In the film Back to the Future the Prof and Marty take a trip in a time machine. But, instead of going forward, they end up back in the 1950s where Marty finds himself doing things which change the future. As his family gradually disappears, Marty races to change things back. It's hardly philosophical, but the impact of current activities on the future is equally true for shipping markets. Back to the 2000s After the astonishing 2000s,
was discussed endlessly at Posidonia last week, and the most popular scenario was for tough times in 2012/2013, followed by a recovery in 2014. Nobody said how good the recovery would be, but the unspoken belief was that it will take shipping back to the wonder years of 2003 to 2008. For an industry that thinks in cycles, what could be more plausible?
Or Back to the 1990s?
But, if shipping’s time machine is like the Prof's DeLorean, the point in history where you land is not always predictable. Suppose, instead of reverting to the 2000s, the cycle goes back to the 1990s? So far that is exactly what has happened. The graph compares the Clarksea Index 1990-1999 (the dark line) with the Clarksea Index 2008-2012 (the light line). The correlation is pretty close. Over the four years since Lehman Bros the Clarksea Index has averaged $12,751/day, compared with $11,928/day in the first four years of the 1990s - only 7% difference. So it is fair to say that right now the shipping Time Machine does seem to be somewhere in the early 1990s.
Time for a Change?
From this starting point the remaining six years of the 1990s offers an interesting scenario. In September 1993, the index was at $11,000/day, roughly the same as today. In 1994 it fell to $10,000/day before recovering to $14,000/day in July 1995 where it stayed, with a wobble in 1996, until the Asia crisis in June 1997 drove it to a new low of $9000/day. Under this scenario, the market recovers, but only just, and periods of "strong earnings are interspersed with some nasty troughs.
The 1990s was a weak decade because there was an overhang of surplus from the 1980s, and demand was interrupted by economic crises, the first in the US in the early 1990s and the second in Asia in 1997. Both were severe, but not as bad as the 2008 Credit Crisis. In addition there was a fair bit of shipbuilding capacity though nothing like the volume today (deliveries peaked at 41m dwt in 1999 compared with 160m dwt in 2011). So there are similarities.
Back to the Present
So there you have it. In Back to the Future, Marty finally changes the 1950s so that the 1980s is even better for his family. The moral is that what you do today affects the future scenario and that's as true for shipping as it is for time travel. Have a nice day.