Tuesday, December 02, 2014

Shipping Markets: From Solid State to Liquid State

Year 2014 marked the end of the second commodity super cycle of this century. The signs started emerging during late 2013 when emerging markets started showing signs of slowing down. By middle of 2014, all star commodities gathered enough dust and started losing their value fast.

Iron ore, coal, silver, gold & crude oil; all have fallen appreciably. Along  with supply demand equation, a strong dollar also contributed to their plight. The obvious effect is being seen in the shipping markets. Dry bulk shipping is facing hard times in the freight market. However, tankers have stood out as clear winners in this drought season. The reason being, the drop in oil prices has more to do with excess supply than diminishing demand. Also, the tonnage availability is at the lowest since 2011/12. A fragile order-book and ever-growing scrapping activity has turned tankers into an endangered species. From poor usd12.5k pd in 2013 to impressive usd30.5k pd average yield in 2014 has buoyed the tanker owner's sentiments. The situation is expected to persist through 2015 and thus the tanker rates are expected to remain healthy for some time to come.   

Caution: The better yield in the current spot market has a lot to do with the low bunker prices. Any appreciable upside in bunker prices may lower the numbers considerably. But for now, Tankers Ahoy!  


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