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Shipping rates may remain fragile

Shipping rates may remain fragile
The tanker segment is likely to recover sooner, but bulkers and container liners could suffer from overcapacity for many years to come.

The tanker segment is likely to recover sooner, but bulkers and container liners could suffer from overcapacity for many years to come.

A slowdown in global trade growth combined with anticipated expansion of the available shipping fleet could mean the downturn in the shipping markets could last beyond 2025, according to a consultant.

The tanker segment is likely to recover sooner, but bulkers and container liners could suffer from overcapacity for many years to come, according to Robin Meech, managing director of Marine & Energy Consulting.

His predictions follow analysis of the anticipated increase of available tonnage in the world fleet up to 2025 versus possible growth in trade ranging from 3-5% per year.

Meech analysed an index based on available shipping tonnage for all tankers, bulkers and liners as of 1/1/2008. He made a baseline for each segment to demonstrate the expected growth in the fleets based on newbuild orders, taking recent significant increases in cancellations, delays and scrapping into account.

He then plotted the capacity increase for each segment against simple possible growth in trade from the start of 2008 at 3%, 4%, 5% per annum.

The analysis assumed that there was approximate supply/demand balance for the three types of vessel at the beginning of 2008.

Meech produced analysis that identifies the points in the future for the three types of ship where the three growth rates cross as a simplistic indication of when the supply/demand might approach a balance and freight rates recover.

The tanker market could recover as soon as 2011 with 5% annual growth, according to Meech. It would take until 2013 with 4% trade growth and until 2020 with 3% annual growth to achieve that balance.

The bulker and liner segments would take longer to recover. At 5% trade growth, it would take until 2014 or 2015 to achieve fleet supply/demand balance in these sectors.

But if growth is only 3%, both segments would suffer fleet overcapacity beyond 2025, according to Meech's calculations.

At 4% annual trade growth, balance in the bulker segment could be seen around 2015, but the container segment would remain oversupplied beyond 2025, his data showed.

"In practice trade growth rates are less than 3% per annum for the next three to four years. Negative growth rates have been discussed for liners for a couple of years, bulkers nearly flat and tankers at 1% per annum," Meech told.

"The results are depressing and provide an indication of how out of line the supply/demand position is," he said.

"Some degree of balance will only achieved with extensive lay-up and early scrapping - that's if sufficient acceptable scrapping capacity can be established. This will achieve some degree of balance, but rates will remain fragile for some years to come while owners will continue to support a very large volume of idle tonnage," Meech observed.

"The trade growth projected by the IMF would make it even worse," he added.

At the end of January, the International Monetary Fund (IMF) cut its prediction for GDP growth for 2009 to 0.5%. It predicted that world growth in 2010 will pick up to 3%, according to reports.

www.TurkishMaritime.com.tr

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