors of two notable differences between the decades – the LIBOR interest rate has fallen dramatically and fewer tankers are on time charter contracts, implying that the majority of the global tanker fleet responds quickly to cash pressures.
Further exacerbating the predicament of shipowners today is persistently rising fuel costs. In the past eight months, vessel costs have exceeded earnings, tightening the cash squeeze for owners and fundamentally altering the balance of maritime economics.
Anticipating that shipowners may struggle to survive in the weak decade ahead, Stopford’s advice is to invest for the environment by anticipating impending regulations and invest for the economy by conforming to the “bunker regime” and slow steaming.
Or, as World Poker Champion Amarillo Slim put it, “play fast in a slow game and slow in a fast game.”
Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.
Join the 110,100 members that receive our newsletter.
Have a news tip? Let us know.
In a quiet corner of the Pacific last August, a vessel unlike any other was making what many thought was its final voyage. R/P FLIP (Floating Instrument Platform), the U.S....
Wendover Production’s latest video, “How Inland Waterways Work,” the spotlight is on the often-overlooked yet vital network of U.S. inland waterways that power much of the economy. These rivers and...
Yachting World is reporting that while missiles rain down on oil tanekrs and major shipping companies divert billions in cargo away from the Bab-el-Mandeb Strait, a handful of brave, or...
Access exclusive insights, engage in vibrant discussions, and gain perspectives from our CEO.
Sign Up
Maritime and offshore news trusted by our 110,100 members delivered daily straight to your inbox.
Essential news coupled with the finest maritime content sourced from across the globe.
Sign Up
Join The Club
