MSI: Shipping Market Recovery Faces Multiple Demand-Supply Challenges

Maritime Strategies International (MSI), a leading independent research and consultancy firm, has forecast a stormy road to recovery for the shipping industry, with uneven supply/demand trends set to test the nerve of investors and operators.

Addressing the Hansa Forum in Hamburg, Germany this week, MSI Senior Analyst James Frew warned that the industry will continue to face multiple challenges to a sustained recovery despite positive demand fundamentals.

“The commodity shipping sectors remain well correlated with each other – with the exception of offshore and LPG – and most sectors are positively correlated, but not tightly so,” said Frew. “So the question is whether it is supply or demand that is wrecking the markets?”

In demand terms, headline trade in goods and services has stalled in relation to GDP and policy decisions rather than fundamentals, hold the key to future direction. Factors including increased energy efficiency, slowing containerisation demand and reshoring are all threats. However, the demand side is far from all bad news.

“How many ships are needed to meet demand projections is a function of multiple factors; routes taken and their distance, sailing speed, port waiting times, operating days, ballast ratio, cargo carrying capacity and vessel size changes,” added Frew. “Taking these factors into account, incremental vessel requirements until 2019 show that more ships are needed to meet projected demand in sectors such as oil, product and chemical tankers, bulk carriers and containerships.”

According to MSI data, ships required versus ships on order exceed projected demand for product tankers and chemical carriers but lag for bulk carriers and containerships. This is thanks to the industry’s self-prescribed medicine, with 2016 scrapping levels at or near record levels in the bulk carrier and containership sectors.

“The elephant in the room remains shipyard capacity. The ‘addition’ phases of 2000-2010 and 2014-2016 have not been balanced by the subsequent contractions and capacity elasticity remains a threat to supply/demand balance,” said Frew.

Looking to future prospects, it is clear that historical average earnings are no guide to forward earnings. Mean Absolute Percentage Error calculations for a 1yr T/C rate on a Panamax bulk carrier fluctuate wildly between the 5 and 10 year average and in historical terms since 1970.

“The recovery is going to be uneven at best, with a disproportionate increase in vessel earnings for LNG carriers, tankers and LPG carriers. Even with improvements, earnings for containerships and bulkers will not approach their pre-crisis highs,” said Frew. “Shipyards will continue to suffer from a lack of forward cover next year and only cost pressure will stop newbuilding prices falling further in 2018.”

Reference: allaboutshipping.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.

Latest Shipping News You Would Like:

55 Chinese Sailors Presumed Dead After Nuclear Submarine Became Trapped Underwater, According To Sources

Posted on October 4, 2023

According to Western intelligence estimates, 55 Chinese sailors were killed when a nuclear submarine became stuck underwater, however, China denies this.

All Three Of Ukraine’s Major Black Sea Ports Have Reopened To Ships

Posted on October 4, 2023

Despite Russian threats to attack ships sailing to Ukrainian ports, all three of Ukraine’s Black Sea ports have reopened to grain exporting ships.

Four In Court Regarding A €157 million Cocaine Seizure From A Cargo Vessel

Posted on October 4, 2023

In connection with last week’s €157 million narcotics seizure off the Cork Coast, four individuals have made court appearances and have been appropriately charged.

World’s Largest Cruise Ship “Icon Of The Seas” Will Make its Debut in January 2024

Posted on October 4, 2023

The largest cruise ship in the world, the Royal Caribbean Icon of the Seas, is nearly finished at Finland’s Meyer Turku shipyard.

Remains Of US Navy Sailor Killed In The Pearl Harbor Attack Identified After 80+ Years

Posted on October 4, 2023

Officials reported this week that a US Navy man killed in the WWII attack on Pearl Harbor has been identified, over 80 years after his death.