The remarkable thing about this past year in shipping is that there have not been more bankruptcies. It does not take a genius to suggest that far more are likely in 2016.
Stretched balance sheets, especially among dry bulk and offshore owners, will see some big names go to the wall. As big as Daiichi Chuo – this year’s biggest bust? I’d say so.
2015 has been the first year in a generation where China’s exports and imports actually declined. This was desperately bad timing for shipping, in need of its key growth engine of the past decade more than ever as overcapacity hurt the global fleet more than at any time since Lehman Brothers went bust.
The Chinese economy has changed – and will not revert to double-digit growth again. Slumping Chinese coal demand was especially brutal – down 29.4% in the first 11 months and widely predicted to decline further in 2016.
The only solace for dry bulk owners is the thought that at least they are not involved in offshore. The low oil price this year has seen close to 300,000 redundancies in the offshore sector, while operating day rates are down by up to 60% across all classes of OSVs and offshore drilling rigs. A severe contraction in the global OSV and rig fleet is needed next year. Alarmingly there are still up to 600 OSVs on the global orderbook and around 130 jack-ups and 70 floaters contracted at yards. Something has to give.
For container shipping, 2015 marked the year where reality dawned – the coming years will be extremely tough, and further consolidation such as CMA CGM’s NOL takeover will be inevitable. Mighty Maersk Line, the world’s number one boxline, painted the grim future outlook, announcing 4,000 redundancies this November as well as nixing 240,000 teu of newbuild options. The moves, combined with a $600m drop in the group’s profits for this year thanks to the dire box freight rate situation, was described as “necessary steps to transform our industry”. Other liners are taking their own emergency action.
Boxship layups have hit record highs in the final days of 2015, with even giant 18,000 teu vessels idling. More ships will lie empty for much of next year.
The only bright spot in this annus horribilis for shipping has been in tankers.
While oil prices fell about 35% in 2015, average earnings for VLCCs jumped to $67,366 a day, the most since at least 2009, according to Clarkson Platou. VLCCs did break through the $100,000 a day barrier earlier this year, something not seen since the giddy days just before Lehman Brothers disappeared in 2008. Listed tanker owners have seen their share prices soar. Cheap oil has seen many look to tankers for floating storage options, something that will persist into 2016.
Nevertheless, unlike many other analysts I am not as bullish on the length of this particular bullrun. Bare in mind the giant orderbook: 2016 will see second highest number of tanker deliveries ever. As is so common in shipping, this goose looks cooked.
Coming into the New Year, the team at Splash will continue to provide readers with all the latest breaking news and dig up exclusives. In our first year we have become the world’s fastest growing shipping news site thanks to our commitment to track down hard-hitting stories. Exclusives this year have included the fall of Daiichi Chuo, the merger of Anglo-Eastern and Univan and the sale of most of the Ridgebury fleet. Expect more crackers in that vein in the coming months.