In the ever-evolving world of maritime, breakbulk, project cargo, and logistics, the industry finds itself at a crossroads. Despite promising indicators hinting at robust cargo volumes, the anticipated surge seems to be perpetually delayed. The culprit? A perfect storm of supply chain disruptions and a prevailing aura of economic uncertainty, according to experts speaking at the International Shipowning and Shipmanagement Summit (ISSS).
Martin Stopford, a prominent voice in the maritime sector, issued a stark warning during the summit, stating, “We’re moving towards this period where there are a bunch of things that have been building up.” These factors include the enduring impact of the COVID-19 pandemic, the ongoing war in Ukraine, which has disrupted the grain trade, surging interest rates, a significant 60% increase in transport costs, China’s slowing economic growth, and the shifting geopolitical landscape in Asia and the Middle East.
However, amidst this turbulence, there is a glimmer of hope for the Multipurpose (MPP) niche market. Historically, governments have countered impending recessions by bolstering infrastructure investments—a trend that’s currently in play. This increased focus on infrastructure projects, often seen as a harbinger of economic downturns, is creating a continued demand for oil and gas. Furthermore, despite mounting challenges, the renewables sector is poised for substantial growth in the coming years.
Yet, the maritime industry faces a paradox. While the current fleet size and its projected reduction could potentially stabilize rates, the container and bulk markets are grappling with intense pressure. Simultaneously, there’s uncertainty about whether the industry can muster enough capacity to meet the impending demand surge.
Multipurpose Shipping Report: Time Charter Market
Much like the bulk markets, the Multipurpose (MPP) market finds itself ensnared in a paradox that challenges even seasoned analysts. Shippers and carriers are reporting a surge in demand, particularly in the premium sector, along with an uptick in forward bookings. The oil and gas sector is also exerting increasing influence. However, this optimism stands in stark contrast to the current level of activity and the availability of prompt cargo, which remains weak.
In response to this ambiguity, charterers are treading cautiously when it comes to charter rates and durations. The spot market, in particular, has fallen short of MPP owners’ and operators’ expectations during the summer months. Nevertheless, there’s confidence that period charter rates will rebound in the next 12 months, driven by anticipated demand growth.
According to assessments like TMI-P6 and TMI-P12, collected from industry experts monthly, the reference fixtures suggest a divide between short and long-term time charter rate levels. The Atlantic spot market, in particular, exhibits weakness in cargo volumes and inquiries, with limited upside potential in the Far East. Owners are finding themselves under pressure as charterers push for lower rate levels.
The period time charter rates for an F-Type 12,500 tons-deadweight MPP vessel have reverted to levels last seen in August 2021 when rates began to soar after a 12-year cyclical slump. However, in the summer of 2023, rates experienced a steeper decline, nearing the 10-year average for 6-12 months’ time charters. The final quarter of the year will be pivotal in providing shipowners with the confidence and security needed to face upcoming challenges, especially in complying with global and regional regulations aimed at achieving climate targets.
A Strong Newbuilding Market Amidst Uncertainty
In contrast to the turbulence in the charter market, the newbuilding market remains robust. Market sentiment suggests that newbuilding prices will remain stable in the medium-term future, primarily driven by labor shortages and inflation. Activity in the newbuilding market is on the rise, with notable orders from German owners Auerbach and Krey for F500 types. Several other owners are in negotiations with Chinese shipyards, some even having letters of intent (LOIs) in hand, although effective orders are yet to be confirmed.
In conclusion, the maritime industry, as depicted in the latest “Toepher Multipurpose Shipping Report,” stands at a pivotal juncture. Despite the storm clouds of uncertainty gathering on the horizon, there are glimpses of optimism, particularly in the MPP niche market and the new building sector. The industry must navigate these complex waters, adapting to changing geopolitical and economic landscapes while seizing opportunities for growth and stability.
Source: Toepher Transport’s Multipurpose Report #29