Drewry: Slow Car Carrier Recovery To Trigger More Distressed Asset Sales

Car carrier shipping is expected to continue its slow recovery, supported by improving utilisation and minimal vessel ordering. However, costs are rising while the trade outlook is vulnerable to rising geopolitical risk, which is expected to lead to more distressed vessel sales as shipping lines focus on landside investments in search of profitability, according to the Finished Vehicle Shipping Annual Review and Forecast 2019/20 report published by global shipping consultancy Drewry.

Seaborne trade in finished vehicles, including high & heavy and used autos, continued to grow from 2016’s low, recording growth of 1% in 2018 to 22.8 million units, and this trend has continued into 2019. This is despite the first decline in global vehicle sales in a decade as US and Europe transactions peaked and a decline in China, now the world’s largest vehicle market, accelerated after years of double-digit growth.

“North-south and intra-regional trades continue to gain market share compared to hitherto dominant East-West routes, offering opportunities for triangulation,” said Tom Ossieur, Head of Car Carriers at Drewry. “However, matching supply and demand is becoming increasingly challenging for car carriers in the current climate of rising trade tensions and low forward traffic visibility.”

Car Carrier
Image for representation purpose only

Continuing last year’s trend, owners and operators are holding off acquiring vessel capacity, as trade uncertainty and downward risks weigh on the market. Just four car carriers were ordered during the first half of 2019, mostly small ships for regional trades.

As fleet utilisation improves time charter rates are forecast to rise over the next five years. But profitability will lag on rising operating costs and higher bunker prices with the introduction of IMO mandated low sulphur fuel regulations in 2020.

Meanwhile, despite the slowdown in trade growth ports across North America and Europe reached peak utilisation in 2018 leading many terminal operators to invest in capacity expansion, rewarded by strong financial returns. Similarly, ports in developing regions remain in need of new investment and finished vehicle handling expertise to accommodate rising auto traffic, particularly as carrier deployment of larger vessels is compromising operational efficiency at these ports.

Nearly two-thirds of the 550 terminals handling vehicles around the world move less than 50,000 units a year (see chart). Most of these are small multi-purpose terminals that struggle to handle sizeable parcel sizes carried by large Post-Panamax vessels and are in need of expertise to leverage capacity and service offer expansion opportunities.

“Unlike car carrier shipping, the global vehicle port terminal sector is highly fragmented, with the need for investment likely to trigger more consolidation,” Ossieur added. “Poor financial returns from carrier liner operations and an uncertain trade outlook will force a rise in distressed vessel sales and a diversion of investment to more profitable port assets.”

Reference: drewry.co.uk

Disclaimer :
The information contained in this website is for general information purposes only. While we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.

In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from loss of data or profits arising out of, or in connection with, the use of this website.

Disclaimer :
The information contained in this website is for general information purposes only. While we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.

Do you have info to share with us ? Suggest a correction

About Author

Marine Insight News Network is a premier source for up-to-date, comprehensive, and insightful coverage of the maritime industry. Dedicated to offering the latest news, trends, and analyses in shipping, marine technology, regulations, and global maritime affairs, Marine Insight News Network prides itself on delivering accurate, engaging, and relevant information.

About Author

Marine Insight News Network is a premier source for up-to-date, comprehensive, and insightful coverage of the maritime industry. Dedicated to offering the latest news, trends, and analyses in shipping, marine technology, regulations, and global maritime affairs, Marine Insight News Network prides itself on delivering accurate, engaging, and relevant information.

Article Footer Banner
Article Footer Banner

Web Stories

Subscribe To Our Newsletters

By subscribing, you agree to our Privacy Policy and may receive occasional deal communications; you can unsubscribe anytime.

Leave a Reply

Your email address will not be published. Required fields are marked *