Heavylift / Breakbulk
«An alternative with added value»
Initially it seemed as if 2013 would bring a minor improvement to shipping lines in the heavylift and project cargo segment. In the meantime, however, it has emerged that such optimism was a little premature. Things may get better towards the end of the year, however, as Drewry’s latest analysis of the industry indicates.
Just as we did last year, we are bold enough to once again gaze deep into the crystal ball (see ITJ 19-20 / 2013, page 17) and analyse how the market for heavylift vessels is set to develop in the short-term future. (See also pages 46–47 for an assessment of the current global fleet.)
There was precious little gloss on the crystal ball last year. The market conditions were poor to unbearable for shipping lines in this segment. They had to compete with declining demand and growing competition from providers from other sectors of the industry, such as container shipping.
Initially, there was hope that 2014 would be ringing in some improvements in the overall situation. As Susan Oatway, an associate with the English analyst Drewry, admits: «This optimism was misplaced – or at least premature.» The reasons behind this development, she believes, are the facts that demand growth has slackened and market share dwindled, in the face of very determined competition.
But has the trough been passed in the meantime? Drewry’s «Multipurpose Shipping Market Review and Forecaster», the company’s latest annual report for the multipurpose and heavylift sector, believes there is some cause for cautious optimism.
Declining market share
Even though cargo demand has risen steadily since the crash of 2009, the share of the multipurpose sector, a category in which Drewry also includes heavylift units, was not able to benefit from this positive development. Its volumes, rather, have been eroded. The analyst goes as far as to reckon that 2013 was, in fact, a worse year for heavylift and multipurpose shipowners than that recession-blighted year of 2009. Their market share dropped to just 8% of the dry cargo segment, even though tonnage was actually higher.
Drewry estimates that project cargo volumes have fallen by almost 15% over the last year. «The outlook is now more positive, however,» according to Oatway, «as global steel production, to cite just one example, is expected to rise at an average annual rate of 5% over the next two years.» But there is no place for euphoria in the market at the moment, for «the outlook for the specific project cargo market is more mixed», the expert believes.
Light at the end of the tunnel
Thus general expectations for the project cargo and heavylift industry remain subdued, at least for 2014, in Drewry’s assessment. There are signs that the sector could begin to pick up further volumes towards the end of the year, however, and grow in 2015 and 2016. Drewry forecasts that demand for multipurpose units will grow at an average annual rate of 5% over the coming years, underpinning a gradual recovery. «I believe that we will only see modest growth in 2014,» Oatway says, adding that «any delay in the recovery of the container liner sector will also delay the recovery for project carriers.»
The effective multipurpose vessel fleet grew by just 1.7% over 2013, with newbuilding deliveries continuing to swell the fleet, in spite of continued strength in demolition volumes. In general, the multipurpose fleet is aged towards the older end of the maritime spectrum, and the orderbook at the beginning of 2014, comprising a relatively unimpressive 128 vessels totalling 2.1 million dwt, represented just 7% of the existing fleet.
But as long as newbuildings offer a unique quality – it is not so important what that is; it could be any thing like eco-friendly engines or extraordinary lift capacities, according to Drewry – there will still be space to accommodate them in the market. «What this means is that Drewry’s forecast provides some room for optimism for owners. Demand is expected to continue to grow and it has the potential to deliver significantly increased volumes.»
It’s five to twelve
Drewry believes that such a development is urgently called for, as capital costs, which are a significant part of most shipowners’ bottom lines, can only be borne for so long. Oatway closed her argument with one uncontested fact. «It is our strongly-held view that those owners who are able to promote their vessels as an added-value alternative to containers will be the ones to see positive results sooner rather than later.»