CONTRACTING AND EARNINGS MOVE APART
In April last year, we wrote about the Clarksons Contracting Index which counts the number of vessels that had been ordered since the beginning of each year. For our 'Chart of the Week', we calculated a rolling 365 days contracting index to measure the number of vessels newly contracted during the past 12 months. Back in April 2021, the 365 days contracting index started to increase, reflecting shipowners' rising confidence in a supportive market environment. Meanwhile, this index has reached a temporary peak and seems to move sideways at around 1,650 newbuilding orders per year (dark blue line).
We added a second line, the Clarkson Sea Index (light blue line). At it seems, both lines were highly correlated over the course of the last twenty years. However, the correlation seems to have eased lately as the contracting index has not kept pace with the Clarksea Index. There are some reasons that may explain this: Firstly, the number of existing yards is lower than in the 2002-2008 boom times. Secondly, today's newbuildings are bigger than in the past (particularly for containerships) and occupy more yard space. Thirdly, owners may be more reluctant to order new vessels when there is increasing uncertainty about future environmental regulations and new ship designs.
Still, we would argue that the current overall contracting is too low compared to the earnings capacity of the world merchant fleet. As a consequence, this may give more headroom for a continuation of elevated earnings in the years to come, especially in the sectors with relatively low orderbooks such as bulkers or tankers.
Shipping stocks generated some decent gains last week, partly decoupling the industry from the overall capital markets as there seems to be some renewed interest in value stocks. Bulker companies turned out the biggest winners. For example, Star Bulk and Grindrod announced pretty impressive quarterly results. On the contrary, container stocks dropped by 4.3% w-o-w without specific negative newsflows.
The Notos Maritime Sentiment moved sideways and we decided to de-risk our trading strategy by lowering our overall exposure somewhat. We may re-enter the markets in the next weeks when the geopolitical tensions have been fully priced in by the markets.