Are ships a good hedge against today’s sky-high inflation? Many owners reckon so, but well known economists show the historical pitfalls of such theories in an exclusive deep dive into what inflation means for shipping carried in the April issue of Splash Extra.
Inflation is now a daily front page news item, with families around the world tightening their belts, looking at every aspect of their weekly spends as soaring bills hit home.
For shipping, however, many would argue today’s once-in-a-generation economic outlook is favourable.
In a high inflationary environment, real hard assets like ships ought to appreciate, said Khalid Hashim, the managing director of Thai dry bulk owner, Precious Shipping. Moreover, with the ongoing inflation of commodity prices, shipping rates ought to also increase, Hashim reckoned, especially with the likely increase in ton-mile demand thanks to the ongoing Russian war in Ukraine.
Tim Huxley, chairman of Hong Kong-based shipowner Mandarin Shipping, warned that if inflation shrinks growth and prompts a recessionary environment, then it is not good for anyone.
Roar Adland, shipping professor at the Norwegian School of Economics, agreed that owning real assets, like ships, can be a way to protect an investment portfolio.
“High energy and steel prices will push up newbuilding and demolition prices and so be supportive of the entire secondhand price curve,” Adland said while going on to echo Huxley’s concerns that high prices could eventually lead to demand destruction.
“Using ships as an inflation hedge may sound good but needs careful thought,” said Dr Martin Stopford, the world’s most famous maritime economist, going on to detail previous shipping cycles that have had to contend with bouts of high inflation.
The full, chart-packed article is available to subscribers.
Elsewhere in the April issue of Splash Extra, the lead story looks at how shipping must work closer with governments to ensure it is better prepared for any future pandemic and to protect seafarer recruitment amid a tightening of crew availability. There’s the usual markets commentary, S&P trends, a review of this month’s key shipping news plus an interview with Isabelle Rickmers.
Published on the last Wednesday of every month and priced for as little as $200 a year, Splash Extra serves as a concise monthly snapshot, ensuring readers are on top of where the shipping markets are headed.
To access the April issue, click here. For more details on Splash Extra subscriptions, click here.
The world’s most famous maritime economist (the same one that predicted that Porthole insulated containers would be the reefers of the future in his 1998 book) seems to have omitted a salient fact from his sweeping statement- It all depends where in the inflationary cycle you bought your ship and how much was paid in relative market terms.