Archives for posts with tag: shipping industry

Since remote antiquity the essential importance of energy to human civilization has been well appreciated: in ancient Greek mythology for example, it was the secret of fire that the Titan Prometheus stole from the gods and gifted to mankind. Today the still increasing energy needs of humanity are greater and more diverse than ever before. And in this energy tale, shipping of course plays a titanic role…

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

 

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Container shipping is often thought of as the ‘glue’ which keeps the world economy turning, providing a low unit cost way of moving both manufactures and a range of other goods between producers and consumers around the world. As such, container ports and terminals are crucial nodes in the world’s transportation system, and their sheer number and ubiquity merits a close look.

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

By the late 1800s, the shipping industry had been transformed by the introduction of steam power and iron ships. Coal and grain were two of the most important cargoes, alongside timber, sugar, cotton and tea. While technology, the sheer scale of the business, and the global cargo mix, have of course all changed since then, dry bulk cargoes have retained a position at the heart of global seaborne trade.

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

In the metal and mineral bulk trades, as in the heavy metal music scene, a few very big names often end up dominating the headlines: metal has the likes of Metallica, Rammstein and Judas Priest; mining bulk has iron ore and coal. But in both cases, the triumphs and travails of the smaller names can often be just as riveting and indicative of the broader trends as those of the superstars…

Atlas, Rise!

The ‘mining bulks’ consist of the metallic and mineral outputs of the extractive industries (and substitutes such as scrap metal destined for blast furnaces) typically shipped in bulkcarriers. Seaborne trade in mining bulks is projected to stand at 3,415mt in 2017. Unsurprisingly, the ‘mining’ major bulks of iron ore and coal predominate in the forecast. Even so, ‘mining’ minor bulks (a range of commodities utilised primarily in metallurgy such as bauxite, manganese ore, nickel ore, copper concentrate and coke) still make up a respectable 22% of the projection. As part of the cargo creating demand for a bulker fleet of over 11,000 vessels, the mining minor bulks are no minor matter.

As for demand for the mining minor bulks, while there are numerous importers, China has been the main driver of seaborne trade growth. Since the start of the century, seaborne trade in mining minor bulks has increased at a CAGR of 3.4% whereas imports into China have grown at a CAGR of 16%. The disparities are just as apparent in specific areas such as bauxite/alumina (4.5% versus 21%) and other non-ferrous ores (8.5% versus 20%, with metals like manganese used in steel alloys). Indeed, China accounts for more than 50% of growth in seaborne mining minor bulk imports since 2000. Just as in shipping and seaborne trade generally, China has played a key role in mining minor bulk trade growth.

Reise, Reise

The picture is more complex on the supply side, with mining minor bulks sourced from a range of countries, none accounting for more than 9% of total exports. Developing countries are prominent. For example, the Philippines is projected to account for 75% of nickel ore exports in 2017, Guinea for 45% of bauxite exports and Chile for 38% of copper concentrate exports. Some developed economies like Australia are involved, but on the whole, trends in mining minor bulk further confirm the ongoing diversification of shipping trade networks, particularly between China and other developing economies.

Metal Meltdown

As the Graph of the Month shows, mining minor bulk trade can also be very volatile, another common feature of seaborne trade. Mining minor bulk volatility is in part due to political risk factors such as strikes and government policy. Indonesia accounted for 57% (65mt) of seaborne nickel ore exports in 2013; by 2015, it was exporting no nickel ore at all following the mineral ore export ban introduced to boost the domestic smelting sector.

So the mining minor bulks are in sense akin to more obscure heavy metal bands. They may be complex and often idiosyncratic but certain key themes are apparent: the impact of China, the emergence of new trade patterns and market volatility, each illustrating broader trends in shipping too. Have a nice day.

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Shipping is a cyclical industry and for shipyards the current trough in newbuilding orders has put further pressure on capacity. While the scale of the current surplus appears huge, this is not the first time that the shipbuilding industry has grappled with excess capacity. Looking back to the past, and specifically the shipbuilding cycle of the late 1970s, what can be learnt from previous experience?

Enjoying The Highs

The shipbuilding industry has a habit of ramping up production capacity rapidly. In 2010 shipyards broke all previous delivery records, outputting 53.2m CGT (in dwt and GT terms deliveries peaked in 2011). Compared to 2004, early into the most recent ordering boom, this was a 122% increase in deliveries. Looking back to the mid-1970s, there was a similar burst of activity as strong newbuild demand saw yard output double between 1972 and 1976 to 10.2m CGT.

What Goes Up…

As in the late 1970s, economic downturn and its impact on the shipping markets led to a significant fall in yard deliveries after their peak in 2010. The initial decrease in output was faster and sharper in the 1970s, with deliveries declining by 64% between 1976 (Year 0) and 1979 (Year 3). The current cycle has seen a more gradual fall in deliveries, declining 34% between 2010 and 2014 with 178 yards reported to have completed delivery of their orderbooks in 2012 (Year 2).

…Must Come Down

Shipyard output is still in decline. Though the surge in ordering in 2013 has helped support delivery volumes, current estimates are for an 18% fall in shipyard output in 2018. Many anticipate that the current delivery cycle will dip around 2019 (Year 9), suggesting a shorter cycle than before. It also seems unlikely that delivery levels will fall by as much as in the late 1980s, as the same pattern would imply a further 47% reduction in output from 2018 estimates to around 15m CGT.

Time To Recover?

After the 1970s crash, it took over a decade for shipbuilding output to recover. Today, following one of the weakest levels of newbuild contracting on record in 2016, the overcapacity which has characterised the global shipbuilding industry in recent years is even more prominent. While 353 shipbuilders currently have a vessel (1,000 GT or above) on order, almost half of these shipyards have failed to win a contract since the start of 2016.

If the current shipbuilding cycle were to follow the same pattern as in the 1970s, we would only be 7-8 years in, with a full recovery still some way away. However, the situation will improve if contracting levels increase. Trade growth, the replacement of older, less efficient ships and stricter environmental regulation could support yard capacity in the future through a recovery in newbuild demand.

Looking back at the shipbuilding cycle of the 1970s, it is clear that the industry has faced similar challenges in the past. It seems unlikely that we have reached the bottom of the current cycle, and pressure to remove capacity remains. Shipbuilders will be hoping that newbuild demand drivers come through quickly to stem the duration of this particular downturn.

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The introduction of new environmental regulations is leading the shipping industry to look for ways of reducing its emissions of harmful gases. This week we focus on two separate but related issues: the way in which vessels are powered, and the type of fuel that they use. New technologies are being adopted, with certain ship types leading the way…

Electric Therapy

The majority (96%) of active merchant vessels are powered by mechanical systems in which a form of fuel oil powers a main engine (usually a 2 or 4-stroke diesel) which is connected to the propeller. Most other vessels are “diesel-electric”, in which the power generated by the (4-stroke) main engine(s) is converted to electricity before being transferred to propeller(s) or thruster(s) via electric motors.

By optimising the loading of the engines, diesel-electric systems can lower fuel consumption and emissions. These systems are well established in sectors such as offshore, tugs and passenger, where manoeuvrability, variation in power demand and engine noise are important considerations. For larger cargo vessels, where demand for power is generally higher and more consistent, conventional mechanical systems remain more efficient and cost-effective. Our Graph of the Week shows that against a backdrop of reduced contracting in the larger cargo sectors, electrically-driven ships have assumed a greater share of the newbuilding market, accounting for 22% of reported newbuilding contracts so far this year.

Battery Charged

The next step for electric power may be more widespread adoption of batteries in main propulsion systems. There are 22 vessels in service and 14 on order that use batteries, mostly alongside either conventional diesel or dual-fuel generating sets. As well as reducing emissions when using battery power, these can enhance efficiency by optimising engine loads and transferring surplus power to or from the batteries as required. For smaller ferries intended for short routes, all-electric propulsion systems are feasible.

Gas Treatment

LNG has been identified as a cleaner fuel capable of reducing vessel emissions in line with new regulations. Clarksons Research’s World Fleet Register currently identifies 542 merchant ships in the fleet and on order capable of using LNG fuel. 351 of these are LNG carriers, which can use cargo boil-off to fuel a choice of turbine, dual-fuel diesel electric or dual-fuel 2-stroke main engines. In other sectors LNG fuel has taken longer to gain market share, but there are signs that where ship designs and the supply of bunkers allow, it is becoming more popular. Out of the 130 contracts recorded so far in 2017, 21 are for vessels capable of using LNG fuel. These include 4 Aframax tankers, the largest vessels other than LNG carriers to adopt dual-fuel 2-stroke engines.

More efficient power systems and cleaner fuels are two examples of how the shipping industry is responding to the challenges set by new environmental regulations. Alongside other developments in vessel design and operating practices, shipping is steering towards a more efficient and cleaner future. Have a nice day!

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In the last few decades, the shipping industry has generally been able to rely on seaborne trade as a fairly steady performer. However, the slowdown in volume growth since the financial crisis has focussed the industry’s thoughts on potential barriers to healthy long-term trade growth, so all eyes are on signs of a potential return to faster expansion in volumes…

Steady As She Goes

From 1988 to 2008 growth in world seaborne trade averaged an estimated 4.2% pa, a fairly robust level underpinning long-term demand for ships. Sure, the markets at times felt the impact of oversupply, but sustained weakness of demand growth wasn’t generally the problem. However, since 2009 the growth rate has slowed, averaging 3.2%, and just 2.8% since 2013. This still equates to significant additional volumes (1.8% growth in 2015 added 194m tonnes) but it’s still enough to get market players worrying.

Could Be Worse?

But should it? Maybe it depends on how you put the trend into context. Cycles can be long; Martin Stopford has famously identified 12 dry cargo cycles of more than 10 years back to the 1740s! The current cycle certainly feels like it has dragged on; it’s now more than eight years since the onset of the financial crisis. However, there are interesting historical comparisons. Between 1929 (the year of the Wall Street Crash) and 1932, the value of global trade dropped by 62% and didn’t get back to the same level until the post-war years. Now that really would have been a time to worry!

Getting Serious?

Today perhaps some of the anxiety is amplified by the seemingly wide range of factors that look threatening to seaborne trade’s supportive historical record. Protectionist tendencies, whether they be from the Trump presidency or the UK’s Brexit vote, slowing growth in China, ‘peak trade’, robotics and 3D printing: no-one really knows how things will pan out but everyone’s watching closely for anything to allay at least some of the fears.

Basket Case

So that brings us back to our old friend the ‘monthly trade basket’ (see graph and description). Six months ago we reported that this appeared to be showing a pick-up and this time round things are still looking positive. The 3-month moving average shows a generally upward trend since autumn 2015 with an average of 4% in the second half of 2016, hinting that the bottom of the demand cycle may finally have been passed. The current projection for overall seaborne trade in 2017 is still less than 3% with plenty of scenarios possible, but both market sentiment and the momentum right now feel a little more positive than that.

Feeling Any Better Yet?

So, while it’s quite right to try to assess the range of factors which appear to be lining up against a return to more robust levels of trade growth, it’s also far from incorrect to look for signs of a turn in the trend. Cycles in shipping can be long and sometimes it can take a while to identify them. That may not be helpful to hear but you can have a nice day trying…

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