Modest recovery seen for shipping industry

“In China, ports are seeing their highest congestion this month since July 2009.

“The number of capsize bulkers waiting to berth at Chinese iron ore ports hit a high of 45 vessels in July 2009, but for the last 15 days it has risen to 60.

“Globally, there are 27 capesize vessels waiting to load iron ore off Brazil and 23 vessels waiting to berth in Australia,” he told StarBiz.

Rakish said the recent Asean-China free trade agreement would also result in a surge of goods moving between Asean countries.

Citing a Credit Suisse report, he said the market outlook for offshore tanker storage was expected to be consistent this year.

“The amount of oil in tanker storage will remain a moving target due to several financial factors.

“The prospect of easy money from storing oil onboard ships to take advantage of the oil price contango has brought more than a few financial players into an arena that is traditionally dominated by major oil companies due to the large capital outlays,” he said.

“Other factors that would keep the floating storage trend going in 2010 were the projected weak tanker rates, a record new tanker fleet delivery and the phasing out of single-hulled tankers,” he added.

On the impact of the global economic recession, Rakish said the industry’s poor performance could be due to inaccurate forecasts of strong growth for 2008 and 2009.

“Players then rushed for new buildings and when the ‘bull bowed’ at the end of 2008 and the first quarter of 2009, there was notably a huge overcapacity of assets,” he said.

This resulted in freight rates and ship values staying at the rock-bottom level.

“By mid-2009, 50% of the vessels over 10,000 dead weight tonnes (dwt) in size built in China were delayed in delivery while 15% of similar sized vessels in South Korea was falling behind (delivery) schedule.

“The yards in these two countries represent 80% of all tanker deliveries worldwide,” he said.

Rakish noted that the container sector was worst hit when the total fleet reached about 130 million dwt while the demand for tonnage stood at only 112 million dwt, resulting in the utilisation rate falling to 72 million dwt of the total fleet last year.

“This has resulted in the collapse of charter and freight rates that had forced liner operators to scale down capacity, resulting in 10% of the container fleet now reported to be inactive,” he said.

Rakish said the global economic recession had also led to a 5% fall in seaborne oil volumes and even more tonne-mile terms.

On the other hand, he noted that the dry-bulk market in 2009 had performed stronger than expected.

“The main contributor to this was the high imports by China and a few other countries,” he said.

Meanwhile, Rakish said piracy and armed robbery would still be a fear factor to the industry.

“The rising incidence of piracy is another problem that is squeezing even more economically (out of) shipowners,” he said.