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  • Writer's pictureMarsoft Admin

"Volatility is good for shipping"

At the Marine Money Norway Ship & Offshore Finance Forum this morning, Arlie Sterling, President of Marsoft, delivered an insightful presentation on the current state and future prospects of the shipping industry. His talk, titled "Market Outlook: Cycle and Structure," highlighted the remarkable returns from recent years and the factors that continue to drive growth in the sector.


Volatility in Shipping: A Catalyst for Growth

"Volatility is good for shipping," Sterling emphasized, underscoring a key theme of his presentation. He elaborated on how the shipping markets have experienced significant returns on investment between 2019 and 2024, with annual returns ranging from 21% to 42% across different segments. This contrasts sharply with the historical average of 9% to 14% over the past 45 years. Previous peaks were noted in 1985 and 2003, but the recent period has been exceptionally lucrative for shipowners.


Market Dynamics and Orderbook Insights

Sterling pointed out that while the dry bulk and tanker markets resemble the conditions of 2019, the container market has undergone a dramatic shift in its orderbook. In 2019, the orderbook-to-fleet ratio was below 8%, a level typically seen as a buy signal, though it wasn't particularly strong at the time. By 2024, this signal has turned negative for containerships but remains relatively stable for bulkers and tankers. A significant portion of the fleet—20% of bulkers and 40% of tankers—is over 15 years old, highlighting potential future supply constraints.


Trade Growth and Economic Volatility

The presentation delved into the unexpected turns in trade growth due to global events. Sterling contrasted Marsoft's 2019 forecasts, which anticipated slow but steady growth, with the actual developments. The COVID-19 pandemic caused a dramatic recession followed by a recovery, altering consumption patterns and trade dynamics. The invasion of Ukraine and other geopolitical events further contributed to trade volatility. Despite these disruptions, Marsoft's base case forecast as of 2024 shows an improving global macro outlook, although challenges like China's structural slowdown and real estate issues persist.


Asset Prices and Earnings

Sterling addressed the fluctuations in ship prices and charter rates. In 2019, ship prices were considered low, offering a weak buy signal. By 2024, prices have surged, suggesting a potential sell signal. Similarly, cash yields from charter rates have shifted from being low in 2019 to significantly higher in 2024, reflecting the market's bullish trend.


He illustrated the implications of Marsoft’s analysis with an assessment of the prospects for the VLCC market.  A key in that regard is the duration of the Houthi attacks on shipping and Red sea diversions; lengthy disruptions could drive VLCC rates up sharply in 2025.


Environmental Considerations and Green Investments

An intriguing part of Sterling's presentation was the emphasis on environmental sustainability through Marsoft's GreenScreen initiative. He advocated for retrofitting ships to reduce carbon emissions, with Marsoft offering to purchase the carbon credits generated by such investments. Up to $700 million is available for this program, providing a financial incentive for shipowners to adopt greener technologies without incurring additional costs.

In conclusion, Arlie Sterling's presentation at the Marine Money Norway Ship & Offshore Finance Forum painted a comprehensive picture of the shipping industry's recent performance and future potential. Despite the inherent volatility, the sector has shown resilience and adaptability, with promising opportunities for continued growth and sustainability.


Photo: Marine Money

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