The shipping markets are renowned for their volatility but today there is one aspect of the industry where the last cycle has taken 20 years. The orderbook expressed as a percentage of the existing fleet, a widely used statistic, is basically back where it was twenty years ago, following a very long cycle indeed, and the trajectory in the meantime is well worth a closer examination.
A lot can change in 20 years. Back in April 1998, the global fleet stood at 0.5bn GT compared to 1.3bn GT today, and global seaborne trade that year totalled 5.6bn tonnes compared to 11.6bn tonnes in 2017. However, one of shipping’s key orderbook statistics has not changed too much, and give or take is back where it was 20 years ago. At the start of April 2018 the number of ships on order stood equivalent to 3.7% of the existing fleet, the lowest figure on record over the last 20 years, whilst in GT capacity terms, the orderbook stood at 10.8% of the existing fleet, almost back to the 10.7% seen last in mid-1999 (and briefly in September last year). Although the orderbook figures are much bigger in absolute terms (141.9m GT on order today compared to 61.0m GT in April 1998), today’s orderbook in relative terms looks historically low.
The Best And Worst Of Times
In the intervening period, the orderbook has not been a case of major volatility, but rather more like a long cycle with a big upward trend followed by an equally large downward one (see graph). The 2000s saw the great ordering boom with an average of 106m GT per annum ordered 2003-08, before the onset of the global financial crisis. This saw the orderbook increase to its peak at 51.4% of the fleet in Sep-08. But ordering slowed following the crash, and continuing deliveries (despite some slippage and cancellation) started to erode the orderbook; 90m GT per annum was delivered in the period 2009-13. This was then of course compounded by generally more limited ordering in the post-downturn period. In the years 2009-17 an average of 60m GT per annum was ordered; that is almost 40% less than the average 2003-08.
Back To The Future
The obvious question is when might the next cycle begin, or could this orderbook statistic go even lower? Well, taking into account projected deliveries in 2018 of around 55m GT, if contracting continued at the run rate of the first quarter of the year (12.2m GT ordered, across 192 ships), without accounting for any cancellation, the orderbook would end the year at below 10.5% of the projected fleet in GT terms, for the first time since 1996. The headline orderbook statistics may not have changed much over 20 years, but the financing and shipyard capacity environments (and the global fleet) certainly have, providing the backdrop to an orderbook still slimming in relative terms.
So, lots has changed in two decades, but in shipping there’s at least one metric that looks very similar to 20 years ago. Shipping generally offers speculators plenty of volatility to manage, but for long-term trend spotters it isn’t immune to some very long cycles too. Have a nice day.