An Analysis of Shipping Market’s Behaviour During 2017-18

(Image Courtesy: IHS Fairplay)

In the fiscal year ended March 31, 2018 the global economy continued to be steady on the whole despite rising geopolitical tensions in some regions. However, since the beginning of 2018, there have been developments that leave doubt over the global economy, including the United States’ imposition of restrictions on imports of steel and aluminium products and additional tariffs on Chinese products and China’s announcement of countermeasures, including the imposition of additional high tariffs on imports from the United States, in revenge for such U.S. measures.

Shipping Industry & US Economy

The U.S. economy continued to grow amid robust corporate business performance due to steady personal consumption and a labour supply increase that have been supported by favourable employment and income environments. On the other hand, although the European economy kept expanding thanks to a steady increase in imports and exports, the economic growth has slowed down since the beginning of 2018 because of the euro’s appreciation.

Scenario in Japan & China

In China, exports expanded against the backdrop of the global economic recovery and personal consumption grew m a stable manner, despite some slowdown, due to favorable employment and income environments. As a result, the Chinese economy continued to grow steadily throughout the year.

In Japan, production activity recovered moderately and exports stayed firm. As employment and income environments also remained steady, the Japanese economy continued to recover at a moderate pace on the whole.

Emerging economies stayed generally strong because of such factors as the recovery of the economies of resource-rich countries due to a resource price rise, an improvement in the Indian economy and a pickup m domestic demand in ASEAN countries.

Cargo movements remained firm throughout the year in the containership business and freight rates remained on a recovering track. However, the supply-demand balance did not improve.

Dry Bulk Business

In the Cape-size sector, the market continued to recover on the whole despite continued pressure from the supply of new ships on order, although there were some market rate fluctuations.

In the medium and small vessel sector, market rates also continued to rise moderately as a result of robust demand especially for coal and gram in addition to other minor bulk movements. Vessel supply-demand adjustments slowed down because of a steep year-on-year decrease in scrapped capacity. However, as transportation demand exceeded supply, progress was made toward resolving the supply-demand gap.

(Image Courtesy: Youtube)

Car Carrier Business

In the fiscal year, cargo movements for finished vehicles remained sluggish in shipments from Asia to resource-rich countries in the Middle East, Central and South America, and Africa, but cargo movements from Europe to North America and within Europe remained strong.

2018 Forecast

A caution will be needed in 2018 to sustain the improvement in shipping markets last year, with China remaining as the driving force of demand. Looking across the three major markets – dry bulk, containers and tankers, Bimco analyst Peter Sand foresees continued improvement for bulkers and boxships, and potential for an upturn in the tanker sector.

At the centre of this activity as demand driver is China. “Being the one driver of dry bulk shipping demand growth, China has also taken a giant leap in hiking crude oil import levels during 2017. By introducing robotics into its enormous manufacturing sector, China aims to remain the world’s top exporter of containerised goods too,” Sand said.

(Reference: “K” Line, Reuters, BIMCO)

Sea News, May 1