Oversupply still major challenge warns ICS

(Posted on 08/04/19)

Speaking in Istanbul, Simon Bennett, Deputy Secretary General of the International Chamber of Shipping (ICS) has warned that avoiding overcapacity and unsustainably low freight rates is still a major challenge ten years after the massive downturn of 2008.

Mr Bennett said: “In that time shipping companies needed to show restraint when ordering new ships, to prevent stifling recovery. Yet the dark clouds of protectionism and slowing growth in key economies mean that the avoidance of overordering is now more important than ever.”

Addressing an audience of shipowners and operators at the Global Maritime Summit 2019, organised in conjunction with the Turkish Chamber of Shipping, Mr Bennett acknowledged that individual operators would legitimately make their own individual business decisions regarding new tonnage.

“Opinion is still divided on whether the rapid globalisation that has been experienced in the last thirty years may have run its course, and whether the slower rate of trade growth seen since the 2008 crisis represents some kind of permanent structural change,” he said. “Certainly in 2019, the outlook for the global economy and thus demand for maritime transport appears to be worsening.

“Ship ordering (in deadweight tonnage) fell 14% in 2018, about 17% below the average since the 2008 downturn. This suggests that many shipowners may indeed be resisting the temptation to over order and in early 2019, the worldwide shipping order book appeared to be stable at around 10% of the fleet,” he said. “However, the reluctance of governments in Asia, where the vast majority of ships are built, to address overcapacity in the shipbuilding sector remains a serious issue.”

Mr Bennett explained: “As well as the temptation to over order, decisions about when to recycle older ships are also fundamental to the equation. The good news is that a number of important regulatory uncertainties which have complicated decisions about when best to dispose of older ships are finally being resolved.

“In particular this includes the implementation dates of the IMO Ballast Water Management Convention. And while the precise cost of compliance with the IMO sulphur regulations is still unknown, the situation should become clearer after January 2020 now that IMO has confirmed that the implementation date of the global sulphur cap is irrevocable.”

ICS is also encouraged by the decision in 2018 by the Organization for Economic Co-operation and Development (OECD) to resume negotiations on an agreement to remove market distorting measures from shipbuilding that contribute to overcapacity. However it remains to be seen whether China (which is not an OECD member) will take an active part.      

“Notwithstanding the risks of uncertainty in the immediate years ahead, in the long term there is always cause to remain optimistic,” said Mr Bennett. “The UN has revised its projections for population growth upwards to an incredible 8.6 billion in 2030 from 7.7 billion in 2018. Combined with seemingly unstoppable demand for higher living standards in emerging economies, this indicates that long term demand for international shipping should continue to increase significantly.”  

Latest News

ASL sees continued surge in demand for Cape Size carriers

The surge in demand for Cape Size bulk carriers will continue for another six weeks, driven on by increased... Read more

Partnership to enhance compliance and emissions management

OrbitMI, a leading provider of maritime SaaS software, has announced that Istanbul-based Statu Shipping... Read more

INTERCARGO statement on loss of seafarers in Odesa bulker attack

“The International Association of Dry Cargo Shipowners (INTERCARGO) is deeply saddened by the... Read more

DNV white paper on adoption of ammonia and hydrogen fuels

As the shipping industry continues its transition to carbon-neutral fuels, ammonia and hydrogen are... Read more

Enclosed space survey aims to understand why seafarers are still dying

Ship managers and maritime professionals have joined forces to address concerns over the continuing... Read more

Algoma takes delivery of three vessels in a week including final Equinox

Algoma Central Corporation has achieved a significant milestone, taking delivery of three new ships,... Read more

Asyad Shipping successfully lists on Muscat Stock Exchange

Asyad Shipping Company SAOG, one of the world’s largest diversified maritime providers and a global... Read more

Maritime framework in focus as Jamaica develops its maritime services

As Jamaica continues to develop its maritime sector, expanding its shipping services, growing its bunkering... Read more

Record-breaking year in safety for ESL Shipping

ESL Shipping, the leading carrier of dry bulk cargoes in the Baltic region, has achieved remarkable... Read more

DNV report to help shipowners select energy-efficiency measures

With increasing regulatory pressure and rising fuel costs, the shipping industry must accelerate decarbonization... Read more