Braemar: Updating Ageing Feeder Sector Is Critical

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Hub and spoke maritime supply chains, while always in use, are becoming increasingly important, with the Gemini Cooperation to be launched in a few months an example, but the feeder sector is in anything but ship-shape, reports Container News according to shipbroker Braemar.

Feeder sector is in anything but ship-shape

According to the broker’s figures, the orderbook for vessels in the 1,000-3,000 TEU size range is well below the level of expected scrapping given the number of ageing ships in the fleet and the incoming environmental regulations that will impact all sectors in shipping.

We divided the data into 1,000-1,999 and 2,000-2,999 TEUs, with a small variance to capture ships on the upper edges of the 2,999TEU. For the 1,000-1,999 TEU sector, 21% of the ships are aged 20 years or more. For the larger regional types 2,000-2,999 TEUs, 23% of the vessels are aged 20 years or more,” explained Braemar researcher Jonathon Roach.

The broker added that vessels of less than 1,000 TEUs are not seeing investment today. However, 1,100, 1,700-1,900, 2,500 -2,800 TEU ships are still required for feeder and regional work and Braemar said it expects orders to continue for these standard feeder/regional types.

Orderbook statistics for vessels in the 1,000-2,000 TEU range are 109 vessels totalling 157,597 TEUs, according to consultant MDS Transmodal, with 415, out of a current fleet of 1,701 ships, over 20 years old.

In the larger size range, the situation is much worse, with 240 ships from a total fleet of 875 currently 20 years old and just 39 vessels on order.

Looming shortfall in feeder vessels

To cope with this looming shortfall in feeder vessels Roach said, “In the future, we may see upsizing of feeders to 3,000 TEU plus, but that is a long way off.” He added that operationally, the flexibility of smaller, traditional, feeders at hub ports is an advantage given that they are easier to handle and can be squeezed into quay space more easily than larger ships. Moreover, smaller ships have the flexibility to operate in ports where larger vessels are restricted.

Dynamar analyst Darron Wadey has analysed the feeder sector in detail and believes there could be some consequences: “On the face of it, there will be a considerable shortage of the necessary feeder vessels. The ultimate consequence of this – other things remaining equal – will be a closing of certain feeder routes, especially those that support ‘near porting’, which is the projection of the maritime leg of the supply-chain as close as possible to the ultimate origin or destination.”

Wadey added that islands and remote communities will be maintained given that shipping is still the most economical and ecological form of transport, but he said: “Such a development will impact the sector’s sustainability credentials.”

Shifting vessels from one market to another is not really an option, said Wadey: “A shift of sorts brought about by the sulphur emissions control areas in North America and North Europe. Both are stricter than the younger IMO 2020 regulations and both have led to investments in new and compliant vessels with these trades leading to the introduction of LNG fuelled vessels. North Europe is now even seeing other fuel types as methanol and, not too far away, ammonia.”

Roach added that slow steaming to meet CO2 compliance will squeeze the supply further: “Regions without strict CO2 compliance may offer an alternative to non-compliant and older ships, but this is a short-term view. Fleet renewal of ECO feeders will be required.”

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Source: Container News