Speaking at the BNP Paribas-Moore Stephens Singapore Shipping Forum 2018, he said the next two years should be profitable years for all and looking further ahead 2020 will be “an interesting year” depending on the market’s reaction to the two main upcoming regulatory issues.
As the sulphur cap kicks in Hashim sees that the simplest way to save on consumption is to reduce speed. He noted that reducing speed from 12 knots to 10 knots would effectively remove 17% of dry bulk shipping supply.
In particular ships older than 15 years old which comprise about 142m tons or 17% of existing fleet have the most potential for scrapping. “These guys have to make a decision,” Hashim said, as their older engines are not really able to burn low sulphur fuel oil and in addition, they will have to invest in ballast water treatments systems as their special surveys come up.
“One way or the other in 2020, you’re going to have a supply shock either through massive slow steaming of the entire fleet or a combination of scrapping of older ships and slow steaming
In addition, the effective cost of capital is rising with a higher interest rate environment which should act as a dampener for newbuild ordering. Also lack of clarity with future environmental rules will act as a further barrier to new ordering.
Downside risks include geopolitical factors which could act as a speed bump to growth, as well as if US tariffs lead to lower than expected demand growth.