wheeee … wrong again- suckers! - marine money · 2019. 3. 15. · confessions of a shipping...

Confessions of a Shipping Cyclist

Martin Stopford, President Clarkson Research Marine Money, 26th February 2015

Wheeee… Wrong again-

suckers!

Surviving the Shipping Cycle

1. Secrets of our rich cycle forecasting heritage

2. Why shipping cycles are sexy

3. Predicting the shipbuilding super-cycle

4. How to predict the oil price 5. Predicting the shipping

super-cycle

OK, I confess. Everything I told you last year was completely wrong

Forecasting Expert

1. Secrets of our Ancient Cycle Forecasting Methods The old

ways are still the

best

1

2

3

4

5

Antonius Van dale 1700

Honey cakes

Lights Mirror

Smoke

6

Should I buy a Panamax?

Absolutely & we have some very nice ones

for sale

No, Useless

Was it good?

It was fantastic!!

Was it good?

Method 2: Aristotle – The Rational Approach

• Aristotle's logic revolves around deduction (sullogismos).

• A deduction leads to our notion of logical consequence: If X and Y are true, then Z must be true

• For example “If you buy our shares AND you’re a sucker, we’ll buy them back for 30% at the bottom of the cycle”

Aristotle Onassis – Early Greek Shipowner

Method 2: The Computer Model • The computer model is the

direct descendent of the Aristotelian approach of deduction

• It uses data to summarise the relationships in the world economy

• We type things into a plastic box and it tells us the market’s about to recover

All I did was scrap 3 more ships and now

we have a boom

DATA

Method 4: Blame the Banks….

"The rates today are lower than ever before. This was brought about by the over-production of ships fostered by reckless credit given by banks and builders, and over-speculation by irresponsible and inexperienced owners. J.C.Gould, Angier & Co, 31 December 1894

Wales to Singapore 1871 $11.4/ton (coal) Tubarao to Japan 2002 $8.70/ton (ore)

Shipping’s success over a century

2. Why Shipping Cycles are Sexy

Three types of shipping market cycles

60 Years 60 Years 60 Years

1. Seasonal cycle (12 months)

Figure 3.1 Compiled by Martin Stopford from various sources

2.Short Cycle (5-10 years)

3. Long cycle 50 years?

1. Shipping cycles fall into three categories 1. Seasonal Cycles 2. Short Cycles 3. Long Cycles

Seasonal shipping cycles

-1%

-23%

-38%

-25% -16%

37% 37%

17% 8%

13%

-16% -8%

-50%-40%-30%-20%-10%

0%10%20%30%40%50%

JuneJulyAugSeptO

ctN

ovDecJanFebM

archAprilM

ayDeviation of VLCC monthly earnings from trend

23 Dry Cargo Cycles 1741-2014

0

100

200

300

400

500

600

70017

41

1761

1781

1803

1821

1841

1861

1881

1901

1921

1941

1961

1981

2001

Index 1741=100

Sailing Ship Era Steam Ship Era Bulk Era

Stopford Era

Source: Maritime Economics 3rd Edition 2009

The length of 24 “short” shipping cycles

10

20

16

11

15 15

17

7 7

11 13

6

11

5 4

14

3

6 7

11 10

4 4

13

0

5

10

15

20

25

1700 1750 1800 1850 1900 1950 2000 2050

For example this cycle lasted 14 years peak to

peak

Cycl

e le

ngth

in y

ears

3. Predicting the Shipbuilding Super-Cycle

One free with every ship

The shipbuilding super-cycle 19

63

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

2011

0

50

100

150

200

250

300

Orders Placed Deliveries

Million Dwt Shipyards expand in the 1970s boom & again in the 2000s

Step i: take orders for a lot of ships

Step 2: predict the market will get

worse next year, then recover

Fig 17.1 Comparison of forecasts of world shipbuilding completions

1975 1980 1985 1990 1995

Million CGT

0

3

6

9

12

15

18

21

24

Actual world shipbuilding completions

Note: This graph tracks how between 1978 and 1984 a group of international shipbuilding experts revised their forecast of future shipbuilding completions as the 1980s recession developed

How will output

develop?

June 1978 forecast 1

1

June 1980 forecast

2

2

April 1982 forecast 3

3

June 1984 forecast

4

4

Figure 22

How Shipbuilders Saw the Market 1978-1984

4. How to predict oil prices If he’d paid

more attention to the IEA he’d

be up here with me

The Oil Price – Hard to Predict

0102030405060708090

100110120130

1861

1867

1873

1879

1885

1891

1897

1903

1909

1915

1921

1927

1933

1939

1945

1951

1957

1963

1969

1975

1981

1987

1993

1999

2005

2011

$ per

bar

rel a

t mar

ket p

rices

$ money of the day

Winner of the Shipping cycle yellow jersey

Marttin Stopford 7 Junel 2011

0

2040

60

80

100120

140

16019

60

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

Pric

e $/

barr

el

Source: BP energy review

When it comes to forecasting oil prices the IEA has all the information – just follow them

IEA’s Price Forecast Leads the Way

In 1993 the oil price was $17 a barrel. What was the forecast for 2010?


0102030405060708090

100110120130140150160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

Pric

e $/

barr

el

Oil Price 1993 forecast


World Oil Price - The 1993 Forecast


020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Ene

rgy

Use

Mill

Ton

nes

Oil

Equ

iv Oil Price 1993 forecast 1994 forecast


World Oil Price & 1994 Forecast


020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Ene

rgy

Use

Mill

Ton

nes

Oil

Equ

iv Oil Price 1993 forecast 1994 forecast 1995 forecast




020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

pric

e $/

barr

el

Future price 1994 forecast 1995 forecast1996 forecast 1998 forecast




0

2040

60

80

100120

140

16019

60

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Ener

gy U

se M

ill T

onne

s O

il Eq

uiv Oil Price 1993 1994 1995 1998 2000




020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

pric

e $/

barr

el

Oil Price 1993 forecast 1994 forecast 1995 forecast 1998 forecast 2000 forecast 2004 forecast




020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

pric

e $/

barr

el

Oil Price 1993 forecast 1994 forecast 1995 forecast

1998 forecast 2000 forecast 2004 forecast 2006 forecast




020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

Pri

ce $

/bar

rel

Oil Price 1993 forecast 1994 forecast1995 forecast 1998 forecast 2000 forecast2004 forecast 2006 forecast 2007 forecast




020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

Oil

Pri

ce/b

arre

lOil Price 1993 forecast

1994 forecast 1995 forecast






2008

2007

2006


020406080

100120140160

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

Oil

Pri

ce/b

arre

lOil Price Future actual1993 forecast 1994 forecast1995 forecast 1998 forecast2000 forecast 2004 forecast2006 forecast 2007 forecast2008 forecast 2010 "Current Policies"2010 Carbon 450


2008

2007

2006

World Oil Price & 2010 Scenarios Scenarios

5. Predicting Today’s Cycles

Seems like we’re still under water, folks

-10

10

30

50

70

90

110

130

150

19

47

19

50

19

53

19

56

19

59

19

62

19

65

19

68

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

W/S

Gu

lf E

uro

pe

1. Tight

Supply shortage of ship yards

2. Shipper driven market Run by

oil majors

13% trade growth pa with 2% standard deviation

4. Distressed

market & no demand growth

0% trade growth pa with 7% standard deviation

3. Investment

bubble

11% trade growth pa with 1.5% standard deviation

3.5% trade growth pa with 3.4 % standard deviation

5. Long trough

working surplus out of system

6. Super- boom 3.5% pa growth

with 2% st. dev.

Oil tanker market 1947-2015 – each decade different

7. Kicking

can down road

0.7% pa trade

growth with 2.4%

st. dev.

-10

-5

0

5

10

15

2019

7019

7219

7419

7619

7819

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

1020

1220

14Net e

arni

ngs a

fter O

PEX

inte

rest

& d

epre

ciatio

n

Free cash $ m VLCC

VLCC Net Earnings 1970-2013 VLCCS made good money in 16 out of 44 years (36%)

Free cash flow in $ million The average ship value

was $75 m and the average return was $.6m ,

a 1% return

05

10152025303540455055606570758019

70

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Peak 19 1973-4

"An exciting market"

Peak 20 1979-81 "Rates

boomed" Peak 21

1995 "Firm"

2000 “Stronger"

1999 “Sentiment

rock bottom"

Peak 22 2004

“fortunes made”

Source: compiled by Martin Stopford from various sources

1982-6 "Worst ever"

1971-2 “Very poor"

1975-7 “Un-

profitable"

$000

1 y

ear T

C

Note: based on the US Gulf-Japan grain freight 1964-2015.

Peak 23 2008

Dry bulk market cycles 1947-2015

Peak 24 2010

2014 “recovery next year”

Amarillo Slim’s Advice (and mine too!)

1. “Play the players, not the cards.

2. Watch them from the minute you sit down.

3. Play fast in a slow game , slow in a fast game.

4. Never get out when you are winning.

5. Look for the sucker and, if you don’t see one , get up and leave because the sucker is you”

wheeee … wrong again- suckers! - marine money · 2019. 3. 15. · confessions of a shipping...

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