BIMCO Shipping Market Outlook
SHIPPING: In a new analysis, BIMCO Shipping Analyst Peter Sand writes, that oil demand is growing - but freight rates stay subdued as vessel supply is plentiful, and that an oversupply of ships in the bound, will keep freight rates from flying high in the Dry Bulk market
Global economy:
Achieving a "strong, balanced, and sustained world recovery" - requires two fundamental and difficult economic rebalancing acts according to IMF. First, internal rebalancing: When private demand collapsed, fiscal stimulus helped alleviate the fall in output. But fiscal stimulus has to eventually give way to fiscal consolidation, and private demand must be strong enough to take the lead and sustain growth. Second, external rebalancing: Many advanced economies, most notably the US, which relied excessively on domestic demand, must now rely more on net exports. Many emerging market economies most notably China, which relied excessively on net exports, must now rely more on domestic demand.
Dry Bulk Shipping
Demand: Overall demand remains strong in volumes with European trades picking up to supplement Asian demand. Volumes are set for 7% growth in 2011 following this year's 9% growth. During the 2nd half of 2010 Capesize rates have been increasingly volatile and running their own show, while smaller segments have been much calmer, with rates staying quite firm but with a slightly downward tendency over recent months.
Outlook: The oversupply of ships is bound to keep freight rates from flying as high as in recent years. But for dry bulk shipping being a tramp shipping industry driven by the demand-side, there will also be moments in 2011 where rates will spike due to inefficiencies in loading and discharge ports.
Rio Tinto and BHP Billiton, the world's second- and third-largest iron ore exporters, may raise contract prices about 7% in the first quarter of 2011 under the new quarterly price-regime.
Tanker Shipping:
Outlook:
Both dirty and clean tanker markets have basically played out as forecasted in the latest edition of SMO&O. Thus BIMCO continues down that road and suggests that the Winter season could provide a breathing space for the tanker markets. Don't expect rates to go through the roof as we are not in for really enjoyable spikes, but growing demand and lower stocks provide for some optimism, mostly in the product tanker segment. Freight rates for product tankers of all sizes are not expected to break the USD 20,000 per day mark during the Winter market. Once we have achieved a "strong, balanced, and sustained world recovery", the tanker markets will look much better. Even though China has gained importance in terms of tanker demand, the US economy needs to get back on its feet before tanker demand can take off.
Container Shipping
Demand:
The last two years have been extreme for the container shipping industry. When the crisis started in 2008, the industry first saw volumes contract sharply and subsequently rates dropped like a stone as liner companies were fiercely fighting for market shares at full speed - so to speak. Battling with low demand throughout 2009 the industry laid-up almost 600 vessels and prompted the industry to introduce slow steaming and extra slow steaming widely to reduce ship supply and reduce cost.
Outlook:
How deep will the current slowdown dig? BIMCO foresees that the slide in rates will continue if oversupply of capacity on the strings is not reduced - and so far some liners appear to be hesitant to take capacity out of service. Volumes are not expected to rise again until the beginning of February 2011 following the Chinese New Year. BIMCO estimates that more than 300 vessels could become idle in the meantime before markets return should the industry respond firmly to the lower volumes in its quest to keep freight rates from sliding further.
Source: BIMCO
