The container shipping companies are facing great challenges. Specifically, their profit will be cut amid stricter environmental regulations and soaring oil prices.
The performance of shipping companies in the next 18 months will depend on their asset quality, size and diversification, said German rating agency Scope Ratings, explaining that they are likely to become profitable in 2018 only with the biggest and most efficient fleets.
One of the major issues faced by liner majors is the high oil price which has seen carriers introduce emergency bunker surcharges as a means of recovering costs.
Scope expects a surge of around 25% in bunker prices this year compared with last year, squeezing thin profit margins despite robust global economic growth and active trade, notably in Asia.
Scope analyst Denis Kuhn pointed out that the market's excessive capacity is pushing down freight rates, but the analyst expects the shipbreaking activities to speed up in the second semester of 2018 and 2019 because of the new environmental regulations.
The trade disputes between the US and its major trading partners are another factor weighing on the container shipping market. However, Scope said that the world's overall trade volumes might see slight impacts, noting that those with large and diverse fleets which can adapt themselves to new trading patterns will have more opportunities for making profits.
Italian shipyard Fincantieri saw its orderbook reach 109 units this July thanks to orders for cruise ships and naval vessels.
According to the shipbuilder's CEO Giuseppe Bono, the orderbook amount has exceeded EU€32 billion (US$37.2 billion) , which displays its capability of building and delivering high value-added vessels on time.
In the first half of this year, the builder's profit came at EU€15 million, an increase of EU€4 million year-on-year. In addition, its revenue during the same period standed at EU€2.52 billion, jumping by 10 percent compared with EU€2.29 billion recorded at June 30, 2017.
What's more, Giuseppe Bono expects the builder's revenues, profits, and margins to further climb in the second semester of this year.
During the first six months of the year, FIncantieri delivered six newbuilds consisting of four cruise ships, namely Carnival Horizon, Seabourn Ovation, MSC Seaview, and Viking Orion, and two naval vessels.
Japan-based shipping company NYK Line has downgraded its forecast for the interim and full year consolidated financial results.
Based on the previous forecast for the interim results covering April-September 2018 period, NYK Line said that its anticipated revenue was JPY 905 billion and a profit of JPY 8 billion (around USD 72 million). However, these figures have been cut to JPY 890 billion worth revenues and a profit of JPY 3 billion, down by 62.5 percent.
For the full year ending March 31, 2019, the revenue has been downgraded from JPY 1.805 trillion to JPY 1.260 trillion, while the full year profit forecast was cut from JPY 29 billion to JPY 12 billion, down by 58.6 percent.
NYK Line ascribed the revision to, among other things, higher than expected one-off costs related to the launch of the Ocean Network Express with K line and MOL. The JV signaled the termination of NYK Line's liner business.
COSCO Shipping Lines confirmed it has been hit by a cyber attack on July 24 impacting its internet connection within its offices in America.
According to the information unveiled, the Chinese shipping giant was attacked by a ransomware.
The company said that its vessels were not impacted and that its main business operation systems were performing stably. However, COSCO's terminal at the Port of Long Beach was affected.
The company said it has taken effective measures and it will try its best to make a full and quick recovery. Besides, it added it will keep all the people updated of the latest progress via various channels.
The latest attack shows that we have to further improve the cyber security in the maritime industry which is becoming increasingly dependent on digital technology.
The South Korean government has approved a major investment in the recently launched state entity, Korean Ocean Business Corporation. In detail, the country's finance ministry has recently said that KRW1.35 trillion (US$1.2 billion) in-kind investment would be made into the new company through stock contribution.
The ministry's statement shows that 12.7 percent stakes in South Korea's four port authorities would be contributed to the Korea Ocean Business Corporation.
The state entity, established earlier in July, was aimed at supporting the local shipping industry. Specifically, the entity would focus on supporting the country's five-year plan for the revitalization of its struggling shipping industry with the construction of about 200 ships in the next three years.
The entity was officially launched in Busan with an initial capital worth KRW3.1 trillion. In addition, the country's government plans to invest KRW200 billion into the agency.
According to NGO Shipbreaking Platform, in the second quarter of 2018, 169 ships out of 220 which were demolished were sent to South Asian beaches.
During the period, American shipowners top the list with 26 vessels beached in South Asian yards, followed by Greek and UAE owners.
In the end of April, Pakistan re-opened the market to the import of tankers. In two months alone, twenty-two tankers reached the shores of Gadani to be demolished. Industry sources show that low freight rates resulted in the demolition of over 100 tankers in the first half of this year.
Only three ships had a European flag – Greece, Malta and Norway – when they were beached during the quarter.
It is noting that more than half of the ships sold to South Asia this quarter changed flag to the registries of Comoros, Niue, Palau and St. Kitts and Nevis just weeks before reaching the beach.
What's more, the Platform's report showed that between April and June, six workers have lost their lives and seven others have been severely injured when breaking ships in Chittagong, Bangladesh. Another worker was reported dead after an accident at a shipbreaking yard in Alang, India.
2017 was another year of exceptional growth for Asian cruise market, according to the latest report released by Cruise Lines International Association's (CLIA) on Asia Cruise Trends.
Asian sourced cruise passenger numbers hit record high in 2017 of 4.052 million. Asia accounted for about 15 percent of total global ocean passenger volume in 2017.
According to Joel Katz Managing, Director for CLIA Australasia & Asia, after another year of exceptional growth which saw Asia outperform other established markets, it's clear that cruising is continuing to grow in popularity as cruise lines continue to deploy significant capacity in the region, including brand new, large cruise ships purpose-built for Asian consumers.
Joel added that 2018 is expected to deliver another year of growth as Asian travellers increasingly recognize cruising as an easy, relaxing, and great value for money way to travel.
According to the same report, the year of 2018 will see 38 cruise brands deployed, up by 3 in 2017. More ships are also bound for Asian waters in 2018, with 78 ships are set to be deployed in Asia, up from 66 in 2017.
In addition, there is a tendency toward deployment of bigger cruise ships which can hold 3,500 passengers as well as small upscale ships in the region.
Destination markets seeing the most calls are Japan, Mainland China, and Thailand in 2018, with the figures of 2,601, 1,012, and 581 respectively.
Miami-based cruise ship major Carnival Corporation & plc has realized a 26.3 percent cut in CO2 emissions compared with the figure of 2005, surpassing its 2020 target in advance.
By the end of last year, 62 percent of the company's fleet was equipped with exhaust gas cleaning systems, which can reduce sulfur compounds and particulate matter in vessels' engine exhaust. In addition, 43 percent of the fleet had the capability to use shoreside electric power when docked.
According to Bill Burke, chief maritime officer at Carnival Corporation, in order to be a responsible global organization, it needs to have sustainability in all aspects of its operation.
Besides, the compnay has invested in two major environmental intiatives, EGCS and LNG. They provide a balanced approach to fuel usage and clean-air emissions. For example, in 2017, Carnival Corp added the world's second cruise ship powered by LNG while in port.
It is worth noting that this December, AIDAnova will start its maiden voyage as the first fully LNG-powered cruise ship globally. It is capable of running exclusively on LNG both in port and at sea. What's more, six more fully LNG-powered vessels under the company will be put into operation by 2022.
The Women’s International Shipping and Trading Association (WISTA) International has received an approval for consultative status from IMO.
The International Maritime Organization’s governing body, the IMO Council, approved WISTA’s application on July 5, 2018.
“Consultative status gives us the opportunity to promote diversity, inclusion and women’s empowerment, which are our main aims,” Despina Panayiotou Theodosiou, WISTA International President, said.
“We can now formally contribute to the discussion for increasing capacity in our industry, a critical component of which is promoting women in the industry, both shoreside and shipboard. WISTA’s efforts support the overarching principles in IMO’s Strategic Plan, especially the promotion of Gender Equality and the empowerment of women.”
WISTA International has been a voice for female executives in the maritime industry since 1974. Today, WISTA International has more than 3,000 members worldwide representing 44 National WISTA Associations.
The enthusiasm for newbuild orders across most shipping markets has started to wane after over USD 10 billion were committed in the first quarter of 2018, according to a report from VesselsValue.
The total committed to new deliveries is now the lowest since the start of 2016. Ordering trends in the start of the year were highest in the markets that recorded the highest returns. This includes the dry bulk and LNG carrier markets, while interest in the low earnings environment tanker markets was softer.
“In one sense this highlights the short-term view that some investors take of the market. It still appears to be easier to secure financing for ships in a strong market as opposed to those that are suffering in the doldrums.”
VesselsValue explained that rising asking prices from shipyards are partially to blame in the downturn in new orders. Higher steel prices, smaller workforces, and less willingness by yard creditors to accept low margins are contributing to lower buyer interest.
“The slowdown in newbuilds is an encouraging sign that over-ordering may not be a significant issue.”
Some of the market segments have a large outstanding orderbook, but most of these are offset by an equal number of ships on the water which are equal to their recycling value. If orders remain between USD 4 and 8 billion level through rest of the year it should support the asset values of younger ships as well, VesselsValue said.
The headwinds to global trade may give some owners pause in fleet renewal plans, especially in the container and dry bulk markets, however, most shipping markets appear to be at their trough level or improving.