Operators of multipurpose ships positioned best in soft breakbulk market

Operators of multipurpose ships positioned best in soft breakbulk market

What are you selling? That’s an eternal question that will determine winners and losers — and survivors — in a difficult market for breakbulk and project cargo carriers.

Oversupplied with ships ordered in the boom years before the 2008-09 financial crisis, operators of multipurpose carriers are struggling with soft demand and growing competition from container, bulk and roll-on, roll-off carriers.

Which carriers will still be standing when the smoke clears? The ones with something special to sell and enough buyers willing to pay for it. This supply-demand equation is out of balance for operators of most vessel types. With demand slow to come back, many operators are desperately trying to hold on.

Operators of basic multipurpose vessels are in a particularly tough spot. Everyone’s seeking a piece of their business and most have nothing unique to sell. It doesn’t take a sophisticated ship to carry a load of steel or aluminum ingots.

Better positioned are operators of the 900 or so multipurpose ships that qualify as project carriers, with lifting capacities of more than 100 tons, or premium project carriers, which can lift more than 250 tons. These ships can carry the increasingly heavy cargoes for projects — many energy-related — in addition to run-of-the-mill breakbulk commodities. They have something unique to sell.

Operators of roll-on, roll-off ships that carry wheeled equipment and vehicles also figure to be around for the long haul. There are only a few of these big global carriers. They’ve invested in big, modern ships built to give them an edge in attracting heavy and oversize cargoes.

The sales pitch of container ship lines is more complicated. Their weekly sailings provide shippers with flexibility and a way to ship in smaller increments. Their new, larger ships provide more room for out-of-gauge shipments on flatracks or in holds, at least until container shipping demand picks up.

But specialized cargoes will always be secondary to container lines’ primary business. And their Achilles’ heel for high-and-heavy cargoes may be constraints at ports. Marine terminals have all they can handle with regular container shipments, without the additional complications of a 200-ton turbine thrown into the mix.

Drewry analyst Susan Oatway believes multipurpose carriers have another couple of years of rough seas before things level out. Because most multipurpose carriers are privately owned, there’s limited visibility into their financial condition. But given market conditions, it’s a safe bet that few are rolling in profits. Some undoubtedly will fall by the wayside, and the first to go will be those with nothing unique to sell.

Because carriers can’t control demand, Oatway says, they must restrict supply by accelerating the scrapping of older, less-efficient ships. In addition, she says operators need to relearn the old-school basics of securing cargo commitments before ordering ships.

“That’s what shipowners used to do,” she said. “We forgot about that when the market boomed, and I think we have to get back to that.”

Contact Joseph Bonney at joseph.bonney@ihsmarkit.com and follow him on Twitter: @josephbonney.