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Multipurpose Shipping Outlook Bleaker, But Growth Still Expected - Drewry

Logistic News - Published on Thu, 11 Jul 2019

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Drewry has downgraded its outlook for multipurpose shipping, which includes both breakbulk and project cargo vessel types, in light of weaker projected global economic growth, greater competition from dry bulk and container sectors, as well as slower ship demolitions. The bedrock to MPV demand is the demand for dry cargo and within that dry bulk and general cargo. With the ongoing tariff war affecting Chinese steel production, expectations for dry bulk iron ore volumes have weakened over H1 2019. However, concerns that the same tariffs would affect steel cargoes has proved unfounded. Clearly US-China trade has decreased over the last twelve months, but imports into Europe and the Far East excluding China have improved. Meanwhile the overall situation is improving as new trading partners are sought.

So at the half year point we expect dry bulk and general cargo volumes to increase at an average annual rate of around 2% in the medium term. The bulk and container markets encroach on the MPV sector in both the carriage of breakbulk and project cargo and the increasing containerisation of cargoes. With uncertainty rising across the globe due to tariff wars, the rise in populist policies and a slowing Chinese economy, all dry cargo sectors have been affected by slowing demand and this means greater competition for the cargo that is available.

Also in the equation is the multipurpose shipping fleet supply. The newbuilding deliveries versus the demolition candidates produces fleet growth or contraction. We currently have a fleet that is hampered by an ageing group, representing about 12% of the fleet, which are mainly trading short sea in the breakbulk trades. Regrettably, over the first half of 2019, we have not seen any significant sales for demolition that would suggest owners are starting to get rid of these vessels. This translates into fleet growth of around 0.3% per year over our forecast period.

This is admittedly very slight – but it means that the overage tonnage currently holding the fleet back is not being removed as quickly as it should be. MPV operators are, in the main, opting for low sulphur fuel over scrubbers to comply with IMO2020. With minimal investment needed to keep their ships going they are running them as long as possible.

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Posted By : Mohan Sharma on Thu, 11 Jul 2019
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