Rates to Climb in Response to Strong Project Cargo Demand

By Luke King

Strong demand for project carriers will push up rates throughout 2024 and into 2025, delegates at Breakbulk Europe were told on Wednesday.

Ahead of the MPP Fleet Outlook: Business & Market Opportunities session, the audience heard a presentation from Peter Molloy, senior analyst – multipurpose shipping (associate) at Drewry Maritime Research.

Despite positive signals from the demand side of the business, Molloy said that conflicts, low consumer confidence and global tensions remained a cause for concern. “77 percent of the order book is in China, based on deadweight tonnage,” he cautioned. “If you actually focus on how many of them are project carriers, the majority of the project carriers are being built in China.”

As the panel session got underway, moderator Kyriacos Panayides, CEO of AAL Shipping, said there were still “many reasons to be cautious,” adding that the whole sector was “coping with unpredicted events”. He also questioned whether “investors will come back” to provide the financial muscle required to support expansion in the heavy-lift shipping industry.

Fellow shipping line CEO Ulrich Ulrichs of BBC Chartering agreed, declaring the “silly money is gone”. He added: “You have to be creative to get finance for your ships. We are private, family-owned companies, and we are rather cautious. We can’t repeat mistakes made by the industry in 2009, 2010.”

While BBC will receive a number of vessels in the coming years, including a series of fifteen 13,000 DWT multipurpose triple deckers, the net effect will be that “BBC will not grow, since some others will be sold or scrapped,” Ulrichs said.

Alex Azparrent, global director supply chain – mining and metals, Fluor, reported “positive indicators” for demand in the next five years and addressed the subject of fleet age. “We hear about a 15-year age requirement, but that’s a recent scenario – it used to be older. However, we don’t determine that, it’s typically insurance companies.

“From a Fluor perspective, all predictions are healthy – but the challenge is knowing how long it takes for projects to get off the ground.”

Tim Killen, head of growth – project sector, Fracht Group, brought a different perspective to the panel, reminding the audience that it was a forwarder’s job “to put options on the table”.

Outlining the promising sectors that were driving the universally accepted premise that the outlook looks positive, he said: “We speak a lot about renewables, about sustainability and energy transition but, by far, the biggest potential investment is in traditional oil and gas. Potential investment capex in the oil and gas industry is approximately US$5 trillion in the next ten years.

“Second on the list is renewable energy, solar, hydro, wind, etcetera, with a potential investment of around US$4 trillion. I think there’s a lot of question marks around that as there are challenges with regards to subsidies, price points, energy strike prices and the hugely increasing cost of manufacturing wind.”

Ulrichs corroborated that view. “Oil and gas is underestimated – it’s still the bread and butter. Demand for energy will not slow down so I also see oil and gas as number one. Renewables is there, of course, but inflation has run away, environmental regulations get tougher. Some of these projects will never happen.”

Leaving the audience with something to think over, Drewry’s Molloy returned to the thorny subject of ship financing. “We’ve said that the silly money is ‘gone’, but I think the silly money will again come from a place we don’t expect, and people (investors) will get involved.”

He also called on the industry to adopt a more proactive approach to public relations, saying: “We are still sometimes considered a dirty industry – because we don’t communicate what we do. It’s down to us as an industry to tell our story properly.”

The session was sponsored by AAL Shipping.