Britain's Clarkson, the world's largest shipbroker with 174 years of history, posted record results for the first half of this year, powered by an unusually hot tanker market. Clarkson, which brokers everything from chartering and secondhand sales and purchases to newbuilding orders, is seen as a gauge of how actively money is moving through the global shipping and shipbuilding markets.
What changed the market landscape this year was the Hormuz crisis. When the Strait of Hormuz, through which about a quarter of the world's seaborne oil transactions pass, was blocked, freight rates soared, and secondhand ship deals and newbuilding orders became active. As financial transactions to hedge against surging rates also increased, the shock from Hormuz even altered the flow of money in the global shipping and shipbuilding markets.
◇ Broking profit jumps 55% on Hormuz shock
According to Clarkson on the 7th, first-half revenue rose 39% from a year earlier to £413.5 million (about 800 billion won). Adjusted pretax profit, excluding one-off items, increased 56% year over year to £61.5 million (about 118 billion won), marking a record first half. In particular, operating profit in the broking institutional sector, which handles ship chartering, secondhand transactions and newbuilding contracts, jumped 55% from a year earlier to £64.8 million (about 124 billion won), setting a new record high.
Brokerages like Clarkson typically take around 1.25% of freight as a fee for charters and about 1% of the ship price for sales and purchases. When freight and ship prices rise and transactions also become active at the same time, brokerage revenue grows. After the Hormuz crisis, increases in rates and ship prices and a rise in transactions appeared all at once. Choi Jae-seong, head of Clarkson Korea, said, "The market before and after March is completely different," adding, "As surging rates pushed up secondhand prices and newbuilding orders in turn, the entire tanker market expanded rapidly."
The shock from Hormuz showed up most starkly in the very large crude carrier (VLCC) market. VLCCs, which carry about 2 million barrels of crude at a time, saw demand surge as it became harder to move Middle Eastern crude. As Asian countries shifted their crude procurement to farther sources such as the United States, voyage distances lengthened, and the time it takes one ship to complete a trip increased. More ships were needed to move the same amount of oil. VLCC rates, which had been $50,000 to $60,000 per day before the strait was blocked, jumped to around $200,000 within a week of the crisis.
Secondhand ships, which can immediately capture high rates, also became "hot commodities." The price of a 15-year-old VLCC jumped 33%, from $75 million in January to $100 million in July. Compared with newbuilding prices rising 1.6%, from $128.5 million to $130.5 million over the same period, secondhand prices outpaced newbuildings by a factor of 20. New ships take years from order to delivery, but secondhand vessels can sail right away, making some 3- to 5-year-old ships more expensive than newbuildings.
As immediately available secondhand ships became scarce and prices surged, owners turned to new vessels. Global VLCC newbuilding contracts reached 156 ships in the first half, already more than double last year's annual total of 73. First-half orders alone broke the annual record for VLCC orders since 1973. As rates spiked in a short period, derivatives transactions such as forward freight agreements (FFA), which shippers and cargo owners use to reduce price risk, also became active in tandem.
◇ Polarization in newbuilding orders on energy security… ammonia carriers stall
While demand for transporting crude and liquefied natural gas (LNG) has grown due to supply instability, orders for ships carrying ammonia, a clean fuel, have been comparatively sluggish. Even in the ship market, order momentum has diverged depending on the energy source.
Hanwha Ocean said on a conference call on the 27th that demand for LNG carriers and VLCCs is supported by stronger energy security, supply chain reconfiguration and longer-haul transport, but noted that for very large ammonia carriers (VLAC), a next-generation clean-fuel vessel, "latent demand exists, but with infrastructure and market formation delayed, it will take time for orders to become visible."
The industry expects that even if transit through the Strait of Hormuz returns to normal, the oil and gas transport market will not immediately revert to its prior state. Procurement sources for oil and gas have already changed, and ships have shifted to longer-haul routes accordingly. Separate from the resumption of transit, it will take considerable time for supply chains and ship deployment to find a new balance. Choi said, "I think the high volatility in the shipping and shipbuilding markets will continue through the second half," adding, "Trump's cease-fire negotiations are a variable, but it will be hard for the market to change quickly."