A »healthy correction« is about to take place in the multipurpose vessel market, says Jan Erik Schulte, managing partner of shipbroker and commercial manager COE Shipping in Buxtehude. [ds_preview] What worries him is the differential treatment of ship types engaged in the smallest dry bulk trades.
There has been some pressure on breakbulk and project freight rates in Europe lately. What’s happening? Are cargo volumes falling?
Jan-Erik Schulte: I am not sure if volumes of breakbulk and smaller bulk parcels are down. Perhaps the economic slowdown and supply shortages across industries are limiting export volumes in Europe. My impression is that it’s more to do with relaxation of capacity in the neighbouring segments of container and dry bulk. As a result, you have more tonnage competing for all sorts of cargo. So as cargo broker we are able to obtain better rates again from container lines for project cargoes. Perhaps it’s normal, though, for container and bulk trades to take a breather in a summer lull after a rally of 1–2 years.
What’s in store? How do you expect the multipurpose (mpp)/project charter market to be one year from now?
Schulte: I think the market will retreat a bit to a healthier level in the 16,000–18,000 $/day range for F class type 12,500 dwt ships. Today it’s over 20,000 $/day which doesn’t feel sustainable in the long run. A moderate correction would bring back cargo that’s been put on hold because of sky-high freights. We know big project shippers who now prefer to manufacture locally instead of shipping from their central plants to jobsites worldwide. A client of ours withdrew a few hundred thousand tons of cargo from Southeast Asia to Australia only to contract local production.
Would you go as far to say that the mpp market is a »bubble« about to burst?
Schulte: Well, there could be a few bubbles here and there, but I don’t think we see a major shake-up anywhere near what happened after 2010. We saw some transactions both for charter employment and S&P at extremely lofty levels recently. I doubt that the business case and market development will be strong enough in some of these cases. However, tonnage supply will remain relatively short as newbuilding contracting is limited and older ships get sold into domestic markets where they don’t compete for international trades any longer.
How will environmental regulation like the IMO’s EXXI/CII impact the mpp/small bulk market from next year?
Schulte: We will see more slow steaming of mpp ships that were built for higher speeds in the project cargo market and of less-efficient designs with high consumption. This will limit capacity and mitigate any market correction. It annoys me, though, that the regulator places all responsibility on the ship owner, not on the operator. Another issue is that ship types, engaged in similar trades, are treated differently. One example: Our 12,500 dwt geared bulker »COE Laura« must have a speed limiter installed, but an mpp of the same size with a speed/consumption ratio that’s even worse does not! This is a problem because both, small bulkers and mpp, often compete for the same cargoes.
Interview: Michael Hollmann
