13 November 2018
- Tonnage supply has rapidly expanded in the last 2 weeks, which is starting to apply downward pressure on the rates. This is clearly visible in one of the key functions of the cargo Carrying Capacity (CCC), namely the fleet turnaround time. We have recorded a relatively high fleet turnaround coefficient this week. Since higher turnaround time = higher available capacity, our model reads this as a market-negative development.
- Demand for freight is weakening and will likely weaken further later in the month. Demand for oil and oil products is low for the season. On top of this, OPEC is mulling the possibility of further output cuts. Demand for shipping capacity is likely to suffer as a result. This situation is clearly demonstrated by the Implied Forward Demand Index below.
- Our macroeconomic view has deteriorated further. Back in October we were particularly worried by the weak lending activity for short-term trade finance. Our concerns have re-appeared in November as we register net outflows of credit which is a price negative development. On the positive side is the rising energy intensity which justifies to some extent the recent rally of the VLCC market.