By Dr Martin Stopford
If shipping forecasters had a patron saint, it would be Peter. That naughty boy alarmed all the villagers by shouting "Wolf", but when they rushed out to help him there wasn’t a wolf in sight. But in the end Peter was right. The wolf came …and it ate him up. Well, life isn't perfect.
Calling the Shots
Shipping forecasters have to struggle with the same sort of problem. Gloomy forecasts make easy headlines, but they’re often premature. For example in 1972, the year before the last great tanker spike, forecasters predicted recession to 1975, but only months later the tanker market went through the roof. Forecasters were discredited and to celebrate, record orders were placed (the ordering level for tankers in 1973 has never been beaten). But in the end the gloomy forecasters were right. The market collapsed in 1975 and took the best part of 20 years to recover.
Certainly Uncertain
This dilemma is on the mind of many forecasters today. China and the world economy still make good growth stories, but the growth dynamics look wobbly. Although the world economy is growing very fast, the brewing financial problems are reminiscent of the late 1980s. Meanwhile China's imports grew at 18% in 2007, up from 13% in 2006, but again there are real doubts about how long this can be sustained.
Wolfing up the Ships
The underlying volatility of China's growth is apparent from the graph, which shows annual growth of trade since 2000. Until the end of 2002 China's imports were growing steadily at around 60 million tons a year. Then it shot up to 130 million tons in 2004, before slipping back to around 90 million tons in 2005 and 2006. Finally in 2007 it surged up to 130 million tons. To put these numbers in perspective, very roughly 130 million tons of growth represents demand for around for 18 m dwt of ships. A large number, bearing in mind that the bulk carrier fleet only grew by 23 m dwt in 2007. It also ties in very well with the market peaks in 2004 and 2007. It is easy to see the pressure which the trade surge in 2007 put on an already tight shipping market.
Predicting the Unpredictable
But 18 months ago the fundamentals suggested slowing Chinese imports. Pre-Olympic investment was winding down and steel was spilling into the export market. How much steel could the world absorb? But steel supply, like ship supply, takes time to come through the system. Developers have to come to terms with the fact that buildings are harder to sell and it takes time for the escalating steel exports to provoke a response.
Barking up the Wrong Tree
So there you have it. Call wolf too soon and forecasters are in the doghouse. But leave it too late and the damage is already done. As they gaze at today’s still healthy rates, shipping analysts must be reminded that, as in 1973, the show ain’t over till the fat lady sings. Have a nice day.
Editor's note: Actually, the wolf ate the duck, not Peter! At least in the Peter Tsiakowsky version 
