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.”
AXSMarine, a pioneer and market leader in the provision of advanced solutions for shipping professionals... Read more
The Baltic Exchange has launched a new assessment to track the cost of operating vessels. Initially... Read more
The West of England, a leading mutual marine insurer, has celebrated the 50th Anniversary of its Greek... Read more
Fleet Management Ltd, one of the world's largest independent third-party ship management companies,... Read more
Rotterdam based ship management company Misuga Kaiun Holland B.V. has chosen Marlink to provision cost... Read more
Clipper Bulk, in close collaboration with a financial partner, has acquired three Handysize dry cargo... Read more
A vision of the Ship Manager of the Future and the way ship management companies will interact with... Read more
Arun Sharma, Executive Chairman of the Indian Register of Shipping (IRClass), has been formally introduced... Read more
Leading Classification Society ClassNK has established a cross-sectional cyber security project team... Read more
Fednav Limited has taken delivery of the Federal Montreal, its newest Great Lakes-suitable handysize... Read more