HISTORY doesn’t repeat, it rhymes, and today’s energy shipping boom is rhyming loudly with the 2003-2008 supercycle.

No one quoted Mark Twain’s aphorism on history at Marine Money Week, held on June 15-17 in Manhattan, but comparisons of the two cycles came up repeatedly.

Rates and asset values are sky high, as they were two decades ago.

According to Matthew Freeman, vice president of valuation and analytics at Veson Nautical, VLCC asset values are getting close to the 2000s peak and LR2 values are higher. “We have surpassed, in some ways, the 2008 supercycle,” he said.

The orderbook is massive today, just as it was in the 2000s.

“If we compare the orderbooks, they’re very similar,” said Adam Kent, managing director of Maritime Strategies Inc. “If anything, the orderbook today is a little bit more frontloaded than it was back then.”

According to MSI data, orders placed in 2003-2008 totalled 586m gt, versus 622m gt in 2021-2026.

But the context of the 2020s orderbook contrasts with the 2000s.

“The orderbook today represents around 20% of the vessels on the water. Back in 2008, the orderbook represented 50%, so there is a huge difference. We also have more older vessels in the fleet,” said Kent.

Shipping debt and owner leverage

Another historical rhyme: shipping debt is cheap and extremely plentiful. Some shipping banks are “chasing margins down”, said Christos Tsakonas, global head of shipping at DNB Bank.

Lending margins were extremely low in the 2000s, as they are today, but shipping borrowers were highly levered two decades ago, causing a wave of defaults after the 2009 global financial crisis.

Today, shipowner leverage is historically low. The banks competing on margin are doing so because cash-rich owners prepaid much of their legacy debt.

“If you look at the cash we generate and the capital structure of shipping companies, and if you look at this industry without having its history in mind, you’d think this was a low-risk industry,” said Tsakonas.

“We are in an unprecedented position in shipping, because you have companies that are extremely strong on the back of the last five years of super-strong cash flows,” Tsakonas said in an interview with Lloyd’s List.

He confirmed that it’s not just listed shipowners that have low-leverage balance sheets, it’s private owners as well. “In some cases, private companies are even stronger,” he said.

“The market will turn, and when it does, shipping companies are much better equipped to deal with the turn of the market than they have ever been in the past.”

Geopolitical disruption to the rescue

No one speaking at Marine Money predicted a downturn anytime soon. There was no fear in the room. The expectation is for ongoing rate and asset value strength.

In addition, one of the key differentiators between the 2000s and 2020s cycles — geopolitical disruptions — could affect the duration of the next downcycle.

Disruptions are much more frequent, and they have persistently rescued shipping markets over recent years.

When there is a downturn, owners flush with cash should be able to survive until the next disruption, assuming the future event is positive for rates and does not cause a global recession.

“Perhaps the most important thing that differentiates [this cycle from the 2000s] is what I refer to as the cocktail of contributors,” said Freeman. “Over recent years, we’ve had wars — both physical and trade wars — sanctions, tariffs and Covid-19. All of these things put together have compounded.”

According to Lars Barstad, chief executive of Frontline, “We were in the period of globalisation since the 2000s when China joined the WTO. Now, we’re in a different mode.”

Jerry Kalogiratos, chief executive of Capital Tankers, said, “In the 1990s and 2000s, shipping was in a way dislocated from geopolitics. We had some activity, but nothing like what we experience today.”

According to Omar Nokta, shipping analyst at Clarksons Securities, “I always used to say that shipping had a front-row seat on geopolitics. Now it’s not a front-row seat. Shipping is actually living geopolitics day by day.”

Kalogiratos said, “We should forget what we knew over the previous decades and realise that this is the way it’s going to work going forward.”

Transition to multipolar world

The rise of geopolitical disruptions that support freight rates coincides — and may well be caused by — a fundamental shift in the global order.

“We are living through a key transition moment: the transition to a multipolar world,” said Jacob Shapiro, director of geopolitical analysis at The Bespoke Group.

“We have been living in a unipolar world for the last 30 to 40 years. The United States has been the dominant political, cultural, military, economic and trade power. Before that we had a bipolar era, with the Soviet Union on one side and the United States on the other.

“We are moving towards a multipolar world with competing great powers, rising and falling great powers, and spheres of geopolitical influence and trade.

“None of you and none of your competitors have lived through a multipolar era, because the last truly multipolar era was in the 1890s.”

Shapiro said, “When you are thinking about the world today, rather than one global undifferentiated marketplace, making supply chains as lean as possible, driving down margins as much as you possibly can while still maintaining the ability to function, you should think instead about the world as competing spheres of geopolitical and trade influence.

“It’s no longer about accessing the global marketplace and everybody playing by a standard set of international laws and rules backed by a global hegemon.

“All the rules are going to be determined by who the hegemon is in the space you’re operating in, and the relationship that your government has with the government you’re transacting with. The place where you’re going to is going to matter in an incredibly meaningful way, more than it has mattered for a long time.

“The folks that are going to be successful are the ones who stop assuming the old world of globalisation is coming back and see the world as it is, and see the opportunity behind every single disruption,” said Shapiro.