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Improved supply-demand balance and reduced competition from container and dry-bulk ships could provide multipurpose carriers with “the first signs of recovery” by late 2017, says global shipping consultancy Drewry.
“By the second half of 2017, the tide may start to turn,” said Susan Oatway, Drewry’s lead analyst for multipurpose shipping. “I’m cautiously optimistic, and a lot more positive than I was at the start of 2016. “Slow growth in supply, alongside better growth in demand, is expected to help multipurpose charter rates in 2017 and beyond,” Oatway said. “As always, a lot will depend on what happens in the container and dry bulk sectors.”
In its latest Multipurpose Shipping Market Review and Forecaster report, Drewry said dry cargo demand is weak but strengthening while scrapping rates are rising and new vessel orders have slowed. The result, the report said, should be minimal growth in multipurpose vessel capacity by 2020.
For operators of multipurpose vessels, this forecast of closer supply-demand balance represents a rare flash of good news in a long-depressed market. Rates have been depressed by oversupply of vessels, not only in the breakbulk sector, but among container lines and dry bulk operators.
Low rates in their core markets have driven container lines and operators of handy-size bulk carriers with capacities of 15,000 to 35,000 deadweight tonnes to compete aggressively for breakbulk cargoes.
Multipurpose carriers’ cargo has been nibbled from both sides. Container lines have picked off heavy and oversized cargoes such as oil and gas project shipments. Bulk carriers have targeted basic breakbulk commodities such as steel and aluminum that otherwise would have moved in multipurpose vessels.
Higher container and bulk rates would encourage container ship and bulk carrier operators to focus on their primary markets instead of contributing to overcapacity among breakbulk carriers, Oatway said.
Drewry also believes container rates have bottomed out following Hanjin Shipping’s bankruptcy and a flurry of mergers and acquisitions.
“This can only help the multipurpose market,” Oatway said. “When dry bulk rates improve, handy bulk carriers that have been carrying steel, timber and scrap instead of dry bulk will move back into their natural markets. When container carriers can get good rates on containers, they don’t have to fill up their slots with project cargo, which is harder to manage.”
Roll-on, roll-on vehicle carriers also have made a big play for breakbulk cargoes but appear to be in the market to stay. Oatway said, that breakbulk demand is likely to start recovering as growth picks up in developing economies in Asia and elsewhere. Drewry forecasts that overall dry bulk demand will rise 1.4 percent annually through 2018, at about the same pace as dry bulk vessel capacity.
The growth will not be evenly distributed. Basic general cargo vessel capacity will contract by about 2 percent through 2020 while capacity for project carriers, defined as vessels with more than 100-tonnes lifting capacity, will rise by almost 3 percent, Drewry forecasts.
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