Shipping Sector Review 2013
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Dr. JALE NUR ECE

Dr. JALE NUR ECE

Shipping Sector Review 2013

29 January 2014 - 09:53

The global shipping industry is one of the leading industries of today's times and plays a significant role in the economic, political and national  interests of  countries.  The IMF has  forecast a slight improvement in the global economy (3.5%) in 2013. The World Trade Organisation’s projected trade growth is 3.3% in 2013 rising to 5.0 % in 2014. Seaborne trade during 2012 reached 9,468 million tons with a ratio of 4% and was expected to reach 9,863 million tons in 2013 with a ratio of 4,2% (Manuel Carlier de Lavelle, Merchant Marine and Maritime Transport 2012/2013, ANAVE). World seaborne trade will reach between 19 and 24 billion tonnes a year by 2030, the report entitled "Global Marine Trends 2030". However, during the coming years, the global shipping sector is expected to decline by 5-10% due to oversupply and high bunker oil prices (www.researchandmarkets.com). Shipbuilding has been in crisis since 2013 due to supply-demand gap, continued delivery of large numbers of ships, stiff competition between shipbuilders due to shipbuilding overcapacity, difficulties encountered by shipowners in securing financing, a reduction in profit margins for shipbuilders and owners etc. (BRS, 2013 Annual Review Shipping and Shipbuilding Markets).
On 1st January 2013,  the world merchant fleet comprised of 54,859 ships with a total of 1,543 million dwt, which shows an increase of 4.1% as compared to the previous year (Manuel Carlier de Lavelle, Merchant Marine and Maritime Transport 2012/2013, ANAVE). Platou also estimates that the Merchant fleet grew by 7.3% in 2012, 5.3% in 2013 and will grow by3.7% in 2014. Platou also estimated that in 2013 the tanker fleet would grow by 4%. Clarkson predicts demand for crude and product transportation (in t·miles) will increase by less than 3.1%. According to BIMCO, crude oil tanker asset values continue to decline. Product tanker supply increased in 2013 and will gradually decline in 2014-2016. Product tanker contracting has been intensive in 2013 and new orders have tripled. The order-book-to-fleet ratio is 18% for product tanker fleet for sizes between 45,000-60,000 dwt.
The tanker market has also been affected by the oversupply of vessels and by lower OPEC production levels. According to The Baltic and International Maritime Council-BIMCO, the dry-bulk and crude oil tanker segments have the largest supply-demand gap due to over supply in 2013. (BIMCO Market Analysis Reports 2013), (ISL Shipping Statistics and Market Review, 2013). BIMCO estimates that crude tanker supply growth in 2013 will come in at 3.4%.
Total value of Newbuilding orderbook as of 1st August 2013 is US$279.4 bn compared to US$286.2 bn in 2012. In 2013, there was an increase  in the orderbook of gas tankers and other cargoes (tankers, bulk carriers and containers) and the orders for other ships were on decrease. According to a BIMCO research paper; asset value of crude oil tankers continue to fall. BIMCO expects 2013 full-year deliveries to come in just shy of 20 million dwt – equal to a fleet growth of 2.9%.  
BIMCO expects that over capacity in the shipping building industry will increase between 2012-2020 and it will be a potential threat to the shipping sector. 
BIMCO expects total container shipping fleet capacity to grow by 5.9 % in 2013. Container volumes have grown on the Far East to Europe trading lane by as much as 1.9%  in the period of January-July 2013. As of December, 11 2013 there are 5,961 ships active on liner trades, for 17,748,708 TEU. The percentage of  operator's share of the world liner fleet in TEU terms. Maersk Line , Mediterranean Shipping Company and CMA CGM, currently stand at 15.6%  of their current fleet. The combined order book of the next 18 carriers has reached 19.8% of their existing fleet (www.reuters.com/article/2013/12/03).
Container trade will grow by 4.7% in 2013 and 5.7% next year, reaching 684 million TEU by the end of next year, according to the latest forecasts from Drewry. Port capacity is only expected reach 994 million TEU. 
BIMCO forecasts that there will be growth in container shipping and container supply-demand imbalance in the market will continue in the coming years.  This situation will have a negative impact on the market.
Maersk Line has taken delivery of five mega ships with a capacity of 18,270 TEU each this year and another 16 sister ships will be finished by DSME shipyard in South Korea and delivered within the next year and a half. Mærsk Mc-Kinney Møller which is the lead ship of Maersk's Triple E class of container vessels and has the largest cargo capacity in the world with 18,270 TEU,  a total length of 399 metres, a maximum speed of 23 knots and constructed for Maersk by Daewoo Shipbuilding & Marine Engineering (DSME) of South Korea.  She is reducing her fuel consumption and carbon dioxide emissions by 20 percent compared to the previous most efficient cargo vessel. 
Mid-July numbers from Alphaliner indicates that 187 units for 448,000 TEU is currently idle. This represents 2.7% of the total fleet. BIMCO expects that vessels with a total capacity of 450,000 twenty-foot containers (TEU) will be scrapped in 2013. 29 million DWT of new dry bulk vessels have been ordered so far in 2013. According to BIMCO dry bulk supply growth has been decreasing since 2010 and will gradually  decrease so that in 2015 no growth is  expected. For 2013, Platou estimates that the bulk carrier fleet will grow by 7% while demand transport will increase by 5-6%.  Dry bulk trade volume is expected to grow by 6% on average in the next 4 years. According to analysts, China's demand for dry bulk market will continue to remain the focus of attention, and demand for bulk carriers is expected to continue. (Karaçelik, L., Marvel and Marine Consulting Inc.).
The trend will be for larger vessels in 2013 and for the coming years.
On December 24, 2013, the Baltic Dry Index (BDI), which is an important indicator of world trade, climbed to 2,227 points, up 30 points (1.34%) against the level of December 23. This situation is an indication of correction of imbalance between the supply and demand (www.dryships.com). The worldwide cruise ship market for 2013 is estimated to be worth US$ 36 billion – up 4.8% from last year. The World Travel & Tourism Council estimates  the total worldwide cruise capacity in 2013 tol be around 439,000 passengers - an increase of 3% on 2012. 
To improve the energy efficiency of ships, IMO and relevant organizations are conducting studies on various procedures such as slow steaming, technologies to reduce carbon emissions through various technical and operational measures.Maritime Claims Against Reinforcement of the Limitation of Liability Regarding the 1976 Convention, the 1996 Protocol (Protocol of 1996 to Amend The Convention on Limitation of Liability for Maritime Claims, 1976) maritime security and safety and environmental issues for additions were made. Energy efficiency and reduction of greenhouse gas emissions, are important regulations that the IMO has  implemented under its auspices and have entered into force from 1st January 2013.The International Labour Organization’s Maritime Labour Convention (MLC, 2006) comes into force on 20th August 2013. It aims to provide acceptable global conditions of work for seafarers, thus ensuring secure economic interests in fair competition for shipowners. 
There have been 188 incidents of piracy and armed robbery against ships in the first nine months of 2013. In 2013, 10 vessels were hijacked, 17 vessels fired upon, 140 vessels were boarded, and there were 21 attempted attacks. A total of 266 crew were taken hostage, 34 kidnapped, 20 injured and 1 killed. The downward trend in attacks in the Gulf of Aden, off Somalia and Red Sea is attributed to the crucial action of the naval vessels engaged in anti-piracy operations,  compliance with the Best Management Practices (BMP) and the use of professional security teams on board. Although the number of attacks has dropped significantly in Benin, the areas near Benin and Togo remain risky (ICC, IMB Piracy and Armed Robbery Against Ships Report, January-September 2013). From 1st January 2013, reinsurance costs have significantly increased for most classes of business, including for P&I Clubs and all other insurers.

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