Monitoring the Global economy provides daily updates of global economic developments for the near future. These are mainly based on wishes & predictions of Economists or final/ prospective decisions taken by the world's leaders. In addition, recent economic situation of the countries is another important criteria for monitoring.
However, in order to understand the reality of economic developments, we require monitoring the freight volumes. Freight market developments after harmonized with above criteria represent us more realistic perspective for the future.
In this respect, we will investigate global markets initially then focus on seaborne transport in this article.
Growing Global Middle Class
Global Middle Class* (GMC) has increased by 700 million people from 1980 to 2009. The GMC is expected to increase by over 3 billion in the next 20 years (2010 to 2030).
Asia Pacific will lead the GMC over the next twenty years, accounting for 85% of the growth, while more advanced economies will remain roughly constant.
Global Middle Class Demographic
|
2009
|
2020
|
2030
|
millions
|
%
|
millions
|
%
|
millions
|
%
|
North America
|
338
|
18
|
333
|
10
|
322
|
7
|
Europe
|
664
|
36
|
703
|
22
|
680
|
14
|
Central and South America
|
181
|
10
|
251
|
8
|
313
|
6
|
Asia Pacific
|
525
|
28
|
1740
|
54
|
3228
|
66
|
Sub-Saharan Africa
|
32
|
2
|
57
|
2
|
107
|
2
|
Middle East and North Africa
|
105
|
6
|
165
|
5
|
234
|
5
|
World
|
1845
|
100
|
3249
|
100
|
4884
|
100
|
*Daily per capita spending $10 to $100 in ppp terms
Source: Teck Resources and OECD
Growth in the Global Middle Class should support world trade and increase seaborne movements of raw materials and finished goods.
Global Economy
We have still significant downside risks and political & economic uncertainties surrounding global economy meanwhile there are also some positive issues;
- On a seasonally adjusted annualised basis, US economy expanded by 2.2% (4Q 11: 3%), supported by private domestic spending
- Unemployment is a worry in the US but there are positive signs (US unemployment dropped to 8.1% in April ’12);
- Europe has built up some defense mechanisms (EFSF) against country member default
- The economies of the Far East generally show continuing growth and are playing a key role in the development of the world economy.
- Developed economies growth has been revised modestly upwards by IMF (as of April 2012)
BRIC countries (Brazil, Russia, India and China) outlook unchanged – China 8.2%, India 6.9%
Asian economies on average revised modestly upwards for 2012 and 2013.
- Japan and US are expected to lead the way for growth among advanced Economies in near term
Some negative issues still remain:
- Concerns about Greece defaulting and threatening Euro in the process persist
- The European economies are struggling with special problems in the banking sector. Questions about countries, Spain, in particular, intensified
- Uncertainty about the “new” Franco-German cooperation within the Eurozone that could drag the world economy down
- Concerns that US growth might fall behind after November elections
- China on track for a soft landing
- Seaborne imports of crude oil into the US have not increased over the recent past
Globally in the near future, Local partners or Local consulting companies in foreign projects will have a new and important role in achieving success for all business activities especially in current unstable market conditions due to various reasons.
MARKET UPDATES
- DRYBULK MARKET
- SHIPBUILDING MARKET
- CONTAINERSHIP MARKET
- TANKER MARKET
- OFFSHORE DRILLING MARKET
- CHEMICAL TANKER MARKET
DRYBULK MARKET
Drybulk trade supply update
- Dry Bulk Orderbook (May 1st/2012) stands at approx. 29,1%;
- Slippage continues to claim around 1/3 of scheduled deliveries
- Resale market full of Chinese built vessels with quality questions. Yards provide alternative financing (BBHP) structures
- Vessel financing continues to be limited
- Asset prices are deteriorating
NB Asset Prices – Dry
- 2012 net increase forecast: 12% (simply too much tonnage to be delivered)
Deliveries & Orderbook – Drybulk market (Million DWT) – Clarkson, May 2012
- Deliveries should slow down after 2012
Drybulk Orderbook
- Acceleration of scrapping so far points to more than 30m dwt annualized. High Scrap prices and low freight rates continue to foster scrapping.
Scrapping Activities – Drybulk Market
- Average age of scrapped vessels decreasing to approximately 29 years in 2012 from 32 years in 2010
Drybulk Trade Demand Update
China
- Iron ore imports growth on track
- Coal imports growth accelerating
- Minor bulks imports growing while exports slowing
- China is not the only emerging economy
Increasing Intra Asia Products Trade
- 11.5% (20MT) increase in 2011 Intra Asia seaborne products trade
- Forecasted annual growth rate of 2.5%
- Average distance: 2,000 nautical miles
Intra Asia Seaborne Products Trade (MT)
Drybulk trade routes
- Almost 75% of major bulk imports and almost 2/3 of total bulk are destined to Asia and half of those to China
- Trade increasingly depends on economic developments in Asia and emerging economies in L. America and Africa
- Demand/Supply fundamentals will continue to favor the “geared” vessels
Baltic Dry Index (Drybulk trade growth expectations having been negatively affected by slower world growth)
Average Spot Rates (even assuming healthy scrapping and delivery cancellation rates, it is expected to overwhelm any demand growth in 2012 and a big part of 2013 and keep rates and values under pressure)
|
Supramax
|
Panamax
|
Capesize
|
1Q 2012
|
$8,730
|
$8,072
|
$7,322
|
2Q 2012 (quarter-to-10th May)
|
$10,697
|
$10,858
|
$6,656
|
Drybulk Trade Demand & Forecasts
|
2009
|
2010
|
2011
|
2012 (F)
|
2013 (F)
|
2014-2016 (F)
|
Annual change (%)
|
-5
|
12
|
4,5
|
4
|
5
|
6
|
SHIPBUILDING MARKET
- Newbuilding prices have reached breakeven levels (rising steel plates, inflation, exchange rates)
- Far East dominance
- Japanese shipbuilding under pressure
Aging workers
High yen value
High costs
Consolidation expected
Setting up overseas facilities (China, Philippines and Vietnam)
Japan is focusing on simple designs and high productivity
- Quality in China is improving but still not like others
- There are also good newbuilding alternatives in some other countries such as Korea, Turkey etc. regarding price, quality and delivery time but local support and owners’ serious enquiries for good results/interest are a must for a meaningful success eveywhere.
- It is expected that only competitive and powerful shipbuilding countries and yards will survive in near term. This concern depends on management and financial capabilities, local R&D and consultancy services as well as support policies from the governments. Otherwise, global competition will find a way to close the nonproductive yards inherently.
- Global shipowners & brokers may also require local partners in a challenging market environment more than earlier for the succesful realisation of their projects in shipbuilding countries before contract to delivery due to many reasons such as labor & management changes, real status of the yards, succesful project oversight and other know-how requirements etc.
CONTAINERSHIP MARKET
- Orderbook is ~25% of existing fleet capacity (Pre-crisis peak >60%)
Existing Container Fleet: 15.7 M TEU
|
Container Fleet Orderbook: 3.9 M TEU
|
|
|
|
If All Orderbook realised: 19.6 M TEU
|
|
|
- Economic uncertainty has negatively affected containerized trade growth expectations
- Fleet growth is expected to be significant but likely lower than in the past 2 years
- Most of fleet growth in large vessels sizes giving rise to “cascading” (Over 78% of the current Orderbook is in sizes above 5,100 TEU). Mid and smaller size segments;
Mid-size, 3,000 – 5,099 TEU segment; orderbook is ~15% of existing capacity
Smaller, 2,000 – 2,999 TEU segment; orderbook is ~5% of existing capacity
Source: Alphaliner, Clarksons, Howe Robinson. Fleet & orderbook data as at March 31, 2012
- Number of laid-up vessels is declining
- Very low ordering in the last 12 months and cascading might change the relative economics of the various vessel sizes
Containerised Trade Demand & Forecasts
|
2009
|
2010
|
2011
|
2012 (F)
|
2013 (F)
|
2014-2016 (F)
|
Annual change (%)
|
-9,4
|
12
|
7,9
|
7,6
|
8,2
|
8-10
|
TANKER MARKET
- Seaborne imports of crude oil into the US have not increased over the recent past.
- Chinese crude oil imports increased 6% in 2011 compared with 2010. At the current pace, annual crude imports into China will total a new record high in 2012.
- Tanker market rates are also affected by newbuildings that enter the markets
- In a weak tanker market, the speed of the vessels is much lower on the ballast voyages than in a stronger market. To save bunkers, some vessels go as low as about 8 knots in ballast depending upon the technical features of the vessels. Some owners have installed fuel saving equipment on their vessels.
Near term market outlook
- Recovery but no boom
- Supply growth will be limited
- Attractive ton-mile demand outlook due to Euro / US refinery closures and Emerging markets oil demand growth
OFFSHORE DRILLING MARKET
Demand outpacing supply, very few rigs available until 2013
Ultra-deepwater
- Significant exploration successes continue
- Activity expanded to new regions and countries
- Limited rig availability in the next two years
- Daily rates continuing higher – exceeding US$600,000
- Clients willing to commit to available rigs in 2014 and beyond
- Increased demand for semi-subs with flexible positioning/mooring systems
Harsh environment units
- Significant discoveries in Norway
- Frontier artic areas receiving greater attention
- Ageing fleet – newbuilds replacing existing rigs
Tender rigs
- Strong demand for modern equipment
- Daily rates have increased
- Newbuilds ordered against contracts
- Newbuild prices slightly up
Jack-up rigs
- Newbuilds absorbed by the market
- Slight increase in daily rates – longer duration
- Newbuild prices have increased
CHEMICAL TANKER MARKET
- Rates for US and European trade were firm, whilst Asian exports came under pressure
- Bunker prices increased further during the quarter, together with piracy, this remain major concerns
Average Freight Rates & Bunker Prices
- In second quarter so far, the activity has been slower with less volume in many areas
- Port congestion and delays remain high
- The orderbook is now quite small and tight credit is keeping a lid on new orders
- 2012 will be a challenging year and do not expect a meaningful recovery until 2013
- Consolidations expected rather than placing new orders
