Danish
Ship Finance, the Scandinavian shipping bank, has just published its eagerly
anticipated forecasts for the industry. Published twice a year, the report is
one of the most keenly read by the world’s shipowners. The mood of the latest
report is decidedly sombre.
Danish
Ship Finance warned in its latest report that shipping’s value propositions are
being redefined dramatically.
“[T]he
shipping industry is in the midst of a process whereby supply continues to
expand while medium to long-term seaborne trade volumes seem to be on the brink
of stagnation or are facing very low demand growth,” the ship finance
specialist maintained. “This apparent decoupling is expected to introduce
massive changes to the competitive landscape of the shipping industry within
the next five years. We believe that the forces currently in play will
introduce far-reaching changes that redefine or augment the established value
propositions within the shipping industry. Some players are already adapting
successfully, while others are lacking behind.”
In
the shipbuilding sector, the bank said ordering activity and continuous
pressure on newbuilding prices would continue in the coming few years, which
will see the number of active yards reduced “dramatically” while capacity at
continuing yards will be mothballed.
For
the container sector, Danish Ship Finance said its biggest concern centred
around the tonnage providers, particularly the smaller players, which could
become increasingly marginalised as the liner alliances become capable of
servicing their trades with less chartered tonnage.
In
dry bulk, Danish Ship Finance questioned the perceived wisdom that the sector
has bottomed out.
“It
looks as though 2016 will end on a better note than it started,” the bank
reported. “However, even though the last quarter especially has been good
compared with the first quarter, it is too early to say that the trough is
behind us.”
For
both crude and product tankers, the bank warned premature scrapping will be
necessary as future demand will not be sufficient to absorb all the new ships
entering the trades. Moreover, the impact on secondhand values will be
significant for both crude tankers and LR product tankers since the age profile
of both fleets indicates that the average age of the vessels to be scrapped
could be as little as 17-18 years.
“If
this is the case, older vessels could see their value reduced by up to seven
years’ worth of expected future earnings,” Danish Ship Finance warned.
For
the LPG trades, the bank said the outlook for 2017 and 2018 is subject to a
large orderbook, a reduced economic growth outlook for Asia and the risk of
shorter travel distances.
The
LPG orderbook currently equals 22% of the fleet, indicating what the bank
described as “significant expansion potential”. At the same time, scrapping
potential is limited, as only 5% of the fleet is older than 25 years.
“We consider it unlikely that freight rates
for VLGCs and MGCs will remain stable without significant scrapping – which
could include younger vessels,” the bank stated.
Source: splash.
15 December 2016
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