Behind the scenes of volatility in the shipping market

Behind the scenes of volatility in the shipping market

The shipping market has been volatile recently, and the ClarkSea Index* published by Clarkson Research can help us understand the reasons for market volatility more clearly. Despite the common influence of various events, by comparing the Clarkson Shipping Index and the trend of tanker freight revenue, we can find that the tanker sector is the main driving force for the recent fluctuations in the shipping market.

ClarkSea Index: Clarkson Research has been compiled and published since 1990. It is a comprehensive index reflecting the average daily income of dry bulk carriers, tankers, gas carriers, and container ships, weighted by the number of ships of each type at the beginning of the year. .

   Index ups and downs

The recent Clarkson Shipping Index has been rolling up and down like a roller coaster. The trends are summarized as follows:

·There have been two peaks after the financial crisis, USD 31,207/day in October 2019 and USD 29,288/day in April 2020

·The average value of the Clarkson Shipping Index in 2019 reached US$15,082/day, the highest level since the financial crisis

· The global spread of the new crown epidemic and the retracement of the earnings of the tanker market have caused the latest Clarkson Shipping Index to fall from its peak in April 2020 to $11,656/day, a 50% decline from the end of 2019 and a 26% decline from the 2019 average. And below the average after the financial crisis (12,250 USD/day)

·From the beginning of 2020 to the present, the average Clarkson Shipping Index has increased by 53% year-on-year, an increase of 17% from the 2019 average

·The Clarkson Shipping Index range (ie, the difference between the maximum and minimum) for the past 12 months is about US$20,000/day, exceeding the extreme level of the past decade (US$13,600/day), which shows that the recent market volatility is very high severe

   Changes in the tanker market

From the perspective of subdivided ship types, the tanker market is the most volatile, and it is also the main driving force driving the Clarkson Shipping Index to have the above two peaks. In October 2019, due to US sanctions affecting about 3% of the world’s tanker capacity, tanker freight rates skyrocketed on the background of tightening of the supply side, and the average income rose to more than US$80,000/day in mid-October (desulfurization tower installation uncertainty) It also caused downward pressure on the supply side). This pushed the Clarkson Shipping Index to soar to the first peak mentioned above. Although the New Crown epidemic has greatly weakened global oil demand, the increase in demand for offshore oil storage in the context of oversupply and low oil prices made the tanker’s capacity once again tight, pushing the freight rate of the sector to surge again to 98,000 US dollars / day, promoting Clarkson Shipping The index soared to the second peak mentioned above.

   Performance of other market segments

Of course, there are fluctuations in the freight performance of other market segments. The freight revenue of bulk carriers in 2019 is better than that of the first half in the second half, but it is still relatively weak from the beginning of 2020 to the present; the average freight revenue from the year to date has fallen by 46% from the average level in 2019, and the latest (May 22) revenue is The 19-year average fell 60%. The revenue level of container ships has increased steadily since the first quarter of 2017 and has declined after the fourth quarter of 2019; under the pressure of the new crown epidemic, the average freight revenue of container ships has fallen to the same level as the same period of 2019 since the beginning of the year. This is a 26% decline from the 19-year average. The revenue level of super-large gas ships has been strong for most of 2019 and early 2020. The average freight revenue from the year to date has still increased by 13% year-on-year from the 2019 average; but the pressure has become more significant recently, and the latest freight revenue has been compared with 2019 The average has fallen by 21%. In addition to the market fundamentals and black swan epidemic factors, freight revenue will also be affected by environmental protection related factors such as fuel oil cost and installation of desulfurization equipment. The time series of freight revenue of relevant ship types can be queried on SIN.

Overall, the recent fluctuations and rises of the Clarkson Shipping Index are largely supported by the tanker market; although other subdivided ship types are also constantly changing dynamically, the trend is weak. Judging from the current market performance, tankers may only lead to fluctuations in the shipping market in the short term. In the future, there will still be many uncertainties around the new crown epidemic, trade growth, energy demand and storage, environmental protection regulations, etc. We will continue to deal with these Potential influencing factors, to study and analyze the volatility reasons and development trends of the shipping market from different perspectives.