2019 Jan 15

Focus on logistics could blunt new ship orders

The interest by container carriers in developing a wider scope of logistic services could benefit the industry if it suppresses its tendency to flood the market with too much capacity, says Drewry, the London-based shipping consultants.
    “We believe that the industry’s supply-demand balance will benefit from a reduced appetite for ultra large container vessels (ULCVs) among the major carriers, some of which now have their eyes fixed on a bigger prize of becoming global logistics integrators,” says Simon Heaney, senior manager, container research at Drewry and editor of its quarterly Container Forecaster publication.
    Maersk, the largest container carrier, has said it wants to become a “global integrator of container logistics;” CMA CGM has acquired a large stake in CEVA Logistics and made a tender offer for remaining shares; and COSCO Shipping said in its last annual report that it also plans to emphasize door-to-door products.
    Although last year Korea’s Hyundai Merchant Marine ordered a dozen 23,000-TEU ships and eight 15,000-TEU ships that will boost the company’s capacity by 496,000 TEUs, Heaney said, “Aside from feeder ship replenishment, there has been no reaction from other lines to HMM’s mega-ship order and as such we have greatly reduced our projected new orders for 2020 onwards.”
    Drewry foresees a “tighter but still oversupplied market. Ultimately, we believe that these adjustments on the supply side will be sufficient to cushion the blow from slowing demand growth and will contribute to better freight rates and profits.”

However, the trade war between the U.S. and China has muddled the outlook for container shipping.
    “Last year was one of the most unpredictable the container shipping industry has faced, and this year is likely to be similarly volatile with question marks still hanging over the U.S.-China trade war and new fuel regulations. However, despite being dogged by uncertainty, Drewry is predicting another solid year for the market,” says Heaney.
    Drewry says, “Weaker global macro-economic drivers contributed to a downgrade to Drewry’s port throughput forecast for 2019 to approximately 4 percent, but that softening trend should be mitigated by changes made on the supply side to better balance the market.”
    Adjustments to the containership orderbook in its most recent Container Forecaster report reveal “deliveries have been spread more widely than before with more original 2018-19 newbuilds being pushed out to 2020. Combined with an expected increase in demolitions the net addition to the fleet is expected to be only half that of 2018, leading to a fleet growth rate of just 2.5 percent.”
    Drewry added the mandate to reduce sulfur emissions from ships starting on Jan. 1, 2020 has “the potential to curb capacity, at least on a temporary basis. A growing tendency towards retrofitting scrubbers could see a number of ships taken out of service for a number of weeks at a time, while more generally Drewry expects shipowners to idle and eventually scrap more older and uneconomic ships before the 1 January deadline. Wider use of slow steaming will also help to absorb new capacity and reduce the often negative influence of the cascade on the supply-demand balance.”

Source:; Chris Dupin


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