Five of the EU's approved recycling yards have decided to join forces as they entered into an agreement to form the European Ship Recyclers Group (ESR).
Namely, the French Port of Bordeaux , Belgium-based Galloo, Smedegaarden from Denmark, Dutch Scheepssloperij Nederland and Spain's DDR plan to operate under the flag of the International Ship Recycling Association (ISRA).
"Our first target is to create awareness of the recycling capacity in Europe which today is over a million ton," said Peter Wyntin, ESR Chairman.
"We have to ensure that our member yards are on the top of the ship-owners' list for dismantling their ships. Our message is a clear one. If we can handle them let's keep the EU flagged ships in Europe," added Wyntin.
The European Ship Recyclers Group, which has an aim to unite all the green European recycling, will speak as one voice towards the European Commission which is in charge of implementation of the new EU Ship Recycling Regulation.
A representative from the NGO Shipbreaking Platform said that the move to raise awareness of existing best practice is "a very welcomed development," which highlights the fact that there is capacity in Europe to recycle ships.
The agreement comes less than three months after the European Commission (EC) adopted the first version of the European List of ship recycling facilities.
In December 2016, the EC said that demolition yards included in the list are located in Belgium, Denmark, France, Latvia, Lithuania, the Netherlands, Poland, Portugal, Spain and the United Kingdom.
The first 18 shipyards would have exclusive access to the recycling ships flying the flags of the EU member states, according to the EC.
Yards in third countries also submitted applications, however, the EC earlier said that it will decide on their inclusion in the list in 2017.
A record number of 450 OSVs will be delivered this year, showed VesselsValue data.
At present, there are 456 OSVs on order worldwide, according to VesselsValue.
As the container shipping industry continues to be plagued by the same challenges since the breakout of the 2008 financial crisis, the outlook for global container carriers remains grim at the start of 2017, according to consulting firm AlixPartners.
Sluggish demand levels are exacerbating supply-and-demand imbalances, while mega vessels continue to join the growing global fleet.
In addition, events like Brexit and the new US administration's policies threaten to add insult to injury as they inject even more uncertainty into the future of global trade.
Yet, according to AlixPartners, hope remains for the shipping industry as the fourth quarter of 2016 saw a surge in rate levels on major East-West trades.
What's more, Hanjin Shipping's bankruptcy at the tail end of peak season helped create a rare seller's market that lasted through the close of 2016.
"Although carriers will struggle to improve their financial performance this year, they can take clear steps to shore up balance sheets in this difficult environment," said the consulting firm.
Carriers will face some hard decisions in 2017. As they have already taken steps to relieve their financial woes, including slashing CAPEX and OPEX and stepping up scrapping, the companies should continue to drive down costs through effective post-merger integration and fleet rationalization activities that can bring supply and demand back into balance.
Fortunately, spot rates have improved in the wake of the Hanjin bankruptcy, which carriers must maintain at the very least.
The collapse of South Korean shipping company Hanjin Shipping in late-August 2016 was "a wake-up call" for the entire ocean transportation supply chain and there is a number of lessons to be learned from it, William P. Doyle, Commissioner with the US Federal Maritime Commission, said this week at 2017 TPM Conference in Long Beach, Calofornia.
As a consequence of the bankruptcy of the world's seventh largest carrier, more than USD 14 billion in cargo was stranded at sea and Hanjin ships were scattered all over the globe at anchor or just outside territorial waters.
Chassis in the US were scarce because the empties could not be taken off the trailers. Exporters couldn't get their goods out of terminals to rebook onto other ships. This went on and on and up and down the supply chain costing tens-of-millions of dollars in additional losses to land-side operations, according to Doyle.
"Shippers and carriers need to work in the direction of providing safeguards. It is so important that this does not happen again. Companies may fail, but the responsibility lies with everyone, at least to the extent that we do not have the damage that occurred post-Hanjin," Doyle pointed out.
Doyle said that things could have been done differently as the South Korean government pulled its support funding and let Hanjin fail without any advance notice to the international community of government and industry.
"We are seeing once again government-financed entities stepping in to prop-up liner companies. These include the South Korean-supported Korea Shipping Company, Korea Development Bank, Export-Import Bank of Korea, and the Korea Asset Management Corporation. We are also reading about the National Development Bank of the Taiwan Government and Taiwan’s Ministry of Transport and Communication," he said.
"My concern is what is the breaking point for a government to back-out and leave a liner company broke. We've seen this before. Indeed, it was the Korean Development Bank that backed away from financially supporting the liner company, and once that happened, it was over," Doyle added.
In the future, safeguards will be needed, according to Doyle. Upcoming new alliances should be jointly responsible for their partner lines.
"I firmly believe that if you are going to join an alliance it is the responsibility of the alliance members to ensure the cargo gets where it needs to go. If a carrier company fails and that carrier is party to an alliance, the cargo carried on the failed company's ships may only equate to one-third of the container volume carried. The other two-thirds of containers may belong to the other carriers in the alliance. So, it is essential that you all take responsibility," the FMC Commissioner explained.
"The responsibility is to get the ship into port and get it unloaded, get the empties on board and get the ship back out to sea. The industry needs to investigate options such as insurance contracts or pooled funds to protect shippers from the fallout of a carrier collapse," Doyle said, adding that there may be a problem with funding mechanisms which need to be solved.
Doyle further said that the US was the first country to put commerce first after a federal judge in New Jersey ordered that Hanjin ships could not be arrested or seized. The order allowed vessels to enter ports and be unloaded. However, due to the fact that marine terminals in the US are privately operated, ports did not allow Hanjin ships into port if there were no funds to unload the ships and otherwise pay for terminal services.
In the end, it was the Korean government that had to pay. At the direction of South Korea, the Korean Development Bank or other directed entities would deposit millions of dollars in banks around the US to be used as funds to unload vessels. However, a couple of months passed until the funds were cleared.
"Hanjin was carrying the cargo not only of Hanjin but of the other alliance members of CKYHE as well. Everyone suffered. Wouldn't it have been less caustic for the alliance to insure against such a catastrophe to protect all alliance members?" the FMC Commissioner asked.
"You all in the supply chain need to find a way to speak with one voice on the importance of the entire industry. On world trade, the entire supply chain can do better talking about your importance — from carriers to the ports, to the terminals, to port authorities, to labor, truckers, importers, exporters and distribution centers," Doyle concluded.
Following the lifting of sanctions against the Islamic Republic of Iran in early 2016, seaborne demand for Iranian crude has more than doubled, according to a report released by VesselsValue.
In the past five years, the greatest demand for Iranian crude came from China, Japan and South Korea, respectively.
Excluding the Iranian domestic trade the most journeys of crude were made to China with 105 journeys recorded in 2016. Next was India at 85 journeys and this was followed by the UAE at 58 journeys.
Shipments last year were made using VLCC, Suezmax and some Aframax tonnage. China, India and UAE have always been stalwart importers of Iranian crude, VesselsValue informed.
New players in the mix following the removal of sanctions include France with 21 journeys in 2016, while Italy took 15 shipments, Greece fourteen and Spain thirteen shipments.
"It is no surprise that historically Itan's national tanker line NITC is the largest provider of tonnage. In 2015 companies operating on the trades out of Iran came from a very different demographic to after the sanctions," VesselsValue said.
Besides NITC, top operators in 2015 included COSCO, Idemitsu, Irano Hind, JX Ocean and K Line. This group changed in 2016 to begin to include owners from Greece and Belgium.
The influx of Greek owners has also significantly increased the number of Suezmaxes on the trade rising from 15 to 81 vessels employed.
In the face of the Organization for Petroleum Exporting Countries' (OPEC) cuts, Iran has increased production over January by over 50,000 barrels per day. And with shipments almost doubling, Iran is regaining considerable market share.
At the start of February, the US President Donald Trump announced new sanctions on Iranian and Chinese interests following a missile test by Iran in January.
"Tensions are hot between Iran and the US and any further provocations from Iran could find their crude export programme curtailed once more," VesselsValue said.
Very large crude carrier (VLCC) rates on the AG/Japan route tumbled by nearly w10 points within a day to w60 on Tuesday, according to Ocean Freight Exchange (OFE).
The drop comes on the back of S-Oil placing its tanker Australis on subs for an AG/Onsan run at w54.75, as charterers "went for the jugular," with at least 4 older vessels fixed within the range of w55-w58 for an AG/East voyage.
"We believe that VLCC rates will remain depressed in the short term due to the upcoming refinery turnaround season in Asia, diminishing floating storage inventories that will free up more tonnage as well as OPEC production cuts,” OFE said.
Asian refinery maintenance over the next two months is expected to lower March cargo flows out of the AG, weighing on VLCC rates. At least 2 mmb/d of refining capacity in the East of Suez is expected to be offline in March, more than double that of last year.
China's state-owned refiners account for around 50% of overall shut capacity in Asia in March, which will reduce AG-loading cargo volumes.
Additionally, the overall impact of OPEC's production cuts "is evident from the fall in VLCC fixtures from the AG."
The number of fixtures is estimated to have dropped by 9% m-o-m to 145 in February.
According to OPEC, compliance reached over 90% in January with Saudi Arabia shouldering the bulk of agreed cuts.
Product tanker orderbook has slumped to its lowest level in nearly 17 years as it was equivalent to 10.2% of fleet capacity at the start of February 2017, a low not seen since August 2000, according to Clarksons Research.
At the start of February, the product tanker orderbook of 10,000+ dwt vessels stood at 321 ships of 16 million dwt. This is the lowest number of product tankers on order since 2001, following a sharp decline in the orderbook in 2016 when it fell by 9.2 million dwt, a drop of 35%.
While orderbook trends have differed between vessel sizes, the shrinking orderbook is expected to lead to slower overall growth in the product tanker fleet in the coming years.
Overall, the heavy newbuilding investment in 2013-15 led to rapid growth in the product tanker fleet of around 6% in both 2015 and 2016. This year, with the orderbook at the lowest level for a number of years, product tanker deliveries are forecast to fall to 7.7 million dwt, with fleet growth projected to ease to 4%.
However, some segments of the fleet are still expected to grow rapidly, with LR2 fleet expansion projected to exceed 8%. On the basis of vessels already on order, 5 million dwt of product tankers is expected to be delivered in 2018, taking fleet growth to just 2% next year.
"The product tanker orderbook has slimmed down to the lowest level for years and is now more evenly balanced between the sectors. Overall, it seems that the product tanker fleet is now entering a phase of more moderate growth," said Clarksons.
Amid a huge gap between supply and demand in the container shipping industry, carriers seem to be reluctant to fully seize the opportunity to narrow the difference, according to shipping consultacy Drewry.
Namely, the shipping companies are not expected to take the advantage and delay gratification as they still want to get their hands on big new ships as soon as possible for the kudos, market share and slot cost advantages they offer.
However, the rewards for delaying in the form of a better supply-demand balance leading to higher rates might prove too tempting to resist, Drewry said.
Newbuilding deferral offers the container industry a golden opportunity to smooth out the capacity peaks in the coming years.
2016 was the worst on record for new contracts of merchant ships with data from Clarksons Research showing that only 4 million gross tonnes of new orders were placed, down from 25 million gt in 2015 and from the five-year peak of 56 million gt in 2013.
Drewry informed that slippage is expected to be broadly similar in 2017 as it was last year.
"The lack of new business will see yards around the world…with an ever shrinking pile of work, which will almost run dry after 2018 without a sudden reactivation of the orderbook," the shipping consultancy said, adding that yards will probably have to offer very big discounts to attract new orders.
The vulnerable position of the shipyards gives containership operator-owners a window of opportunity to smooth out the delivery of the newbuilds to which they are committed and to massage the supply/demand balance more in their favour.
Danish shipping giant Maersk Line recently decided to push back the delivery of nine 14,000teu units originally due for delivery at the end of this year from South Korean shipyard Hyundai Heavy Industries (HHI) to end-2018.
Following Maersk's deferral there is around 1.6 million TEU worth of new container ship capacity scheduled for delivery in 2017, which includes some carried over from 2016.
"To ensure that the nascent recovery of the market is not scuppered carriers need to follow Maersk's lead by smoothing the supply-side pressures as much as possible by deferring new ships and scrapping more existing units," Drewry said.
Global ordering activity has slumped to 26-year low this January, according to shipbuilding data from Maritime & Trade by IHS Markit.
Specifically, demand for bulk carriers and gas carriers has plummeted as there were no booked orders in January. The appetite of shipowners for tankers over 10,000 dwt has also subsided as there were only 6 recorded orders. This is much lower when compared to figures from 2016, which was an already dire year for newbuild orders, when 16 tankers were ordered.
The situation on boxship market was also similar, as there were only three orders placed for 2,150teu container vessels, also down from five ordered in 2016.
Owners and operators are refraining from new orders as they battle low freight rates prompted by oversupply in both container and bulk shipping. What's more, increased capacity of tankers resulting from the delivery boom in mid-to-late 2016 has exerted negative pressure on oil and gas shipping. This resulted in lower freight rates and significant competition between shipowners to attract good charters, Maritime & Trade Analyst Devlin McStay says in a commentary.
"Most orders being placed at present are for specialised, high-value ships," according to McStay. "For example, the three box ships ordered by Eimskip/Royal Arctic Line are for operation in Arctic conditions and, in principle, will operate outside mainstream, over-tonnaged markets."
As explained, the significant slump in shipbuilding orders comes as little surprise, given the prolonged period of over-tonnaging in many key shipping markets.
On the other hand, owners with substantial cash on their hand are availing of the attractive newbuilding prices brought about by the ongoing market downturn.
"The very few 'conventional' ship orders placed in January, such as a pair of VLCCs for Norwegian owner DHT, represent a savvy owner with a long-term viewpoint taking advantage of very low newbuilding pricing," McStay adds.
The shipping industry's total employment contribution has increased to 2.1 million people while the total GDP contribution is estimated to have been EUR 140 billion in 2015.
The European Community Shipowners' Associations (ECSA) update on the economic value of the EU shipping industry, commissioned from Oxford Economics, shows that the sector directly employed 640,000 people and supported an EUR 57bn contribution to GDP in 2015.
ECSA's report further indicates that, at EUR 89,000 per worker in 2015, productivity in the EU shipping industry remains above the EU average.
"The latest Oxford Economics figures underline that shipping remains a solid contributor to the European agenda of jobs and growth," said Patrick Verhoeven, ECSA Secretary General.
"Compared to 2013 figures, we see a modest increase in both employment and value-added figures."
The Oxford Economics report finds that around four-fifths of direct employment occurs at sea. Officers account for an estimated 42% of positions at sea, and ratings 58%. 40% of the 516,000 seafarers employed in the EU shipping industry are estimated to be EU/EEA nationals.
"Although it is an estimated figure, the percentage of EU/EEA seafarers appears to remain fairly stable," Verhoeven said, adding that this is a positive sign, given the challenging market circumstances most European shipping companies still operate in.