Container Market in 3-Year Slump


Global shipping consultancy Drewry has found that the container market is not expected to show any improvements for two, and possibly three, years.  

It is likely that containerships will continue to aggressively target break-bulk and project cargo for the foreseeable future.

The multipurpose shipping market is also not expected to recover until the end of 2017, when it is anticipated that there will be more bulk demand for the Handy vessels and therefore more breakbulk cargoes for multipurpose vessels.

In order to estimate the effective demand for the multipurpose vessel (MPV) fleet, we assess the demand for all possible commodities and the modal split for these between bulk, breakbulk and container.

This follows recent news that the shipping industry is anticipated to remain volatile in 2016 as a result of low freight rates and overcapacity.

The last 12 months have been poor for the MPV market with rates at rock bottom and competition for cargo from every angle.

Weak demand, coupled with falling commodity prices and the oversupply of tonnage in competing sectors has brought rates down to levels not seen since just after the global financial crisis.

The demand for multipurpose shipping registered a drop of almost 3% in 2015 as global demand for dry cargo slowed considerably while competition for it increased.

Dry cargo growth is set to improve in 2017 and beyond but the return to growth for the MPV market share will be almost entirely dependent on the competing sectors.

Development of Dry Cargo Demand (Million Tonnes). (Source: Drewry Maritime Research)

Susan Oatway, Lead Analyst for Multipurpose Shipping, said: “We expect the effective demand for the MPV fleet to return to a positive trend with average annual growth of 2.7% to 2020.

“However, this growth will be very subdued through 2016 and will not show any significant improvement until the end of 2017. This is due to a combination of the lack of project finance and aggressive competition from the container and Handy bulk carrier sectors.”

Drewry has assessed future new-building deliveries, potential demolition candidates and slippage at the yards to determine that the future fleet will grow at less than 0.5% a year to 2020.

However, the project carrier fleet is expected to grow at almost 4% a year, whilst the ‘simple’ MPV fleet will contract at a rate of almost 3% a year.

Owners have borne untenable market conditions for longer than expected but now there is a very real risk for the financial stability for a number of companies.

Oatway concluded: “All this suggests that for those that can survive 2016 and position themselves with unique qualities – whether that is financial stability, good management, eco-friendly engines or extraordinary lift – there is an end to this recession.

“While we do not see any sign that, even in the longer term, the market will return to pre-2009 levels, it should see enough improvement to recover to 2011 levels by the end of our current forecast period.”

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