Peer's Market Predictions for 2023 at the "Big Bottle Wine Tasting" with Nippon Diesel's Stefan Gall
Market Predictions are like predicting the quality of wine before the harvest started (optimistic, realistic, pessimistic)
We know the present market conditions (terrain), the existing fleet and the additional tonnage on order (grapes).
We also know the players in the market (winemakers), and we know that cargo is king (wine drinkers).
What we do not know drives the markets. The weather implications, congestion, and inefficiencies in port.
Total amount of freight, world trade and the related ton-miles. Oil price and environmental challenges.
Currencies and finally geopolitical changes or even hostile actions changing trade routes.
Fleet Growth +++
World Trade -+-
Ton Mile Effect ++-
Oil price , NRG costs ---
General Sentiment -+- (9+/12-)
The art of reading markets is like the art of making good wine.
It takes experience, good ingredients, and a bit of luck.
But luck alone will never make a good wine or good market reading.
A few rules may help to read markets properly.
Look at the actions of the big boys.
Never trust market reports without knowing who wrote them and what were the intentions.
Don’t act like a lemming. If you do follow a market trend, make sure not to be the last to follow.
Entering a trend at a later stage, make sure you have an exit strategy in place.
Investment risks should be kept to a minimum.
Know of all risks and calculate the worst-case scenario.
When in doubt follow the 50/50 rule or stay away from investing.
NEWBUILD PRICE CHANGE SINCE THE START OF 2021 (till May 2022)
15,500 TEU - 45%
2,750 TEU - 40%
Ultramax - 34%
VLCC - 31%
Capesize - 29%
MR - 21%
LNG - 18%
Dry Bulk Fleet Growth – knowingly until 2025 the dry bulk fleet will grow by 7% after slippage and demolition it reads about 3% p.a.
Currency – strong US Dollar dominates the market (less raw materials will be traded), Euro, RMB, JPY and KOW at very weak level.
Commodities – Iron Ore USD 100, Coking Coal USD 285, Thermal Coal USD 390, Steel Plate RMB 4,100, Scrap USD 630, Crude USD 92 (all about)
Dates to remember:
Sept. 2003 – Oct. 2008 BDI excess 2350 for 60 months (longest period in history)
2019, Dec. 5th Outbreak of Covid (officially in China)
2020, May 11th – BDI 407 (low Score; lowest in history 2016, 10th February at 290)
2021, Oct. 4th 2021 – BDI 5526 (high Score, highest in history 2008, May 20th at 11,793)
2022, April-June BDI excess 2350 for 3 months (shortest period) ; May 16th – BDI 3344 (2022 high and start of the falling market)
1985-2022 so far only 4 periods with BDI in excess of 2,350 points for longer than 3 months (4/2009 – 7/2010 = 15 months; 4-12/2021= 9 months).
Total 87 months excess 2,350 points BDI in 37 years (367 months),
My personal outlook into 2023 is positive.
I believe the war in the Ukraine will soon be finished. The rebuilding of the Ukraine will create certain trade surplus.
In China, the new 5-year plan will settle in as of next year. First assembly of the CPC Commercial Board in December.
Thereafter we know more clearly, how much stimulus the Chinese will put into the market.
China will be a smaller factor in world trade but will continue to play a major role buying raw materials and agricultural products.
We will learn to live with Corona, even the Chinese will stop zero Covid policy.
I assume we will have more disruptions by weather and inefficiencies in ports.
Globalization will not come to an end, but certain industries may be reinvented in the western democracies.
The Green Movement and the efforts for less dependency on fossil fuel will continue.
Generally, I foresee a very stable MPP and General Cargo market, a stable bulk market (with certain challenges throughout the year).
The larger vessels may be up against some negative market fluctuations. Whilst the Handysize Bulkers may benefit from smaller cargo sizes.
Strong LNG and Tanker Market. PCTC as well as Chemical Tankers should expect good markets.
The Container market will suffer for the next few years. The big Liner Companies will not suffer too much. They have deep pockets and
earn from servicing the entire supply chains. It will be the tramp owners which will suffer most and the smaller Liner Companies.
Above is a general outlook. It is my personal reading of the market combined with my gut feel. I am not claiming to be right,
but want to share my ideas with you. Hope you enjoyed it.
“There are decades, when nothing happens; and there are weeks when decades happen.”
-Peer Gröpper, 27th October, 2022