Market must still absorb newbuildings close to 40% of the existing fleet over the next three years

Last year, thanks to cancellations and delayed deliveries, new vessels were less than expected and the world fleet increased by “only” 7% while seaborne trade declined 3%, according to Barry Rogliano Salles (BRS).

But the good news could be overshadowed by the newbuilding tonnage overhang. In its annual review, just published, the Paris-headquartered international shipbroker notes some optimistic signs:

“Demolitions reached 36m dwt – taking us back to the records seen in the 1980s – while oil storage immobilised 6% of the tanker fleet permitting the market, with the help of a harsh winter, to achieve higher rates by the end of the year. In the containership market, with around 10% of the fleet in lay-up, and with the introduction of slow steaming plus a series of tariff increases, the cost of transporting a box between Asia and Europe reached a level by year-end that no one would have expected at the start of the year.”

BRS comments that in the dry bulk market, rates were kept afloat by the immense needs of China which increased its imports by more than 270m tonnes in 2009 thanks to an insatiable demand for iron ore (+45%) and coal (+300%). The second hand market was also again busy, with a total number of transactions ultimately similar to 2008, although with an average price of 40% to 50% less.”

“Good news then? “ BRS asks and then answers it own question: “Yes, but… newbuilding deferrals will only postpone the problem of overcapacity, and the market must still absorb close to 40% of the existing fleet over the next three years (65% for the large bulkers). Faced with an economic recovery that most experts qualify as “soft”, these ships will long weigh on the market and its return to equilibrium.”

The broker highlights the funding problem facing some owners and says that it is estimated there are US$150bn of newbuilding contracts not yet financed, out of a total orderbook worth $450bn.

“The current price of new and second hand ships should allow more healthy economic calculations, and raise hopes of increased activity in the shipbuilding industry. However those vessels ordered or purchased at excessive prices are here to stay, and will penalise heavily the profit and loss accounts of some shipowners,” warns BRS.

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The total ship building market saw a rise in cancellations during January with a total of 60 orders cancelled, higher than the monthly average in 2009, according to the latest Fairplay Shipbuilding Market Forecast from IHS Fairplay.

January was the third consecutive month of declining orders since October 2010, but Fairplay says early indications point to an increase during February. Contracting of new dry bulk vessels in 2009 was cut by almost two-thirds from the previous year. During 2010 and 2011, ordering is expected to average 300 ships annually, with the number of orders expected to fall in all size segments, but mostly in the 60-99,999 dead weight tonnage (dwt) segment.

“During 2009 to 2013 we expect to see dry bulk contracts for 143 million dwt to be signed. This is the effect of the Chinese wanting to transport their cargo on keels built on home ground and their raw material suppliers securing tonnage for deliveries of their cargo, which means it is not an effect of a supply deficit,” explained Niklas Bengtsson, senior consultant at IHS Fairplay.

According to Fairplay China has the largest total order book at 3,783 ships, an increase of 33 orders during January 2010. South Korea is second with 1,741 and saw 10 new orders in January 2010.

During the period 2004 to 2009 the world shipping fleet has grown by 6.6 percent on average when measured in dwt but only by 1.9 percent if measured in number of ships reflecting a trend towards larger vessels.

Fairplay says it expects that orders for general cargo ships will double in 2010 to 203 orders and total fleet capacity is expected to increase by 3.3 percent. The increase is helped by the expected increase in removals from the fleet during the next 5 years which is forecast to exceed that of the previous five years by a large margin, reaching 4.9 percent dwt, which amounts to a increase of almost 150 percent.

Deliveries to the dry bulk fleet is expected to grow by 21 percent in 2010, from 47 million dwt last year to 57 million dwt. As a result, bulk fleet capacity is calculated to grow by 7.5 percent this year, by 10 percent next year and by the same amount during 2012. This is higher than the forecast increase for global commodity trade volumes.

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Promoting UK international maritime service companies

The deadline for advertising in the UK Maritime Services directory closes 15 April.

Published on behalf of Maritime London by Navigate PR, the directory will include the contact details of over 1500 companies active in the UK’s international maritime services sector. The directory will be distributed at Posidonia 2010 as well as via Maritime London promotional trips including events in Shanghai this September.

Companies which have already confirmed advertising include:

ABS, Andrew Weir Shipping, Beluga Projects (UK), Bentleys Stokes and Lowless, Brodies, Burness Corlett Three Quays, Clarkson Research Services, Coracle Online, Cyprus High Commission, Holman Fenwick Willan, Ince & Co, Insurance Premium Finance, International Registries, Jensen Associates, Kite Warren & Wilson, LA Marine, Liverpool JMU, Maquarie Bank International, METL, Norton Rose, Shipping Podcasts, Spinnaker Consulting, Honourable Company of Master Mariners, The Nautical Institute, Theisen Securities, TLT, Warsash Maritime Academy, Wavespec.

For further details, including rates, see www.maritimelondon.com/media_pack2010.pdf or contact Will Bixby ASAP.

Tel: +44 (0)20 73769 1650 or email: wbixby@navigatepr.com

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MEPC takes place in London this week

Delegates to IMO's Marine Environment Protection Committee (MEPC 60) meeting in London this week will hear an update on potentially revolutionary emissions scrubbing technology developed by Singapore-based Ecospec Global Technology. IMO says the MEPC meeting will focus on greenhouse gases (GHG) and the establishment of a North American Emission Control Area (NA ECA).

International Bunker Industry Association chief executive Ian Adams says: “The shipping industry needs a clear steer from IMO on how to proceed on the GHG issue in the build-up to the UN Climate Change Conference (COP 16) in Mexico.”

He adds that the bunker sector will be looking with great interest at the details of the new ECA.

But there is likely to be considerable interest in the Ecospec CSNOx gas abatement system now that classification society American Bureau of Shipping (ABS) has verified the results of sulphur dioxide (SO2), carbon dioxide (CO2) and nitrogen oxide (NOx) removal from the emissions of a trading 100,000-tonne aframax tanker. The system removed 77% of CO2, 99% of SO2, and 66% of NOx from the tanker’s emissions. The verification was part of an ongoing IMO Type Approval certification process for CSNOx as a NOx and SOx abatement system, but it is its ability to remove CO2 that has aroused massive interest.

The presentation is to take place on Wednesday lunchtime.

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An International Transport Workers' Federation (ITF) meeting in Berlin last week adopted a motion from Anglo-Dutch seafarers' union Nautilus and the Seafarers' International Union (SIU) calling for governments to commit adequate resources to tackle piracy off the coast of Somalia.

Against a background of moves by some governments to prevent the payment of ransoms the ITF campaign calls for a halt on interference in shipowners' efforts to get crews released through making ransom payments and to further protect vessels moving through the area

Nautilus and the SIU also call for governments to follow the example of those who are actively involved in combating the threat by dedicating resources and finding workable solutions, taking steps to secure the speedy release and safe return of kidnapped seafarers, and working with the international community to secure the stability of Somalia.

“At the end of last year we warned that the affected area had become too dangerous to enter. We also highlighted the negligence of countries making billions from ships they are doing nothing to protect,” says ITF maritime coordinator Steve Cotton.

“This decision has empowered us to build a worldwide campaign to pressure all governments to close the gap in their anti-piracy efforts.”

Like almost all shipping industry organisations the ITF says it remains firmly opposed to the arming of seafarers. It has however agreed to support armed military personnel on ships in addition to protection by naval vessels.

Union general secretary Mark Dickinson says: “Despite the deployment of so many naval forces off Somalia, piracy continues to represent a growing threat to seafarers, with levels of violence and intimidation at all-time record levels. And it should not be forgotten that attacks on shipping occur all over the world, and not just off Somalia.”

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The 2001-built, 4,954 gt cruise ship Sea Voyager has been accepted into Lloyd’s Register class following two weeks of sea trials in Jacksonville, Florida on the St Johns River.

The US-flag vessel, in lay-up since 2002, will provide accommodations for World Food Programme (WFP) staff engaged in relief efforts in earthquake-stricken Haiti. Lloyd's Register North America, Inc says its surveyors worked closely with the management company, International Shipping Partners, and the US Coast Guard to verify the vessel was in compliance with all necessary rules and regulations before its departure for Haiti.

“We have found Lloyd's Register to be the most efficient and organized option for classing passenger ships, and we have a very close relationship with the Passenger Ship Support Center in Miami, ” says Kenneth Engstrom, executive vice president of the vessel's manager International Shipping Partners.

“The Lloyd's Register North America, Inc. surveyor in Jacksonville worked well with the Coast Guard representative to cover their respective areas of responsibility.” “Conducting the sea trials quickly and thoroughly required everyone involved to work together and stay focused on the main goal: to get a safe and compliant ship to Haiti as soon as possible,” says John Hicks, manager of the Passenger Ship Support Center, Miami.

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London headquartered Electronic Shipping Solutions (ESS), which provides electronic documents to trading partners, has announced the signing of Cargill International to its eSafety Data Sheets (eSDS) service. Earlier this year, ESS issued the first electronic Bill of Lading for BP Oil UK, Morgan Stanley, INEOS, Denholm Barwil and Brostrom Tankers.

eSDS enables users to comply with global legislation such as the Globally Harmonised System (GHS) and regional legislation such as Registration, Evaluation, Authorisation and Restriction of Chemical substances (REACH), both of which deal with the management and distribution of Safety Data Sheets.

Ernst Herger, head of operations for Cargill International SA, said: “eSDS Services allow us to be both operationally efficient and REACH compliant with regard to our safety data sheet obligations. One of the main benefits is that eSDS allows a number of key activities to take place simultaneously, saving us valuable time and money.”

ESS was established in 2003 to enable international trading partners to use electronic documents for operations, legal, compliance and customs purposes, including Bills of Lading, Certificates of Origin and Safety Data Sheets.

According to ESS, there the emergence of ‘eDocs’ will also provide faster credit line turnover, reduced credit risk management, improved document management and visibility, simpler compliance and reduced risk or fraud.

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The House of Commons transport committee last week urged the Department for Transport (DfT) to delay final publication of its national policy statement (NPS) on ports so that it can be co-ordinated with the impending draft statement on national road and rail networks.

The committee's chairman Louise Ellman said: "The Government seems to be rushing the ports' NPS through with unnecessary haste."

She also said: “The NPS for ports is not fit for purpose until major changes are made.

The British International Freight Association (BIFA)has supported the MPs. Its director general, Peter Quantrill said: “Britain is at a tipping point in terms of its sea port framework and there is a danger of valuable shipping activity being lost to near continent rivals.”

The Department for Transport (DfT) issued its draft National Policy Statement on Ports (NPS) and invited responses to its proposals late last year. BIFA says its main concern remains that certain elements of the NPS could disadvantage the UK and may contribute to trade moving abroad.

Mr Quantrill added: “BIFA has expressed its concern that if the NPS puts additional hurdles in the path of UK port expansion that could drive more vessels to the welcoming arms of ports such as Antwerp and Rotterdam to load and discharge their cargoes.

Under the draft Statement, non-business issues such as the impact on the environment, national security and historic buildings/wrecks have to be considered when an application for port development is made. The concern is that the NPS, in both tone and content, fails to place sufficient emphasis on business issues.

He added: “It is of the utmost importance that deep sea ocean shipping lines continue to call direct at UK ports, if they do not the danger is that freight will be discharged on the continent. Regardless of how the goods are finally delivered to the UK, the extra handling would increase costs and cause delays.”

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As part of its loss prevention programme the Standard P&I Club has published Standard Cargo: A Guide to the Carriage of Oversized Cargo – Yachts. It is the first of two Standard Cargo publications that deal with items of cargo that are an unconventional shape or size, are difficult to handle or are difficult to secure, and that may require specialist knowledge in order to ensure safe carriage.

The club notes: “Ship’s officers used to be experienced in loading project, heavy lift and unusual cargoes. The art of ensuring that the lift was safely slung, properly stowed and correctly lashed was something learnt through experience. Deck officers and crew knew what was needed to prepare for the lift and stowage. It would appear that much of this basic knowledge has been lost, or possibly it is now considered someone else’s responsibility.”

The club gives general guidance and advice that applies to all ‘oversize’ cargo and then concentrates on the carriage of yachts. In its next issue of Standard Cargo, the club will deal with the various other types of unconventional items.

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