Shipping Market Heating Up?

Increased activity in a number of core areas in 2017 has seen the shipping market temperature rise a little, according to Clarksons Research. The shipping services provider’s ClarkSea Index, which measures the performance of key volume market sectors, averaged USD 11,816/day since the start of the fourth quarter of 2008, compared to USD 23,667/day between the start of 2000 and the end of the third quarter of 2008. Aside from earnings, investor appetite for vessel acquisition often added “heat” to the market in the form of investment in newbuild or secondhand tonnage, even at times when earnings have remained challenged.

The quarterly Shipping Heat Index, which reflects not only vessel earnings but also investment activity, shows that things, though still chilly, have been warming up a little:

  • In 2016 the quarterly index averaged 37.4
  • The ClarkSea Index has averaged USD 10,718/day, up 14% on its average level in 2016
  • It surged by 32% in 2017, averaging at 49.4, and in the fourth quarter it stands at 46.1, up 25% year-on-year

One factor behind this has been that earnings have started to improve this year. Meanwhile, the investment side has seen an even more positive, if still mixed, picture. Contracting, although more than 40% up on full year 2016 in value terms, remained limited at USD 53 billion in the first eleven months of 2017. S&P investment meanwhile has seen an active year. Around USD 19 billion so far is an improvement of nearly 55% on 2016, reflecting that, albeit with many distressed assets out there, investors perhaps harbour warmer feelings towards the markets. The shipping markets still “look like a chilly environment,” Clarksons said. Although earnings alone suggest a slight thawing in conditions, a wider view of the temperature of the shipping markets points towards a greater degree of heat, with S&P investors in particular helping to bring back some much-needed warmth.

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