Volatile as a Rottweiler

Volatile as a Rottweiler

Chief correspondent Jason Jiang assesses shipping’s fortunes in the Year of the Dog.

The Chinese Year of the Dog takes over from the Rooster this week. What this canine future holds for shipping at first glance looks more volatile than a Rottweiler.

“Dog years are usually bringing numerous changes, good and bad. Although, they are normally growth years for the economy, the earth element this year prompts to volatility in stock markets and/or currencies, hence one should take extra care with investments this year,” Lion Shipbrokers says in its Feng Shui analysis report.

However, a Chinese proverb also says: “To be followed home by a stray dog is a sign of impending wealth.”

In general, the shipping industry is still staggering on its arduous way to recovery. The dry bulk and container shipping sectors have seen a promising rebound in the past year, while the outlook of the tanker sector has become gloomy.

In Chinese culture, the dog represents duty and loyalty and is a sign of defence and protection, which are much needed characteristics for those in the hard hit shipping sector to hold on to in 2018.

“Despite the fact that we are now approaching 2018’s Lunar New Year and the effects of the traditional slowdown are already visible, the BDI remains at least for now in excess of 1,100 points, signalling a rather positive period March onwards if the pattern of previous years repeats itself that is,” shipbroking house Intermodal said in its latest report.

Shipping association BIMCO expects global dry bulk demand to outstrip supply growth in 2018.

“But, be aware that 2018 may not be quite as strong as 2017, and profits may not come around until 2019, if the ongoing recovery is not handled with care,” Peter Sand, BIMCO’s chief shipping analyst, warns.

Sand believes the improvement of container shipping sector in 2017 will carry on into 2018, where the fleet growth rate seems to match demand growth. No big freight rate changes are expected to lift earnings however.

Purple is meant to be a lucky colour for those born in year of the dog, potentially good news for the Japanese magenta-branded ONE, which is set to launch in April. 

Rajesh Verma, Drewry’s lead analyst for tanker shipping, reckons tanker rates are set to further drop in 2018 following a sharp decline in crude tanker freight rates seen during 2017, amid an expected slowdown in China’s crude stocking activity.

“We expect China’s stocking activity to decline to 0.25m bpd in 2018 from an average 0.75m bpd in 2017, curbing global trade growth. The anticipated decline, added to a slowdown in worldwide oil demand, will keep global crude oil trade growth modest in 2018, which in turn will keep rates under pressure despite some slowdown in fleet growth,” Verma says.

Compared to previous years, then, it would appear shipping as a whole is out of the dog house, but is far from off the leash when it comes to a solid earnings outlook.

Splash wishes all its readers a healthy and prosperous Year of the Dog ahead.

Jason Jiang

Jason worked for a number of logistics firms following his English degree, then switched this hands-on experience to writing and has since become one the most prolific writers on the diverse China logistics industry writing for a host of titles including Supply Chain Asia, Cargo Facts and Air Cargo Week. Jason’s access to the biggest shippers with business in China has proved an invaluable source of exclusives.

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