How to make money from the coming disruption to shipping

How to make money from the coming disruption to shipping

I used to work for a man – a very well-known shipowner – who said he would fire anyone who told him what was going to happen. Only fools predict the future, but the market now – at the start of August – is an odd one.

The oddness comes not so much from the usual suspects on the supply side – these are not much stranger than usual, with reports that China’s shipbuilders are about to re-open several mothballed shipyards and that Chinese banks and quasi-banks are about to offer more – perhaps a lot more – finance. That’s all standard stuff, once freights move off the bottom, as they have done. Banks and shipyards are, to shipowners, rather like Dr Samuel Johnson’s Patron, who “looks with unconcern on a man struggling for life in the water, and when he has reached ground, encumbers him with help.”

The real puzzles are on the demand side – economic growth, which we will look at in the next paragraph, and the reported decoupling of growth in GDP from the volume of trade by sea.
The economies of most countries seem to be doing better than they ought to be doing, given that President Trump is threatening tariffs in all directions. I can offer two thoughts. One, which will commend itself to classical economists, is that the market is rational, and it is telling us that people don’t believe either that President Trump means what he says, or that those whom he is threatening with his tariffs mean it when they say that they will retaliate, and that therefore these things shall not come to pass.

The other thought, which will commend itself to seamen, is:
“If you can keep your head, when all about you
Are losing theirs, and blaming it on you…

…then you haven’t realised the gravity of your situation.”

I will suggest that the latter is more probable, and that what the average consumer is doing is simply trying, quite hard, not to think about all the thoroughly alarming political news, with the help of a little retail therapy.

Of course, it’s an ill wind that blows nobody any good, and if China doesn’t want American soya but buys Brazilian and Argentine soya instead, so much the better for ton miles. No decoupling there.

Decoupling usually gets mentioned in the same breath as 3D printing, but I haven’t seen a 3D printed crankshaft yet, and I think that much bigger ‘de-couplers’ are the changes in how we buy energy and what we do with waste. Shipping waste – be it a hold full of scrap or a container full of waste paper – across oceans is very quickly becoming unacceptable, and there are not a lot of ton miles in a wind farm, once it is up and running. We might also notice that Holland, a small, highly urbanised country, not known for its sunshine or its low-cost workforce, grows, and then exports, a staggering quantity of fruit and vegetables through science, factoring, and logistics. These are replicable processes, and not good for ton miles.

I think we might be about to see a disruption. In such times, people make money by knowing what not a lot of people know. Amongst the people well placed to do so are the very well informed, with cash and short decision chains, of course, but also the niche operators, who are close to their cargo base and able to defend themselves against inexpert competition.

It isn’t ‘The economy, stupid!’ any more, and we may well live, and die, in interesting times.

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