Multipurpose Sector Remains Positive As Lines Turnoff Oversized Cargo

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  • Larger breakbulk and heavylift vessels are predicted to see an average 6% rise in their earnings this year.
  • Container lines ‘lose interest’ in oversized cargo.
  • Carrier poaching receded significantly in past months as the supply of containerships has been artificially reduced.
  • MPV sector to remain positive for 2020 on the back of stronger demand.
  • Expectation for dry cargo trade, the bedrock of MPV demand, remains a steady 2.1% growth a year for the medium term.

Larger-sized breakbulk and heavylift vessels are predicted to see an average 6% rise in their earnings this year, says an article published in The LoadStar.

Lost interest

According to Drewrys, as container lines ‘lose interest’ in oversized cargo, larger-sized breakbulk and heavylift vessels are predicted to see an average 6% rise in their earnings this year.

Breakbulk shipowners are now not seeing the usual threat to their sector from container carriers looking to top up their ships with project and heavylift cargo.

Receded carrier poaching

The danger from “carrier poaching” has receded significantly in past months as the supply of containerships has been artificially reduced by the vast number of vessels out of service for retrofitting of scrubbers.

According to a UK project shipper, container lines were “running away” from their transport quotes.

Why multipurpose charter market?

He said, “Clearly they have lost interest again.” 

“We can’t rely on [the carriers] to honour their commitments, so we are scratching around in the multipurpose charter market. But there are not that many opportunities there anymore.”

MPV sector in 2020 

Susan Oatway, senior analyst for multipurpose & breakbulk shipping at Drewry, said she was “more optimistic” about the MPV (multipurpose vessel) sector for 2020 on the back of stronger demand.

However, the analyst added she was reminded that the sector was “not based on a straightforward supply and demand equation – there are always other factors on the outside that influence the market.”

Supply side

On the supply side, Ms Oatway said the MPV orderbook remained “thin” due to recent fallow years in the sector and a consequential lack of investment in the market.

No new investment?

One London broker source agreed, noting that the few orders in the past two years had been for replacement tonnage, with no new investment coming into the sector.

“There is so much uncertainty over the survival of the sector that nobody in their right mind wants to invest in building a ship that may be obsolete in five or ten years’ time,” he said.

Average vessel age

And Ms Oatway added, “The average age of ships has crept up to 17 years, with some vessels now approaching 30 years. The diverse and ageing fleet has changed little over the last 12 months and, unless demolition numbers increase significantly, is set to stagnate, over the short-term at least.”

6% average earnings increase 

Drewry’s Multipurpose Shipping Forecaster Q4 19 report shows a headline 6% average earnings increase for the sector this year, but for smaller ships, below 15,000 dwt, the uplift is likely to be more modest.

Ms Oatway said, “Our expectation for dry cargo trade, the bedrock of MPV demand, remains a steady 2.1% growth a year for the medium term.”

Q4 19 report 

The report adds: 

  • Although the pace of global activity slowed in 2019, it is expected to recover this year and next. 
  • Expectations for steel production and trade are positive and, although investment in traditional projects remains weak, the momentum behind renewable energy appears unstoppable.
  • Looking further ahead, earnings are expected to continue recovering, albeit modestly and subject to some minor corrections in 2021.

Competition from the bulk shipping

This, it suggests, could come from a heightening of competition from the bulk shipping sector and a likely return into the market by the container lines.

Drewry concludes, “But the ongoing trend for the multipurpose sector remains positive and is more upbeat than previously envisaged.”

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Source: The LoadStar

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