IHS: Bulker Ship Sizes to Diversify amid Slower Fleet Growth

The slowdown in fleet supply growth for dry bulk ships should result in better diversification in ship sizes (or tonnage balance) over the next few years, according to the latest analysis by IHS Maritime & Trade, a division of IHS Inc.

This trend will play out as innovative vessel conversions, better fuel efficiency designs and shipyard consolidation become key factors for maritime stakeholders in restoring freight rates to satisfactory levels, the analysis finds.

IHS Maritime & Trade’s latest Fleet Capacity Forecast shows that about 47 million dwt of dry tonnage ships was delivered in 2014, which increased the total fleet capacity to 730 million dwt.

The capacity addition in 2014 was, however, 22 percent lower than in 2013 and nearly 53 percent lower than in 2012.

“After a promising 2013, it looked as if the upturn in the dry bulk market would begin early in 2014. However, a slowing Chinese economy led to a fall in the volume of cargo imported. This, combined with the steady flow of newbuilding ship deliveries throughout the year, has put freight rates under severe pressure,” said Richard Clayton, Chief Maritime Analyst at IHS Maritime & Trade. 

“The upside of a low dry market is that owners are less likely to order ships. If this continues into the medium term, the prospect for recovery is good,” Clayton said. “On the other hand, investors might use the opportunity of low ship prices to place orders in the expectation of an upturn. There are several variables at play. As always, the key to recovery is maintaining discipline.”

Most of the tonnage that entered the fleet was in the Panamax and Capesize segments, about 40 percent of the total in each category, while there were some noteworthy deliveries in the large Handy and Supramax segments adding up to about 10 percent of their 2014 totals.

IHS Maritime & Trade expects deliveries will show a slight acceleration in 2015 as they were about 40 percent higher (totaling 76 million dwt) than in 2014. If all deliveries come to fruition, this would mean a 10.5 percent total (dry bulk) fleet growth for 2015.

“Energy-efficient designs offer a competitive edge in a depressed market, helping to develop a two-tier structure,” Clayton said. “Ships with fuel-efficient engines and improved operating capabilities will be able to negotiate better rates than their older counterparts. While the price of bunkers is low, the difference in rates is not so significant, but increasing demand in future will favour modern vessels.”

In 2015, IHS Maritime & Trade sees a significant number of completions in the Ultramax class (64,000 dwt), with about 280 vessels. Among these deliveries are modern designs such as the first of the series of four sisters built to Tsuneishi Shipbuilding’s TESS6 Aeroline design, the 38,000 dwt Green Dolphin 38 design of Handysize vessels along with Mitsubishi Heavy Industries’  bulk carrier vessel design that offers reductions in carbon dioxide emissions by about 25 percent compared with conventional bulkers.

Tough market conditions are also encouraging shipowners to seek new ways to operate their fleets, even negotiating with competitors with a view to mergers and cooperation.

“Putting pride aside, consolidation and collaboration are tried and tested ways to weather the challenging times,” Clayton said. “Shipping alliances such as Capesize Chartering help owners to take control over supply and demand in the short term by positioning their vessels to increase freight rates until the market picks up.”