Executive Briefings

Glut of Vessels, High Fuel Prices to Lead to Global Shipping Industry Decline, Report Says

In the coming years, the global shipping industry is expected to decline by five percent to 10 percent, according to Global Shipping Industry 2013 - Forecast, Trends and Opportunities, a report from Taiyou Research.

Glut of Vessels, High Fuel Prices to Lead to Global Shipping Industry Decline, Report Says

Oversupply and high bunker oil prices will eventually lead to a constraining of performance.

The report said: "A sustained oversupply of vessels combined with high bunker oil prices will pressure margins in most shipping segments. The dry-bulk and crude oil tanker segments are likely to have the largest supply-demand gap in 2013, complicating these sectors' ability to meaningfully improve their earnings.

"The tanker market has also been affected by the oversupply of vessels in the near term aided by lower OPEC production levels; though the outlook for the product tanker segment is more favorable since demand growth is likely to outpace supply during 2013, leading freight rates to rise by the end of this year. Box freight rates for the container segment have rebounded since March this year.

"However, strong improvement in earnings should not be expected for the full year in this segment. This reflects sustained high bunker oil costs and pressure on container rates stemming from recent increases in deployed tonnage of box ships."

Japanese conglomerates could be affected to a lesser extent by the negative market trends that will damage other global shipping trends. This is due to the scale of the Japanese conglomerates, their diversification, (including their liquefied natural gas, or LNG, fleets) and strong relationships with customers, said the report.

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Oversupply and high bunker oil prices will eventually lead to a constraining of performance.

The report said: "A sustained oversupply of vessels combined with high bunker oil prices will pressure margins in most shipping segments. The dry-bulk and crude oil tanker segments are likely to have the largest supply-demand gap in 2013, complicating these sectors' ability to meaningfully improve their earnings.

"The tanker market has also been affected by the oversupply of vessels in the near term aided by lower OPEC production levels; though the outlook for the product tanker segment is more favorable since demand growth is likely to outpace supply during 2013, leading freight rates to rise by the end of this year. Box freight rates for the container segment have rebounded since March this year.

"However, strong improvement in earnings should not be expected for the full year in this segment. This reflects sustained high bunker oil costs and pressure on container rates stemming from recent increases in deployed tonnage of box ships."

Japanese conglomerates could be affected to a lesser extent by the negative market trends that will damage other global shipping trends. This is due to the scale of the Japanese conglomerates, their diversification, (including their liquefied natural gas, or LNG, fleets) and strong relationships with customers, said the report.

Read Full Article

Glut of Vessels, High Fuel Prices to Lead to Global Shipping Industry Decline, Report Says