The key to making a profit in the shipping industry is managing fleet growth to ensure the balance between supply and demand is just right, according to Peter Sand, chief shipping analyst at the Baltic and International Maritime Council (BIMCO).
The container shipping industry is seeing improvements in 2017 in the wake of a tumultuous 2016, but as is the case in dry bulk and wet bulk shipping, capacity management is the critical factor, Peter Sand, chief shipping analyst at the Baltic and International Maritime Council (BIMCO) said in a webinar on the shipping industry outlook last Monday.
“In the shipping industry, we can do literally nothing about the demand side but being at service to our customers, but we need to manage the fleet growth in order to improve that vital fundamental balance to lift utilization of our assets to make better use of our investments and then actually make a profit at the end of the day when the balance between demand and supply is just right,” Sand said.
In the first seven months of 2017, the China Containerized Freight Index grew by 20.7 percent compared to the corresponding 2016 period, Sand said. However, as freight rates in the container shipping industry recover, their rise seems to be magnified beyond their actual performance, since they were so low last year, he explained. Consequently, in some instances, the improved rates may still be at loss making levels.
Looking ahead, Sand said containership fleet growth is expected to be “manageable” in 2017 and 2018.
Meanwhile, in the dry bulk shipping industry, which is still bogged down by overcapacity, BIMCO projects fleet growth of 2.7 percent for 2017.
And Hurricane Harvey, which made landfall near Corpus Christi, Texas on Aug. 25, has had an outsized impact on the oil and gas market, temporarily closing 16 refineries, representing a total of 20-25 percent of total U.S. refinery capacity, Sand said.
This drove up freight rates in the Atlantic basin significantly, and created a short term benefit for both oil traders and ship owners.
On a year-to-date basis, growth for crude oil tankers has increased 4.3 percent, and BIMCO expects fleet growth of 4.7 percent for the full year. Although BIMCO is forecasting the demolition of 9 million DWT of crude oil tanker tonnage for 2017, the segment is facing a six-year high in terms of new capacity being delivered, Sand said.
It has also been a very poor year for oil product tanker earnings, and the demolition of product tankers has not been enough, he said.
BIMCO is projecting oil product tanker fleet growth of around 4.1 percent for 2017.
The outlook for 2018 appears better for oil product tankers, but BIMCO still expects below normal demand growth in 2018 due to swollen global oil stocks and oil product stocks.
BIMCO: Capacity management still critical for shipping industry
