The International Maritime Organisation’s (IMO) tentative step towards a plan to cut shipping’s climate emissions represents only ‘modest’ progress, Transport & Environment cited the Marshall Islands’ transport minister Mike Halferty.
Earlier this month, countries meeting at the IMO’s environment committee agreed to ‘headings’ to be included in a strategy, which itself will be the first step of a broader plan to cut greenhouse gas emissions.
The details of each section are to be decided at a meeting in October, and a draft strategy agreed by 2018. However, the strategy will not be finalised until 2023.
The seven headings, or titles of each chapter of the strategy, cover the level of climate ambition and guiding principles for the shipping industry; possible measures for short, medium and long-term action; barriers to action, supportive measures and technical cooperation; and a plan for a review of the strategy.
Shipping is one of the fastest growing sources of transport emissions and is projected to account for 17% of global emissions by 2050. But, despite the IMO being first tasked with addressing ship GHG emissions by the Kyoto Protocol some 20 years ago, shipping is the only industry in the world not subject to climate measures.
“Disagreement over how to distribute efforts and the potential costs of measures remain the biggest obstacle to progress. On a positive note there was a strong delegation of Pacific Island nations. These countries, so vulnerable to climate change, are leading calls for an ambitious reduction target and urgent measures. In any case, as long as the IMO does not deliver a robust global deal to reduce shipping GHG, the inclusion of shipping in the EU ETS must remain on the table,” Bill Hemmings, T&E’s shipping director, said.
Meanwhile, a proposal to bring forward the target of improving the efficiency of new ships’ designs could be decided on next year. The IMO is being called on to advance the 2025 target date to 2022 following evidence that the current design efficiency standard, known as the EEDI, is too relaxed to drive ship efficiency.
“Making new ships more efficient saves both fuel and carbon emissions. It is a no brainer. But the current EEDI requirements are so weak that ships built in 2016 are actually becoming less efficient. If the IMO is serious about reducing shipping emissions the very first thing it should do is tighten the the EEDI requirements,” Faig Abbasov, T&E’s shipping officer, said.
The containership orderbook has diminished by 30% in capacity terms since the start of 2016. Ordering during this period has remained very limited, with capacity contracted in 2016 at 0.29m TEU, representing the lowest level since 2009, and contracting in the first half of 2017 totalling less than 40,000 TEU. Despite this, however, there are several important aspects of the containership orderbook to consider.
The first of these concerns the change in the overall size of the orderbook, with the volume of capacity on order shrinking considerably over recent years. At the start of July 2017, the orderbook stood at 396 units of 2.78m TEU, a marked drop from 515 units of 3.97m TEU at the start of 2016. While the volume of capacity on order is still not insignificant, as a percentage of fleet capacity, it is the lowest it has been on record, standing at 14% at the start of July. As a result, boxship fleet growth in the next few years is expected to be relatively moderate, and significantly lower than 8.1% in 2015. In full year 2017, the containership fleet is projected to expand by 3.0% y-o-y in TEU terms, and by 3.7% y-o-y in 2018.
Checking The Schedule
The second interesting aspect is the shape of the orderbook schedule, which is a result of the pattern of ordering, as well as delays to deliveries to owners throughout challenging market conditions. With the vast majority of boxship capacity currently on order scheduled for delivery either in the remainder of this year or next year, the containership orderbook looks very thin after 2018 (see inset graph). Basis start July, just 22 boxships of over 12,000 TEU (including ‘mega boxships’) are scheduled for delivery from 2019 onwards (out of a total 108 vessels in this size range currently on order). In reality, some vessels currently expected to be delivered in 2017-18 may slip into 2019-20. Moreover, new orders for containerships of very large capacity could yet still emerge for delivery in that period, although appetite for boxship ordering in general currently remains very subdued.
Thirdly, the orderbook tells a very different story across the boxship sectors, remaining heavily weighted towards the larger sizes (see graph). Ships of 15,000+ TEU account for c.40% of capacity on order, and represent the equivalent of 73% of 15,000+ TEU fleet capacity. Meanwhile, sub-3,000 TEU there are currently 213 ships of 0.39m TEU on order, equivalent to 10% of fleet capacity in this size range, and expectations of limited deliveries mean that the sub-3,000 TEU fleet is expected to shrink in the short-term. Moreover, the orderbook in the 3-7,999 TEU size range is extremely limited, just 2% of fleet capacity.
So, the boxship orderbook has dwindled significantly, and against the current backdrop of a diminished appetite for contracting, it looks likely that it will continue to shrink. The shape and size of the orderbook does vary significantly across different vessel sizes but overall the schedule looks pretty thin after 2018. Peering through the orderbook ‘looking glass’, clearly there’s still a lot to see.
Asia’s piracy watchdog ReCAAP and Oil Companies International Marine Forum (OCIMF) have signed a Memorandum of Understanding (MOU) to boost the fight against piracy and armed robbery against ships in Asia.
The first regional government-to-government agreement, signed on July 24 in London, would promote and enhance cooperation against maritime crimes to safeguard the interests of ships and seafarers operating in area.
Both parties will join hands to promote the partnership between governmental organisations and the shipping industry for the improvement of maritime safety by sharing information, best practices and expertise.
The signing of the MOU builds on an existing relationship between ReCAAP Information Sharing Centre and OCIMF. In late 2015, the parties, together with other stakeholders, formed a working group to develop a comprehensive guide for shipowners and seafarers operating in Asian waters.
“Over the past few years, the incidences of piracy and armed robbery against ships in Asia have gradually declined. Continued vigilance and engagement with stakeholders are essential in safeguarding the interests of ships and seafarers operating in Asia,” Masafumi Kuroki, Executive Director of ReCAAP Information Sharing Centre, said.
“ReCAAP Information Sharing Centre’s deepening partnership with OCIMF represents our commitment to work with industry to support the safety and security of ship owners and mariners,” Kuroki added.
Japan’s shipping firm Kawasaki Kisen Kaisha (K Line) has received board approval to dispose of its subsidiary company, the owner and operator of heavy lift vessels, SAL Heavy Lift GmbH (SAL).
The subsidiary would be transferred to SALTO Holding GmbH & Co. KG. (SALTO), according to data provided by K Line.
The move comes on the back of a number of difficulties that SAL encountered as the company “struggled after financial crisis in 2008 and profitability of owning asset has been depressed, heavily affected by low-price in energy markets.”
After reviewing its business portfolio in mid-term management plan in 2016, K Line decided “that the best solution should be to transfer the business to SALTO.”
K Line said that it is not estimated that financial loss will be recorded in this fiscal year following the transaction.
Japan’s shipping major entered into an agreement to take 50% shares of SAL in 2007 in order to diversify its business. In 2011, K Line took all the rest of the shares and SAL became a 100% subsidiary company.
Greek ship owners have more than doubled their newbuilding orders during the first half of 2017. According to exclusive data provided to Hellenic Shipping News (www.hellenicshippingnews.com), from ship valuations’ specialist VesselsValue, ship owners from Greece have so far placed orders for 58 ships, versus 28 in the same period of 2016 and 72 in 2015. As such, Greek owners have returned atop of the global newbuilding activity and by some margin, given that the next highest ordering nation was China with 40 orders. Japanese owners ordered just 13 ships, versus 105 ships over the first half of 2015 and 36 ships in 2016.
Globally, newbuilding orders amounted to 245 ships over the first half of 2017, a slight decrease versus the same period of last year, when a total of 254 units were ordered. However, these number pale in front of the 2015 ordering activity, when 594 newbuildings were contracted during the first six months of that year.
Orders By Companies
Lou Kollakis’ Chartworld Shipping has been the most aggressive in terms of its newbuilding ordering activity, having contracted a total of 14 ships so far. However, it’s worth noting that the company was absent from such activity during the past couple of years. The Angelikoussis-controlled Maran Tankers has also been very active with three newbuilding oredrs this year, on top of an additional six in 2015 and 4 in 2016 (13 in total). TMS Tankers has ordered four more vessels this year, while Enesel has invested in four newbuildings this year.
Orders by Ship Types
What’s also striking is that all of the 58 newbuilding orders this year have been for the mainstream ship types, i.e. tankers (42 orders) and dry bulk carriers (16). It’s worth adding that out of the 151 orders that Greek shipping companies have placed over the course of the past three years (first halves), 104 are for tankers, i.e. two thirds are for the wet segment. By contrast, the once favored and less capital intensive dry bulk segment attracted orders of just 29 ships over the same three-year period.
South Korean shipping major Hyundai Merchant Marine (HMM) saw a 77 percent surge in its Asia-US west coast (USWC) volume in June 2017, compared to the same month a year earlier.
HMM’s Asia-USWC handling cargo rose year-on-year from 7,953 TEU per week to 14,055 TEU per week at the end of the month, the company said citing PIERS Data. Additionally, the shipping firm improved its rank, reaching the fourth place in terms of market share, up from 12th in the previous year.
The company’s Asia-all US route cargo handling also rose by 49 percent year-on-year from 11,626 TEU to 17,291 TEU per week in June 2017.
HMM’s USWC market share reached 7.4 percent, up by 3.4 percent from the same month last year, while all US route market share grew to 5.8 percent, up by 2 percent year-on-year.
The company’s cargo processing at Busan Port, the largest sea gateway in Korea, increased by 91 percent last month from a year ago. Its volumes at Busan port jumped from 78,039 TEU to 148,950 TEU per month in June 2017, the second-largest volume after Maersk.
The total includes 76,376 TEU per month of imports and exports cargo, an increase of 83 percent compared to the same period a year earlier, and 72,574 TEU per month of transshipment, representing a 100 percent rise.
“HMM’s volume has dramatically increased, as it has regained customer trust through a successful restructuring and has expanded shipping networks through ‘2M+H strategic cooperation’ and ‘HMM+K2’ consortium,” HMM official said.
Recent developments in the crude tanker market, such as the delay in the IMO Ballast Water Management Convention and the OPEC meeting on Monday, are expected to add downwards pressure to the ailing sector.
The OPEC meeting at St Petersburg on Monday, Saudi Arabia declared that they would cap crude oil exports at 6.6 mm/d in August, marking a six-year low, Ocean Freight Exchange (OFE) said citing JODI data.
The effect of the drop in exports is already being felt in the VLCC market as charterers start covering the August program, with meagre fixing activity seen so far. Charterers seem to be withholding cargoes in an attempt to further pressure rates downwards, which have been languishing around w50 for an AG/Japan voyage, OFE said.
While Nigeria was previously exempt from the production cuts, they voluntarily agreed to limit or even cut their output from 1.8 mmb/d.
The market is currently facing a perfect storm of tonnage overcapacity, low demolitions, OPEC oil output cuts as well as seasonal summer lull in demand.
As reported by Reuters, Nigeria’s crude production has been averaging 1.7 mmb/d recently. While the bulk of Nigerian crude exports are loaded on Suezmaxes and VLCCs, the production cap “may not have much impact on the tanker market as volumes often fluctuate due to unplanned outages.”
“Assuming the Saudis continue their strategy of cutting medium/heavy crude production, refiners in Asia are expected to continue importing crudes of similar grades from the US and Latin America to meet demand,” OFE said.
Although newbuilding orders for tanker and bulkers increased during the first half of 2017, the overall number of orders placed has more than halved when compared to the same period in 2015, according to data provided by VesselsValue.
A total of 245 new orders were placed so far this year, against 594 new ships ordered in the first half of 2015. When compared to the same period in 2016, the new contracts slightly decreased from the 254 new ships ordered a year ago.
Owners’ appetite for tankers was apparent as this type of vessel was in the lead with 145 orders out of the 245 newbuilding deals. Tankers were followed with 70 bulker orders, while LPG ships took the third place with a mere 16 orders. The containership market saw 10 new orders, while only four vessel orders were added to the LNG sector.
In comparison, bulkers were in the lead during the first half of 2015 with 229 orders, followed by 181 new tankers deals. Containerships took the third place with 90 new orders. The LNG sector was more active in 2015, with 26 new ship orders placed during the first half, followed by the LNG sector with 18 new ships.
The plunge in shipbuilding orders was also noticeable in the offshore sector. There were 50 offshore vessels ordered in the first half of 2015 compared to a complete lack of offshore orders during the first six months of this year.
Reviewing schedule reliability by trade, nine of the 12 trades improved from May 2017 to June 2017, according to the latest data from intelligence provider CargoSmart.
The three trades with decreasing schedule reliability were Asia-Africa, Europe-South America, and Europe-Oceania, decreasing by 13.7%, 6.6%, and 1.1%, respectively. The Europe-Middle East trade experienced the largest improvement in reliability, improving by 10.4%, from 60.7% in May 2017 to 71.1% in June 2017. The North America-Oceania trade had the highest reliability with 96.1% in June 2017.
Most of the carriers experienced varying degrees of improved schedule reliability from May 2017 to June 2017. As shown in Figure 3, CCNI, OOCL, Wan Hai, Alianca, and Hyundai showed the most improvement in schedule reliability with 11.9%, 11.5%, 10.7%, 10.1%, and 10.1% from May 2017 to June 2017.
The top five most reliable carriers in June 2017 were CCNI, MCC, OOCL, Evergreen, and CMA CGM, with an average on-time performance of 86.5%, 80.3%, 77.4%, 76.3%, and 76.2%, respectively.
From the port of discharge by region perspective, the Oceania region continued to rank the highest with 94.2% reliability in June 2017. Africa had the lowest reliability of 37.3% during the month, while the Middle East region experienced the largest improvement in reliability, improving by 12.3%, from 61.4% in May 2017 to 73.8% in June.
Additional phasing in of ultra-large container vessels (ULCV)– with a nominal capacity in excess of 18,000 TEU-on the Asia to North Europe trade lane could double their capacity share on the trade by next year, market intelligence provider in the container shipping industry SeaIntel says.
There are 58 ultra-large vessels currently in operation, with 47 to be delivered – predominantly in 2017, and 2018.
The mega container ships currently have a 35% deployment share of the trade, as carriers have been phasing in their 18,000 TEU+ sizes on Asia-Europe string as they eyed benefits of economies of scale. This has resulted in cascading of ships from the Asia-Europe trade since the launch of Maersk Line’s E-class ships 11 years ago.
The yet to be delivered 47 newbuilds are expected to also be phased into the Asia-North Europe trade lane, according to SeaIntel.
“If the capacity deployed on this trade lane grows by 5% annually for the next two years, we will see the share of ultra-large vessels jump to 61% by the end of 2018 – double of what it is today,” SeaIntel said.
The injection of larger vessels brings with itself a number of complications. Firstly, it will serve as a dampener on the future freight rate levels, as they to a significant degree will be influenced by the low slot costs offered by the ultra-large vessels.
Secondly, it will increase the load on the ports and terminals although the number of containers that need to be handled won’t change.
“The ultra-large container vessels lead to an increase in massive bursts of containers to be handled at once, rather than being spread across the week, which can pose a major challenge to ports and terminals, and downstream on the hinterland,” SeaIntel CEO, Alan Murphy said.
Thirdly, assuming that the Asia-North Europe trade lane can only absorb an additional 5% capacity per year, the new mega-vessels being delivered will push out vessels currently in deployment, and as these vessels are too young to be considered for scrapping, they will have to be cascaded to other trade lanes, pushing the excess capacity to other markets.