Multipurpose Shipping Set For Recovery In 2018

Multipurpose Shipping Set For Recovery In 2018

Recovery in the multipurpose shipping sector is forecast to strengthen in 2018 as lessening threats from competing sectors help propel growth in the industry, according to global shipping consultancy Drewry.

The positive outlook is supported by data that suggests rising demand for breakbulk transport, combined with contracting vessel supply is finally turning the tide on several years of difficult operating conditions.

“This year has started with renewed optimism, and it is Drewry’s belief that the market has finally turned that corner. Rate rises are never stratospheric in this sector, but we believe a steady growth of around 2 percent to 3 percent per year is possible over the forecast period,” said Susan Oatway, lead analyst at Drewry.

The findings are published in Drewry’s most recent edition of its Multipurpose Forecaster and Annual Review report.

Storm clouds remain but tariffs to have limited impact 

Despite the overall favorable forecast for growth this year, Drwery cautions that significant risk factors still remain over the medium term. Key among these is any escalation of proposed tariffs on U.S. steel or a global trade war impacting nascent demand growth.

“The 45 million tonnes of steel imported into the U.S. on a yearly basis represents just 8 percent of the global trade. And many countries have now been exempted from tariffs, including the two largest U.S. suppliers, Canada and Mexico,” the report’s authors state, adding that “impact will be limited” under certain scenarios.

A secondary concern for the multipurpose shipping sector is expected to be around the implementation of the IMO sulphur cap on marine fuel from 2020, with the deadline for compliance looming and refit costs likely to add an extra burden to many breakbulk shippers bottom line.

Changing fleet profile as heavy-lift vessels dominate

While these costs are forecast to add a drag to profitability for some operators, it may also have the positive effect of further reducing vessel supply and helping to support charter rates across the wider industry as older vessels are retired.

“Drewry believes that for the older, simpler vessel this could be the impetus needed to send overage vessels for demolition since almost 10 percent of the fleet is over 30 years old,” Oatway said.

As a result, Drewry predicts that the future profile of the sector will involve greater deployment of project carriers, with an increased proportion of vessels with lift greater than 100 tonnes.

“Some 80 percent of all newbuildings over the last five years have heavy-lift capability, and at least 70 percent of the orderbook has this capability. The project carrier fleet is growing, but it will be some time before it reverses the decline in the overall multipurpose fleet,” Oatway added.

Photo: Drewry predicts growth in the project carrier segment. Credit: Wikimedia