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office party

2014 in review vol. 1

It’s that time of year when we start to look back at what the past 12 months have meant for shipping. It’s also the time of year when offices decamp to restaurants for Christmas parties, so we thought we’d combine the two and take you on a tour of the year in shipping as though it was an office party…

Oil Prices: Well, who'd have thought, when in 2011 I told Spinnaker's eager staff that USD1000 bunkers (USD1200 for low sulphur) were on the horizon and were the future, that we'd see fuel at USD430 per ton in December 2014? Good news for tanker owners, the VLCC market in particular suddenly enjoying a very welcome boost. They were the first to arrive at the party, like a rugby team who'd already had a few in the pub down the road.

Eco Ships: I've been a sceptic of the whole eco-ship story for some time now, including the likelihood of altruistic environmental motivations producing a willingness to pay higher freight for eco-ships. I'm not denying the need for them or the economic benefits of chartering fuel-efficient ships, but it's the rush to buy them that flummoxed me. Over-supply is over-supply and even with annual scrapping levels at 30-35m tonnes a year, we all knew that it would take some time for things to balance out. If you'd have told anyone in shipping in January 2009 that 2010 and 2013 would be very big contracting years, they'd never have believed you. An eco-ship is just a modern ship. A ship ordered in 2015 will be no less eco than a ship ordered in 2010.

Shipyards: In 2013 I reflected with Spinnaker's staff on articles I'd read setting out the thorny question shipyards needed to answer to stay alive – stick with heavy metal (tankers and bulkers) and plough the eco-furrow, or invest huge amounts of time and money re-tooling and specialising in markets such as offshore supply (in which USD25bn more was spent on newbuildings in 2012 than the USD20bn spent on steel-intensive ships). Not dissimilar to asking BMW to start making farm machinery instead of cars. A Tradewinds article (5/12/14) points out that oil prices now are "a long way from the USD700 per ton required when Korea's top yards began an aggressive campaign for eco tonnage in 2012." Perhaps that's why they haven't turned up at the party at all. Cheaper bunkers are described as a major negative for shipyards, but then again I bet they'd never have believed the good years they've had since 2009.

Cashflow: …is king! We all know that. But to me watching the oil exploration market from the touchlines, it's a remarkable thing that today's oil prices have such an immediate impact on the timing of E&P projects. Oil majors may very well have coffers the size of countries, and may very well be pretty certain that prices will rise again in and for the long term, but clearly they are ruled by King Cashflow just as much and just as rapidly as the rest of us. We'll ask the DJ to play 'Price Tag' by Jessie J.

Offshore: The lucky ones during the last few years (other than those who got tickets to the gas party) are the unlucky ones when oil prices fall and the oil industry puts the brakes on. Combine this with plenty of newbuilding activity in the offshore sector in the last few years and you can understand why OSV players need cheering up and why they nearly didn't come to the party.

(to be continued!)

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