Heavylift shipping outlook clouded by slowing world trade
The multipurpose and heavylift shipping sector will see strengthening rates through 2019 fuelled by rising project cargo traffic, but prospects thereafter are muted by an anticipated slowdown in world trade.
Drewry’s forecast acknowledges that the uncertainty surrounding trade demand is receding slightly as the US and China appear to be moving toward some kind of a truce, although it has taken longer than might have been anticipated at the start of the year. However, at the same time the global economic outlook has deteriorated and continued uncertainty in Europe due to Brexit suggests that multipurpose shipping is not out of the woods yet.
Drewry’s latest expectation for the addressable demand for the multipurpose vessel (MPV) fleet is for average annual growth of 1.2% to 2023. This is, however, much stronger in the short term, at 3.8% in 2019 and 1.4% in 2020. This is because as the global economy is expected to slow down after 2020, increased competition for cargo will eat into market share.
It is also the case that the project market is expected to be strong in 2019 as it was boosted by the rise in oil prices through the first half of 2018. However, over the longer term oil prices are expected to average under $70 per barrel and this will limit new project investments.
On the other side of the supply/demand balance is the multipurpose and heavylift fleet. The number of vessels with lift capacity of less than 100t SWL is in decline and this trend is expected to continue for the foreseeable future with contraction of almost 3% pa to 2023. Although demolition levels are at an all-time low, they are expected to pick up over the year and the multipurpose (no gear & geared) sector has the most overaged tonnage available for recycling.
Meanwhile the project carrier fleet with lift over 100t SWL is growing at a rate of around 2% per year as most of the newbuildings being delivered and on order are in this category. The combination of the two sectors leads to a net contraction of about 0.2% pa to 2023 in total MPV supply.
The swing ships for this sector are the Handy bulk carriers and the container lines. The number of competing vessels looking for breakbulk and project cargo will depend very much on how the trade war between the US and China plays out. In the short term the MPV share is expected to improve as the competition moves back to its more traditional cargo base. However, as general cargo demand weakens over the longer term with slowing economic and trade growth, it is anticipated that these competing sectors with their own oversupply challenges will return to breakbulk and project cargo and so stagnate MPVs market share.