It’s difficult to predict what lies ahead but it’s illuminating to revisit what we said at the beginning of 2022. By and large, we were right to say that 2022 would be a strong year for shipping and ship owners. The predicted rise in ship casualties has not quite materialised as predicted and this seems likely to be down to the ongoing drive towards safer operation of ships.
One thing we could not have predicted in January 2022 was the Russian invasion of Ukraine. The impact of that on world energy prices has been felt in the shipping markets with freight rates increasing to accommodate higher fuel costs and heightened demand. Going into 2023 the challenge facing most ship owners is the possibility of a recession and its impact on trade and thus on demand for shipping. This is already being felt in the container market where rates have plummeted. The silver lining of course is that container operators like Maersk and Hapag Lloyd have banked bumper profits and now have a formidable war chest going into 2023.
On balance, our view is that 2023 will be another good year for shipping markets. In our view, much of the growth could lie in Asia buoyed by the Chinese market’s reopening after Covid restrictions have been lifted. The China consumer market is vast and so this could support freight rates through 2023.
On the legal side, we predict an uptick in ship building related questions as discussed in our recent post. That’s particularly so in relation to container ships where demand has fallen but also possibly to tankers where prices have risen but market rates may cool. Shipbuilding is likely to benefit from the new CIL regulations and it remains to be seen whether these regulations might lead to disputes between ship owners and charterers. Early indications are that charterers are not happy with the BIMCO CIL operations clause and we are already seeing more bespoke clauses being adopted in new charters to address this issue. We also predict more issues relating to sanctions as ship owners and operators seek to navigate an increasingly regulated environment.
We also predict that more European banks will return to shipping in 2023 and a move away from the sale and leaseback structures utilised by many Western ship owners seeking finance from Asia. That seems to be tied to higher interest rates and perceived lower risks. It seems that the unpleasant memories of 2008 have finally been forgotten and a new wave of finance and equity is now seeking to get involved in the shipping business.
To sum up, we predict that 2023 will be a good year for shipping and we look forward to assisting our clients when it comes to the inevitable legal issues that will arise.