Bunkerworld recently conducted a survey. We asked a wide audience from the bunker and shipping industry when the shipping industry will return to its  pre-2008 glory days in terms of freight volumes and new vessel orders. Of course, all the responses to our questionnaire are just 'feelings' and ideas, but there is a lot of agreement about some time-lines for recovery. I want to use the survey to make some further observations about the future; I am not making predictions, just looking at what is happening and drawing some conclusions. I hope you find them interesting.

There are a few optimistic people who think the shipping sector will recover by the end of 2010, and that the recovery is already in progress. While some parts of the world may indeed be peeking up again – maybe Germany, for example – I think most people will consider these optimists to be wearing rose-tinted glasses or even to be, like ostriches, sticking their heads hopefully in the sand! By a small margin in the poll, the biggest slice of of opinion, 42%, is those who think the recovery will come between 2011 and end-2012, while 40% think it will be between 2012 and 2015. That is 82% who expect the downturn to last at least another two years. Most of these think the bottom for the shipping industry has not been reached yet. As you would expect, a small minority of real pessimists say recovery will never happen (4% of the total).  

But whatever you think about other people's opinions, there is a big question now not about the 'when' of an upturn, but more basically about what 'recovery' might mean. Is there really a 'norm' that we will return to? Or is there actually something else going on in the world economic dynamic?  Personally, I don't think there is any going back now as everything has changed. That's really what I will be writing about in this blog.

In many ways we have seen fundamental changes in world trade and in the banking system that supports it. These are really basic changes and who knows what our industry will look like when we emerge from the present storm. Just recently, the Chairman of one of the world's biggest banks, HSBC, was speaking openly about some very fundamental changes needed in that sector. Just consider that hydrocarbon prices are likely to continue to rise in the medium/longer term – with Goldman Sachs' much derided forecast in early 2008 of a US$200 barrel of oil now maybe not looking so silly if you look ahead.

Alternative power sources (green fuel, kites and all sorts of other ideas that today still look more or less like fantasy) are going to become much more significant in the future when we really do start to face a situation where oil is scarcer and more expensive (it is, after all, a finite resource and add to that the fact that the places where it is found will continue to be politically dangerous hot-spots with terrorist-driven war an increasing threat to supply).  

We will also surely see big changes in world trade, as it strikes home that a lot of what is being shipped around the world now is actually unnecessary and damaging. Vegetables shipped from Africa to Europe bring tons of precious water from a continent that cannot afford to lose it. Shipping lamb and apples from New Zealand to the UK, which grows its own, will soon seem ridiculous. Bringing textiles and garments from Asia to the West, which has its own closer sources of raw material and manufacturing capacity (for example in Eastern Europe), will become less attractive.

One thing seems certain, that eventually – in three years, five years, maybe ten years – the cost of transportation will rise. This may be because oil becomes more expensive, or because international regulation to curb noxious emissions really gets serious, but at some point it will go up and quite apart from moral issues, the cost of transportation will push world trade into different patterns. Surely we will see an increase in coastal and short sea trade, and possibly higher numbers of smaller ships appearing in the world fleet. The economies of scale derived from building ever larger ships – in the tanker, dry bulk and container sectors – makes sense if large volumes are being shipped over long distances. What if that pattern alters? It will not be an overnight change, but I do think we will see this as a long term trend. This will affect the  bunker supply industry directly, and most players with good judgement will be already looking at their future strategies.

As countries and regions begin to adjust their agricultural and manufacturing strategies, so we may well see not just increasing regionalisation, but maybe also a fall in world trade overall. Clearly, these changes will take time to work through, but they will come. The past is now gone and we really are looking at a new era in the not too distant future. Even if one of the predictions above is correct, things will change. Already it is the case that only the really niche operators in the shipping universe are making money. Will small be beautiful again?

Personally, I would like to think that the industry generally may have to become more responsible and take a wider view. If too many people using a swimming pool do not wash before entering, the unwashed will soon start to suffer the effects of their pollution directly just like the responsible ones who do wash. It will become harder in the future just to feather our own nests and not worry about how our activities affect the rest of the industry and the world.

Now turning to the nearer future, whatever one believes the longer term to bring (and I don't expect everyone to agree with me!), it really does look as if the days of cheap bunkers are gone. So there are some serious short-term issues for the bunker supply sector to contend with. With emission controls plus increased refining efficiency reducing supply of residual fuel produced price rises could lead quite soon to a situation where the cost of fuelling a ship will be 70% of overall operating cost. Freight rates may rise at some point, but they are still dragging along the bottom and below levels of operational viability across most sectors, and even if they do go up, bunker prices will surely rise too.  Governments had to step in to save the banks – are they now going to have to do the same to the shipping sector? It's already happening.

So right now there are still huge pressures on the capacity for a ship operator to pay his bunker bills. And this may well not be a short term problem. Like everything else, bunker trading and bunker credit are changing and we need to start thinking of new ways to look at credit rating and reporting in the maritime world. As you can imagine, Ocean Intelligence is already working on radically new developments to assist the bunker industry into the future – they will be announced very soon.