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Have you heard the one about the business that claimed to have defensive qualities in a downturn? It seems like Clarkson’s expertise is not in one-liners. This is appropriate because this UK broker operates in various shipping businesses, which sets it apart from Maersk, the Danish containers group that recently predicted a demand drop of 1-4% this year.
Inflation and higher interest rates are putting pressure on consumers. However, Clarkson expects that broader shipping rates will be boosted by energy insecurity, the green transition, and capacity constraints. According to a positive statement, revenues rose to £321mn in the first half of the year.
The rerouting of oil and fuel shipments due to the war in Ukraine is keeping tanker rates high. Chinese and Indian refineries have taken over the lost Russian supply. Tonne mileage for both crude and product carriers increased by almost 10% and 8% respectively in the first half of this year, as reported by the trade body Bimco.
The greening of the supply chain is contributing to market imbalances. As customers and investors become more concerned about indirect or Scope 3 emissions, shippers are making adjustments. Around 60% of the world’s order book for tonnage consists of vessels powered by alternative fuels like natural gas, moving away from dirty marine diesel. Demand for space on newer and cleaner ships is expected to rise.
A shortage in global shipbuilding capacity may also lead to higher earnings in tanker broking.
Clarkson believes that there are now 40% fewer large shipyards compared to a decade ago, with most of them being occupied with building container ships and natural gas carriers. Total global tonnage is projected to increase by just 2% next year, the slowest growth rate in two decades. Orders for new crude oil and product carriers are at historic lows.
Shares of Clarkson have declined by almost one-third from their peak in 2021. While the “defensive qualities” claim may sound cliché, there is a structural squeeze on tanker rates that is expected to persist beyond the current economic downturn.
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