Home' Ships and Shipping : March 2011 Contents The velocities of the Capesize freight rates movements are
expected to continue going into 2011. Meanwhile, the smaller
segments are predicted to be in smoother waters than the bigger
vessel types, as the inflow of new tonnage in these segments is
less dramatic and the commodities which they transport are
more diversified. Tankers:
when will demand catch up with supply?
While product tankers have been under almost constant
pressure throughout the year, crude oil tankers have "only" felt the
pain of low demand and increasing supply in the second half of
2010. This is the outcome of much lower consumption of both
crude oil and refined oil products in the main consuming areas in
the Western hemisphere.
Meanwhile, demand in the Eastern hemisphere has proved
solid, with China emerging as a large importer of crude oil. The
overall trend is clear; it is very positive that Asian demand has
grown and will continue to grow, but to offset the drop in Western
demand, the oil thirst in the East is not strong enough to offset the
lower consumption in the West. This is due to fewer tonne-miles.
While the Winter markets could prove to be a pause for breath
for tankers in the short run, it seems likely that tanker freight rates
will remain a bit under the weather in 2011.
For 2011, the crude segment remains the better half of
tanker shipping as the product segments are still heavily
affected by the weak demand from the main consuming areas, as
well as oversupply.
When Western demand growth eventually returns, tanker
demand will look strong again as Eastern demand is unlikely to
slow down any time soon. Whether the strong tanker demand will
also give higher rates is also dependent on the fleet development.
However, the underlying trend is more challenging for crude oil
tankers than product oil tankers. The business is developing
towards higher growth in oil products transports than crude oil
transports, as refineries have been and are being built closer to the
oil well today than 20 years ago.
Container shipping has travelled from the deepest bottom at
the beginning of 2010 to the highest top in August where revenue
and volumes were at levels not seen since 2008: development
characterised by restocking of inventory and a lack of equipment,
in particular containers.
During the first quarter of 2010 freight rates went from very low
to peak levels and stayed there for half a year until rates started to
slide by the end of the traditional third quarter volume peak.
This comeback took many by surprise as the industry managed
to handle the oversupply of tonnage by the introduction of
widespread slow-steaming and lay-ups to bring freight rates back to
sustainable levels, even though for some segments -- for example,
the smaller segment -- the situation has not improved a lot.
The positive volume growth resulted in turn in an extensive
reactivation of laid up tonnage to an extent that just 120 vessels
were idle by the beginning of November 2010. However, with
many newbuildings constantly coming on stream, it remains to be
seen to what extent layups once again will be a part of the
industry's solution to overcapacity.
Freight rates are expected to slide quietly in the beginning
months of 2011, with the momentum of the weakening being
greatly dependent on the industry's ability to adjust deployed
capacity to transportation demand. Moving further into 2011, the
return of consumers to the shops and the creation of more jobs in
the EU and US will have a large spill-over effect onto container
shipping demand. Intra-Asia demand is expected to stay on the solid
growth path, but in order to match the positive note from 2010, and
with the restocking effect behind us, real demand must follow in
order to bring both volumes and rates upwards once again.
Outlook for 2013 is "really scary"!
One huge uncertainty is of course how shipyards will react to
the slow-down in ordering. The yard capacity is expected to grow
from 51CGT in 2010 to 55CGT in 2011 and it is clear that as ships
are delivered, orders are not being placed at the same pace.
The outlook for 2013 is really scary, with a severe overcapacity.
With probably the youngest world fleet in history there is little
prospect of a significant increase in ordering, leaving the shipping
industry with its traditional dilemma -- ship-owning being capital
intensive and shipbuilding being labour intensive -- and inundated
with the usual problems. One can only hope that we will not see
the ugly face of subsidies and trade distortions that has been so
damaging for world trade and economy and created unnecessary
distrust and suspicion between nations.
Reproduced from BIMCO "Reflections" 2011.
SHIPS AND SHIPPING March 2011 17
World Trade Volume of Goods and Services,
percent change year-on-year
Source: BIMCO, IMF
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