Thread by @AllVentured

1/ 15 months ago I penned an article entitled "Welcome to the New Container Shipping Supercycle" questioning the premises of popular conceptions of supply and demand at the time.

Some reflections on what I got right and what I got wrong.

A 🧵...

seekingalpha.com/article/439810…

2/ New ship deliveries are not hard to predict 2 years into the future as it takes upwards of 18 months to build most ships from contract date. A dearth of new ordering through late 2020 ensured insufficient supply coming to market to through 2023 to meet demand.

3/ I was also correct that there was limited capacity to add additional megamax ships in 2024.

What I completely underestimated was the enormous demand and shipbuilding slot availability for new panamax ships in lieu of available megamax capacity.

4/ And although I also correctly predicted that it would take some time to develop new midsize designs, the demand and slot availability for these (in lieu of now full panamax capacity) once again surpassed expectations.

https://twitter.com/Alphaliner/status/1455880385326370819?s=20&t=LqIkr5mYFMv3Ajy5T70psQ

5/ The relentless hunting down and conversion of all available shipbuilding capacity to new boxships has taken most by surprise.

With a 25% orderbook it is far less certain that ship supply will remain tight into 2025 and hard to say what will happen with rates in '24 - '26

6/ FAR more interesting is what the implications are for the worlds other largest fleets #drybulk and #tankers whose order books are at multi decade lows and almost non existent deliveries scheduled for 2024.

7/ Monitoring delivery dates for newly contracted ships agrees with the anecdotal evidence from industry insiders suggesting that there is very little capacity for large ships of any type left in 2024:

https://twitter.com/ed_fin/status/1515386747697479691?s=20&t=LqIkr5mYFMv3Ajy5T70psQ

8/ With impending EEXI carbon efficiency regulations greatly reducing effective fleet capacity beginning in 2023, it is becoming all but certain we see negative fleet growth in 2024 without extremely high rates to keep old inefficient ships out trading. splash247.com/less-than-25-o…

9/ Seeing as the commodities shipped on #drybulk and #tankers are very inelastic (people must eat and power homes) and the freight portion of landed cost low, I see commodity trade continuing to grow irrespective of the rising cost of freight due to a static or shrinking fleet.

10/ So although the #boxships outlook mid-decade is in question due enthusiastic ordering, it has made supercycle call on #tankers and #drybulk far easier and more certain than the one I made on boxships 15 months ago.

11/ To me it is no longer a question of if we will see high rates in the coming years, but more questions of how forward looking the market will be, what interim volatility looks like and what the size and likelihood of the tail risks are.

12/ I suspect the largest and highest quality names like $SBLK $GOGL $FRO $EURN will do very well in the coming years as a buy and hold barring the very real possibility of global recession.

13/ For those that take the time to understand the more idiosyncratic names in #tankers and #drybulk, can stomach the volatility, and manage the associated risk, I suspect there could be an opportunity for truly exceptional returns like those seen in #boxships in the last 2 years