Archives for category: North America

The Wall Street Crash in 1929 marked the onset of the Great Depression in the US. Times were tough, but jazz music, which had taken off in the 1920s, endured and evolved into the era of big bands and swing music now synonymous with the 1930s. The crude tanker sector is having a tricky time of its own at present, but over the last decade, crude trade patterns have seen their own evolutionary swing…

For the full version of this article, please go to Shipping Intelligence Network.

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The car carrier sector has been yet another part of the shipping industry to have faced challenging conditions this year. The focus has largely been on demand side difficulties, with growth in global seaborne car trade appearing to have gone into reverse gear. It has been a rather bumpy ride, and today’s car carrier market indicators still seem to be flashing up plenty of warning signals.

Going Slow

Growth in global seaborne car trade has struggled to return to the robust levels seen prior to the global economic downturn, when car trade was one of the faster growing parts of seaborne trade. Given the strong link between economic growth, consumer demand and car sales, the car carrier sector has been highly exposed to sluggish world economic performance in recent years, and global seaborne car trade has still not yet returned to its 2008 peak of 21.3m cars, with average growth of just 1.4% p.a. in 2013-15. This year has seen further pressure on seaborne volumes, with car trade projected to have dropped 4% to 19.8m cars.

The key driver of this fall has been considerably lower imports into developing economies following the commodity price downturn. Car sales in these countries have dropped sharply, and seaborne car imports into the Middle East, Africa and South America are set to drop by more than 10% this year. While imports into North America and Europe, still the two largest markets for imported vehicles, have grown moderately (by 2% and 4% respectively), this has not been enough to offset declines elsewhere. Other factors have also dented volumes, with expansion of car output closer to demand centres leading to a disconnect between global car sales, which have continued to expand, and seaborne trade volumes.

Warning Lights

Largely as a result of the downturn in demand, car carrier market conditions have deteriorated further this year. Most car carriers still operate under long-term agreements, but guideline charter rates have fallen back to subdued levels, with the one year rate for a 6,500 ceu PCTC falling to $16,000/day in recent weeks, down 30% from the start of the year. Vessel idling has risen, utilisation of active capacity is under pressure, and waiting time between fixtures has increased, whilst a trend towards shorter-term and spot fixtures has also been apparent.

Making The Turn

In response to these pressures, owners have stepped up supply-side action. Scrapping has increased, and is projected to reach 0.2m car equivalent capacity this year, over four times the 2015 level and the highest since 2009, with fleet capacity projected to have declined by 0.3% in full year 2016. Meanwhile, only two ships have been ordered this year, after 42 contracts were placed in 2015.

Route Planning

Yet the road ahead still seems far from clear for the car carrier sector, with demand seeming unlikely to shift up a few gears in the short-term. In our annual Car Carrier Trade & Transport report, we look at the latest trends in detail. This year’s report is now available on the Shipping Intelligence Network. Have a nice day.

SIW1250

Following several years of a more cautious approach to ordering, it appears that we have entered a new phase of cruise ship investment. This summer’s activity has lifted the cruise orderbook to record levels, and the sector is hoping to take advantage of the mobility of its assets to tap the enormous potential in emerging markets.

Looking Up…

The cruise industry today appears to have once again entered a phase of rapid growth. Since the start of last year we have recorded 24 firm orders for new vessels, including 15 with capacity in excess of 3,000 passenger berths. The orderbook now consists of 41 vessels with a combined berth capacity of 120,664, equivalent to 25% of the current fleet. In the 3,000+ berth sector the orderbook is equivalent to 73% of the current fleet.

A continued focus on “mega” cruise ships is evident from the orders noted so far this year. Royal Caribbean has ordered another Quantum-Class, 4,200 passenger ship for delivery in 2019. Elsewhere, Carnival Corporation has firmed the first four of a previously announced plan for a nine-ship order. These will be the largest ships contracted by Carnival at 180,000 GT, and while not as large as the Royal Caribbean Oasis-Class ships (225,000 GT), they will have a higher total passenger capacity (6,600), giving Carnival at least a claim to having the largest cruise ships afloat.

Looking Back…

In the past 20 years we have seen three distinct phases of expansion, with the orderbook exceeding 100,000 berths in early 2001, in 2007-08 and again in 2015. The two previous peaks were followed by a sharp drop as investment in new vessels was abruptly cut off by economic slowdown in the established key markets in North America and Europe. What factors will determine whether the current phase is similarly short-lived or a more sustained phase of investment?

Looking East…

In the short-term the performance of the cruise sector will remain closely linked to that of the major “western” economies. Last year North American and European passengers accounted for 55% and 29% of the global market of 22 million respectively; these markets will continue to exert an important influence. However, the outlook may be shaped by developments further east. Thus far, relatively few of Asia’s rapidly growing middle class have been exposed to cruises, but the cruise lines believe they can develop significant demand growth in this region. In 2015 the number of mainland Chinese tourists cruising is expected to pass 1 million for the first time, and according to industry sources in 2014 the number of cruises based at a Chinese ‘home port’ grew by 9% y-o-y to 366, while another 100 cruises called at a Chinese port (up 41%).

So, the cruise sector once again seems to be in rapid expansion mode. This time, the question is whether the establishment of new Chinese brands, the deployment of vessels specifically designed for Chinese operation and further investment in Asian cruise ports could drive a more sustained phase of ship investment. Finding the answer will certainly make for an interesting itinerary. Bon voyage!