Cancellations, delivery delays and record shipbreaking stabilise shipping

In his comments on the market, Jean-Bernard Raoust, Chairman of BRS said that “demolitions reached 36 million dwt, taking us back to the records seen in the 1980s, while oil storage immobilized 6% of the tanker fleet, permitting the market, with the help of a harsh winter, to achieve higher rates by the end of the year. In the containership market, with around 10% of the fleet in lay-up, and with the introduction of slow steaming plus a series of tariff increases, the cost of transporting a box between Asia and Europe reached a level by year-end that no one would have expected at the start of the year. As for the dry bulk market, rates were kept afloat by the immense needs of China which increased its imports by more than 270 million tonnes in 2009 thanks to an insatiable demand for iron ore (+45%) and coal (+300%)” said Raoust.

Of course, the shipping industry isn’t yet out of the woods. According to Raoust, “newbuilding deferrals will only postpone the problem of overcapacity and the market must still absorb close to 40% of the existing fleet over the next three years (65% for the large bulkers). Faced with an economic recovery that most experts qualify as “soft”, these ships will long weigh on the market and its return to equilibrium. Furthermore, it is estimated that there are $150bn of newbuilding contracts not yet financed, out of a total orderbook worth $450bn. The current price of new and second hand ships should allow more healthy economic calculations, and raise hopes of increased activity in the shipbuilding industry.

However those vessels ordered or purchased at excessive prices are here to stay and will penalize heavily the profit and loss accounts of some shipowners” he said, adding that strong volatility in the shipping markets is going to remain the norm, for as long as the global is still on the recovery phase.