May 18 | 2022
Commercial, Contracting Terms and Conditions Need ‘Game Changer’
By Carly Fields
SAME-DAY BREAKBULK EUROPE COVERAGE: “Little fires everywhere” are making the multipurpose world burn – that was the assessment of the current chaotic shipping market for breakbulk and project cargoes by a panel speaking at Breakbulk Europe taking place in Rotterdam Wednesday.
Carsten Wendt, head of sales, high & heavy and breakbulk at Wallenius Willhelmsen, highlighted some of those “little fires” as lockdowns and Covid in China, physical disruption of vessels, labour shortages and the war in Ukraine.
Taking note of the anticipated direction of travel for the container sector, panellist Frank Mueller, general manager at AAL Shipping, said that there can be no talk of “normal” yet. “We have not seen a ‘normal’ in capacity or rates and we will not for a long time. Looking at container carriers, they are ordering new vessels and fixing at extremely high charter rates for 48 months out. That’s my indicator for when we can expect rates to come down.”
The audience heard that attempting to draw parallels with the peak of 2007 and the subsequent crash was a futile exercise. “There are many differences between now and 2008,” Ulrich Ulrichs, CEO of BBC Chartering, said. “In 2008, the fleet was young; today, the fleet is relatively old. There were a lot of ships on order in 2008; and now the orderbook is very small. Ship finance was not a problem in 2008; today ship finance is very difficult.”
There is also a major difference on the cargo side with the arrival of a major new commodity in the segment: renewables. “You have to appreciate these differences to set yourself in a new mental state going forward,” Ulrichs said.
He added that in previous years the logistics service provided by the industry in this market has been underappreciated. “It is a sophisticated service with engineering involved and expensive assets, yet it is cheap and readily available. Now, people are learning the lesson that it is not so cheap anymore and it is also not available anymore.”
AAL’s Mueller highlighted a “game-changer” that is set to rebalance the carrier/shipper dynamic, saying that the new normal will require a completely new set of commercial and contracting terms and conditions. “We need to start changing T&Cs in a carrier market,” he said. “Over the past 10-15 years [carriers] have become very accommodating with requests simply to get cargoes. All this is going to change again - it makes more sense to streamline and be fair to everyone. We need to see a change in T&Cs in long term projects to bring partnerships back again.”
Check out our post-session interviews with speaks:
