Maritime Strategies International (MSI), a leading independent research and consultancy firm has forecast a positive outlook for most shipping markets but the complex and nuanced trading conditions ahead could quickly derail the recovery.

In an article by Director Dr Adam Kent MSI notes that Compound Annual Growth Rate for seaborne cargo growth showed improvement almost across the board between 2013 and 2017 and will be equalled or bettered over the next four years for all sectors, except crude oil and LPG.

However the improvements come with caveats, including more complex and diverse trade routes, shifting bilateral relationships and national policies that will impact front and backhaul business.

“To illustrate the changes taking place, we used our proprietary models to rank significant bilateral trades by rate of growth in the last five years and the next five. Many of the fastest growing trades are on routes which did not see significant growth over the last five years,” explains Dr Kent. “Across all shipping sectors China remains critical to the demand side equation over the next five years but politics and policy are likely to play an increasing role.”

Thanks to lower than expected deliveries and robust scrapping, MSI predicts fleet growth levels close to or less than 2.5% over the next 2-4 years, providing good news for market balances and shipyards continue to manage underutilised capacity with deliveries outpacing new contracting.

“In terms of the earnings outlook a snapshot of the MSI forecast shows almost all vessel types at the bottom of the trough or moving up, with LNG carriers in particular leaping ahead in recent months,” adds Dr Kent. “But how owners will view prospects for 2018 depends very much on timing. An assessment of break-even levels when comparing a five year old vessel bought in 2012 or a 10 year one old bought last year show that the better result was to be patient.”

Earnings for bulkers and containerships will show marginal increases on an annual average basis this year, with sustained better rates on containers post-2018. This generally rosy outlook comes with a warning, which is that for the recovery to continue the brakes need to stay on new vessel contracting.

“The current wave of optimism evident in the shipping markets appears justified, but this outlook is not without risks. A rush to over-ordering could jeopardise the recovery within a couple of years and geopolitical factors will certainly play a part,” concludes Dr Kent. “So while many owners will have the champagne on ice, when to open it will depend on their ability to judge the market correctly and capture the best returns.”