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Supply & Demand

The attached PowerPoint slides highlight the nature of the supply and demand curves for shipping.  These curves have a similar shape to those seen in the power generation markets.  Space capacity can be abundant - but when it becomes scarce in the short term, there just isn't any more supply to be had.  The same holds true for bulk shipping.

Today it takes 3 years or so to order a new VLCC and have it delivered.  Since supply and demand change on a daily basis, tight market conditions cannot be solved from the supply side.  The increased demand considerations that led to the tight market can only be solved through the bidding process, i.e. higher rates.

Strongly recommended reading on this and many other shipping topics is Martin Stopford's "Maritime Economics".  This is must have pulp for anyone trying to make money within shipping.