In 2016, market conditions in most shipping sectors have been
highly challenging. The ClarkSea Index, an average of earnings for
the main commercial vessel types, reached a record monthly low in
August. In the first ten months of 2016, the index dropped 37%
y-o-y to average $9,129/day.
Tanker market conditions weakened considerably in the first ten
months of 2016 from very firm levels at the start of the year and
in 2015. Average tanker spot earnings fell from $28,483/day in
January 2016 to $9,922/day in August, but have risen since. While
growth in oil trade has been healthy this year, partly supported by
firm growth in Asian crude imports and products exports, tanker
supply growth has accelerated. Fleet growth is expected to outpace
demand growth in 2017, which may exert further pressure on the
Meanwhile, conditions in the dry bulk market have remained
depressed throughout much of 2016 as existing vessel oversupply has
been coupled with muted trade growth. While Chinese dry bulk
imports have expanded firmly this year, iron ore and coal imports
into other Asian nations and Europe have declined. Bulkcarrier spot
earnings averaged $5,645/day in January-October 2016, close to
typical operating costs. While earnings improved in November, they
remain at historically low levels. In 2017, fleet growth is
projected to slow, but the continued muted pace of dry bulk demand
growth is likely to mean market conditions remain very
The containership charter market remains at bottom of the cycle
levels. Average containership charter market earnings fell 36%
y-o-y in January-October 2016. Freight market conditions have also
remained under pressure this year, but appear to have bottomed out
in recent months. While box trade growth has improved this year,
including more robust growth in intra-Asian volumes and a return to
positive growth territory for Asia-Europe trade, this has not yet
been sufficient to support an improvement in the charter market and
further improvements in demand will remain key to any significant
In the LPG sector, although trade growth has been robust, rapid
fleet expansion has underpinned a deterioration in the market to
bottom of the cycle levels this year, from historical highs in
2015. LNG carrier market conditions have also remained challenging,
but may now have bottomed out. Elsewhere, offshore market
conditions have remained under extreme stress following severe
deterioration in late 2014 and throughout 2015, constituting the
most difficult environment since the 1980s.
However, there has been some positivity in the niche sectors.
Ro-Ro and ferry market conditions have been firm this year.
Meanwhile, the cruise sector has been a bright spot, with continued
robust expansion and record levels of investment. In fact, in the
first ten months of the year, cruise newbuilding orders accounted
for 51% of all newbuild orders placed in contract value terms.
Overall, sentiment in the shipping markets remains weak and
comparable to that at the time of the global economic downturn.
Market conditions are depressed across many key sectors, exerting
severe financial pressure on owners and operators, with surplus
capacity and subdued demand growth remaining key themes. Overall
global seaborne trade is projected to expand by 2.5% in 2016 to
11.1 billion tonnes, a little faster than in 2015 but below the
3.8% per annum trend of 2011-14. Ordering of newbuilds has been
extremely limited in 2016, with less than 400 orders placed at
shipyards across all sectors in the first ten months of the year
compared to over 1,600 in 2015 and over 3,000 in 2013. Demolition
of capacity has remained at an elevated level with 39.1 million dwt
sold for recycling in the first of ten months of 2016, just above
the total of 39.0 million dwt sold for scrap in full year 2015.
Whilst these trends are illustrative of a supply-side response to
current market conditions, further re-calibration of supply and
improvements on the demand side appear necessary before a more
balanced market can be achieved, and shipping market observers will
be looking for further evidence of that in 2017.
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