Johannes Haraldsen: Welcome to Morningstar. Today, I have the great pleasure of talking to Europe Market Strategist at Morningstar, Michael Field, about the global shipping market.
Supply chain issues have plagued the container side of the shipping market during much of 2020 and 2021. Has this been resolved, Michael?
Michael Field: Yeah, you're spot on, Johannes. It was a huge issue and something that we talked heavily about over the last year or so. And the short answer is, it's been resolved to a large degree. We're getting back on track is what's happening. If you look at delays to shipping, it's improving, port congestion, also a good measure of this, is also improving. So, the bottleneck is finally becoming unstuck again, but it's probably going to take a few years before we get to that, kind of, pre-pandemic level of efficiency that we were very much used to.
Haraldsen: And on that note, I mean, the shipping market going forward 2023 after some really interesting years in 2021 and 2022, what's your thoughts on that with the changing oil price levels?
Field: So, I think, the good times are over. That's the short answer to that one. Maersk made more in 2021 than it did the previous 10 years combined, and then it made more again in 2022. So, it was completely unheard of. And now, we're reverting back to more normalized levels. The outlook for the year is slightly negative, or for the next couple of years, supply is picking up, demand is falling slightly. So, you're seeing something of an imbalance there. But the good news, like you said, is that oil prices are falling also and that should help reduce the cost base for these firms.
Haraldsen: And I guess the last couple of weeks, we've all seen the headlines about the ongoing banking crisis that started in the U.S. with Silicon Valley Bank and spread to Europe with Credit Suisse. Do you think that the ongoing banking crisis will impact the shipping market?
Field: It's a good point and probably something that hasn't been talked about a lot, but it could have an impact at some point. Ultimately, what we're going to see in Europe and possibly globally now after the events of last week and rising interest rates is a tightening of credit conditions, which could impact vessel buying and things like this over the next few years and banks' willingness to lend to these shipping firms, particularly if we're going into a point in the cycle where some of these firms could be loss making.
Haraldsen: And to wrap it up, what do you see as the biggest threats to the global shipping market? I mean, I'm thinking throughout the year, but also next year, do you see a specific pattern?
Field: There's so many macroeconomic threats at the moment that it's difficult to pick one. But actually, if I had to, it would be something actually more internal and that's the rationality of the industry as a whole. For quite a number of years now, we've had a situation where the companies have operated together to some degree and they haven't brought on too much supply and they've kept that balance quite tight, which has kept shipping rates up, which has helped the companies. But the danger now is that we could go into a period where supply outstrips demand by quite a lot and rates fall hugely as a result. And that's the biggest threat as I see it.
Haraldsen: That's all really interesting. Thank you, Michael, for taking the time. For Morningstar, I'm Johannes Haraldsen.
.jpg)
.jpg)
