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4 April 2016
Shipping in all its forms has lost its lustre, says BRS president

SHIPBROKER Barry Rogliano Salles Group has painted a dire picture of shipping markets in its 2015 annual review, a year BRS president Tim Jones summarised as “as bad as expected”.

The 128-page review of shipping and shipbuilding markets is littered with figures showing markets at their worst since the aftermath of the global financial crisis, earlier in some cases.
“Massive scrapping in almost all segments would be needed to rebalance the markets,” the report claimed.

Ordering activity at shipyards fell by 20% to 104.7m dwt in 2015 compared to 131.1m dwt in 2014, according to the report.
China’s share of the shipbuilding market fell for the first time since becoming the world’s largest shipbuilding nation in 2010, although it still commands 43% of the market with 121.6m dwt.
Its loss was Japan’s gain due to the weakened yen, with Japanese yards edging up 5% to take 22% of the total market.

Financing newbuilding became more difficult as “traditional ship financing banks accumulated huge losses and are more reluctant to continue trading in shipping and shipbuilding”, said the review.
The dry bulk sector’s record lows in 2015, since beaten by plumbing new depths below operating costs in early 2016, were reflected in slippage. According to the report, 48% of dry bulk ships due for delivery in 2015 did not hit the water, leading to the lowest level of tonnage joining the fleet since 2008.

China’s coal imports fell by 29% in 2015, and India’s coal demand was zero. “The year for forward freight agreements has been one of the most depressed in recent memory,” the report summarised.
Total losses for the seven largest listed dry bulk companies totalled $760m in 2015, while the seven largest listed tanker owners brought in just over $1bn in profits.

Better times were had in the tanker sector overall, where earnings were up and costs driven down by low bunker prices. For very large crude carriers, one-year period charter rates rose by 75% in 2015, and time charter activity was up by 22%. Chemical tankers generally returned to profit, boosted by lower bunker costs.

Current activity levels would mean the market could absorb the expected 8% fleet growth for the crude and product fleet in 2016, BRS claimed. It expects product tankers will enjoy a third good year in a row, while VLCCs may see earnings ease off at the end of 2016 as new deliveries affect market balance.

For tankers, comparisons were drawn to the boom year of 2008; but for the container market, BRS drew comparisons between 2015 and “the dark days of 2009”.
A lack of trade growth and severe overcapacity still plague the container sector, with no signs of easing, the report claimed.
The near-term outlook for the box sector "remains bleak, with negative signals on all fronts: weak demand, historically low cargo freight rates, some of the worst ever charter rates, a continuously high orderbook, especially for very large vessels, and comparatively low scrapping levels”, the report said.

Adding to market woes, 255 vessels, including 60 ultra large containerships, were ordered in 2015, spurred partly by deadlines of environmental regulation that increased the cost of vessel ordered after January 1 2016.

Demand growth was at its lowest level since 2009, and although fleet growth is expected to ease from 8.5% in 2015 to 5.2% in 2016, that growth is still ahead of global transportation demand growth forecasts.
Across shipping sectors, China’s reduced heavy industrial activity and sluggish economies are cited as reasons for lower demand for marine transportation. For the longer term, Mr Jones said the world is realising energy use must be restrained to meet environmental targets, a change that he believes is bad news for shipping.

Adding to pressures from external factors, the industry itself added to supply problems by building larger vessels to reduce transport costs and increase efficiency. “Each actor made its decisions as if it was the only player,” Mr Jones said.

Source: Lloyd's List

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