Offshore Wind Could Provide Timely Boost For Sector
The conflict in Ukraine and new Covid lockdowns in China have dampened the outlook for multipurpose shipping, maritime consultancy Drewry said during a webinar on the latest trends and outlook for the sector.
Susan Oatway, senior analyst for multipurpose and breakbulk shipping at Drewry, said the conflict and a fresh wave of restrictions in Shanghai amid a surge in Covid cases are leading to a “multitude of ripple effects” that impact the global economy and weaken demand.
“When we last wrote our forecast report at the end of 2021, we described ourselves as ‘cautiously optimistic’,” Oatway said. “In the last three months – really in the last month – that has waned considerably. And it is all to do with the uncertainty in the market.”
The analyst pointed to renewables and offshore wind in particular as sources of demand that could alleviate crunch issues.
The Global Wind Energy Council has projected a 6.6 percent rise in wind power capacity over the next five years, driven partly by pledges made during COP26 but also growing global concerns on energy security that have been triggered by the conflict.
“That is only going to push the world further towards seeking out those new energy sources, because of those concerns. And that is a positive for this sector, definitely,” Oatway said.
According to Drewry, demand for dry cargo – made up of bulk cargo, containerized cargo and general cargo – bounced back in 2021 with a rise of 4.5 percent. Demand is expected to slow over the next two years, but still at an average growth of 3.5 percent per year.
“Much of the recovery we have seen over 2021 is more to do with the supply chain crunch in the competing sectors than it is with any significant volume increases. The multipurpose sector has benefited from the desperate search for space, which has resulted in cargoes that were previously containerized moving back into breakbulk vessels,” the analyst said.
“We do expect that effect to weaken over the second half of this year and into 2023.”
MPV freight rates meanwhile were likely to plateau over the first half of 2022, the analyst said. Supply chain turmoil has seen rates soar by 43 percent over the last year and by 78 percent since March 2020, according to Drewry.
Its latest Multipurpose Time Charter Index fell by 0.2 percent month on month in March to US$11,170 per day. The weakening trend is likely to continue into April, with Drewry projecting a further fall to about US$11,100.
“Russia’s invasion of Ukraine might not have a clear impact on multipurpose rates except perhaps in those short sea northern European markets,” Oatway said. “But the impact on global confidence, rising commodity prices and the competing sectors has definitely caused the recent rate rise to falter.”
The analyst warned the sector continues to suffer from a lack of newbuild development and investment, with newbuilding slots at a premium as yards remain chock full of container tonnage.
Oatway previously told Breakbulk that the sector witnessed very limited speculative ordering, with owners preferring to order to replace or build with a specific commodity or project contract in mind.
“Although the short-term outlook remains weak, we do expect newbuilds to pick up marginally post-2023 when there is space available and also as the need for more eco-conscious vessels will become more pressing.”
Read Breakbulk's recent interview with Susan Oatway on MPV outlook:
MPV Bull Run Nearing Plateau
