NEW YORK: After years of forecasts of imminent recovery in depressed breakbulk and project markets, there are growing signs that the market finally is on a path of revival.
“I am a little more optimistic than I was last year,” said Susan Oatway, Breakbulk Specialist at Drewry. “The fundamentals are definitely there.”
She cited broad improvement in the global economy that is boosting demand, a slowdown in vessel orders that is keeping capacity growth in check, and the possibility that container and bulk carriers will see improvement in their core markets that discourages them from competing for project and breakbulk shipments.
This kind of optimism has been voiced before, but now it is being shared by companies involved in oil and gas, petrochemical, mining, and infrastructure projects, and by economists forecasting global improvement that will drive increases in cargo volume by late 2018 or early 2019.
Operators of multipurpose and project carriers and their customers have endured a multiyear slump.
Soft commodity prices have forced companies to cancel or delay projects, and to cut back on maintenance that generates shipments of machinery and equipment.
Now, global economic growth is gaining momentum. The global economy is on track toward 3.5 percent growth in 2018 and 2019, Nariman Behravesh, Chief Economist at IHS Markit, told the JOC’s 18th Annual TPM Conference in Long Beach on March 5.
Furthermore, IHS Markit expects world trade volumes to grow 5 percent this year, up from 2.5 percent in recent years, as growth accelerates in emerging and developed countries alike. “It’s not quite the boom rates of the 1990s, but it’s certainly better,” Behravesh said.
Drewry estimates that at the end of 2017, there were approximately 3,210 multipurpose project carriers, or premium project carriers, with total capacity of 29.5 million deadweight tonnes and average age of 16 years. Project carriers are defined as vessels with lifting capacities of 100 to 250 tonnes. Premium project carriers have lifting capacities of more than 250 tonnes.
The composition of the global multipurpose and project fleet is changing. Simple multipurpose vessels average 20 years in age and are gradually being scrapped.
New investment is concentrated in larger ships with heavy-lift gear. Drewry expects the project carrier fleet to expand by almost 3 percent a year through 2019, while similar multipurpose vessels decline at a similar rate.
Consolidation of the fragmented multipurpose and project sector also has increased during the last few years, without much impact on capacity. “Consolidation doesn’t necessarily affect supply,” Oatway noted. “What often happens when two companies merge is they get an injection of cash and go out and order new ships.”
And when supply and demand eventually come into balance, vessel operators often find it hard to resist adding capacity. Shipping companies tend to have short memories, Oatway said, making for “a really cyclical market.”