Due to depressed dry bulk market conditions, which triggered a slump in bulk carrier contracting and in turn led to the newly slim orderbook, which hit a nine-year low at the start of September, the bulk carrier fleet expansion is expected to ease in the coming years, according to Clarksons' Shipping Intelligence Network.
A dearth in ordering has seen the bulk carrier orderbook shrink fairly consistently since mid-2014.
By September 2016, the bulker orderbook had shrunk to 108.4 million dwt, down 19% since the start of the year. This was equivalent to 13.8% of the fleet, down from 17.2% at the start of 2016.
Overall, the bulker orderbook is at its slimmest for almost a decade, despite a 'non-delivery' rate of over 50% in the year to date, according to Clarksons.
Capesize contracting had been in fairly steady decline since the start of 2014, until 30 Valemax 400,000dwt orders were placed in early 2016, which units currently account for 11% of the total bulker orderbook in terms of capacity. Nevertheless, by the start of September 2016 the Capesize orderbook had contracted to a three-year low of 47.1 million dwt, also supported by a 10% YoY rise in Capesize deliveries in January-August 2016.
Meanwhile, by the start of September, the Panamax orderbook shrank to a nine-year low of 21.4 million dwt, driven by the consistent slide in contracting activity in the sector, including for Kamsarmax designs, in recent years.
In 2015, Panamax ordering totalled 6.6 million dwt, down 49% on an annual basis. This was followed by a near total collapse in reported Panamax orders in the first eight months of 2016.
Similarly, newbuild contracting activity has slumped in the smaller Handymax and Handysize sectors, in recent years, before dropping to an almost standstill in January-August 2016. This saw the Handymax and Handysize orderbooks shrink to 28.4 million and 11.5 million dwt respectively by the start of September 2016, representing a 10-year low in both cases.
Clarksons added that, at the start of September, only 60 million dwt, or 55% of the bulk carrier orderbook, was scheduled to be delivered after the close of the current calendar year. This compares to 67% in September 2015.
"The slim orderbook is currently expected to contribute to bulker fleet growth of 2% in full year 2016 followed by around 0.8% in 2017; this compares to average annual growth of around 9% in the period 2010-15," said Clarksons.
The Baltic Exchange Limited (Baltic Exchange) shareholders approved the GBP87m takeover by Singapore Exchange on Monday following a period of extensive consultation with shareholders and other stakeholders.
At the General Meeting held on Sept. 26, immediately following the court meeting, the resolutions set out in the notice of the General Meeting included in the Scheme Circular were both passed by the requisite majorities of shareholders by way of a poll.
The resolutions comprised a special resolution approving the Scheme and certain corporate authorities requisite to the Scheme and an ordinary resolution to approve the Special Dividend.
In a separate announcement, Baltic Exchange said that Mark Jackson, currently Chief Commercial Officer of AM Nomikos Group and a former Chairman and Director of The Baltic Exchange, will become its next Chief Executive Officer.
He is expected to take up his appointment early in 2017 and replaces the current CEO Jeremy Penn, who last year announced his intention to stand down this summer.
Singapore Exchange Limited (SGX) and Baltic Exchange agreed on the terms for the recommended offer by SGX for the entire issued share capital of the Baltic Exchange in late August.
Under the terms of the proposed acquisition, Baltic Exchange shareholders will be entitled to receive GBP160.41 in cash for each Baltic Exchange Share and GBP19.30 in cash per Baltic Exchange Share as a final dividend.
Shipping confidence, notably on the part of charterers and managers, improved for the second successive quarter in the three months to end-August 2016, according to the latest Shipping Confidence Survey from accountant and shipping adviser Moore Stephens.
In August 2016, the average confidence level expressed by respondents was 5.4 on a scale of 1 (low) to 10 (high). This is an improvement on the 5.1 recorded in May 2016, and the highest rating for the past nine months of the survey, which was launched in May 2008 with a confidence rating of 6.8.
Although confidence on the part of owners was down this time from 5.7 to 5.3, charterers (up from 4.0 to 4.8), managers (up from 5.1 to 6.0) and brokers (up from 4.3 to 4.5) were all more optimistic than in May 2016. Geographically, confidence was up in Asia, from 5.2 to 5.5, and in North America from 5.0 to 5.8, with sentiment in Europe unchanged at 5.2.
Overcapacity was the dominant theme of comments from respondents to the survey. "Scrapping is still not sufficient to cope with newbuilding deliveries and the general supply-side overhang. Every new order will prolong the crisis,” said a respondent.
Conditions in the dry bulk market also occupied the thoughts of large numbers of respondents, as the implementation of the Ballast Water Management Convention "will most likely solve overcapacity," according to another respondent, "but it will also cause a bloodbath among owners."
Concerns about the global economy were uppermost in the minds of a number of respondents, one of whom neatly encapsulated a number of the main issues currently impacting the shipping industry by noting, "Brexit, Trump, supply overhang, consolidation, demolition, bankruptcies, and the low risk appetite of banks for shipping and shipping stocks seem to be the main topics to follow for the next 12 months or so. We would be pleasantly surprised if this were to change."
The likelihood of respondents making a major investment or significant development over the next 12 months was unchanged on the previous survey, with a rating of 4.9 on a scale of 1 to 10. The confidence of charterers in this respect was up significantly, from 4.1 to 5.0, while brokers also recorded a small increase, from 3.5 to 4.1.
Owners and managers, however, were less confident in this regard than they were three months ago, dropping from 5.7 to 4.8 and from 5.4 to 5.3 respectively.
Demand trends, competition and tonnage supply featured again as the top three factors cited by respondents as those likely to influence performance most significantly over the coming 12 months.
"Given the challenges currently facing the industry, the continuing uncertainty surrounding the worldwide economy, and the ongoing level of global geopolitical instability, it is encouraging to see an increase in shipping confidence for the second successive quarter. Confidence is now at its highest level for nine months, which says much for the resilience of the shipping industry," said Richard Greiner, Moore Stephens Partner, Shipping & Transport.
There's some glimmer of hope in the dry bulk trades for the first time in a very long time, according to panellists at Marine Money's event held in Singapore.
Rates are increasing thanks to the demand side which has improved substantially, driven by China, argued Pankaj Khanna, CEO of Singapore handy specialist Pioneer Marine.
"Supply and demand is coming into balance," Khanna said with capesize rates showing some early signs of that realignment.
"To survive it's important that loan to valuation levels remain strong," Khanna stressed, noting how there is still plenty of cash available to buy ships, and seemingly every ship going to market gets sold.
Khanna felt the current environment was very much a seller's market.
More stressed sales are inevitable, warned Christoph Toepfer, managing director of Borealis Maritime. Despite seeing a small recovery at present, the German national said the market still had a long way to go before becoming profitable.
Any upside will be limited, suggested Drewry's Arjun Batra, who was adamant that the bottom of the market had now been past.
Michael Nagler, head of chartering at Noble Group, said commodity prices and demand are increasing but he felt the rise in the cape market was "somewhat artificial".
"Ordering capes now would be a disaster," Nagler warned.
The disruption to cargo services made by South Korea-based Hanjin Shipping has pushed up spot freight rates temporarily creating better conditions for other container shipping companies which stepped in to plug the gap, according to Moody's rating agency.
"Hanjin's woes are occurring at a time traditionally considered the busiest time of the year for the industry. Among those who stand to benefit from higher rates in the short term are Maersk Line, Hapag-Lloyd and CMA CGM," said Maria Maslovsky, a VP-Senior Analyst at Moody's.
Hanjin filed for court receivership on Aug. 31, which resulted in parts of its fleet having effectively been stranded at sea as some ports refused to unload the cargo out of concern that they will not be paid for their services. The length of the disruption is uncertain although slow progress is being made, Moody's added.
The carrier's parent company, the Hanjin Group, and its chairman, have announced plans to provide financing to the troubled firm to help fund the unloading of its cargo ships.
"Still, given the dire straits in which container shipping industry finds itself in the current environment, a temporary removal of Hanjin's ships from operation will provide a much-needed boost to cash flows," Moody's said, adding that even a few weeks of operations at improved freight rates during liners' busiest quarter will be a plus for the third quarter results of container liners.
Rates increased by 42% per forty-foot equivalent unit (FFE) on the Shanghai-Los Angeles route, 19% on the Shanghai-New York route and by 39% on the Shanghai-Rotterdam route following the Hanjin's receivership filing, according to Drewry. The increases follow consistent declines in freight rates in 2016.
Moody's notes that the uncertainty surrounding Hanjin is likely to be credit negative for vessel owners that charter out their ships to the company at least in the short term.
The number of 'active' shipyards globally has more than halved since the start of 2009, falling to around 400 shipyards at the start of September 2016, with rapid growth in the total followed by steep decline all within the last decade, according to Clarkson Research.
Global contracting surged by 78% from 2002 to peak in 2007, with the orderbook peaking in 2009. With capacity expanding to meet this demand, the number of active yards skyrocketed, rising by 72% from 2005 to a peak of 931 yards in 2009.
However, since the financial crisis, the shrinking orderbook has led the number of active yards, ones which have at least one vessel (1,000+ GT) on order, to decline.
As of start September 2016 there were 402 active yards, down 57% on the 2009 peak, according to Clarkson Research.
Alongside this drop in the number of active yards, newbuild output has fallen and this year is projected to stand 34% below its 2010 peak in CGT terms.
Chinese Yards Losing Bulk
From 2005, the number of active Chinese yards grew rapidly, increasing 117% to a peak of 382 yards in 2009. Many of the new yards specialised in the bulk carrier sector. Since then, the number of active Chinese yards has dropped by 63%, with almost half of these closures accounted for by 'small' yards that had delivered two ships or fewer.
There were just 140 active Chinese yards at the start of September 2016, or around 35% of all active yards globally. The number of active yards in Japan has been more steady, peaking at 71 in 2008, before falling 17% by September 2016, when 59 were reported to have an orderbook.
At the same time, larger Korean yards have mostly remained active up to today. Elsewhere, post-2008, European yards struggled to compete for the more limited number of orders.
By September 2016, 140 fewer European yards were active than back in 2008.
Challenge to Be Active
Clarkson Research said that, looking ahead, many active yards appear vulnerable today. Around 240 currently active shipyards are scheduled to deliver their last units on order by the end of 2017.
Some of these yards may yet receive orders or have deliveries delayed, however, around a quarter of active yards have only a single ship on order, while around 40% are not reported to have taken a contract since 2014.
Only 59 builders have deliveries due into 2019 and beyond.
"The number of active yards has more than halved since 2009, with a prominent feature being the exit of many Chinese builders from the scene. With ordering levels likely to remain subdued going forward, some shipyards that do not already have substantial orderbooks may also find remaining active a challenge," Clarksons' Christopher Pearce said.
Not enough companies in the shipping industry are following joined-up risk management procedures, according to international accountant and shipping adviser Moore Stephens.
The second annual Moore Stephens Shipping Risk Survey revealed a fall in the overall level of satisfaction on the part of respondents that sound risk management had contributed to the success of their organisations. The involvement of senior management in managing risk at the highest level also declined against last year.
Respondents to the survey rated the extent to which enterprise and business risk management is contributing to the success of their organisation at an average 6.6, on a scale of 1 (low) to 10 (high), compared to 6.9 last time. Under a quarter of respondents (23%) returned a rating of 8.0, compared to 26% last time, while 70% put the figure at more than 5.0 out of 10.0, as opposed to 74% in 2015.
Overall, respondents rated the extent to which enterprise and business risk was being managed effectively by their organisations at 7.0 out of 10.0 (unchanged from last time).
Demand trends were deemed by the greatest number of respondents to pose the highest level of risk to their organisation, closely followed by competition, with the cost and availability of finance in third place.
"The survey revealed that risk is being managed effectively within a high percentage of those organisations which participated in the survey. It is nonetheless disappointing to find that confidence in the level to which enterprise and business risk management contributes to the success of shipping organisations has fallen slightly in the past 12 months. So, too, has high-level involvement by senior managers," said Michael Simms, Moore Stephens Partner, Shipping & Transport.
Simms added that the current rating of 7.0 out of 10.0 in respect of the level of effective management of risk at companies which participated in the survey is not too discouraging, however, "it needs to be higher, as does the figure of just over 40% of companies which formally document the management of risk."
Despite many adversities for the maritime sector over the last year, seaborne perishable reefer trade increased in 2015 and is forecast to grow further still in 2016. By 2020, seaborne reefer cargo will hit 120 million tonnes, increasing by an average of 2.5% per annum, according to global shipping consultancy Drewry.
While future seaborne cargo growth levels are lower than those of the last decade (3.1%), such increases are expected to have a direct effect on both container lines with reefer capacity and specialised reefer operators.
With over 400 containerships with reefer capacity yet to be delivered, and possibly more still to be confirmed, Drewry believes that reefer utilisation will improve as a result of the increased seaborne cargo volumes and rising market share for the reefer containership mode.
"On the other hand, with a reducing specialised reefer fleet, not only will this mode see its cargo volumes decrease, but also its market share will reduce year-on-year," Drewry said.
Nevertheless, it currently provides around 5% of overall reefer capacity yet carries in excess of 23% of total seaborne perishable reefer cargo and is set to continue to "punch above its weight".
"Drewry estimates that the container sector as a whole made $4 billion in profits over 2015, but as the year progressed momentum slowed as demand weakened. This in turn impacted freight rates in the specialised reefer sector as container lines chased every available dollar. As a result, reefer shipping has become increasingly unprofitable in 2016, along with dry cargo trades," said the editor of Reefer Shipping Market Review and Forecast 2016/17 report, Kevin Harding.
Shipyards become the next victim of the deteriorating conditions in the dry bulk, container and offshore markets as 2016 looks to set the record for the lowest newbuilding contracts in more than 20 years, according to BIMCO.
After a decline from 2010 to 2012, shipbuilding had a rebound in 2013 and was expected to level out over the next few years. The reality was a slight decline in 2014 and 2015, but still high levels of contracting measured by compensated gross tonnage (CGT).
BIMCO said that since then, shipyards have crashed, as the contracted CGT globally has hit its lowest level since on record.
"Since the high contracting in 2013, BIMCO expected the shipyards could come under pressure. This expectation became a reality at the start of 2016, with Q1 contracting the second lowest CGT in 20 years," said Peter Sand Chief Shipping Analyst at BIMCO.
"A low level of contracting is exactly what the shipping industry needs in order to eventually restore the fundamental balance between supply and demand," he added.
The shipyards in Europe were the only ones to see an increase in contracting in the first eight months of 2016 compared to the same period in 2015. Europe contracted 2.52 million CGT, an increase of 45.3% compared to the previous year.
Japan and South Korea have had the biggest decline in contracting, down by 86.7% and 86.5% respectively, compared to the same months the year before, while China contracted 49% less CGT in that period.
"Globally, the tanker and container segments are the main reasons for diminishing new orders by percentage as well as in CGT in 2016. Combined, they were responsible for 67.7% of the total contracted CGT in the first 8 months of 2015. This year, tanker contracts are down by 80.1% and container contracts are down 84.1% compared to the same eight months last year," said BIMCO.
The effect of declining contracts and continuing shipyard overcapacity has put pressure on the shipyards order cover. The order cover is the number of years it will take to deliver the scheduled order book, based on the capacity of the shipyards. Therefore, a low order cover can be a result of high capacity at the shipyards, as well as a decreasing order book.
Shipbuilding in South Korea is suffering the most, as they hold orders for less than two years of building. Europe continues the positive trend seen in contracted CGT, with increasing order cover. This shows that additional contracting orders are not being absorbed by new shipyards entering the market.
"There is a declining trend for Japan, China and South Korea and with such low levels of newbuilding contracts being placed, this will look even more severe next year. However, the order cover could have been even lower, if capacity had been taken out due to shipyards cutting down on operations or closing entirely," Peter Sand said.
Tanker trading patterns in the Baltic are set for a shakeup with news that Russia will stop exporting oil products from foreign ports in the region by 2018. Russia's oil pipeline boss, Nikolai Tokarev, revealed the news while in discussion with the nation's president, Vladimir Putin on Monday.
If confirmed the news is a blow to the Baltic states of Lativa, Lithuania and Estonia. It would also hit Vitol, the world's top oil trader, which controls the Latvian port of Ventspils.
"We will be shipping through our own ports as there is surplus capacity," Tokarev said. Russian ports in the Baltic include Primosrk and Ust-Luga.