The prices in the commodity super cycle peaked in 2007, dipped strongly in 2009, recovered and are now going down again for many years, according to researchers of Columbia University and Citigroup. The mysterious temporary price recovery in 2010/2012 cannot be explained very well by conventional economic theory, but it can be understood if you include the so-called Lehman Wave. The Lehman Wave, which was first described  in 2009, can be defined as a global destocking wave that went through the industrial supply chains after credit became scarce in the panicky period after the Lehman Brother bankruptcy (hence the name). Due to the delays in the supply chains, over-eagerness in the speed of destocking and the cumulative effects thereof, the destocking went too far and the industry had to re-stock. Especially for upstream commodity suppliers it resulted in enormous swings in demand, with the deepest point early 2009, a recovery late in 2009 and a second dip in 2010. As a result the commodity supply/demand balance changed from a shortage in 2007 to oversupply early 2009 and changed back to a shortage again mid-2010, causing both the price dip and recovery. Click here for a blog with more information.

It takes years to build a ship. This is a problem because all shipping companies order new capacity when demand for cargo goes up. When cargo volume goes down as in 2008/2009, the ships that were ordered before continue to come in, creating a huge overcapacity. So the shipbuilding cycle is no different from the well-known Pork cycle. We may expect that when cargo demand will pick up in the future, the ordering of new ships will start too late and there will again be a temporary shortage when the current overcapacity has been filled and new ships have not been built yet. This will create a new rush in shipbuilding, which will result in a new overshoot some years later. A system dynamic model with global trade as input could show how much ships should be built, helping wharfs, suppliers, shipping companies, customers and investors. 

It may seem strange that investors and shipping companies continue to behave like this despite the obvious cycle, but the Pork cycle was first described in the 1920ies, and is still there. In the period 1990 – 2007 global cargo capacity went up much faster than global trade, both well documented and visible. At this moment the price of shipping volume is dropping dramatically and the price to book ratio is below 1. Investment groups like the Dutch Scheeps-CVs are going bankrupt in numbers (article in Dutch). A simple model with global trade as input could show how much shipping capacity will be needed, and although it may not dampen the cycle, it will help the wharfs, suppliers, shipping companies, customers and investors that study it.