WITH most of
the developing world in an economic slowdown, business information provider IHS
is forecasting prolonged weakness in commodity prices over the next decade with
prices for coal, iron ore and crude oil all likely to remain depressed for the
next few years.
For most
shippers, the five to 10 years of slow growth ahead translates into depressed
rates for shipping, particularly dry bulk shipping. Accentuating the price
weakness is that most fleets - with the exception of Panamax fleet coal and
grain cargo vessels - are fairly young, leaving little room to reduce capacity.
One exception
to this trend is tanker shipping, which is expected to stay strong in the short
term. Although lower oil prices will spur more consumption, IHS expects overall
global oil demand growth will average just 0.6 per cent per year through 2040.
"The
possibility of low commodity prices for a prolonged period of time will mean
readjusting current and near future fleet capacities, particularly in the dry
bulk sector that experienced large growth of the fleets in last 10 years."
This is one
of the five trends identified in a new report from IHS, called IHS
Global Maritime Trends 2016, put together by a team of experts at IHS
Maritime & Trade that will shape the global maritime industry for the
coming decade.
"After
years of heavy investment in commodity extraction, the majority of commodity
producers are concentrating their efforts on keeping their market share, which
in turn influences oversupply situation," said principal analyst at IHS
Maritime & Trade, Dalibor Gogic.
The second
trend is that with the excesses in industrial capacity, housing inventory and
debt are expected to further dampen China's domestic demand in 2016. Slow and
unstable global economic growth means that China will not be able to exports
its way to recovery.
From 7.3 per
cent in 2014, IHS forecasts that China's GDP will sink to 6.3 percent in 2016,
before a modest rebound in 2017.
Government-controlled
steelmakers in China are exacerbating the disconnect in the shipping industry
between the expectations of owners and charterers for three- to five-year spot
rates.
Newbuilding
prices suggest that freight rates will drop further. While the larger Asian
shipyards appear stable, smaller shipyards may be vulnerable, particularly
those that specialise in the dry bulk and offshore vessel markets.
One bright
spot for Chinese shipping is the container trade, where volume on routes to the
western US is expected to rise 8 per cent in 2016 and on the European routes by
6 per cent.
"The
slowdown in Chinese demand means most businesses will simply readjust to new
economic realities. However, the situation for dry bulk shipping is much
worse," Mr Gogic said. "The number of new ships and increased
capacity expected to be hitting the waves in next couple of years is huge.
The third
trend is that IHS expects certain EU and US sanctions against Iran will start
to be lifted early next year after IAEA verification that Iran has met its
JCPOA commitments. The lifting of some sanctions is expected to add about half
a million barrels of oil a day to the global supply by the end of 2016.
Iran's
re-entry into the oil export market won't help tanker operators directly
because most of the oil will likely be shipped in National Iranian Tanker
Company's carriers sidelined in the Persian Gulf while sanctions were imposed.
The fourth trend
identified is that shippers will soon benefit from better forecasts with the
increased availability of shipping data and advances in big data analytics,
providing shippers with greater visibility into market and pricing trends.
IHS believes
2016 will see an increased development and adoption of big data analytics by
the industry to mitigate risks and transform challenges into opportunities.
The fifth and
final trend is that shifts in global demographics and population growth rates,
coupled with long-term economic growth in developing markets, will have
implications for the maritime sector over the course of the next decade.
The middle
class is growing in the emerging economies of Asia, Africa, and Latin America
where disposable incomes will drive growth in demand for imports of commodities
and finished goods.
One
consequence for the maritime sector of a rise in consumer spending in
developing markets will be long-term growth opportunities for container ships.
More and
larger container ships will require investment in ports, infrastructure,
technology, and services to ensure that the flow of business remains efficient.
Shipping's
employment problem is that it is seen as low-tech compared with industries such
as the aviation, automotive and technology. To attract the next generation of
maritime professionals, shipyards must become more technologically advanced and
innovative, and seafaring must learn new skills and integrate new technology.
Source :
HKSG.
