Fast forward to today and, at least on paper, shipping should be celebrating harder than ever. The ClarkSea Index has reached a record nominal high, with tanker earnings in particular climbing to levels that would have seemed implausible only a few years ago. This week, the Baltic crossed into $1m-plus territory for the first time.
Speaking at Capital Link in London this week, shipping economist Martin Stopford estimated that the industry has generated around $3.1tn in cash since 2021 — more than during the celebrated 2004–08 boom.
So where is the excess? Where are the three-hour lunches, the reckless ordering sprees, the owners buying ships at lunch and flipping them for millions by dinner? This does not feel like 2007.
Part of the answer is that the source of today’s prosperity is fundamentally different. The last supercycle was driven by an intoxicatingly simple story: China.
China was industrialising at extraordinary speed. Its demand for iron ore, coal, oil and manufactured goods seemed limitless. Owners could look at surging trade volumes and persuade themselves that tomorrow would inevitably be bigger than today.
This time, the money has come from something far less comfortable: Covid disruption, sanctions, Russia’s invasion of Ukraine, Red Sea diversions, trade wars, shadow fleets and Hormuz. Shipping is earning extraordinary sums because the world has become extraordinarily inefficient. That may be profitable, but it is hard — and perhaps indecent — to celebrate.
It also makes owners wary of projecting current earnings too far into the future. A ceasefire can destroy tonne-miles almost as quickly as a war creates them.
There is another important distinction. That $3.1tn has not arrived in one synchronised wave. Containers had their moment. Then car carriers. LNG and LPG enjoyed spectacular runs. Product tankers followed. Crude tankers are now minting money. Dry bulk has had its own bursts of strength. This has been a rolling supercycle, not one vast, industry-wide party.
Owners have changed, too. Balance sheets are stronger. Leverage is lower. Debt has been reduced. Dividends have risen. Share buybacks have become routine.
Before the financial crisis, rising ship values encouraged owners to borrow more to buy more ships, whose rising values in turn allowed them to borrow still more. It was a magnificent machine — until it wasn’t. Today, there is far more cash in the system and far less need to impress a banker.
Then there is the biggest investment headache of all: nobody knows exactly what ship to order. An owner placing a capesize order in 2006 had a fairly clear idea of what propulsion system that vessel would use for the next 25 years. Try making that call today. Owners have the money. What they do not have, necessarily, are the answers. That may be the defining difference between these two supercycles.
The boom that ended in 2008 was powered by confidence in the future. This one is powered, increasingly, by uncertainty.
