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Containers The transpacific has been the greatest source of wealth earned for carriers during this record earnings year for liner shipping. However, there are plenty of signs to suggest this American imports bonanza has peaked. Higher inventory levels and lower growth in consumption of containerised goods will ease the pressure at US ports in the second half of next year, Danish Ship Finance suggested in a report issued on November 11. Consequently, the active fleet will gradually expand, while demand growth will level off. “This is likely to send box rates on a downward trajectory, with timecharter rates and secondhand prices following suit,” the Danish analysts suggested. The growth in retail sales is tipped to level off as consumers turn back to service consumption. Danish Ship Finance expects transpacific trade to grow by some 10-12% this year and 3-4% next year. Fuelled by government stimulus cheques, US consumer spending on goods has increased by 20% compared to pre-pandemic levels. However, US consumption of goods peaked in April 2021, when around 36% of spending was on goods, compared to 30% in January 2020. While services spending has increased for six consecutive months, consumption of goods has stagnated. In other words, Americans are returning to restaurants and holiday resorts while keeping their budgets for clothing and household equipment steady. Sea-Intelligence data for US inventories shows that inventories are now larger than pre-pandemic levels. The level relative to sales is still low, but this does not necessarily imply a continued build-up of inventory is wise. It could also be taken to imply that if the US consumer boom abates and reverts back to normal, then America is now at a reasonable inventory level overall. Further ahead, the orderbook looks worrying. In 2023 and 2024, a massive inflow of 15,000+ teu vessels will hit the water. “We fail to identify any demand drivers strong enough to counterbalance the supply growth,” Danish Ship Finance warned. Dry Bulk Contracting activity in the dry bulk sector has increased this year though it has been in the shadows of the extraordinary newbuild orders placed in other sectors such as containerships and LNG. Other sectors ordering big have seen bulker newbuild prices leap. The total number of dry bulk orders is nearing 400 ships this year, highs not seen since 2018, according to Greece’s Eastgate Shipping. Alternatively fuelled bigger ships are also making waves. Data for the first ten months of 2021 suggest that around 44% of capesize vessels have been ordered to be LNG dual-fuel capable, compared to 26% in 2020 and 5% in 2019. Eastgate is reporting a 30% increase in the levels of the Chinese newbuilding price index where new capes now cost in excess of $60m. After a 49% drop in 2020, the number of new bulker orders is clearly rising again. So far in 2021, 26m dwt has been contracted compared to 21m dwt in all of 2020, according to data from Danish Ship Finance. There remains however a drop in the orderbook regardless of the uptick in ordering. The orderbook shrank by 10% in the first three quarters of 2021 and represents a modest 6% of the fleet. Tankers Tanker owners looking for solace in what has been a dire year have been buoyed by the latest monthly oil market report from the International Energy Agency (IEA). The IEA says that global oil supply is rising fast and that a reprieve from the price rally could be on the horizon, contradicting recent narrative coming out from OPEC. The IEA does little to its global demand forecasts, but it has raised its forecasts of US oil production, now being upped by 0.3m barrels per day in the fourth quarter of this year and by 0.2m barrels per day on average next year, something that is expected to have a significant effect on the tanker ton-mile picture in 2022. The IEA believes that the US will account for 60% – or 1.9m barrels per day – of non-OPEC+ supply gains next year. “That is a huge fast-tracking of events with the US poised to surpass the all-time-high threshold of 13.1 mbd already within a year,” analysts at Lorentzen & Stemoco stated in a markets update. US oil production has recovered to an estimated 11.5m barrels per day, from a post-pandemic low of 10.7m. The Norwegian brokerage maintained that the oil market balance is about to tilt from a deficit to a surplus and bring about a complete turnaround for the tanker market. “Downward pressure on spot crude oil prices, already underway, will flatten out the oil price structure from steep backwardation into contango, as long-dated prices will remain relatively sticky on anxiety over dwindling OPEC+ spare production capacity. That, in turn, will lead to refineries boosting their refining margins and able to act on a newfound upward price structure encouraging inventory build-up. More production will come from US shale oil producers, both majors and independents, triggering a response from OPEC+ producers competing head-on for Asian market share,” the Oslo-based firm predicted. Lorentzen & Stemoco is predicting global production increasing significantly next year. Since much of that production will come from the US Gulf Coast into Asia, ton-mile demand will grow relatively more, probably by double-digit figures, the analysts predicted, setting in motion a tanker market ready for an “explosive upturn” nearing soon. OPEC, meanwhile, has said it expects high energy prices to hit consumption and slow the pace of demand recovery. On US output, OPEC sees US shale output rising 610,000 barrels per day in 2022, up by 200,000 barrels from last month’s forecast. Both Goldman Sachs and JP Morgan see demand reaching the 100m barrels per day mark within the end of the year or by Q1 2022 at the latest.

Analyst Abstract

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