Mr. Lewis: Indeed shipping is a highly cyclical business. However in, answering your question about where we are in the cycle, it depends on which sub-sector of the maritime industry we are discussing. Across the maritime industry, there are three major sub-sectors that I will focus on today. Those being the dry bulk sector, the tanker sector, and the container shipping sector. While it is difficult to know where we are in the cycle until we look back historically, based on current freight rates, both the container and tanker sectors look to be near their cycle troughs, while the dry bulk sector looks to be near mid-cycle. Turning to asset prices, the containership asset values look to be near trough levels, while both dry bulk and tanker asset values are somewhere around mid-cycle levels.
TWST: What's the difference, just what they haul?
Mr. Lewis: Yes exactly, and as such they have different demand drivers, different points of origin and different end users. While all three sectors are tied to global GDP growth, we only focus on global GDP growth for the container shipping industry. The container shipping industry primarily involves the transportation of consumer and industrial finished goods. The major container shipping trade routes are the Far East to Europe, Far East to North America, and Intra-Asia. Shifting gears to the tanker sector we focus on global oil demand growth. The tanker sector involves the transporation of crude oil and petroleum products. The major exporting regions are the Middle East, West Africa, and South America and the major importing regions are North America, Europe, and Asia. Lastly, the dry bulk sector involves the transportation of dry bulk commodities (primarily iron ore, coal, grain, and other minor bulks). We focus on global and emerging market industrial production as the primary demand drivers. The major exporting regions of dry bulk commodities are Australia, South America, North America and South Africa. The major importing regions are China, Other Asia, and Europe.
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