Putting a spring in shipping’s step

Malcolm Latarche
Malcolm Latarche
ShipInsight

29 April 2016


As spring begins to take hold in the northern hemisphere, so too are there signs of an improvement in the shipping environment. Recent pointers are a long way from suggesting that a return to the heady days of pre-2008 is on the cards but a rising oil price does give some hope to the struggling offshore sector and in bulks the BDI continues to edge upwards having recently breached the 700 mark after hitting a low of under 300 in January. Whether the rise is sustainable or just a reaction to the southern hemisphere grain harvest is yet to be seen. The rise in oil price comes despite the failure of an alliance of OPEC and non-OPEC Russia to agree a freeze on production levels and would appear to be more connected to global stock levels and the strength of the dollar. With regard to stock levels they look to have proved higher than was initially thought last week which should have pushed the oil price down but the Fed’s reluctance to raise US interest rates announced mid-week has continued to weaken the dollar and with chances of further rate rises receding, the price of oil could continue to push up for a short while yet. Of course not everything in the garden is rosy and it is too early to know if the trends will continue and of course there is still far too much tonnage capacity in the market, especially in the container and bulk sectors, and scrap prices do not seen to be improving much which could be a deterrent to rectifying the situation in the short term. If, as some are forecasting, 2016 turns out to be a La Nina year then there is a likelihood that this weather phenomenon will mean the summer in Europe will be cool and damp. That usually reduces consumer demand which in turn will adversely affect the container market. Talk of the container market would not be complete without a mention of Maersk, but it is the Danish giant’s oil arm that is making the news this week. Apparently Copenhagen Municipality is to sell off all its Maersk shares because a new policy forbids the city to hold shares in any organisation that derives more than 5% of its turnover from activities in fossil fuels. Clearly there is a touch of spring fever in some circles in Denmark, for that news from comes on top of a report from the Danish Council on Ethics (a body with members appointed by Danish government ministers) which has called for a climate tax on red meat. The council said that Danes have an ethical obligation to minimise their climate impact and that a natural place to start would be lowering their red meat consumption. In deference to Denmark’s pork industry, the council has for the time being limited its recommendations to cattle.