From the Telegraph:
It’s almost exactly a year since the crisis in the shipping industry made global news with the collapse of Hanjin Shipping.
The company’s vessels and sailors were stranded at sea as ports refused to let them dock, fearing they wouldn’t get paid, while customers were left battling to get their goods off the ships. The situation brought home to many the fact that the vast bulk of the world’s goods are transported by sea.
Hanjin’s failure was caused by a unique set of circumstances that saw new vessels flooding the market while cargo demand stalled, driving down the prices shipping lines could charge to transport goods.
Describing the dire state of the market at the time and the desperate lengths shipping lines were going to to win trade, one shipbroker said: “They keep slitting each other’s throats with lower prices.”
However, those cut-throat practices seem to have ended and there are signs the storm is abating, with shipping rates edging up recently as troubles work their way through the system. Last week came the strongest signal yet that shipping isn’t the basket case many had thought.
AP Moller-Maersk, owner of the world’s biggest shipping lines with 600 vessels, said it was doubling down on the sector by ending its status as a global conglomerate. The Danish group announced the sale of its oil unit to France’s Total for $7.5bn (£5.9bn), leaving it to focus solely on the maritime operations it is best known for.
The deal means Maersk chief executive Soren Skou is betting on shipping as the future of the business, despite some still pretty choppy seas.What has me sounding like Moon Unit Zappa with the introductory line is a series of posts beginning with October 2016's:
It’s a change of tack for Maersk. Early last year, his predecessor Nils Anderson had delivered a much gloomier view describing the market as worse than the downturn unleashed by the financial crisis.
“The oil price is as low as its lowest point in 2008-09 and doesn’t look like going up soon. Freight rates are lower,” said Anderson.
So what has suddenly given Maersk such confidence? For a start, the fundamentals of the industry are strong, according to Andi Case, chief executive of FTSE 250 shipbroker Clarkson.
“Demand grows as population grows,” said Case, adding that between 85pc and 95pc of goods travel by sea.
“In 1990, 0.8 tons of goods per person were transported by sea. That figure is now 1.5 tons and the global population is only rising.”
In other words, as populations grow and become richer, people want more products, and in an increasingly globalised world these goods are transported by sea, mainly in the ubiquitous 20ft standard shipping containers – known as TEUs.
Jonathan Roach, a container shipping analyst at shipbroker Braemar, agrees: “The rule used to be demand for containers rose at about 2.5 times global GDP growth – but that went out the window a few years ago.”
The problem was simple supply and demand – too many ships were chasing too little cargo. In the run up to the financial crisis, booming trade meant huge orders for shipyards. The high oil price also encouraged construction of new ships because owners wanted vessels which burnt less fuel, while incoming pollution regulations also fed the demand.
At the peak of demand in 2007, 2,905 ships over 20,000 tons were ordered, about three times the average of the previous decade. Clarkson’s Clarksea Index – a measure that gives a broad snapshot of earnings for ships – was averaging in the low 30s at the same point, having hovered in the mid-teens until a few years prior....MORE
"Shares of A.P. Moller-Maersk Look Ready to Sail"
December 2016
Shipping: "Maersk's Rose-Tinted 2017"
February 2017
"2017: The Year For Shipping Companies?"
March 2017
Shipping: "CMA CGM Returns to Profit in Q4"
March 2017
Shipping: "Scorpio Bulkers Has Doubled in Just Six Months. This Analyst Just Upgraded It" (SALT)
And a week ago:
China's Yangzijiang Q2 profit jumps, shares hit 6-yr high
