In International Shipping News 13/02/2016
For coal miners and shippers, a bright spot is India. Despite its intentions of becoming self-reliant, the country’s consumption and imports of coal for power generation are rising, Drewry said.
The shipping business has gone from bad to worse.
As global trade slows, owners of the ships that carry industrial commodities across oceans are reeling from falling demand for coal, iron ore and other industrial commodities, which has sent shipping rates to new lows. The decline has been hastened by an oversupply of ships ordered as the world’s economies recovered from the Great Recession.
Danish shipping and oil conglomerate A.P. Moller-Maersk underscored the depth of the slump on Wednesday when it blamed slumping trade and low crude prices for an 80-per-cent drop in 2015 profit, declaring conditions worse than during the financial crisis.
To reduce competition and cut costs amid falling revenues, the shipping industry is scaling back fleets and consolidating. State-owned companies China Ocean Shipping Co. and China Shipping Group have merged, and Neptune Orient Lines Ltd. of Singapore was recently taken over by France’s CMA CGM SA.
Hyundai Merchant Marine Co., one of South Korea’s largest carriers, is dumping assets in a bid to avoid joining a growing list of shipping companies that have gone bust in the past year.
But more bankruptcies are inevitable, as economic activity stalls and ship owners are forced to slash prices to compete, said Rahul Sharan, an analyst with London-based Drewry Shipping Consultants Ltd. “I don’t think anyone is making money,” Mr. Sharan said from New Delhi.
The Baltic Dry Index, a closely watched economic indicator of the shipping rates for carrying coal, ore and other raw materials, is at the lowest point since it was first launched in 1985 and has fallen by 76 per cent since the peak of August, 2015.
Most – but not all – of the decline in commodity demand is because China, the world’s biggest buyer of coal and iron ore, has been throttling back purchases as its economy and industrial output slows, Mr. Sharan said.
There are no signs demand and prices for industrial commodities will rebound soon. China’s economy is forecast to grow at an annual rate of less than 5 per cent over the next five years, while Canada, the United States and Europe will post low single-digit growth, according to the Conference Board. For the companies that carry industrial goods, this means losses will continue into 2017, according to Drewry.
Mr. Sharan said money-losing shipowners have three choices when faced with poor demand for their fleets: they can eat the cost of docking the ships, hire them out at rates that are less than their daily operating costs of about $9,000 or they can sell them to a scrapyard. Increasingly, they are taking the third route.
BIMCO, a shipowners’ association based in Denmark, said record tonnage of large bulk carriers was sailed to the scrapyard in 2015. And the average age of ships being cut apart for steel has dropped to less than 21 years from 25, even as prices for scrap metal are low.
“This increasing demolition is a very welcome development, but a lot more ships need to be scrapped in order to improve on the unfavourable market conditions present in the dry bulk market,” said Peter Sand, BIMCO’s chief analyst.
The fleet paring by money-losing shipowners is welcomed by companies looking for bargains on second-hand ships.
Drewry said the global fleet of ships that carry dry commodities grew by just 2 per cent in the first nine months of 2015, but it will be about five years before the surplus of ships that spurred much of the rate decline will be gone.
Drewry says the trade in iron ore will grow moderately over the next few years, but coal shipments to China will continue to decline. The country is trying to support domestic sources at the same time it is moving toward more environmentally friendly energy sources.
Source: Globe & Ma
