If I had told you this time last year that dry bulk freight rates would be twice to three times higher, and people would still be complaining because the market had fallen you would not have believed me. If I had told you that container shipping would be in the spotlight, not only because of the blockage of the Suez Canal by Ever Given but also because of – dread phrase – ‘supply chain bottlenecks’, and also because owners of containership could command unheard of charter rates and prices, you would have thought I was exaggerating. If I had told you that the price of tankers would be rising whilst still waiting for an upturn in the freight market, you would have said I was being illogical. And if I had told you that COVID had reached another letter, once whose pronunciation by non-Greek speaking people would cause a mixture of amusement and disdain by those more familiar with the language, not to mention undreamt of infection rates, you would probably have said “now come on Simon, it will all be over by then.” So you can see that the tradition of using the change of the year to make predictions for the coming one is largely pointless.

 

I think that there are patterns however that are emerging now that will develop over time that will affect the markets, and rather than making forecasts down to two decimal places, having an eye on these patterns, and how they interact with each other may be a better guide to what we do next.

 

 

Geopolitical

 

By this of course I mean China. Not that China is the be all and end all of everything, but as the largest trading nation in the world of stuff (as opposed to services), it is pretty crucial. China is changing, and changing fast. Not just in economic power, but in what it thinks about itself and its place in the world. General Secretary Xi has just secured the intellectual justification for remaining in power until 2028, if not longer. Common prosperity for his country has become his, and therefore everyone’s, goal. How this is reached has already been set out, and is being planned for, and is already being enacted.

 

Common prosperity is not just about raising, and equalising incomes and opportunities for the majority of the population but covers all sorts of other things: social behaviour, defence, trading and industry. This means defining and eradicating anti-social behaviour using the tools of technology being continually developed; by moving away from a responsive position to a more proactive, almost offensive one; securing the means to not be isolated or stranded by a lack of essential commodities; and by having the Party control the growth, development and direction of all industry, not just mining and manufacturing, but everything including services, construction and finance. Common prosperity is the new mantra that can be used to control the Party and therefore the Republic to a degree that will certainly affect us in shipping in many ways. That China is changing so quickly means that the rest of the world has to change too: the unintended consequences will be hard to predict. I do think in general that a move away from free trade as we know it will increase tonne-mile demand, which will mean more work for shipowners.

 

 

Fleet Supply

 

A lack of newbuilding orders for bulk carriers, a surplus of capacity coming online for containers, and a steady stream of product tanker deliveries will mean conflicting fates for the three main conventional sectors. For 2022 at least however, the picture looks stable enough: the number of ships available to trade will not be greatly increased because there are not going to be that many new ships around.

 

The longer term is more unclear – obviously – but the brake on new orders is still in place, for bulk carriers especially, because yards are full and the technology that ships need to meet future regulations does not yet exist. But that’s ok for now, because the regulations themselves have also yet to come into existence.

 

Most new container orders are for the liner operators themselves, which means tonnage providers may disproportionally suffer when these ships are delivered, but this will also mean more purchasing opportunities for the tonnage providers themselves as liner operators look to offload surplus and inefficient or unfashionable tonnage.

 

Tanker orders and deliveries are steady, and so is scrapping. The long-predicted “end of COVID” boom in petroleum products may boost demand further, and LNG rates may go through the roof as competing power blocs – Asia v. Europe for example – vie for limited cargoes, with some nice Great Power politics thrown in by Russia and other suppliers. How all this plays out also depends on how quickly the decarbonisation policies of varying economies come in to effect. The tanker market is the hardest to work out at present because increasing geopolitical tensions could change everything in minutes.

 

 

Financial

 

Capital flows to profit, and with the increasing media attention on shipping, led by containers but now filtering through to bulk carriers, if not tankers, means non-shipping money, from hedge and private equity funds is looking for a return. Recent mistakes however mean that this money is super-cautious not wanting to burn their fingers again. There is also a lack of credit being made available at the moment because shipping is being seen as non ESG compliant, at least by banks outside Greece. This will restrict new orders, and also irrational lending. Whether that restricts irrational borrowing by eager, aggressive and perhaps foolhardy buyers remains to be seen. Capital may flow to profit, but it also flows to stupidity as many previous shipping cycles have proven. This one particular cycle will probably not break the trend, but the obstacles to lending will keep the lid on exuberance for now.

 

 

Environmental

 

This is the dominating factor in the world at the moment, but I am not sure how much it can affect shipping and the shipping markets in the short and medium run, except to the upside. Leaving aside hydrocarbons of various types as cargo – although admittedly a very important issue for the ships that carry them – the technology does not exist to provide a carbon-free ship for now. Having spent some time in Scandinavia over the last few days it is striking to note how much greener one place looks than the other with a few extra electrical cars (and car charging points), and some biomass and other electricity generating plants (LNG) that do not belch out black smoke whilst still being surrounded by oil and gas tankers, and MGO burning ships. I did see one thing however: a small river ferry propelled by an electric engine. I say see: I did not hear a thing. The future – if it is electrical – is very quiet at least. But to scale up this technology to a handysize bulk carrier, let alone an aframax tanker, is not possible over long distances. This is perhaps how shipping will develop: looking (and sounding greener) when near human beings and then reverting to type out on the oceans. And for those who think I am being cynical: what are Emission Control Areas (ECAs) except this?

 

 

Technology

 

Not to be confused with the above. Despite the claims of many promoting their particular new invention, platform or innovation, I think that we should best be reminded that new – or old and proven – technology are tools which assist us to do things we already do more efficiently and quicker. But as we have seen over and over again in history, every new technological advance brings new issues, new problems, new unintended consequences. Is Facebook, or Meta, or whatever an unalloyed force for good in the world? I don’t think I can find that many people who can make that assertion wholeheartedly. Technology is not a silver bullet to destroy all our problems, and we should stop looking to it for the answers to them. Incremental change in how we do things is the safest way for us, our industry and the planet. Life is complicated, and is better for it.

 

 

People

 

What is clear to me is that shipping as a service industry relies on its people. How we treat, develop, train and co-exist with people we come into contact with will define our industry as we go forward, for good or bad. COVID has brought into sharp relief how much we rely on people, and also how important continual engagement with them is to make our industry work. We can complain about crew change regulations, or quarantines, or self-isolation, or a lack of travel making our life harder, but in the meantime we all bear a responsibility to act reasonably and fairly. In times of stress this can deliver great dividends to all, but not seeing the other person as a human being with rights and feelings can cause huge problems. I am perhaps being too idealistic when I say that COVID may bring about a reassessment to how we treat each other, but COVID, combined with technology, geopolitical and local political developments, and all sorts of other things have given me the feeling that we are better when we are working together, not isolated in our cells. Hell may be other people, but the alternative – being alone – leads to madness. Let’s hope COVID goes away – or we learn to deal with it – before the world of people becomes significantly worse.

 

++++

 

About three weeks ago, I had the privilege to be the moderator of a panel of very interesting and knowledgeable people at the Annual Forum hosted by the Greek branch of the Institute of Chartered Shipbrokers. Well not quite annual, as last year’s was cancelled due to COVID, and this year’s was heavily restricted. Only 180 people were allowed in the auditorium, down from the usual 400+, although as this year’s was filmed and broadcast on YouTube, another 1,000 people were able to see it. If you missed it, you can find it here. It was a joy to be in the company of people that wanted to talk, and discuss, and share their opinions, and do it in a manner that was respectful, collegiate and fulfilling.

 

The shipping markets are unforgiving, and made up of a mass of different human actions, derived from many different opinions, decisions and agreements, but the whole cannot be dictated by the action of one person or one group of people, at least not for long. We are all affected by, and dependent on, each other. My hope for 2022 is that we realise that we are part of a large interconnected world, where our actions count, but more importantly where our interactions count more.

 

A lack of new ships, an increase in tonne miles, an easing of COVID restrictions and the continuing growth of the global economy should make the shipping markets better, with more money coming in. This is turn will assist owners, charterers, financiers, engineers, shipyards, lawyers, researchers and yes even brokers and all the other supporting players in our world, to invest in the future, whatever that will be. Hopefully it will be less carbon intense, but also less harmful to the other parts of the environment that tend to be overlooked, like biodiversity, but also will not harm the development of poorer countries and hopefully lift even more people out of desperate poverty. I firmly believe that the world is a better place than it was one year ago, and certainly better than it was twenty years ago.

 

In wishing you all a happy new year, I hope you will find profit in your enterprises, fulfilment in your labours and peace of mind in your success. For everything else: Good Luck!

 

Simon Ward