The shipping industry, which has faced several challenges over the last several years, including overcapacity, price wars and freight rates below break-even levels, is now showing signs of recovery, according to a recent article in the Wall Street Journal. Due to an improving global economy, industry executives and analysts indicate that the worse may behind container and dry-bulk operators. Additionally, early hints of a recovery in the oil-tanker business are starting to emerge, says the WSJ.

This is good news for the industry after South Korea’s Hanjin Shipping Company, one of the largest container-shipping lines in the world, filed for court receivership under heavy debt last year, and stranded billions of dollars worth of cargo at sea. Container shipping moves 95% of all manufactured goods, with the top 20 operators by capacity posted combined net losses in 2016 of $5 billion. As a result, big players have merged or formed alliances with most expecting to swing to a profit this year.

Moody’s outlook, in fact, for the industry is stable, per their statement in early May. “We expect that supply growth will exceed demand growth by less than 2%, or within our parameter for a stable view. Freight rates in these two segments will also gradually increase,” Moody’s said in its report issued out of Tokyo. 

The cost to transport a container in the benchmark Asia-to-Europe route indeed rose to $965 in May, up 55% from 2016. At the port of Singapore, which the industry uses to gauge trade flows, container volume rose 5% in the first quarter from a year earlier, according to WSJ. Further, container capacity cut the percentage of idle ships to 3.5% in the first three months of 2017, compared with 6.5% in the previous quarter.

China’s weak demand for the coal, iron ore and other commodities hit operators of the biggest dry-bulk cargo ships (capsize vessels) hard, causing dozens to suspends operations and restructure. The Baltic Dry Index, which tracks the cost of moving such products, fell to a record low of 290 points in February 2016 from its peak of 11,793 in May 2008. It’s now around 850 points. Experts now expect the market to do an about-face, forecasting growth at nearly 3% capacity due to Chinese iron-ore imports, which have risen significantly in the last year. Imports of thermal coal used in power plants also are up sharply.

Another sign of recovery for the shipping industry involves tankers that move the world’s crude oil. Although it was a rough start for these tankers over the last five months, most recently a combination of low tanker prices and old ones being retired to scrapyards has prompted a buying frenzy, says the WSJ. Sixty-nine (69) new and used tankers were bought so far this year, compared to eight for the entire year in 2016, a sign that prospective owners expect a recovery.

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Source: WSJ, Moody’s