BBAM2023: MPV Newbuild Orders Remain Subdued

Breakbulk Americas 2023: An ongoing backlog of orders mainly from container carriers continues to delay MPV newbuilds entering the market, while at the same time, environmental regulations and customer demand for “green” transport options are upping the pressure to renew the fleet and replace older ships.

That was one of the key takeaways on a Breakbulk and Heavy-Lift Fleet Update panel discussion at Breakbulk Americas 2023, moderated by Yorck Niclas Prehm, head of research at Toepfer Transport.

“With an expected commercial lifespan of 20-25 years for an MPV, the average age of the fleet sits at more than 16 years. That means that over 30 percent of the fleet that is in service has to be replaced over the next 5-10 years,” Prehm said.

“With a timeframe of about 24 months from the point at which the contract is signed to the delivery of a ship, you would think that the orderbooks should be full to bursting, but you just have to take a look at the figures to see that is not the case.

“As of July, there were only 34 ships under a binding order or currently under construction, which is the equivalent of 3.4 percent of the sailing capacity.”

Susan Oatway, research analyst for breakbulk and project cargo at the Journal of Commerce – part of S&P Global – said very low demolition levels were as much to blame for current fleet stagnation as the lack of newbuilding orders.

“We’re seeing historic low levels, and we don’t see that changing significantly over the next three or four years,” Oatway said. “Demolitions will rise off the floor from where they are at the moment, mainly due to the aging of the fleet and incoming environmental regulations.”

Newbuilding orders from carriers, meanwhile, have been “very subdued”, she added. Going forward, newbuildings are expected to rise slightly by about 1 percent per year to 2026.

Carriers on the panel were invited to speak on their investment plans and fleet strategy.

Felix Schoeller, director at AAL Shipping, said the high freight rates over the past years has been “vital” for carriers as they embark on newbuild programs. The executive pointed to six new dual-fuel vessels the company is developing.

“Our strategy is fleet expansion, fleet renewal, and of course, doing that with a focus on new technologies to make sure there is a modern, versatile and economical fleet in the water within the next ten years,” Schoeller said.

“At AAL, we are focusing on methanol-ready ships, which we see as a bridge technology. I’m hoping we’ll see in the next five to six years some consensus on the future propulsion of ships, so our next newbuild program – which will be a major fleet renewal – will be even more innovative.”

Tim Kopfensteiner, executive vice president at BBC Chartering USA, said his company’s strategy over the next four to five years would be to “maintain our fleet”.

“The future for the newbuilding program will come down to being cutting edge, taking those old designs and modernizing them. A lot of the old tonnage out there still has the capabilities and the capacities, but if you look at the technology out there and what it can do, that will push a lot of the vessels out as they just won’t be competitive.”

Fellow panelist Lars Rasmussen, chief operating officer at US-based breakbulk carrier Intermarine, part of the Harren Group, updated listeners on the company’s expansion plans. Sister company SAL Heavy Lift has already ordered four to six new carbon-neutral vessels, with the first of the fleet slated for delivery in June next year.

“We are pioneers, the first ones to have 100 percent green methanol (ships) in the multi-purpose sector,” he said.

Intermarine is mainly active in the Americas, but the company is now focusing on operations worldwide. According to Rasmussen, Intermarine is aiming to expand its fleet in the next two to three years to some 60-70 multipurpose ships.

Will Terrill, president at US Ocean, a carrier focusing on breakbulk as well as military and humanitarian aid, said the company’s current fleet flying the U.S. flag had an average age of ten years, “so we do have some time,” he said. “When we think about the future, we think about providing vessels that have military utility and commercial viability.”

“We’re all in the cargo business, and we welcome additional demand. For the U.S.-flag business, there’s some potential for additional demand out there – you’re certainly seeing it in the liquid cargo side and dry bulk side as well.”

The session was sponsored by AAL Shipping.

Hear more from Lars Rasmussen on Intermarine’s expansion plans: