According to Mr. Thomas Chasapis, Allied’s Research Analyst, “it may sound repetitive, but we should take into account more and more the idea of a shifting market regime, something that may be missed by the classical measurements of market performance and dynamics. Having used the average FFA closing levels of the forward 3 years, as well as the asset price levels of 5-year-old units, the sustainability of the upward trend noted in the graph seems to be a major break from the “normality” of the past 10-12 years or so. In the past, it would have been hard to see such a well-harmonized hike in both asset prices and FFA rates during a market recovery. The typical pattern would be to note some slight disconnections and time-lagged reactions across these two markets. This time around, most of the main market indicators are pointing in the same direction and relatively attuned at the same time. Valuations are climbing, freight returns have shifted previous floor levels and the overall market’s size & capitalization has made a rapid upward shift”.
“Yet all this can’t be taken as concrete evidence of where the true long-term market trend is, nor as to how sustainable the current market conditions are. All that we can see right now is that the market still holds ample optimism in both the paper and actual market as to the earnings potential of the coming years. This collective view could well hold a fair bit of sound premise given what we are seeing from the side of tonnage supply in the market and current newbuilding orderbook levels. Yet one must not forget the overshadowing risk hovering over the market right now, as central banks around the world look to tame the rapid levels of inflation and early signs of a slowdown in economic activity, while securing access to vital raw resources”, Chasapis concluded.
