Irish Maritime Development Office Releases Shipping Markets Review

On July 10 the Irish Maritime Development  Office released a Shipping Markets Review for week 27, 2012, which provides an in depth analysis of international shipping markets and a global economic overview for the week.

Based on the report, the container market top 20 carriers remain locked in intense competition, with 844,000 teu added to their operated fleet during the last twelve months, Alphaliner reports. The two largest carriers, APM-Maersk and MSC, account for more than half of the capacity additions, having added 232,000 and 218,000 teu respectively since July 2011, with neither carrier ceding any ground to their rivals.

As at 1 July, the total liner capacity has reached 16.53 Mteu of which 16.05 Mteu is made up of fully cellular ships, according to Alphaliner’s latest fleet statistics. Total capacity grew by 6.5 per cent overall in the last twelve months, led by the Top 20 carriers which increased their aggregate capacity operated by 6.4 per cent. Only two carriers, CSAV and Zim, shed capacity during the period. Both these carriers recorded significant losses last year.

Outside of the Top 20, the only major casualty is MISC Berhad, who has ceased all liner operations as of the second quarter of 2012. The two leading Chinese carriers, CSCL and COSCO, recorded some of the largest twelve- month capacity increases in percentage terms of 18 per cent and 16 per cent respectively, despite suffering heavy losses last year.

With respect to tanker market, international crude oil prices have fallen dramatically in recent weeks as Saudi Arabia maintains increased production at a time when global demand has declined on slowing economic growth. Prices rallied slightly last week due to renewed tensions with Iran, which revived its threat to close the crucial Strait of Hormuz following the start of tougher international sanctions on July 1. Prices are forecast to fall again this quarter because Saudi Arabia shows no sign of lowering its output.

Because oil traders are backing out of the market, there is less chartering demand and fewer VLCCs are being fixed. This has created a build-up of vessels in the Middle East Gulf and owners competing for business have knocked daily earnings down to levels that do not even cover operating costs. By close of business last Wednesday, the Baltic Exchange showed earnings on the route had settled at $608 per day. By comparison they were $10,000 per day the previous week and $30,000 mid-May, according to the indices provider. Earnings reached a peak this year of around $40,000 at the end of March, as Saudi Arabia shipped more cargoes to the US and China took more cargoes longhaul from West Africa, reflecting growing concern over political tensions building in the Middle East.

The situation on the dry bulk market indicates that owners of capesize bulk carriers are increasingly being forced into consecutive voyage charters in the spot market, as vessel overcapacity and volatile iron-ore demand strengthen the charterer’s hand. Consecutive voyage charters involve a vessel conducting multiple journeys on a specific route fixed at the same time. Rates on these contracts are commonly set against the relevant Baltic Exchange benchmark spot rate for that route, so that the ship will earn a varying amount per day. For instance, if a charterer wants to export several loadings of iron ore from west Australia to China, it might fix a capesize vessel on these trips and pay daily rates according to the C5 capesize benchmark.

Vessels generally get a percentage bonus or discount on the index rate depending on the quality of their ship. In addition, the contracts take pressure off chartering departments since vessels can be fixed for longer terms than in the spot market. Unlike an index-linked period charter, consecutive voyage charters also allow charterers to take advantage of rate dynamics on specific routes. The contracts are unpopular with shipowners because they make less money than they earn from period charter contracts, at least in the current market, and do not allow them to benefit from upswings in the market. Indeed, the first half of 2012 marked the worst time ever to do this, as the Baltic Exchange reported average capesize spot earnings of $6,534 per day worldwide. With operating costs estimated to be approximately $1,000 per day higher, on this basis many shipowners could have lost close to $200,000 so far this year for every capesize vessel operating in the spot market.

European ports continue to gain from a cruise market that has grown by 24 per cent over the past three years and by over 180 per cent over the last decade. An estimated 5.6m cruise passengers embarked from European ports in 2011. Italian ports Venice, Savona, Genoa and Civitavecchia are the market share leaders — holding 33 per cent in total — having handled 1.9m passenger embarkations in 2011. Statistics from the European Cruise Council put fellow euro-crisis country Spain in second place with nearly 1.4m passenger embarkations, holding a 24.8 per cent market share. Barcelona and Palma were Spain’s major embarkation ports.

In its report, the ECC says: “The European cruise industry is to a large extent destination-led and the Mediterranean and northern European regions include many attractive destinations.” Many of the leading ports are regarded as “must-see” or “marquee” destinations that planners will include in their itineraries. “Other ports, some of which are also marquee ports in their own right, have advantages of strategic position, access to major hub airports and suitable bed-stock, enabling them to feature prominently as home ports.”

The vast majority of cruise port calls in Europe are at the Mediterranean and Baltic ports. Including the Black Sea and Atlantic isles, the region as a whole includes around 250 ports visited by cruiseships.

[mappress]

Source: IMDO, July 12, 2012