2013 and 2014 in World Economy and Maritime Markets

30 January 2014 - 08:16

It might be due to the unlucky number ‘13’ it contains; the year of 2013 has been highly problematic and a turbulent year for the world economy.

Even the US economy, where the recovery process was at its best amongst others after the crisis, a different problem was witnessed: Government has closed the doors, stopped operations (shutdown). It was a complete political stalemate.

Storied recovery in the European Union in the first half of 2013 was passed again with recessions.

So much so that the a similar decision of U.S. Central Bank ( FED ) to drop interest rates to 0- 0.25 % ratio in 2008, had yet to be taken by the European Central Bank at the second half of 2013.

On the other hand, China has gradually become unable to make sales to the outer world as much as before. Having concerns about inflation in the domestic market, it has slowed down the growth rate by controlling the credit growth.

Tensions at the countries with  energy resources, especially those in North Africa and the Middle East has created such  chaos that;  despite  less demand from the world economy, oil prices remained at the upper limits. This in itself has created a spiral that has continued to be a threat to global growth.

The new trends at the maritime transportation and the shipbuilding industry where commercial development and change have been most significantly experienced could be reviewed within this context. 

For the maritime sector, 2013 was a year perhaps with more positive developments after historic lows than what has been experienced in general.

The world trade, which reached 18 trillion U.S. dollars in 2013, has in fact, caught up with the linear growth rates comparable with the pre-crisis era. 

Taking into account that a large portion of world trade is done through the sea transportation, the year of 2013 can be seen as a year of recovery for mariners. Indeed, according to data from Clarksons; the cargo transported by the sea in 2012 was 9.56 billion tons and in 2013, this amount was 9.93 billion tons.

After the 2009-2012 period, in which, even if it was not with an accelerated rate, global demand continued its linear growth. In 2013, a more significant upward motion was experienced. 

One of the influential factors here was the supply-side developments rather than demand-side. Likewise, while the slowdown in 2013 continued, new shipbuilding orders amounted to 268 million DWT. In a demanding market where the existing fleet is 1.62 billion DWT; the ratio of new ship supply to the existing fleet decreased by 16.8 %. In consequence of a slowing supply and a linear increasing demand, a strong correction in the freight rates should be expected. 

The Clarksea Index that represents all the earnings of bulk cargo, tanker, container and gas transportation at the maritime markets showed a significant increase of 79% in 2013. 

The Baltic Dry Index, which is more known, was the dominant factor in the above development.

The Index, which was at 699 points at the end of 2012, closed the year 2013 at 2277 points with an increase of 226%. For containers and tankers, what was seen at the index could be called as a recovery. In 2013; the container index made a 13% gain and the tanker (BDTI) index made  30% corrections up to 30%.

In the container market, there appears to be a substantial increase in new orders, according to Alphaliner data.  

In 2013, with a new order book of 1.78 million TEU, the ratio of new buildings to total existing fleet increased to 21.7%. 

Although still not very high compared to the years of 2008-2009, earnings in the container business did not show any significant rises as it did in the bulk carriers market. 

However, due to its unique market structure, the profitability of carriers that dominate the market still goes on.  

In this sense, for the future; container markets will rapidly move forward to such a structure in which the larger capacity vessels will be dominant on one hand; and the carriers with larger fleets will have dominance on the other hand. 

If we make an assessment –and perhaps a forecast- about the possible developments at the economy and maritime markets, we can foresee that; 

Primarily, in 2014, the U.S. economy might maintain a controlled growth while the unemployment rate might be reduced towards 7%;

the revival of European Union economies might become more evident;

The observed lower growth rate of the Chinese economy in the last two years might continue; 

The developments at the other emerging economies might be more complex.

In the maritime markets we might witness developments in this year which could be different from 2013.  

We might expect that, due to the lowering gear at the China’s rapid production tendency, there will not be a rapid increase at  the bulk cargo segment; but however, as growth of China will still be high at  7-7.5%, levels, it will provide vitality to the markets, even if it remains at  minimum levels. 

Moreover, the signals of growth yet to be received from the other developed economies might also be a plus factor

In container markets; revival of consumption would be effective; we can expect an increase by over 5% of the total transported cargo in TEU basis.

The return of this increase as profitability to container ship operators and owners will be differentiated. 

Indeed, Alphaliner estimates the total deliveries of new container ships for 2014 and 2015 to be at 3.38 million teu. 

On the other side, merging of a total idle capacity of approximately 600 thousand TEU should also be considered.

When we make a brief assessment of Turkey’s economy, 2013 was recorded as the most volatile year in recent times. As our economy  still continues to grow at about 4%; the interest rates rose again to over 10%;  inflation reached to  7.4% levels exceeding expectations; the USD/TL ratio climbed up to  2.20  and excessively revaluated  TL were the main concerns. 

The expectations from U.S. Central Bank to reduce bond purchasing program by $ 85 billion per month and related processes has created financial fragility for Turkey. 

The announcement of the decision to cut only $ 10 billion per month done at the end of the year   did not create any more negativity; since expectations were previously priced.

 However, Turkey’s own peculiar domestic political problems have made the expectations about the year 2014 rather unclear. 

We can expect that there will be significant market fluctuations in 2014, which is also the year in which the elections will be held. 

The maritime transportation and shipbuilding industries in Turkey today has become world renowned. 

This achievement is the result of many years. All of the actors in the Turkish economy should now realize the importance of this sector and become aware of its significance. 

We should expect this awareness to further increase in the coming years. 

We have become a ship-owning country which has an influence in the global fleet.

Our ship-owners have a fleet of 30 million DWT and the possibility to reach 33 million DWT in one year is too high. 

On the other hand, the demand on the global shipbuilding industry continues. 

The shipyards with strong ability of conversion towards the areas in which we are more competitive will be able to get a share of the pie. 

At this point, we should carefully take into account that if our government enters the scene with fair support policies, we can easily be competitive in the new building sector.ν

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