Trade jitters and a continued slowdown in global economic growth are taking some of the wind out of the multipurpose/heavy-lift (MPV/HL) carrier sector’s sails, according to Drewry Maritime’s latest market outlook.
In the near term, MPV/HL rates should strengthen thanks to a healthy project cargo pipeline, but continued trade uncertainties cloud the horizon. There are signs that China-US talks may be stabilizing relations, but Brexit remains a mess. Oil prices (dated Brent) in the $70 per barrel range are good for the project market, but these are expected to settle lower post-2019 as supply expands and demand slows.
Susan Oatway, Drewry’s senior analyst for multipurpose and breakbulk shipping, said in the report that Drewry expects short-term demand for the MPV fleet to grow at 3.8 percent in 2019, before slowing to 1.4 percent in 2020 and 1.2 percent by 2023, as the global economy slows and cargo competition erodes market share for the sector.
Demolition levels remain at an all-time low for the MPV/HL fleet, which in Drewry’s reckoning includes vessels with lift capacities of less than 100 tons. With most newbuildings in the larger category of ships, the absolute number of vessels with these low lift capacities is declining approximately 3 percent annually, while vessels with lift capacities of 100 metric tons and higher are being added at about 2 percent annually, Drewry notes. Combined, this adds up to an annual net contraction of about .2 percent for the global fleet.
Drewry considers the “swing ships” for the MPV/HL sector to be handy bulk carriers and container carriers. Competition levels will depend largely on demand in those sectors; if container and bulkers are able to stay busy in their traditional segments, the MPV share will be relatively healthy. If general cargo demand falters, due to trade restrictions, slowing demand, or a combination of the two, hungry competitors will come after breakbulk and project cargo.
Netherlands-based multipurpose carrier Spliethoff is installing scrubbers in most if not all of its fleet over the near term, in anticipation of the International Maritime Organization’s January 1, 2020 deadline for the global fleet to switch to 0.5 percent low-sulfur fuel oil (LSFO) from today’s 3.5 percent sulfur fuel oil. Much of the MPV/HL sector plans to burn LSFO. Concerns about fuel availability and compatibility appear to be easing somewhat. Some carriers are reportedly trialing LSFO blends under confidentiality agreements, and oil majors including BP, Royal Dutch Shell, and ExxonMobil have said there will be ample LSFO available, at least at major ports, according to The Wall Street Journal.