The editor asked for my thoughts on the idea that the ‘shipping cycle’ might become a thing of the past, thanks to improvements in our ability to process data.
My mind went back to 1979, when the idea of ‘research’ into shipping supply and demand was still relatively new. In that year, Drewry, then a mere nine years old, announced that they would carry out research into the future of the tanker Mmarket. This was at a time when most of the world’s tankers were VLCCs and most of those were three or four years old and laid up. Drewry’s new ways of carrying out research offered a new hope to the despairing tanker owners of the globe, most of whom had contracted VLCCs in the expectation that they would be snapped up on lifetime full payout time charters by the Seven Sisters, and who were fending off their increasingly irritated bankers.
There was huge demand for the forthcoming Drewry report – hundreds of copies (remember – the nearest we had to the internet was telex!) were sent round the world by the then newfangled Courier Services. Some owners went so far as to send senior managers to London to stand in a queue, much in the manner of Harry Potter fans, to collect their copy, read it and telephone their waiting boards with Drewry’s invaluable insight.
Moses distributing manna from heaven was no more popular with the Israelites than H.P. Drewry was with the tanker owners.
The hugely popular report did indeed offer fresh insight. Tanker owners opened its pages (this was still in the days of Gutenberg, not Zuckerberg) and found that they had got it all wrong. The balance of power in the oil patch was shifting away from the Seven Sisters to the oil producing nations, organised in OPEC, and they were concerned to add value to their exports by refining their oil before shipment. The future of the tanker business lay, not with the steam VLCCs that were clogging up the anchorages of the planet, but with the product tanker!
My employers read the report, not because they were tanker owners, but because they were in the supply boat business and were looking to diversify, and beat a path to Tsuneishi, who were happy to build them a handy sized product tanker with an IHI Pielstick for $20m. Before she was launched, they were offered $28m. They turned it down. You may see her model today, in the Hong Kong Maritime Museum. It’s quite a nice model. The only time in her life when she made any money was when an Iranian gunboat hit her accommodation block with a missile – she was insured for loss of hire.
What Drewry had failed to predict was the event that briefly made money for that ship and permanently destroyed the market for her kind – the Iran/Iraq War. That killed plans by the oil producers of the Middle East to build refineries in their own nations – it was simpler and almost as effective to buy refineries in the much safer oil consuming nations and ship the crude oil to them in the VLCCs that the tanker owners had made so cheap to charter by building far too many of them.
The extraordinary overordering of product tankers, on the back of a single well researched, well written, and well argued, but, as it proved, much mistaken report, by the industry’s leading research house, an organisation that was expected to put a stop to the shipping cycle by proving owners with hard data on which to base their business decisions, leads me to suspect that perhaps improvements in our ability to process data may not be the whole answer.
The moral of this story is that, in shipping at least, there is always, always, something nasty in the woodshed.
More anon in which we peek into the woodshed.