2023 Shipping Market Review
Although our average day rate index, the ClarkSea, fell y-o-y (driven by “normalised” container markets), it remained 33% above ten year trend with gas, tanker, offshore and car carrier all experiencing strong conditions and dry bulk and containers (Red Sea disruption) rallying late on. With a return to trade growth and a good flow of newbuild and S&P, it was another positive year for many.
Energy Shipping Strength
Across 2023, there were strong day rates across “energy” shipping, led by LPG (all-time high VLGC rates $91,625/day) and also supported by another strong year for tankers, LNG rates that were down but still healthy and a continued offshore recovery (“Floater” drilling rigs hit 90% utilisation for the first time since 2014). Car Carrier charter rates remained at all time highs (since 2019, trade has grown by 19% and fleet by 1%). Despite a soft year (down 40% y-o-y), bulkers experienced a better fourth quarter and with a low orderbook (6% of fleet) will be hoping for an im-proved average in 2024. Container freight / charter rates fell 71% / 68% y-o-y and the outlook suggested rates would “bump along at the bottom” in 2024. But with Red Sea disruption (over 300 vessels of 4m teu have now diverted via the Cape), Shanghai to Europe freight rates are up 220% (but still 65% lower than the Covid-19 peak).
Trade: Recovery & Distance
After stalling in 2022 (and despite the sometimes gloomy economic fore-casts), global trade increased by 3% to 12.4bn tonnes (we are projecting 12.6bn in 2024 but will monitor economic “vulnerabilities”). Top performing trades were Cars (+15%), LPG (+6%) and, sup-ported by China’s reopening, Dry Bulk (+4.3%) while container volumes re-mained weak (but bottomed out in the summer). And a 5% increase in tonne miles (a full year of redistribution of Russian oil flows supported oil / oil products tonne mile growth of 7% / 10%) represents the biggest growth since 2017: a helpful “distance kicker”. In Cruise, passenger volumes returned to pre-Covid-19 levels of 31m and some market optimism is creeping back.
Supply: Fleet Renewal
World fleet supply grew by a moderate 3.2% to 2.3bn dwt, with the tanker fleet growing only 1.9% but container by 8%. Global shipyard output increased 10% y-o-y to 35m CGT (with China delivering 50% of output for the first time) and there was a good flow of orders (down in CGT, steady by DWT and GT) with an increase in tanker orders (+235% by dwt, albeit from a low base). The orderbook is still overall only 12% of the fleet but highly skewed to container and gas in the coming years (meaning some potential constraints for tanker and bulker supply). Yard “forward cover” is a healthy ~3.6 years and our overall new-build price index rose 10%. The average age of the world fleet increased to 12.6 years (2013: 9.7yrs) and we estimate 31% of tonnage will report D or E ratings under CII. S&P volumes have remained at elevated levels (steady y-o-y at 129.9m dwt) with tanker and bulker prices up ~15%. Scrap volumes remained low (10.7m dwt) with pricing steady ($510/ldt). Financiers reported an active year but with strong competition for “top tier” and early repayments. Capital markets were generally quiet.
Disruption & Green...
So, along with plenty of “managing disruption” (see our briefs on the Red Sea / Panama) and “going green” (EEXI, CII and now EU ETS, net zero commitment from IMO), it has been another resilient and overall healthy year for many across shipping.
The author of this feature article is Stephen Gordon. Any views or opinions presented are solely those of the author and do not necessarily represent those of the Clarksons group.