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Certainly uncertain
A very complicated year which allows us a glimpse
of what is to come.
The macro political scene sets the tone for international trade and this year it had its twists and turns. The Trump-induced trade wars meant signi cant uncertainty in the three major sectors: dry cargo, tankers and containers. We were all hard pressed to foresee or even retrospectively anticipate the signi cance these would have on the shipping markets and it is clear this lack of certainty played a signi cant role. On the European scene, with Brexit looming, Italian populism, the Yellow Jackets, nationalism building, and the traditional axis within the community suffering, uncertainty is the backdrop for a region where a large part of the maritime community has its headquarters. |
Uncertainty in the energy sector and more speci cally in the oil
trades had an ongoing negative effect on an overbuilt market.
During the latter part of the year, uncertainty converted into
speculation and various trades drew attention and some
positive reactions.
The real uncertainty however remains the implication of the
2020 IMO regulations. The debate on the signi cant use of
scrubbers to meet requirements dominated the press and left
owners and freight users divided as to the implications. It
seems that larger ships with standard trades make sense and
are being installed with scrubbers but few believe this is a long
term solution. The industry needs to make signi cant progress
and contributions to the growing ecological issues in as much
as political and public perception of shipping as a signi cant
polluter is growing. The uncertainty surrounding this issue has
probably the most in uence on how international trade will
evolve. Yards, shipowners and design companies all struggle
with being in the know; LNG, solar, wind, low sulphur fuel,
hydrogen, vie for market share and legitimacy. Regulations,
coupled with economics, will eliminate the uncertainty but
not in 2019.
Signi cant trade wars and trade sanctions added to the
uncertainty surrounding everyday activity. Almost every major
owner and charterer announced their withdrawal from activities
sanctioned by the US - with Iran at the heart of these - despite
often being legal in their national jurisdiction. The US Department of Justice in effect displaced sanctions’ penalties
to compliance of major banks who set their own
rules and standards. Rare was a payment or a
transfer that was without incident no matter
what origin or purpose. Signi cant costs and
uncertainty require more cash reserves. With
the impending IFRS regulations coming into
effect, cash reserves will continue to be an issue.
Pressure to dis-intermediate continues to grow,
with traders and brokers on the front line. Cost
cutting ef ciency has led to various initiatives
to promote more transparency at less cost.
Electronic platforms, back-of ce and post xing
tools, ship tracking and its logical evolution into
algorithmic trading tools, all speed up the pace
of evolution in our industry but add signi cant
uncertainty as to the long term structure and
functioning of shipping markets. Indices as
market indicators (and by extension shipbrokers’
contributions) will surely be a growing issue.
The Chinese nance houses dominated the
shipbuilding market and contributed to a
signi cant increase in activity compared to
2017. Unfortunately the over-ordered Very
Large Containership segment arrived at the
heart of the trade wars, while the wave of
tanker newbuildings ordered during the heady
years of 2014/2015 felt like they were adding
to long lines at soup kitchens, despite a record
demolition of some 20 million dwt. Bulkers were
the main concentration by the Chinese, as the
dry cargo market has performed relatively well
for the last few years, but some offshore and
specialised sectors like ro-ro, LNG bunkering
and ferries saw some renewed interest.
Undoubtedly the uncertainty in 2018 will
provoke further developments in 2019. What
transpired at the end of last year in the world
stock markets could be an indicator but certainly
tells us that uncertainty does not lead to strong
markets but surely opportunities. Next year
will require a constant review of strategy and a
nimble approach to inevitable change.
Tim Jones
Chairman