Drewry: Flies In MPV Ointment
By Carly Fields
Competing sectors continue to be the “fly in the ointment” for the project cargo market, with demand improvement relying heavily on improvements in the handysize bulk carrier and container ship markets, according to Drewry.
But, with competition expected to increase as both markets weaken amid concerns about China and project cargo, this improvement is still at least 12-18 months away, said Susan Oatway, the company’s senior analyst.
By way of illustration, Oatway pointed to the strong correlation between one-year time charter rates for a 17,500-deadweight-ton multipurpose vessel, or MPV, and one-year period rates for a handysize bulk carrier and a 13,500-dwt container ship. MPV rates have fallen along with the other sectors, though not as steeply.
“Of possibly more interest to any investor is that there is significantly less volatility in the MPV sector,” Oatway added.
Container ship rates were expected to continue falling well into 2017, with any meaningful recovery not expected until 2018 at the earliest. Freight rates for handysizes fell last year and were likely to continue to do so in 2016.
In terms of cargo, the multipurpose share of general/project breakbulk cargo has fallen to around 17 percent, compared to a high of 20 percent in 2011. “Going forward, we expect to see further erosion of this share in the medium term,” Oatway said.
The order book stands at just 6 percent of the operating fleet in deadweight-ton terms with 107 vessels on order, of which 60 have declared heavy-lift capability.
“The main takeaway here is that this is a very manageable order book – particularly in comparison to the bulk and container sectors.”
Demolitions have also dropped significantly since their peak in 2009 and record low recycling numbers are expected in 2016.
“However, we believe that is unsustainable and expect them to rise back to nearer to 700,000 deadweight-ton in 2016-17, due to a combination of aging fleet, forecast rising steel prices in 2016 and further market weakness,” Oatway said.
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