DS Shipping Market Review April 2013
April 11, 2013 1 Comment
Danish Ship Finance (DS – Danmarks Skibskredit A/S) has released its latest research report on the state of the shipping industry.
It is definitely worth reading the whole report, especially the use of data from IHS Global Insight as a proxy of demand. Below are a few highlights culled from the Executive Summary and the body of the report.
Global shipbuilding capacity could decline to 2002 levels by the end of 2014, according to the DS analysis. This could herald a return to 2002 price levels, too, DS feel that marginal construction costs prevent prices descending to 2002 levels. Nonetheless, the prices for standard vessels could fall by 5-10% by the end of 2014.
There is no good news for the container sector. For the growth in the Post-Panamax orderbook to be balanced owners are going to have to scrap vessels under ten years old. While this is unlikely to happen, another surge in contracting driven by eco-design or market share could extend the suffering for years. In the container sector of the main body of the report DS make points about head haul demand using the IHS Global data (see figure CS 5).
Using the same analysis DS show distance-adjusted demand is expected to contract 0.7% in 2013 as the US and Europe import less crude oil over shorter distances. Overall demand has to improve and fleet supply shrink before the market can recover.
The MR Tanker sector has been one of the bright spots in the general trough, but this is expected to unwind. In 2013 the loaded distances traveled will shorten and distance-adjusted demand may only increase by 0.7%. From late 2013 longer distances and modest fleet growth will improve the balance. This is likely to favour LR1 and LR2 sectors, at the expense of Mrs.
If the shine is fading on the MR Product Tanker sector, then it may be shinier on LPG carriers. Demolition in the sector is expected to increase in 2013, and distance-adjusted demand is estimated to increase by 5%. However, DS point out that this can be undone by a surge in contracting.
There is a detailed analysis of the dry bulk sector, and DS has some interesting things to say about the long-term drivers of the Chinese economy. But in the short-term the outlook for the dry bulk market is more of the same.