Flurry of newbuilds anticipate harder times ahead for shipping and most everyone else
 The recent swelling order books at shipyards for newbuilds might have seemed mysterious to those who have experienced a barely discernible peak season and not much in the way of decent prospects ahead.
But it begins to make sense when one recalls the burgeoning war chests carriers possessed after the ridiculous Covid scare, which panicked factories and beneficial cargo owners (BCO) to produce and ship out as much as they could, while they could before health and safety bureaucrats swept in with fresh edicts and mandates.
So with inflation raging in the Western world as masses of men of military age, swarm into North America and Western Europe, shrinking the value of these huge dollar denominated windfall profits, it was wise to spend the money on something with lasting value.
Yet this did not seem to be the time to buy mega ships when the world economy was headed south. But rule-making health and safety bureaucrats kept the carbon craze going, criminalising the use of older cheaper bunker fuels. So those shipping lines that survive the next round of mergers and acquisitions will be those that have the ships that can find the politically correct fuel at the right price in the quantities needed.
In this way, market forces and elected officials became irrelevant, in the face of the advancing bureaucratic tide, which of course includes state and federal civil service agencies as well as their equivalents in Canada, the UK and Australia. Ditto France, Germany and Italy.
In container shipping, one notes contradictory trends. Sales of the basic unit, the container is on track to experience a slight decline and production is expected to hit its lowest point in more than a decade.
London research house Drewry expects a dip in the pool of container equipment this year, from 50.9 million TEU to 49.9 million TEU, followed by an upward trajectory leading up to 2025, when 53.5 million TEU is to be in service.
The underlying reason for the unexpectedly low replacement rate in 2021 and the first eight months of 2022 was attributed to supply chain congestion, where these containers were indispensable for maritime trade. However, this overhang is gradually diminishing as supply chains return to normal.
Notably, ocean carriers have capitalised on their financial strength by ordering more equipment, while logistics companies and BCOs have also been investing in containers.
One might speculate that ship breakers might enjoy a boom in the next few years as the dual-fuel ships enter service, and the single-fuel ships become outmoded.
But this is hard to predict, perhaps too hard. First, the question is which of the five rival green fuels will triumph - LNG, methanol, ammonia, hydrogen or biofuel? They may individually dominate trade routes. Or will the supply and demand reach such an impossible crisis, that most will revert to old fashion bunker fuel with scrubbers.
Perhaps sniffing the air and sensing a sea change, Maersk cheerfully accepted a demotion from being No 1 container carrier in the world and focused instead on its port operator AMP Terminals and its Star Air cargo operation.
Led by the US, the Western world is maximising government spending to bribe electorates into voting for incumbent administrations before elections this year while providing illegal aliens monthly allowances perhaps to vote as instructed by their sources of funding.
Whatever the outcome, of such elections, the state spending will have resulted in ruinous inflation, which if dealt with by fiscal conservatives will restore economic health over time, during which people will suffer great hardship. Should leftist incumbents win such elections the general hardship will be accompanied by random violence and mass looting. Unable or unwilling to stem the rising tide of chaos during their time in power, these governments will be no better at it than they were before.
One can imagine the development of Neighborhood Watch committees into Freikorps and Marxist militias forming in leftist districts and becoming a substitute for local government much the way the IRA did in Northern Ireland at the height of the Troubles.
Long before we get to those extremes we return to the changes world shipping face in the here and now. It looks like the very poor will be richer, having made great advances in the last 20 years. For example, the UN goals for extreme poverty eradication set for 2020 were met in 2013. At the upper end things have been going well too, as evidenced by the growth in the reefer trade which has boomed and continues to do so as the affluent deck the halls with fresh cut flowers from Africa and South America and flood their kitchens with exotic seafoods and farm produce.
But the bounty is spread more thinly over the vast barren middle ground, where the plumbers, autoworkers, school teachers, opticians, shop keepers, farmers and truckers live. Here petrol prices are out of reach. They are told to drive electric cars they cannot afford and must live a highly scheduled life if they could afford them, and are blithely told that they make good second cars. Food prices have quadrupled in a decade. Oil drillers and coal miners are only licensed to drill where no oil and coal can be found. Pipelines are forbidden where they are wanted. All this is done in the service of the "energy transition" abandoning what we do have to pursue what we don't and likely will not get.
Thus, shipowners make sense using cash to buy things now that will not be available at nearly the same price when it might otherwise appear to be a more opportune time to buy.
One notes that the newbuilds are big - in the 10,000 to 24,000-TEU range - dual fueled ready for every regulatory whim. They might even be ready for retrofitting to accommodate autonomous navigation, reducing slot costs another notch or two. And with slow steaming, even a half empty big ships can turn a buck because they would be so cheap to run.
All this is against an expectation of a fall in trade volume in the next decade because the people in the middle, who buy low-end imports will no longer able to do so in the quantities they once did. Partly this will be the result of their diminished income and partly because of an increasing tendency to near and home shore sourcing.
Thus, fewer men in fewer larger ships can handle what cargo remains, with the affluent still managing to enjoy their high-end goods as they did in the past. The so-called Uni-Party, that union of GOP RINOs and progressive Democrats, still entertains some hope that a World War II-like conflict will kick-start Western economies, the way World War II did.
But while there were high hopes for such an outcome generated by the Russo-Ukrainian War, it has proven disappointing as the people have not taken to it and only the bureaucrats are gung-ho. Attempts to revive the Covid scare are flailing and despite hyperbolic descriptions of global warming as the "Climate Emergency" or "Crisis" none but hysterics and bureaucrats seem to care. |
