I had the pleasure this past week of virtually viewing Marine Money Week 2021, a conference that usually takes place in New York during the last weeks in June. I have attended in the past the old fashion way. While it is much better in person than it is seen remotely, still I was able to hear extensive panels ranging from the implications of decarbonization on shipping to opportunities in offshore wind. I came away humbled by the presentations, but not for obvious reasons.
Many of the speakers made predictions as in prior years. This year they were the most part positive on the rate outlook across ship types. However, let’s take the way back machine to 2020. Was anyone forecasting a boom in dry bulk or containerized shipping? One container shipping executive, optimistic this year, said on his second quarter 2020 earnings call, “Looking ahead, the recent sporadic outbreaks of COVID-19 across the globe as nations endeavor to reopen their economies, growing protectionism, reigniting of trade tensions and shortening of supply chains can lead to further downward revisions in next year’s outlook and, as a result, both owners and charters behavior is affected by the associated uncertainty.” 2020 was the best buying opportunity in shipping in years, yet many of the panelists missed the window. I don’t think their predictions are any more accurate today, but the risks are different. In 2020, the biggest risk was being too soon, while in 2021, it is being too late.
I gained more insight listening to the challenges shipping companies faced, ignoring the predictions. No one really knows what the best power choices are going forward. Steel prices have risen dramatically. The cost of a tanker is up 14% according to Clarkson’s. A ship owner may find that a shipyard is unwilling to deliver a vessel where the steel prices were quoted at too low levels, or has the risk of ordering at market peaks. To the extent vessels are not ordered, it prolongs the up-cycles. While the future of shipping will always be unpredictable, if owners don’t build speculative vessels, rates will be higher. That is a certainty.
