Potential Shortfall in Modern Heavy-lift Vessels By 2023
By Malcolm Ramsay
Sluggish growth of the multipurpose fleet is expected to constrain capacity in the medium term, leading to a potential shortfall from 2023, according to the latest estimates from research consultancy Drewry Maritime.
Projections show that newbuilding activity in the sector has fallen to an all-time low and a lack of modern heavy-lift vessels may cause a new capacity crunch within the next two years.
Speaking at a recent market outlook briefing, Susan Oatway, head of multipurpose shipping research at Drewry, described a "looming age problem" for the fleet, noting that "the MPV sector has been in recession for the past 10 years" and lacks much needed investment for renewal.
“There is very little spare cash, even after a bull market run that has so far lasted nine months. Added to this is the simple fact that the yards are full of orders for containership and bulk carriers, so even if owners had the spare cash and the desire to build, there are very few slots available,” Oatway said.
2023 Watershed
While coffers have been partially replenished in the last nine months, as multipurpose rates have soared over 2021, the balance sheet for most breakbulk and project cargo shipping lines still does not favor investment in new vessels and this has the potential to create a capacity shortfall for the project carrier sector at the point when project cargo could take off again.
Oatway predicts that 2023 could be “a watershed year” as a perfect storm of factors combine to shift both the supply and demand side of the equation. “At this point the average age of the fleet, for multipurpose and project carrier combined, will be over 20 years … the latest IMO rulings on GHG emissions will become much more significant for this tonnage and demolition levels are expected to rise.”
What this means for breakbulk carriers remains to be seen, but the trend for container lines to aggressively chase breakbulk tonnage, which was prevalent prior to the pandemic, may resurface. In the short term however Drewry expects capacity constraints to continue to support rising rates, with further increases over the fourth quarter of 2021 and a tight market for much of 2022.
“We are still very much in the boom market,” Oatway stated, “we expect that growth to slow over 2022, supply chain issues will start to come under control and shippers are reaching a ceiling in terms of the rates they are willing to pay.”
Shipbuilding Constraints
Drewry predicts that newbuild orders for multipurpose and heav-lift vessels in 2021 will struggle to reach pre-pandemic levels, of slightly more than 200,000 deadweight tonnes in 2019. Compounding this problem is the rapid surge in new container capacity, which has been ordered in response to the current global supply chain congestion.
“There has been over 3 million TEU of container tonnage order this year compared to far less than half a million tonnes of MPV,” Oatway notes, adding “the yards are full of orders for containership and bulk carriers, so even if owners had the spare cash and the desire to build, there are very few slots available.”
Prior the pandemic, many container lines aggressively chased breakbulk tonnage, adding new capabilities to their existing liner services to stow breakbulk in containers or on top of container stacks as they competed with traditional cargo offerings and while this trend has sharply reversed this year it still remains to be seen what strategy these lines will take towards breakbulk when a new generation of container ships hit the seas in two year’s time.
Yorck Niclas Prehm, head of research at maritime consultancy Toepfer Transport, also sees little potenital for newbuild MPV orders to rise, stating that any potential slots for new vessels ‘are almost gone” with limited opportunities likely to arise in the near-term.
“Building multipurpose vessels is complicated and the owners are demanding,” Prehm comments, “The yards therefore prefer to concentrate on less difficult segments which are more profitable.”
This backlog at shipyards is amplified by the fact that Chinese shipyards face energy consumption cuts, imposed by the Chinese government, which are causing a temporary slow-down of production as authorities struggle to meet CO2 output goals for 2021.
Demolition Delays
The lack of newbuilds is matched by reluctance to demolish old ships, a trend which is expected to steadily increase the average age of the fleet going forward.
“Demolition have all but ground to a halt over the last six months and we don’t think this trend will change in the short term,” Oatway comments, “This is a niche sector that is heavily influenced by the competing container and bulk sectors. It is also a sector for which there is little if any speculative market. Owners build to replace or do so with a particular commodity/project contract in mind.”
Looking further forward, Oatway predicts there will be a “significant increase” in the number of smaller older MPV demolished from the end of 2022 onwards and this is expected to coincide with the surge in new container ships entering the market from early 2023, drastically reconfiguring the market.
"Now is the right time to make people aware how important our MPV ‘niche market’ is to keep the economic world moving and that our highly specialized part of the global supply chains is crucial to solve issues that affect all humankind,” Prehm said.
