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2018 Review: How Are The Year End Stats Looking?

The ClarkSea Index made steady progress in 2018 (+13% to $12,144/day) taking it above the average since the financial crisis. Tankers had a miserable year before being “saved” by a strong Q4, bulkers consolidated their 2017 gains and LNG finished the year on a high. Fleet growth continues to trend below 3%, with just 11% of the fleet on order, while trade growth eased and needs to be watched closely.

ClarkSea Edging Forward…

Our average earnings index, the ClarkSea, made further steady progress across 2018, edging up 13% y-o-y to $12,144/day. After a 14% increase in 2017, this takes the index into positive territory compared to the period since the financial crisis, albeit only marginally (2009-18 average: $11,751/day).

Sector Round Up…

It was a pretty miserable year for tankers until Q4 provided some very welcome relief and improved sentiment for the coming years. In fact, our average tanker earnings index reached the lowest level since the early 1990s. Bulkcarrier earnings improved by 12%; not quite the 77% uplift of 2017 but still a reasonable year. Containership earnings improved 28% over the year, although charter rates trended downwards in 2H 2018, especially for smaller vessel sizes, and while our forecasts do suggest improvements in 2019, significant demand side risks have developed (see SIW 1355). In last year’s review we suggested there was some “light at the end of the tunnel” for the LNG market, and with spot rates surging to $190,000/day, LNG was arguably last year’s “star” performer. The Cruise and Ferry markets remained “solid” but some of the forward progress in the car carrier sector faded towards the end of the year. Our offshore support vessel indices showed modest positive developments y-o-y but remain in recessionary territory.

Trade Trends…

A year ago we reported “surging” trade and while growth of 2.7% (2017: 4.2%) to 11.9bn tonnes is still “OK” (tonne-miles: 3.1%), after downgrading our projections in 2018 we will be watching economic signals in the New Year closely (e.g. latest Chinese IP data). While the US-China trade “war” dominates headlines (see SIN for summary of the shipping context) broader economic business sentiment seems more vulnerable than a year ago.

Steady Fleet Growth…

Fleet growth of 2.6% (2017: 3.4%) continues to seem “manageable”, with similar growth forecast for 2019 (which should take us to a 2bn dwt fleet!). Demolition levels fell 12% to 31m dwt but tanker volumes hit their highest levels since 1985. S&P volumes remained close to record levels, with a 17% rise in tanker volumes. Newbuild prices saw a 10% uplift while prices for 5 year old tonnage increased 3- 5%. Shipyard orders fell 14% (in dwt) but with good volumes across LNG (69 orders of $11.7bn), Cruise and FPSO. Chinese yards delivered 34.5m dwt (43% share) across 2018, followed by Japan (25%) and Korea (25%) (see SIW 1,356).

Regulation Upside…

No 2018 review would be complete without mention of increasing regulation generally and IMO 2020 specifically (our Scrubber Count increased five-fold to over 2,000, see World Fleet Register & SIW p.15). As we move towards implementation we will be busy collecting data that will help quantify the range of positive “wildcards” impacting shipping supply and demand. Have a nice New Year!

Source: Clarksons

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