The container shipping trade will mark positive growth numbers alongside most months of 2017, however, as long as carriers maintain the current capacity levels spot rates should see small, incremental increases, according to shipping consultancy Drewry.
Growth is returning to the Asia-East Coast South America (ECSA) trade due to favourable comparisons, but container traffic remains a long way off pre-2015 numbers as spot rates are holding steady with capacity settled.
Despite a lengthy economic downturn, continued foreign investment, particularly in Brazil, has strengthened the Brazilian Real currency and boosted the country's purchasing power. Meanwhile, southbound container flows returned positive year-on-year growth rates in each of the last three months of 2016, something that was achieved in only two of the previous 28 months.
December was a particularly strong month with southbound volumes to Brazil rising by 24% year-on-year, Drewry cited Datamar statistics. The return of volume growth in the fourth quarter merely limited the damage to the annual southbound flows to -16%. The trade has not seen any annual growth since 2013 and last year's decline follows drops of 9% in 2015 and 1.5% in 2014, meaning that 2016's southbound volumes "were barely three-quarters of the level they were in 2013."
Despite improving in the second half of the year, it was the Asia to Brazil market that declined the most in 2016, falling by 21% to 770,000 TEU. Volumes from Asia to the Plate region of Argentina and Uruguay fell by 3.5% to 390,000 TEU to give it one-third of the total market, up from the one-quarter share it had from 2012-14.
Capacity on the trade has been relatively stable ever since the rationalisation in late 2015/early 2016 that resulted in only three weekly services left standing. Today the remaining carriers tend to adjust capacity via the occasional missed/void sailing, which can have a significant impact on ship utilisation.
The trade operated at full capacity in the final two months of 2016 but carriers resorted to two void sailings in January, which helped push the annual comparison down to -25%.
"Forward schedules indicate that there were another two void sailings in February to coincide with the Chinese New Year lull, but that by March the trade will once again be firing on all cylinders," Drewry said.
Chinese online retail giant Alibaba has inked a memorandum of understanding with France's CMA CGM in Hangzhou, China to seek cooperation in the digital area.
Alibaba customers using its One Touch platform will be able to book directly onto CMA CGM's services from China to the Mediterranean and the Adriatic, namely the line's MEX1 and BEX services.
Environmental performance will remain one of the "failure-is-not-an-option missions" in modern shipping amid numerous challenges in the industry, Craig Jasienski, CEO of Norway's Wallenius Wilhelmsen Logistics (WWL), said, predicting the outlook for 2017.
With the recent decision of the International Maritime Organization (IMO) to introduce the global sulfur cap in 2020, the discussions on shipping's role in reducing CO2 emission and the ratification of the ballast water treatment (BWT) mean that shipping will have to up the ante in terms of environmental performance, according to Jasienski.
WWL's CEO predicted that high uncertainty will mark 2017 as the UK vote for Brexit represents a sharp change of direction in Europe and creates a more complex backdrop for European roll-on/roll-off (RoRo) trade development in 2017.
"Although direct effects might take time to be felt, the fact that we do not know what Brexit will look like creates a climate of uncertainty where decision makers are likely to err on the side of caution," Jasienski pointed out.
Another source of uncertainty for the shipping industry is the outcome of the US election, as there is a lack of clarity around President Trump's policies.
A positive stimulus for shipping could be seen in domestic policies such as infrastructure development, while protectionist ideas are more likely to have negative effects, Jasienski explained.
WWL CEO further said that it remains to be seen what impact European elections taking place in 2017 will have and how significant they will be for the economic development in the western world.
The container market has seen a turning point in late 2016, with demand rising above supply during the fourth quarter, ushering in the start of a period of strengthening earnings for carriers, Danish boxship giant Maersk Line believes.
As a result, Maersk Line predicts that carriers' earnings could improve in 2017.
The Danish shipping major expects its net earnings to recover by more than US$1bn from an underlying loss of US$384m in 2016 to a net profit in 2017. The improvement is based on the company's assessment of a recovery in seaborne container transportation that is expected to increase by 2 to 4%, Alphaliner said in its latest weekly report.
Maersk saw an encouraging growth of 4% in global container demand in the fourth quarter of 2016 and it increased own liftings by 12%, in line with its strategy to gain market share.
Although Maersk said that container demand rose on a global scale, this has not translated in demand for containerships, Alphaliner explains.
Global demand for boxships has dropped together with supply growth, with average demand in the fourth quarter of 2016 decreasing to 0.6% from 1.6% in the first quarter of the year. Vessel supply growth went down to 2.2% in Q4 from 7.9% in Q1 of 2016, according to Alphaliner.
This has resulted in an increase in the average idle fleet in the last quarter of 2016 to 1.48 million TEU.
The gap between vessel demand and supply has narrowed in the first quarter of this year, with demand growth rebounding slightly to 1%, compared to supply growth of 1.2%. The average idle fleet for the first five weeks of 2017 stands at 1.34 million TEU, the report further reads.
However, other industry players have different projections. Singapore's container port business trust Hutchison Ports cautioned that box volume growth in 2017 remains uncertain due to the "policy stance of the new US administration" and the "continued weak consumer sentiment and high unemployment rate" in Europe that could hinder the pickup of the European trade, according to Alphaliner.
What's more, Japanese shipping company Mitsui O.S.K. Lines (MOL) said it anticipates freight rates to decline in March and the carrier adjusted earnings projections downward for its fiscal year forecasts through March 2017.
"Apart from the uncertainty over demand growth, competition among shipping firms remains intense, ahead of the new Transpacific service contract season, starting on May 1," Alphaliner said.
Namely, various carriers plan to set up new Transpacific services in the next two months, while the 2M alliance will also launch a new high capacity Far East-North Europe string this April.
The dry bulk shipping market is expected to recover from 2017 onwards driven by a narrowing supply-demand gap, according to the shipping consultancy Drewry.
Namely, demand is projected to grow at a healthy pace of 3% while supply could grow by about 1% from 2017.
The growth in demand originates from a rise in iron ore and thermal coal trade, Drewry informed. Coal demand is expected to rise mainly from developing Asian countries including Vietnam, South Korea, Taiwan and China.
The rise in Chinese domestic steel consumption will provide employment to VLOCs and Capesize vessels carrying iron ore in the market. On the other hand, Vale's new project S11D has become the most cost effective iron ore mining project and will increase iron ore supply from Brazil increasing total tonne miles, which "will help demand for bigger vessels in the long term," according to Drewry.
The supply side is projected to grow by just 1% from 2017 because of high scrapping and a thin orderbook. The environmental regulations on Ballast Water Treatment System (BWTS) and IMO's regulation on use of low sulphur fuel oil in 2020 which will result in high scrapping of old tonnages.
In addition, a contracting orderbook and low future new orderings due to limited financing availability are keeping a check on future deliveries.
"At this point in time, the orderbook as a percentage of the total fleet, which is a strong indicator of future deliveries currently stands at a decade low," Drewry said, adding that the outlook for dry bulk demand coupled with a small orderbook of newbuilds as a percentage of the total fleet capacity "will ensure a sustained recovery in the dry bulk market."
Capesize owners could be swayed to scrap more ships following the very firm US$345 per ldt Star Bulk achieved for the scrapping of its 2001-built Star Eleonora.
Now bound for a beach in India, the deal has made the ship's owner a very tidy US$8.26m. Clarkson Research described the price fetched for the vessel as "aggressive" in its latest weekly report. The research unit that belongs to the world's largest shipbroker suggested that the scrap deal may entice more owners to sell their older, larger bulkers instead of passing special survey, which seems to be the current trend.
Danish shipping and energy conglomerate Maersk Group booked a loss of US$1.9bn in 2016, negatively impacted by impairments of US$2.7bn in Maersk Supply Service and in Maersk Drilling as a consequence of an expected weaker outlook.
As a result of US$1.2bn and US$1.5bn of impairments seen by the respective units, the 'unsatisfactory loss' was a turnaround from the company's profit of US$925m registered in 2015.
Despite significant cost optimisation initiatives, Maersk Drilling and Maersk Supply Service were severely impacted by continued large scale cost reductions and project cancellations in the oil industry and the large inflow of new capacity over the last years.
Maersk Group expects its gross capital expenditure for 2017 to be in the range from US$5.5bn to US$6.5bn, as the company anticipates a gradual improvements in container rates.
The decision to halt shipbreaking activities at Gadani yards in Pakistan has left many fearing for the fate of new arrivals and clearance permissions on existing deals, according to GMS, a cash buyer of ships for recycling.
Namely, the uncertainty arose after Chief Minister of Balochistan, Sardar Sanaullah Khan Zehri, banned all demolition activities related to tankers and liquefied petroleum gas (LPG) carriers at Pakistan's Gadani shipbreaking yards last week following two incidents which caused dozens of fatalities.
The minister informed that the works would be stopped until proper safety arrangements are made.
However, once the ban is lifted, key requirement for all tankers arriving locally will be strictly gas free for hot works clean with all cargo and slop tanks totally cleaned of all cargo, slops and sludges, echoing current regulations in both India and Bangladesh, according to GMS.
The ban was imposed less than three months after Gadani yards temporarily closed in November following the series of explosions aboard the oil tanker Aces, reportedly caused by gas wielding processes undertaken during the dismantling work.
The fatal explosion on Nov. 1, which killed at least 28 workers, and the fire on Jan. 9, with another 5 victims "have really shaken up the industry and yard upgrades are inevitable," said GMS.
"It is therefore expected to be a somewhat distracted market in Gadani, until the full range of yard enhancements, restrictions and requirements are established going forward," said GMS.
The cash buyer added that the future of shiprecycling remains uncertain, however, if local beachings in the absence of cutting activities continues, "we can certainly expect Gadani recyclers to disappear from the bidding tables, especially if local authorities take too long to permit yards to come back online."
The rehabilitation process for the former South Korean shipping giant Hanjin Shipping is set to end on February 17, Yonhap News Agency cited the Seoul Central District Court.
The decision was made on Thursday by the South Korean court, some half a year after the cash-strapped carrier was put under court receivership as it succumbed to the prolonged depression in the shipping market.
The company filed for court receivership in late August 2016 as its creditors, led by the state-run Korea Development Bank (KDB), said they would not provide additional financial support to Hanjin starting from Sept. 4.
In an effort to collect enough cash to pay back its creditors, the company opted to sell a number of its assets, including its entire Asia to US route network and operations on the routes, a number of containerships, as well as its overseas businesses.
Earlier this week, Hanjin's stake in Total Terminals International (TTI), the operator of two facilities in Long Beach and Seattle, was sold to Swiss-based Mediterranean Shipping Company (MSC) and South Korean Hyundai Merchant Marine (HMM).
The acquisition, undertaken by MSC's subsidiary Terminal Investment Limited (TIL) and HMM, includes all of Hanjin's equity and shareholder loans in both TTI and the associated terminal equipment leasing company Hanjin TEC Inc.
Crude oil tanker deliveries hit a all-time high in January as 5.5 million dwt of the capacity entered the fleet so far this year, representing an increase of 220% comnpared with January 2016, BIMCO said citing preliminary data from VesselsValue.
The month already accounts for 22% of the previous year's total crude oil tanker deliveries. In comparison to the totals of 2015 and 2014, this 2017 figure amounts to 48% and 51%, respectively.
In terms of crude oil tanker deliveries of 2.5 million dwt, January 2016 hit record levels in relation to the previous two years. However, that level has been dwarfed by the tremendous amount of deliveries in the first month of 2017.
"This record-high crude oil tanker delivery growth is troubling, and worsens the balance between supply and demand instantly, due to sluggish demolition in this segment," said Peter Sand, BIMCO's Chief Shipping Analyst.
From 2014 until 2017, recycling amounts to only 8 million dwt, which represents a small proportion of 2.2% of the current crude oil tanker fleet.
"This development in January highlights the fact that the crude oil tanker market faces headwind for the current year already," added Sand.
VesselsValue data shows that the lion's share of January deliveries was taken by 12 very large crude carrier (VLCC) deliveries, which totals 3.68 million dwt and represents 67% of the month's total.