Shipowners told to avoid over-ordering new ships

ICS executive says “clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever.”

Shipowners told to avoid over-ordering new ships

ICS executive says “clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever.”

Shipowners told to avoid over-ordering new ships

ICS executive says “clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever.”

 

   Avoiding overcapacity and unsustainably low freight rates are still major challenges for the shipping industry a decade after the massive downturn in the industry during the Great Recession, says the International Chamber of Shipping (ICS).
    Speaking in Istanbul at the Global Maritime Summit 2019, Simon Bennett, deputy secretary general of the chamber, said a decade ago “shipping companies needed to show restraint when ordering new ships to prevent stifling recovery. Yet the dark clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever.”
    However, he recognized individual operators will make up their own minds about ordering new ships.
    “Opinion is still divided on whether the rapid globalization that has been experienced in the last 30 years may have run its course and whether the slower rate of trade growth seen since the 2008 crisis represents some kind of permanent structural change,” he said. “Certainly in 2019, the outlook for the global economy and thus demand for maritime transport appears to be worsening.”

   In the container industry, industry analysts often have talked about a decline in the TEU-to-GDP multiplier, the ratio between container growth and growth in global GDP. An article on the website The Geography of Transport Systems says prior to 1990, the multiplier was in the range of two and a half, surged above four in the 1990s, then declined to a range around three from 2000 to 2008, then further declined to around two between 2009 and 2017.
    Drewry, the maritime consultants, said Thursday that the container industry is facing an exceptionally high level of uncertainty. It pointed not only to the threat of overbuilding but costs related to the requirement by the International Maritime Organization (IMO) that ships start using more expensive low-sulfur fuel next year or equip their ships with scrubbers as well as the possibility of a trade recession.
    But it also said, “Every region is expected to see container port handling growth in each and every year of the five-year forecast horizon” of its recently issued Container Forecaster report, “albeit at a slightly slower pace than Drewry was previously anticipating. Moreover, supply growth is expected to be below that of demand through 2023, which will assist the industry’s ongoing effort to rebalance an oversupplied market.”
    Simon Heaney, senior manager of container research at Drewry and editor of the Container Forecaster, said, “The degree of uncertainty is probably the highest it has been in a decade. There are a lot of headwinds facing the industry right now with IMO 2020 at the forefront, but there is also a danger that those fears become overstated and that commentators unnecessarily talk down the market when the truth is that it is moving in a positive direction. The industry is resilient and has shown that it can adapt quickly at times of stress, and we expect it to come out the other side in a stronger position.”
    Bennett did not specifically focus his remarks on the container segment of the shipping industry. But he said ship ordering, as measured in capacity by deadweight tons, fell 14 percent in 2018, about 17 percent below the average since the 2008 downturn.
   This suggests that many shipowners may indeed be resisting the temptation to over order and in early 2019, the worldwide shipping order book appeared to be stable at around 10 percent of the fleet,” he said. “However, the reluctance of governments in Asia, where the vast majority of ships are built, to address overcapacity in the shipbuilding sector remains a serious issue.”
    Bennett said recent regulatory actions may encourage scrapping of older ships.
    “In particular this includes the implementation dates of the IMO Ballast Water Management Convention. And while the precise cost of compliance with the IMO sulfur regulations is still unknown, the situation should become clearer after January 2020 now that IMO has confirmed that the implementation date of the global sulfur cap is irrevocable.”
    The ICS said it was “encouraged by the decision in 2018 by the Organization for Economic Co-operation and Development (OECD) to resume negotiations on an agreement to remove market distorting measures from shipbuilding that contribute to overcapacity. However, it remains to be seen whether China (which is not an OECD member) will take an active part.”
    Bennett said the shipping industry may benefit from population growth and rising living standards in the developing world.
   “The U.N. has revised its projections for population growth upwards to an incredible 8.6 billion in 2030 from 7.7 billion in 2018. Combined with seemingly unstoppable demand for higher living standards in emerging economies, this indicates that long-term demand for international shipping should continue to increase significantly,” he said.

Our waterways are our one artery where we still have capacity to grow into. If we double our cargo … in the next 30 years, we don’t have any choice. We will have to go into the waterways.

The FBX, a global container freight index measuring spot rates on major global trades, had an overall reading of $1,342 per FEU as of June 14, down 1.5% from a week prior, but up 3.4% from a year prior.

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Shipowners told to avoid over-ordering new ships

ICS executive says “clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever.”

Apr 04, 2019 on Dec 27, 2018AmericanShipper.com

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Shipowners told to avoid over-ordering new ships

ICS executive says “clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever.”

Apr 04, 2019 on Dec 27, 2018AmericanShipper.com