In a recent seminar organized by law firm Reed Smith and classification society DNV, Jakub Walenkiewicz, Principal Market Analyst at DNV, emphasised the role of disruption as a primary driver in recent shipping market developments.
Walenkiewicz argued that traditional market predictions, which rely on forecasting demand for commodities, have been overshadowed by unpredictable disruptions such as geopolitical events. He highlighted that supply-side factors, particularly increased shipping distances or “miles,” have been a major influence, stretching the operational capacities of the fleet.
Walenkiewicz discussed how unexpected global events like the Russian invasion of Ukraine in 2022 and disruptions in the Red Sea in late 2023 led to dramatic shifts in shipping patterns. These shifts have resulted in an influx of cash into the industry, particularly for tankers and containerships. The cash-rich state of the shipping industry in 2024, where earnings are substantially higher than the 10-year averages, does not stem from organic supply and demand growth, but from these disruptive forces, Walenkiewicz explained.
One key development discussed was the surge in cash reserves among container operators following the COVID-19 pandemic. Changing consumer behaviors led to inefficiencies and pushed demand, and the tanker market experienced a boom due to longer voyage routes necessitated by the Ukraine war. Walenkiewicz pointed out that crude oil ton-miles increased by 6% and refined product ton-miles by 12% from 2021 to 2024. The impact of the shadow fleet — tankers transporting Russian oil despite sanctions — was also significant, comprising nearly 20% of the global tanker fleet.
Walenkiewicz debunked the traditional belief that shipping operates on a cycle of one good year followed by seven bad ones. He noted that in 2024, nearly all market sectors are outperforming their historical averages, with some vessels even being sold at prices higher than their original build costs due to high demand and limited newbuild availability. This has also driven up vessel speeds as operators aim to capitalize on short-term earnings.
In particular, the wet sector (tanker market) remains highly lucrative, with Walenkiewicz suggesting that investing in super-efficient tankers is a sound strategy, even without betting on substantial market growth. Even if current market conditions persist, efficient vessels are likely to command higher spot or time-charter rates over the next few years. This illustrates how the current cash-rich environment, driven by increased ton-miles and market disruptions, has created unprecedented opportunities for shipping operators across various sectors, challenging conventional market cycles and economic theories.
Source: gCaptain