Archives for posts with tag: car carrier fleet

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.

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The car carrier sector has for some time been seen as one of the fastest growing parts of world shipping. Rapidly growing seaborne trade volumes have driven the requirement for a robustly expanding supply of vessels at the large end of the car carrier fleet. But it hasn’t always been a smooth ride, and today it’s not clear whether the sector has enough drive to remain in the fast lane.

In The Fast Lane

In the period from 1996 to 2007, seaborne trade in cars expanded from an estimated 8.1 million to 22.5 million units, growing by a compound annual growth rate (CAGR) of 9.7%. This compares very favourably to almost any other part of world seaborne trade. Overall seaborne trade registered a CAGR of 4.0% over the same period.

Fittingly for the car sector, there have been a range of drivers. New centres of car production have emerged (particularly in the developing world), broadening the global network of seaborne car transportation, in some cases extending the average haul as well as increasing trade volumes. Meanwhile, new car consumers have been generated by economic growth in developing economies, particularly in Asia. In China, for instance, European cars prove popular driving long-haul car trade. Since 1996 Asian car imports have expanded by an estimated 287% (and exports from Japan, Korea and China by 97%).

Brakes Off…And On

The PCC (Pure Car Carrier, including Pure Car & Truck Carrier) fleet has responded eagerly to the challenge. The fleet has grown from an overall capacity of 1.35m vehicles at end 1996 to 3.76m vehicles today, total expansion of 175%. Today, there are 768 car carriers in the fleet, and 569 of them have capacity of 4,000 cars or more (74% of the fleet) with another 62 on order (55 above 4,000 cars). The average vessel size has jumped from 3,380 car units at end 1996 to 6,810 today.

So far so good, until the downturn when seaborne car trade really suffered. Volumes fell by 35% in 2009 (compared to 4% for seaborne trade as a whole) as western car buyers pulled on the handbrake. Since then volume growth has not been quite so speedy. 2010 saw a partial bounceback but growth of 5-7% in 2011-13, has been followed by a projected 2% this year, on the back of relocation of production limiting export growth from key exporters, new tax legislation in importing regions, sluggish European recovery and political disruption in several emerging importer nations. This has left a question mark over when growth might get back into top gear.

The Road Ahead

Still, PCC capacity growth for the next few years looks fairly moderate with the orderbook standing at 11% of the fleet. Trade is provisionally projected to grow by 5% in 2015, making up for some of the shortfall this year. But the bigger question is whether we can expect trade growth to maintain the robust levels seen historically in the longer term. Perhaps the road ahead isn’t as clear as it once was? Each year, in our Car Carrier Trade & Transport report, we look at the trends in detail, and this year’s report will be available on Shipping Intelligence Network in the next few weeks. Have a nice day.

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