Shipping will continue to suffer excess capacity, persistent weakness in 2017-reports
Shipping market especially container shipping will continue to suffer from capacity under-utilisation, persistent weakness given the current economic realities, global shipping experts have say.
A recent report by Alphaliner said that 2016 saw a number of low records in the container shipping business and such weakness recorded in the previous year, are expected to persist for at least one more year.
Alphaliner further stated that the global containership fleet recorded the lowest annual growth rate ever in the industry’s history as it increased by 1.5 percent to 20.3 million Twenty Equivalent Units (TEU) of container at the end of 2016.
In 2016, the report revealed that there was low growth in the number of ships scrapped as a total of 192 containerships for 654,900 TEUs, was demolished in 2016. Also, the total capacity of containerships deleted reached 200 units for 664,300 TEU after adding a handful of de-celled ships and two casualties.
The new containership deliveries, Alphaliner noted dropped to 934,500 TEUs in 2016 by 46 percent compared to the record in 2015. Also, very weak employment prospects prompted ship owners to delay the deliveries of about 60 ships with a total capacity of 400,000 TEUs, while 18 ships with a total capacity of 57,000 TEUs were believed to have been cancelled.
“Despite the low supply growth, the idle containership fleet surged to a record high of 1.6 million TEUs in October 2016 while it stood at 1.42 million TEUs before the year ended. Surplus capacity remains the industry’s biggest headache, especially with about 1.7 million TEUs of new capacity due in 2017,” Alphaliner said.
The report however noted that though the container shipping market remains fundamentally imbalanced, the New Year brings with it fresh hopes for a recovery,
The main container carriers’ average operating margins remained in negative territory with minus 7.8 percent in the third quarter of 2016, marking the fifth successive quarter of operating losses, Alphaliner added.
Moore Stephens, a shipping adviser, who confirmed that 2017 will remain volatile for shipping business, suggested that the industry is expected to use a mixture of experience and innovation to navigate what is likely to be another volatile year in 2017. Stephens however opines that the oil price needs to continue on an upward trend on the strength of the recent OPEC production cuts.
“The inherent volatility of the industry will continue throughout 2017, during which time shipping will resort to tried and trusted methods and to fresh innovation alike in an effort to keep its head above water,” Richard Greiner, Moore Stephens Partner, Shipping & Transport, said.
He added that there will be calls for higher level of ship demolition are expected to increase significantly, although not ship demolition itself,”
Greiner said that the cost of meeting regulatory requirements should become clearer as the industry and its financiers grapple with the financial consequences of having to burn lower-sulphur bunker fuel whilst ensuring that their ballast water management systems are fit-for-purpose.
“Orders will be placed for new ships. If they are not, a number of shipyards will go to the wall. For many, freight rates will continue to struggle to reach the levels required to ensure commercial viability, while consolidation will remain the buzzword in the liner trades,” Greiner said.
If operating costs do not increase, Greiner said that concern will spread about whether quality and safety are being sacrificed.