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Shipping and the sun spot theory of economic cycles
01 Sep 2007
In the world of shipping we have eternal optimists who would have us believe that growth in trade has reached runaway proportions and will not stop in the foreseeable future. There is hardly a week that goes by without a leading senior executive telling us that double digit growth in container volumes is unstoppable and that the rationale for ever larger ships cannot be questioned. This said, they go on to warn us of ever increasing congestion. The fact that these very same large ships discharging 3,000-4,000 plus containers at a time at a very limited number of ports is one of the root causes of that congestion is not discussed.
The shipping industry is either wildly optimistic or depressingly pessimistic. In 2001-2002 there was nothing but doom and gloom and the end of the world was nigh, but then the results of globalisation took hold and in a mere two years the Executives dismissed the past. Today they appear to have forgotten it altogether in their view of the future.
Do the words ‘slow-down’ or ‘recession’ ring a bell? Do we really believe that growth is never ending? Or do we believe in the Sun Spot theory of economic cycles which works on an 11-year wave? The coincidence of a peak in sun spot activity is linked to the 2001 downturn. We are currently in the low activity phase, which explains the boom.
Once liner shipping had flexibility, today with the big post-panamax ships that is gone. Is anyone planning scenarios of a slow down in growth to single digits? As an economist, I do hope that the top 10 operators, who control so much global capacity, do have back-up plans in case things do not go as expected. If not, get in touch.
Ben Hackett
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