⊗

With the first couple of months of 2024 behind us, we should by now be able to begin to discern which direction the year is going to take. It’s the time of year when analysts forecasts begin to get put to the test and as listed companies report last year’s results, their predictions for the year ahead are coming under scrutiny. Leafing through the reports currently piled on my desk, one word seems to leap out with regularity when forecasting the year ahead: volatile. Volatile markets are the lifeblood of shipping. Show a non-shipping person a graph of the ClarkSea Index since 2018, which resembles a shipbroker’s cardiogram, or the flat-lining of the Howe Robinson Container Index over the 20 months from its peak in March 2022, and a common reaction will be to ask how can you plan for a business with such extreme volatility in earnings? A mid-February Splash article talked of how shipping had entered a new period of extreme swings in earnings, but warned that those choosing to use temporary rate spikes across a relatively short period as a guide to the future risked getting it wrong. Appetite for exposure to increasingly volatile markets differs across the multitude of shipping industry participants. For many commodity companies for whom the shipping element is merely a cost, fixing those costs by way of a time chartered portfolio or managing exposure through a range of shipping derivatives will hopefully allow them to ensure they achieve the primary aim of not paying excessively more for their transport costs than their competition. The volatility being predicted for 2024 is, however, just what plenty of spot market players in both the wet and dry bulk trades have been praying for. Volatile markets are the lifeblood of shipping The difference between now and when previous events sparked wild swings in freight rates is that today we seem to have so many more disruptions at the same time, most unrelated, but combined they are providing a perfect storm of volatility. Some of these will probably pass relatively quickly, for example the El Nino impact on water levels in the Panama Canal is expected to be a phenomenon which will last just a few more months. With others, it is more difficult to predict when there might be a return to normality or indeed what the eventual outcome and longer lasting effects on the world will be - Ukraine and the Middle East being the two great imponderables, but there are plenty of other geopolitical dramas unfolding of which the outcome is unpredictable. When combined with a reasonably manageable supply of new bulk carriers and tankers coming into the market in the next year, the omens for 2024 look pretty good. We saw at the tail-end of 2023 how the positioning of tonnage prompted fairly wild swings in rates, so expect more of the same this year. It’s also a truism that times of global angst are usually good for shipping and fortunes are certainly being made at present on the back of all the global uncertainty. Let’s just hope the eventual resumption of normal trade through the Red Sea does not coincide with an industry destroying recession like we experienced after the last major Suez closure half a century ago. In the meantime, here’s hoping you find yourself on the right side of this year’s peaks and troughs.

Volatility: The spice of life

Volatile markets provide much of the spice to the constant drama of the shipping industry. Our special correspondent expects plenty more in 2024 but hopefully with a happy ending

⊗

To continue reading, please login below or subscribe here.

Read Next

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Maritime CEO Forum Singapore

Maritime CEO Forum Monaco

Advertising

Press Releases

Splash

Splash Extra

Splash Special Reports