IF THE old saying that shipping is the bloodline of global trade holds true in 2018, owners will finally welcome the long-awaited year of recovery — albeit cautiously.

There are catalysts for a market upturn in nearly all merchant shipping sectors, yet at the same time the fragile recovery could be easily derailed by continued fleet growth and macroeconomic risks.

For now, the most cited reason for optimism, namely improving global economic prospects, is still there, supporting underlying confidence among owners.

The latest forecast of the International Monetary Fund puts the world’s economic growth rate next year at 3.7% in 2018, compared with 3.6% in 2017 and 3.2% in 2016. Global growth of real gross domestic product is projected to accelerate to 2.9% next year from 2.7% this year, according to the World Bank.

The Organisation for Economic Co-operation and Development also expects global growth to go on an upward trajectory in 2016-2018.

The momentum is widespread among advanced and emerging economies, except for Brexit-plagued Britain, the forecasters said, painting a rosy outlook for general maritime trades because a broad recovery tends to favour shipments between regions.

But there are also risks. The World Trade Organisation said the growth of global merchandise volume should fall to 3.2% in 2018 from 3.6% this year, although added that the expansion could be as much as 4.4% or as little as 1.4%. Higher base, tighter monetary policy in developed countries and Beijing’s efforts at reining in fiscal expansion and easy credit are behind the deceleration, the WTO said.

In terms of seaborne trade, Clarksons has predicted an annual growth of 3.5% next year, lower than the 2017 level of 4.1%, but higher than the 10-year compound annual growth rate of 3.1%.
The dry bulk shipping markets are about to enjoy their best trading periods since 2013-2014 — but it remains to be seen whether owners can really make net profits.

The easing oversupply has given owners hope, because some analysts predict net fleet growth of less than 1% in 2018 if scrapping picks up ahead of new International Maritime Organization rules taking effect.

However, some other estimates are more conservative. The trading fleet’s capacity expansion rate could still be as high as 4.2%, compared with 3.3% this year, according to LLI, driven by deliveries in the segment of 200,000 dwt vessels or larger.

There are also mixed signals on the demand side, with iron ore and coal imports to China, the world’s largest dry bulk trading nation, supported by healthy economic growth but potentially curbed by environmental policies.

Jefferies has predicted global dry bulk trade growth of 2%-3% in 2018, similar to this year’s level.