The container shipping market has seen a bit of a flop since the onset of the global financial crisis back in 2008, however, the things have started to look a little bit better recently, according to Clarksons Research.
Containership earnings have spent most of the period since the onset of the global financial crisis back in 2008 at bottom of the cycle levels.
The first building block was that the freight market appeared to bottom out in the second half of last year, with improvements in box spot rates on a range of routes backed by careful management of active capacity. In the first quarter of 2017, the mainlane freight rate index averaged 64 points, up 42% on the 2016 average.
However, containership charter rates remained in the doldrums into 2017, with the time-charter rate index stuck at a historically low 39 points at the end of February, before the market picked up sharply during March taking the index to 47, Clarksons informed.
This change in conditions was partly supported by liner companies moving quickly to charter to meet the requirements of new alliance service structures.
"The start of some upward movement at last was to some extent in line with expectations, with demand growth expected to outpace supply expansion this year, and no doubt accelerated charterer activity helped too. However, the market received additional impetus from recent sharp shifts in supply and demand," Clarksons said.
The analysis of the monthly development of year-on-year growth in containership fleet capacity in TEU as well as the 3-month moving average of year-on-year growth in estimated seaborne container trade showed that in 2015, capacity growth reached 8%, and remained ahead of trade growth until the fourth quarter of 2016. In 2017, with capacity declining by 0.1% in the first quarter, backed by historically high demolition, and trade growth, notably in Asia, pushing along nicely, a big gap between the two factors has opened up.
Demand is projected to outgrow supply this year by 4% to 2%, but not by quite as much as seen so far. Full year expectations may be a little more restrained, but it is still a helpful switch, according to Clarksons.
"In the case of the recent changes in containership earnings, maybe a bit of extra heat from the charterers' side helped, but it looks like fast-moving fundamentals have offered some support too. Perhaps it all goes to show that old methods can sometimes be as good as new ones," Clarksons said.
Singapore has once again clinched the top position in Menon's Leading Maritime Capitals of the World Report, the third edition of the maritime report where Singapore was also ranked first in 2015 and 2012.
Singapore was ranked number one in the following three categories: Shipping, Ports and Logistics, and Attractiveness and Competitiveness. The maritime nation also scored good results in the remaining two categories: second place in Maritime Technology and fourth place in Finance and Law.
Significantly, Singapore jumped three places from fifth to second position in the Maritime Technology category, affirming its focus in technology, research and development is in the right direction, according to the Maritime and Port Authority of Singapore (MPA).
"We are deeply honoured yet humbled by this recognition from the international maritime industry. This will spur us to work harder to make Maritime Singapore a global maritime hub of choice. We are truly grateful to all our partners and stakeholders for walking with us every step of the way," said Andrew Tan, Chief Executive of Maritime and Port Authority of Singapore (MPA).
The latest Menon Report, developed by Norwegian consultancy firm Menon Economics, was launched at the Singapore Maritime Week 2017 last week.
The report showed that, while more than 140 shipping companies are represented in Singapore, new companies continue to establish a presence here. At the same time, the Singapore Registry of Ships is still amongst the world's top 5 largest ship registries in the world.
"The Port of Singapore remains one of the world's busiest ports – it sustained its performance in 2016, when vessel arrival tonnage increased by 6.3 per cent to 2.66 billion gross tonnes," MPA Singapore said.
Singapore ranked top in Overall Attractiveness and Competitiveness due to the ease of doing business and customs procedures. According to the report, seven in 10 experts regarded Singapore as one of the three most attractive cities in the world for relocating their headquarters and also identified it as one of the Maritime Capitals most prepared and ready to adopt digitalisation.
Furthermore, looking five years ahead, the majority of industry experts surveyed shared a consensus that Singapore "will remain the most important city," with many believing that the country has strong capabilities to handle digital transformation in the maritime industry.
Five workers have been killed and at least four seriously injured when a crane collapsed at the South Korean shipyard Samsung Heavy Industries, Yonhap news agency informed citing firefighting officials.
Up to ten other workers are reported to have sustained minor injuries in the incident at the Geoje yard that occurred on Monday, May 1st.
According to the report from the Korea Herald that cited police officials, two cranes collided, causing a structure to fall from one of the cranes, from up to 60 meters of height, onto a ship under construction.
As informed, operations are underway to rescue potential victims that may be buried at the site following the 32-ton crane's collapse.
The cause of the incident is yet to be determined.
As of 3 April 2017, the idle container shipping fleet stood at 0.97 million TEU, according to Alphaliner's data, totaling in 4.8 percent of the total fleet.
The major plunge from close to 1.6 million TEU at the start of the year is evident across the boxship fleet sizes.
Most significantly, the 3,000-6,000 TEU segment had 130 idle units' half a year ago, which had become 58 units by early April.
The reduction in idling containerships has been driven by the roll-out of new alliances' networks, Alphaliner said, adding that with reduced availability of spot tonnage, charter market is kept upbeat.
The container shipping industry is expected to continuously optimise networks and make them more efficient, as noted by BIMCO in its Shipping Market Outlook for the sector.
"Cutting costs where it's still possible and making the most of the fleet available remains essential to reaping the benefit of the individual alliance members," BIMCO said.
Above all, the implementation of new alliances remains the one thing to watch carefully in 2017. The three alliances, which replaced the previous four, control 77% of global container ship capacity and as much as 96% of all east-west trades.
"Before getting carried away, we should remember that 57% of all demand, as measured by TEU miles, is generated by non-east-west trades – trades that are particularly impacted by the recent years' cascading of tonnage from the east-west trades. Another two-tier market is in the making," BIMCO stressed.
On the supply side, only eight ships have been ordered, all at Chinese shipyards and small (1,750-2,150 TEU). The order book still contains 3 million TEU that is yet to be delivered, of which 86% is scheduled for delivery in 2017 and 2018. 80% of the capacity scheduled for delivery in 2017 will come in the form of 9,400+ TEU ships. The cascading of ships onto alternative trades will thus continue at an unchanged pace.
"BIMCO expects the container ship fleet to grow by 2.9% in 2017, under the assumptions that 450,000 TEU will be demolished and 1 million TEU will be delivered. For that to happen, the current demolition interest must cool somewhat and the delivery pace must pick up," the association added.
As explained, currently the fleet is getting smaller by the day, as 152,800 TEU has been delivered in 2017, offset by as much as 195,555 TEU being sold for demolition, resulting in a smaller fleet than it was at the start of the year.
A total of 128 end-of-life ships were sold for scrap to the South Asian beaches during the first quarter of 2017, according to the data collected and analysed by the NGO Shipbreaking Platform.
The number represents 65 percent of ships which reached the shores of Bangladesh, India and Pakistan, out of a total of 196 vessels sold for demolition worldwide during the three-month period.
This quarter 22 ships were sold for breaking at Pakistan's Gadani yard, "one of the world's most dangerous places to work," despite a number of incidents at the yard including a major explosion on the tanker Aces in November 2016, a fire on a Greek-owned LPG tanker, and a lifeboat fall from the UK-based Zodiac owned Snowdon, which together claimed at least 34 workers' lives.
A further 37 ships were sold to Bangladesh's Chittagong breaking yards, where as many as six accidents struck the industry in the first months of 2017 killing three workers and seriously injuring another three.
The Alang beach in India was by far the most popular destination for end-of-life ships this quarter, with 69 ships sold for breaking. The yards in Alang have recently been portraying their practices as improved compared to Bangladesh and Pakistan, but the overall unnecessarily risky conditions of breaking ships on tidal beaches remains, the Platform said, adding that serious accidents were reported in Alang this quarter, resulting in at least two fatalities.
"Beaching yards offer cheap, but dangerous and polluting scrapping. Ship owners have been aware of the detrimental effects of breaking ships on tidal beaches for more than 20 years, yet the ease with which existing environmental laws can be circumvented for the sake of the extra profit the shipping industry makes by selling to the beach yards allows the worst practices to persist," NGO Shipbreaking Platform said.
European companies accounted for half of the vessels beached in South Asia the first quarter. For the first time, German owners topped the list with 26 ships sold to South Asian breakers, followed by Greek owners with 17 beached end-of-life vessels.
German ship owners, Hansa Mare Reederei GmbH & Company KG and Peter Döhle Schiffahrts-KG, "top the list of the worst dumpers this quarter with each having beached five end-of-life ships," according to the Platform.
Whilst grey- and black-listed flags, such as Comoros, Palau and St Kitts and Nevis, continue to be particularly popular for end-of-life ships, also ships registered under the flags Malta and Cyprus ended up on the beaches.
Oil tankers experienced a tough start to 2017 as freight rates for all crude oil and oil product tankers continued their decline following the brief lift at year-end, according to international shipping association BIMCO.
Although average earnings stood at US$18,853 per day by April 7, 2017, down from US$63,284 per day reported on December 16, 2016, the very large crude carriers (VLCCs) may not yet have bottomed out.
Looking at the supply side, the 2016 low demolition trend seems to be changing. Namely, last year 2.6 million dwt was sold for demolition, while a total of 0.9 million had left the fleet for recycling at shipbreaking facilities by the end of March 2017.
Although slightly busier than 2016, this has been a slow start to what BIMCO expects will be "a busy year for tanker demolition".
As cargo volumes are not expected to grow that much in 2017, the increase in demand must come from longer sailing distances, and changes to the volumes from one country to the next, BIMCO informs.
China rules the crude oil tanker market, as in many other shipping markets, having been solely responsible for the incremental crude oil tonne mile demand growth since 2010. The country is set to do it again in 2017.
However, BIMCO said that "the US could spoil the party." As supply cuts from OPEC dropped from their highest supply level ever at 33.9 mb/d in October 2016, the US witnessed an increase of supply. This lifted US crude oil stocks to their highest level ever, while global stocks sidestepped.
"A continuance of that could prove difficult to uphold. 2016 was an abrupt break of trend that has seen US seaborne crude oil imports drop consistently since their peak in 2005," BIMCO said.
The shipping association added that 2017 "is proving to be a year of change for oil tankers, as was indicated during 2016 with freight rates coming down. After two years of solid demand growth, 2017 is a year of tepid demand growth around 0–2%. As fleet expansion is also slowing down, though still at a higher growth rate than demand, the shipowners have their work cut out."
Alongside shipping of grains, China's import of iron ore is set to continue to be a key driver for the demand growth in 2017 for the dry bulk shipping industry, according to international shipping association BIMCO.
During the first three months of 2017 the industry experienced an accumulated growth rate of 9.5% compared to the same quarter of 2016, marking the highest imported amount of seaborne iron ore for a first quarter.
The growth rate of Chinese imported iron ore in 2016 was constant throughout the year, as the annual volume broke into landmark territory, BIMCO said, adding that both the total iron ore import and total seaborne iron ore import volumes for 2016 exceeded 1 billion tonnes for the first time ever.
"Despite a growth of 7.5% in total imported iron ore for 2016, the growth in Chinese steel production remained limited at 1.2%. The reason for the increase in imported iron ore originates from China substituting domestically mined ore of low iron content for imported ore of much higher iron content and thereby, squeezing more domestically sourced iron ore out of the market," said Peter Sand, BIMCO's Chief Shipping Analyst.
China imported 71.3 million tonnes of iron ore more in 2016 than the previous year, representing an increase of 7.5% compared to 2015. While the total Chinese import of seaborne iron ore achieved a growth rate of 7.7%, imports of iron ore by land dropped 4% in 2016 compared to 2015.
"This is the best possible scenario for the dry bulk shipping industry, as land borne sources are being substituted for seaborne providers," according to BIMCO.
Brazil has grabbed a larger share of the growth in the Chinese iron ore import, as they have exported 12.1% more in 2016 compared to 2015. The growing Brazilian iron ore export to China has clawed market share from Australia, as Australian iron ore exports to China increased by 5.4%.
As the longest iron ore voyage, the Brazil-China route has brought an increase of 8.5% in tonne-miles in 2016.
The global very large crude carrier (VLCC) and Suezmax fleet completed 4.6% less ton miles during the first quarter of the year compared to the fourth quarter of 2016, according to VesselsValue.
The fleet's reach was over 2.5 trillion ton miles in the first three months of 2017, with a reduction in VLCC work done being the major contributor at -5.42%.
The Arabian Gulf, which covers over 50% of seaborne demand for crude exports, recorded a drop of 14% in export ton mile demand during the first quarter on the back of the promised OPEC production cuts.
Although evidence shows that Arabian Gulf exports are down, "the slack is being met elsewhere," VesselsValue informed.
Namely, exporters of crude in the North Sea saw seaborne demand for VLCC and Suezmax cargoes jump 14% in the quarter, representing their strongest quarter ever.
Also filling the gap is the United States of America, where ton mile demand rose above 70 million ton miles. The surge, recorded over the last two quarters, represents an increase of 145%, with a number of these journeys comprised of VLCC cargoes over Suezmax on the long-haul from US to locations such as China and Singapore.
"The last quarter has shown that world VLCC and Suezmax ton miles have decreased; as have exports out of the Arabian Gulf. However, smaller producers have worked to meet the gap in demand," said William Bennett, Senior Analyst at VesselsValue.
With the launch of the new carrier alliances on the east-west trades on April 1, 2017, the demand for vessels and the final tally of containership tonnage is set to increase by 5% in TEU capacity and by 4% in vessel count compared to March, according to Alphaliner.
Compared against the peak season deployment of summer 2016, total vessel capacity planned for this summer on the revamped Asia-Europe, Transpacific and Transatlantic routes will be 2% higher.
At the same time, the number of deployed ships is set to fall as carriers continue upgrading services to larger vessel sizes.
"The tonnage removed as a result of Hanjin Shipping's withdrawal from the eastwest trades in September 2016 will be fully restored with the new services launched on April 1 by the 2M+HMM, OCEAN Alliance and THE Alliance, as well as various independent carriers including newcomer SM Line who kicked off its new transpacific service last week," Alphaliner said.
Of the 913 ships to be deployed on the east-west services, carriers have secured most of the required tonnage, with some seven ships still to be named, according to Alphaliner's data.
An analysis of the vessel deployment by size range showed increases in the 14,000-20,000 TEU segment as well as the 5,500-10,000 TEU size segment, while the 10,000-13,300 TEU sector shrinks together with the smaller 3,000-5,100 TEU sector.
Demolition activity at Alang yards in the Indian state of Gujarat decreased by 34 percent from January to March 2017, according to data from NGO Shipbreaking Platform.
During the quarter, only 69 ships were sold to Indian shipbreaking yards, compared to 105 sold in the same period last year, NGO Shipbreaking Platform told World Maritime News.
The main reason for the decrease is that Bangladesh and Pakistan are paying more for vessels due to their dependence on recycled steel, Indian news site Business Standard reported.
Another reason is a higher Baltic Dry Index (BDI). When the index is high, fewer ships are sold for demolition.
In addition, hefty declines in local steel plate prices were seen at all locations in the Indian subcontinent last week, according to GMS weekly report.
Ship prices declined by at least USD 10/LDT across the board (except Turkey).
As such, it left a dampener on proceedings moving towards the third quarter of the year and the traditionally quieter/lower-priced monsoon season, GMS said.
However, India is still the most bullish and the highest placed sub-continent market, with both Pakistan and Bangladesh struggling somewhat with travails of their own last week.
"Adding to this is the fact that only Bangladesh and India can take tankers with a total ban on the beachings of wet units still in place in Pakistan, after the fatal accidents that took place there late last / earlier this year," GMS further said.
The latest available report on shipbreaking activity issued by NGO Shipbreaking Platform shows that 122 end-of-life ships were sold for breaking in India, Pakistan and Bangladesh in the third quarter of 2016. India was the preferred final destination, with a total of 61 vessels sent to the country's yards during the observed period.