Chief Shipping Analyst at BIMCO, Peter Sand, chaired and spoke this week at the 3rd European Dry Bulk Shipping Market Outlook Conference in Istanbul, Turkey on 11-12 April 2011.
An international line-up of dry bulk shipping industry experts and participants, offered their expertise and views on some of the most important issues to look out for in the future dry bulk shipping markets. The event provided a great opportunity to share the latest information and insights on key areas influencing the shipping industry.
The BIMCO presentation was putting future dry bulk trends into perspective, by addressing the changing business conditions from an operational view as well as a strategic view. Touching upon the outright unacceptable piracy situation, Sand told the conference that there around 800 seafarers held hostage for ransom on more than 30 ships. This does not speak well for the effectiveness of the measures taken by the international community. It is imperative that the practice of catch-and-release is discontinued and apprehended pirates brought to trial.
Moreover, focus was put on the increasing environmental pressure on the shipping industry. “As a responsible industry we obviously have to accept being regulated in particular in respect of issues involving potential health threats”. The shipping industry can and should reduce emissions, but any perceived reduction must be seen in the context of a tonnes/mile scenario – an absolute reduction for our industry is simply not feasible. Wrapping up the current operational trends he also addressed themes such as Manning and criminalisation as well as Sustainability.
Moving on to the strategic perspectives on future shipping trends he suggested that four external forces are set to drive changes: 1) continued freight rate volatility, 2) conservatism in traditional financial market to bring around a new type of investors, 3) ongoing pivotal shift towards new markets and last but not least the trend of stronger and more concentrated customers.
Seen in the light of these four overall external drivers – future shipping companies may opt for a change to the way they do business today in order to continue to run a successful and profitable business.
To address these movements in the commercial environment shipping companies will become more global, focused and professional in every single corner of their company and the way they interact with its customers.
On top of this, shipping companies are seen to be driven by different kinds of leadership as well as their ability to execute clearer and simpler strategies.
Touching upon the significant inflow of new Very Large Ore Carriers in near future, Sand presented estimates of the impact that is foreseen to originate from the VLOC fleet that Brazilian miner, Vale is set to receive. Focused was put on, the effect Vale’s ore fleet could have on the spot market for Capesize vessels hauling iron ore from Brazil to the Far East.
Already in 2013 that spot market will lack annual employment of more than 50 Capesize vessels, when Vale fleet is reaching 41 VLOC’s.
Also the challenge of balancing supply to match demand was scrutinised. Sand pointed out that liner operators, back in 2009, dealt successfully with overcapacity by refraining from ordering for an extended period, slow steaming and laying ships up in order to restore a sustainable freight rate environment. Dry bulk owners could benefit from using some of those tools to handle the looming threat from overcapacity in primarily the larger dry bulk segments.
To sum up things, Sand concluded that owners must adjust to the “new normal” to survive and learn to manoeuvre in a new profit environment. Managing overcapacity will remain a challenge in coming years. Increased focus will be on, what impact the “China-max” ore carriers will have on the overall market but in particular the Capesize freight rates from Brazil to China. Applying all the tools in the toolbox to manage overcapacity is the key to sustainable freight rates in near future.
BIMCO – Chief Shipping Analyst: Peter Sand PS@BIMCO.ORG
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