The shipping industry has its work cut out going forward in 2017 as it will be another year of intense competition, which now includes tankers, according to the international shipping association Baltic & International Maritime Council (BIMCO) of London.
BIMCO said the world has struggled for eight years to cope with huge changes and challenges brought about by the crash of the financial market in 2008. The resulting issues have not always been dealt with in the best way, leaving many large economies still in ‘recovery’ mode.
“The full restoration of shipping markets will need several years of solid improvements to lift fleet utilisation rates. Sector overcapacity almost everywhere must be reduced,” BIMCO said.
The association said government support for any industry, including shipping, might seem like a good thing, but direct subsidies from governments in fact have a negative impact on the global shipping industry as they affect free trade and undermine the level playing field for businesses. BIMCO said 2016 was the worst year on record for the dry bulk shipping industry. The Baltic Dry Index reached an all-timelow of 290 on Feb 10 but it peaked in mid- November at 1,261.
“This was driven by and benefitted mainly the capesize ships as they transported the key commodities of iron ore into China.”
BIMCO said that the alarmingly low level of demolition activity in the second half of 2016 will not deliver the needed zero fleet growth and with a significant number of new ships on order for 2017 and 2018, BIMCO believes that the only way to neutralise the impact of this influx of new ships will be to scrap 30mn dwt annually.
For tankers last year, after a very strong 2015, fortune faded for crude oil and oil product tankers. In 2016, the fleet grew by 6 per cent for both tanker segments, unbalancing the market as demand growth eased off. Tanker demand growth this year is expected to come predominantly from the Asian region led by China and India. After deteriorating market conditions in 2015, with a very high growth in the fleet of container ships and a high number of new orders for future delivery, 2016 got off to a bad start, said BIMCO.