2009 was a bad year for shipping industry with dramatic fall in shipping rates and billions of dollars in company losses. Shipping line operators bled money due to decreased trade, shipyards were flooded with order cancellations, banks tightened up lending regulations and shipping companies’ stocks plummeted.
2010 could see some shipping industry stocks to be some of the biggest movers. China’s aggressive $586 billion stimulus plan breathed new life into the shipping industry. Beijing’s recent moves to tighten monetary policy and curb lending to keep the economy from overheating have raised doubts about whether or not this growth is sustainable. But there are signs that China is ready to bring global shipping back from the brink. China needs raw materials to expand infrastructure and that will keep capesize vessels (too big to fit through canals and instead use the Cape of Good Hope or Cape Horn) busy carrying iron ore from Australia to Asia. Iron ore accounted for 27% of dry bulk trading last year.
Overseas export markets are recovering as well. The China Federation of Logistics and Purchasing said its official purchasing managers’ index rose to 55.2 in December from 54.3 a month earlier – that is the biggest increase since April 2008 and it was aided by an increase in exports.
China is also developing Shanghai to be a major centre for global shipping. The central government has already leveled an island near the city to construct a terminal in deeper waters to allow large tankers and container ships. Beijing plans to add 30 terminals able to process 15 million containers per year by 2020. And despite shipyards dealing with cancelled orders and inactivity, the country wants to overtake South Korea as the biggest shipbuilding nation.
The Baltic Dry Index, which has been a leading economic indicator since it was introduced in 1985, has climbed back to over 3,000 meaning customers are paying more than they were a year ago to ship materials across the globe. Transpacific shipping lines, mostly consisting of container ships servicing trade to and from Asia, are already reporting vessel use in the mid-to-high 90% range and expect a significant increase in volumes for 2010.
Shipping is cyclical and usually operates in three year highs and lows as shipping rates rise alongside commodity prices.
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