Will the Shipping Industry Recover in 2016?

The shipping industry was not immune to the effects of the recession and now, like every other industry affected by the financial upheaval of 2008-09, shipping is gradually working its way back to pre-recession levels. Could 2016 be the year that things really start to look up for shipping?

While there are some who remain pessimistic, there are plenty of encouraging signs that point to 2016 being a good year in shipping.

Cautious Optimism

K Line President and CEO Eizo Murakami is being very cautious in his predictions for 2016.

“Given stagnating resources demand in China and other regions as well as rising geopolitical risks, the business environment continues to be uncertain in the second half,” Murakami said. “We anticipate that some more time will be required before we see full-scale market recovery.”

While early-2016 may not yet have provided the boost the shipping industry needs, others are optimistic about the coming months.

“As the global trade recovers, container cargo movements will also likely increase this year,” said Kim Wu-ho, a researcher at Korea Maritime Institute. “The increase of cargo volume along with the implementation of mega-free trade deals, such as TPP and RCEP, will also prove to be a boon for the industry.”

Meanwhile shipping industry analysts at Clarksons are predicting a 5.4 percent increase in container cargo transport this year.

Good Signs

Despite the year’s slow start, some in the industry are urging patience as 2016 unfolds.

“Major shipyards remain idle now, which means there will not be much of a supply of new very large vessels for the time being,” said Lee Yun-jae, Chairman of Heung A Shipping. “As the shipping demand has been rising slowly, the situation will considerably improve by year’s end.”

With consumers having more disposable income, there is hope that ships will be taking on more cargo and that more ships will be needed to move those goods. That could also create a need for supplies, equipment, and machines to be moved around the world.

The falling price of oil is also a good omen for the shipping industry. With bunker fuel prices at a decade low of $170 to $180 per tonne, transporting cargo is now less expensive for shipping companies.

That’s also great news for the tanker sector of the shipping industry, as more crude oil will be going out to meet customer demand. Tankers saw their best year since 2008 in 2015 with VLCC rates reaching nearly $100,000 per day.

International Bright Spots

International politics and stock markets certainly play a big role in shaping the shipping industry. While the world may seem more turbulent than ever, some political news from 2015 might provide a boost in 2016.

The Trans-pacific Partnership, which was signed after five years of negotiation in 2015, has given some Asian shipping companies reason to be optimistic about the coming year. Renewed relations between America and Cuba also could mean more of a need for cargo ships in the Caribbean.

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