Ship Orders Increase as Industry Considers Supply Chain Disruptions

Shipowners have reportedly ordered a record number of new cargo vessels according to the BBC’s World Business Report.

The rise in new orders is not only indicative of the growth of the shipping sector but also of various changes in the sector seen over the last year. Not only have shipping companies seen a surge in revenues – which has prompted investment – but longer shipping routes caused by geopolitical tensions are also understood to be an important driver of new orders as existing vessels get used up for longer periods.

Last year of course, headlines were dominated by supply chain disruptions in the Red Sea. Given that the narrow stretch between the Red Sea and the Gulf of Aden acts as a pinch point to global commerce with around 12% of global shipping passing through it (along with 9% of the world’s natural gas and around 10% of the world’s oil exports), Houthi attacks on ships caused major issues to global shipping routes.

Following such attacks, players such as Mediterranean Shipping Company, Hapag-Lloyd, and Maersk diverted ships away from the Red Sea and Bab al-Mandab strait instead diverting them around the Cape of Good Hope. Accordingly, the average ultra large container vessel took an extra 9 days to travel from ports in Taiwan, Shanghai and Beijing to Rotterdam since they were travelling some 25,000km as opposed to 18,520km.

According to one expert speaking on the BBC’s World Business Report, the rise in orders therefore represents how shipping lines have “taken the initiative to mitigate a long-term closure of the Red Sea.”

Sticking with shipping, there has also been a rise in pricing across the industry recently. According to Bloomberg for example, 40-foot containers between Asia and the US’ West Coast rose 50% between the first week in December and first week in January.

The key consideration however is that the lag time between new orders and cargo vessels being birthed is typically 18 months, thus such a long-term strategy will not act as a short-term fix. Threats of strikes at US East and Gulf Coast ports also keep the industry on edge as we enter into a new year.

With just 12-days to go until President Elect Donald Trump is inaugurated, all eyes were on his news conference at Mar-a-Lago yesterday afternoon. Here, the soon-to-be-president outlined some of his key aims for the administration alongside characteristically outlandish statements like turning Canada into the 51st State and his desire to control Panama and Greenland.

In the case of Greenland, he stated that the autonomous Danish territory was essential for America’s economic security, indicating that he would ramp up tariffs to bolster his ability to negotiate. (As an interesting point to note, In the aftermath of the Second World War, President Truman reportedly offered Denmark $100 million for the island, so Trump’s vision is not wholly unprecedented).

Regarding Panama, Trump said that “The Panama Canal is a disgrace, what took place at the Panama Canal. Jimmy Carter gave it to them for $1, and they were supposed to treat us well. I thought it was a terrible thing to do”.

Chiefly then, the Press Conference reiterated Trump’s ‘MAGA’ and ‘America First’ stance, as he criticised the US’ various trade deficits (particularly that with Canada and Mexico) and lamented over what he considered to be overly stringent environmental regulations. As we looked at yesterday, writing on Truth Social, Donald Trump said that “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders.”

He also overemphasised the US’ trade deficit with Canada as being $200bn, when it is more widely understood as $41bn.

As talk turned to Mexico, Trump also said that he intended to rename the Gulf of Mexico to the Gulf of America.

There were also some manifestly false statements. One such instance was Trump’s assertion that “According to Gallup, the American people’s confidence in the economy has just surged to the highest level in history.” In reality the survey – which started in in the 1990s, peaked in January 2000, when the index reached 56. It is now at -14.