Landing Page and Release Letter – 24Q2

Continued Houthi attacks on shipping have had a significant impact on most major shipping sectors during the first four months of 2024. The liner markets have been mostly affected, as 90% of the capacity normally transiting the Red Sea and the Suez Canal has been diverted to longer routes around South Africa. We estimate that such developments resulted in a 6% spike in containership demand, which led to an immediate surge in spot liner freight rates. After peaking at year-start, liner freight rates gradually adjusted lower as sizeable newbuilding capacity has entered the market, but freight rates remain elevated today across most routes. Conversely, time charter rates have steadily gained ground, as liner operators sought after charter tonnage to serve ports and markets left out of main-haul rotations after east-west schedules were adjusted. Containership demand has also benefited from global manufacturing emerging out of a two-year long slump in early 2024. At the same time, liner operators turned their attention to the S&P markets to help boost their owned capacity, thus propelling higher secondhand prices for young and old tonnage alike.

Similarly, the key development in both the dry bulk and tanker markets during the first quarter of 2024 was a shift in trading patterns away from the Red Sea. We estimate that tanker voyages through the Red Sea fell by nearly 40% compared to the year-earlier level, while bulker voyages fell by nearly 30%. This led to an increase in long-haul trades, as more ships being diverted around the Cape of Good Hope. As a result, we estimate that the average distance of both the tanker and bulker trades was up by about 4% year-on-year.

Combined with relatively strong growth in Chinese dry bulk imports (despite lackluster steel production), the jump in average trade distance led to dry bulk tonne-mile demand growing faster than the dry bulk fleet, which led to healthy freight rates. Although rates edged down in 24Q1 compared to their 23Q4 levels, they were up significantly compared to the year-earlier levels, and dry bulk secondhand prices continued to move up, with some values reaching their highest levels since 2010.

Although oil trade volumes were basically flat in 24Q1 compared to the year-earlier level (as increases in exports from North and South America were offset by cutbacks in OPEC output and exports), the jump in average trade distance enabled tanker tonne-mile demand to grow faster than the tanker fleet size over the past year, and thus tanker rates remained very strong, with product tanker rates up modestly over this period, while crude tanker rates fell back a bit. But tanker secondhand values were up across the board, reaching their highest levels since 2008.

As for VLGC rates, they adjusted significantly lower than their historical peaks of 2023Q4, as US LPG export growth moderated and as Panama Canal transits started to normalize. But similar to developments in other shipping markets, VLGC secondhand prices moved higher at the start of 2024.

And finally, LNGC rates have been the most disappointing sector through the first four months of 2024, with earnings down about one-third compared to the year-earlier period. Trade growth has been sluggish over the past year, while fleet growth has started to accelerate.

A common denominator across all shipping sectors is continued gains in newbuilding values. Despite easing steel plate prices and strong USD gains, NB prices are bolstered by elevated shipyard labor costs and equipment prices. Most importantly, newbuilding prices are underpinned by extremely tight slot availability. For most vessel types, the average shipbuilding delivery gap is about three years today, well above the historical norm of 18 to 24 months. 

Marsoft’s Q2 2024 NAVIGATOR system upgrades, the 24Q2 Dry Bulk Market Report, and, under separate cover, the FLAGSHIP Q2 2024 update were issued on May 23, 2024. The Tanker Market and the VLGC/LPG Market Reports , The LNG Market Report, and Containership Market Report will issue between now and the end of June. Subscribers will be alerted via email as Reports and Systems are issued.