Chief Shipping Analyst at BIMCO, Peter Sand, spoke last week at the Inaugural Scandinavian Shipping & Ship Finance Conference in Copenhagen, Denmark on 6-7 April 2011.The conference organisers had assembled an international line-up of industry experts and participants, all of whom stood ready to offer their expertise and views on some of the most important issues affecting international shipping finance and shipping investment today. The event provided an excellent opportunity to share the latest information and insights on key areas influencing our business.
The BIMCO presentation was focused on the order book in the main shipping segments, dry bulk, tankers and containerships as well as the current and future challenges for ship owners and shipyards.
Touching upon the latest on orderings and deliveries for dry bulk, tankers and containers, Sand said that owners must not be tempted by low newbuilding prices to order new ships, as overcapacity is already putting pressure on the freight rates. Action like that already seems to have been taken onboard, in particularly by ship owners in the dry bulk sector. They have surprised on the upside in first quarter of 2011, as the number of contracting of new ships is at the lowest level since mid-2009.
Selected points made at the conference:• Shipping overcapacity is manageable if owners use all the tools available to them and in particular stop ordering new tonnage, but global shipbuilding overcapacity poses a major risk and lower prices could tempt owners back to the yards.
• Overcapacity is manageable, depending on demand growth and players adjusting to the new normal. That is the key.
• The tools available for owners, which are already being used to varying degrees, include slow steaming, additional scrapping, laying up vessels, postponing deliveries and not exercising options. “There is no quick fix. But more than anything else stop ordering new vessels. We have been here before. It is a cyclical business, but this also means that the same mistakes are being made.”
• Sand pointed out that liner operators appeared to have dealt successfully with overcapacity by refraining from ordering for an extended period, slow steaming and laying ships up, but recently they appear to be reverting to focusing on market share, lay ups have dropped and they have resumed ordering new tonnage.
• There should also be more scrapping, especially as scrap prices are relatively high. There are still a lot of old bulk carriers. The “problem” is that many of them are debt-free and therefore can survive even when rates are low.
To sum up things, Sand concluded that owners must adjust to the “new normal” to survive and learn to manoeuvre in a new profit environment. Managing overcapacity will remain a challenge in coming years as owners fight for employment for their vessels and market share. Another risk factor is the growing overcapacity in shipbuilding; with newbuilding prices likely to fall further, owners could be tempted to place new orders. But by holding back signing of new contracts and by applying all the tools in the toolbox to manage overcapacity, sustainable rates could be closer than they at first hand appear.
Source: Bimco
Selected points made at the conference:• Shipping overcapacity is manageable if owners use all the tools available to them and in particular stop ordering new tonnage, but global shipbuilding overcapacity poses a major risk and lower prices could tempt owners back to the yards.
• Overcapacity is manageable, depending on demand growth and players adjusting to the new normal. That is the key.
• The tools available for owners, which are already being used to varying degrees, include slow steaming, additional scrapping, laying up vessels, postponing deliveries and not exercising options. “There is no quick fix. But more than anything else stop ordering new vessels. We have been here before. It is a cyclical business, but this also means that the same mistakes are being made.”
• Sand pointed out that liner operators appeared to have dealt successfully with overcapacity by refraining from ordering for an extended period, slow steaming and laying ships up, but recently they appear to be reverting to focusing on market share, lay ups have dropped and they have resumed ordering new tonnage.
• There should also be more scrapping, especially as scrap prices are relatively high. There are still a lot of old bulk carriers. The “problem” is that many of them are debt-free and therefore can survive even when rates are low.
To sum up things, Sand concluded that owners must adjust to the “new normal” to survive and learn to manoeuvre in a new profit environment. Managing overcapacity will remain a challenge in coming years as owners fight for employment for their vessels and market share. Another risk factor is the growing overcapacity in shipbuilding; with newbuilding prices likely to fall further, owners could be tempted to place new orders. But by holding back signing of new contracts and by applying all the tools in the toolbox to manage overcapacity, sustainable rates could be closer than they at first hand appear.
Source: Bimco
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