The last three months saw “some of the worst” conditions “in living memory” in the multipurpose and project cargo sectors, with little chance for any significant improvement until the end of 2017, according to shipping research and consulting firm Drewry.
It’s not only container operators that are having trouble this year.
“The last three months have been some of the worst the multipurpose and project carrier sector has endured in living memory. The breakbulk and project cargo sector remain weak, with little suggestion that volumes will improve significantly until the end of 2017,” according to the latest Multipurpose Shipping Market Review and Forecaster report published by the London-based shipping consultant Drewry.
The operators of breakbulk ships are being squeezed with increased competition from both the operators of container ships, who through the use of equipment such as flat racks and open top containers can handle oversize cargo, as well as operators of simple bulk ships.
“Rates have continued to slide to barely cover operating expenses, as the competing sectors of container ships and bulk carriers have weakened the MPV (multipurpose vessel) market ever further in their search for market share,” said Drewry. “The container lines lost billions of dollars as they filled slots no matter what, whilst the handy bulk carriers struggled with the Baltic Dry Index (BDI) reaching record lows of below 300 index points on the back of continued oversupply and weak demand.”
With the collapse Hanjin Shipping, there has been some recovery in container freight rates on the spot market.
Drewry said, however, this is “likely to be short lived and not significant enough to take the lines away from the breakbulk sector.”
In the dry bulk shipping industry, the Baltic Dry Index moved back over 1,000 points briefly at at the end of August.
Drewry said it “does see an upturn in dry cargo trade over the forecast period and dry bulk trade in particular. Indeed, although over 2015 to 2020, the MPV market share is expected to decrease by around 1 percent per year, it is forecast to reach a floor in 2017 and return to positive growth thereafter.”
On Sept. 19, the two heavy lift carriers – Copenhagen-based Thorco and Hamburg-based United Heavy Lift – joined forces to create Thorco Projects.
Lars Rolner, the owner of United Heavy Lift, said the aim of Thorco Projects is “to provide a full range of services, offering everything from general and project cargo to heavy lift, with vessels geared up to 800 tons and deck carriers, which can load units up to 8,000 tons.”
“It is clear that with rates barely above operating costs for many owners, the need to find efficiencies is paramount,” said Drewry. “Whilst a financially stable company is needed in the long term, it is also true that a seaworthy ship is needed in the short term. Owners that are being paid less than operating costs are forced to make economies somewhere and that is often on the maintenance budget. Shippers have to decide whether their main driver is price or quality, especially when they are putting high value cargo on these ships.”
“We are more pessimistic about the near term outlook than we were 6 months ago, but we can see recovery for this sector, albeit some way off,” added Susan Oatway, lead analyst for multipurpose shipping at Drewry. “It is not our view that there will be a run of (or even any more) big carrier bankruptcies in the near term, however, those who hold the purse strings might well be inclined to restrict finance to some of the smaller owners.
“While our optimism for the sector remains muted, there are some pockets of growth,” she said. “With oil prices forecast to rise back above $55 per barrel next year, the project sector is expected to see some renewed interest. There is also some potential spend in the Middle East and Africa. And there has been renewed interest in renewables, particularly wind in the US. The main problem remains the competing sectors, particularly container shipping where aggressive pricing is drawing cargo away from MPV ships.”
Breakbulk carriers squeezed by container, simple bulk sectors
