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The current state of shipping markets – unfortunately not an April Fool

The current state of shipping markets – unfortunately not an April Fool
Container freight rates from Asia – Europe just $250 per teu, the Baltic Dry Index (BDI) at 429 points, five-year old capesizes selling for $11m, huge numbers of offshore vessels laid up, vast writedowns and impairments taken on fleet values, and shipbuilding yards racking up billions of dollars in losses.

Just imagine a young ship executive working in the industry in the heady days of March 2007 suddenly transported to the market of 1 April 2016, they would probably think it was just a very bad April Fool’s joke - unfortunately its not.

Back at the start of January we dusted off the Seatrade Maritime News crystal ball to see what the year had to hold for maritime and offshore and to be honest it was overall a rather gloomy and murky picture.

However, a quarter of the way into the year and it looks like we could have been accused of being overly optimistic.

Dry bulk, offshore and containers have all endured a frankly dreadful start to the year, and as predicted only tanker owners are really smiling.

In February the BDI plunged to a previously unthinkable, even at the start of the year, level of 290 points. Yes it is now more than 25% higher, but that is hardly a cause for celebration. Some did not make it – Norway’s Western Bulk split in two try and ride the storm, but new company Bulk Invest quickly slipped below the waves. Just yesterday we reported on Mitsui OSK Lines (MOL) announcing it was shutting its Singapore dry bulk unit after a “drastic review”.

Vast sums have been wiped vessel and forward carrying values as has been reflected in a slew of writedowns and impairments, and there could still be more to come.

The picture in offshore and marine is in many ways quite similar hit by the crash in the oil price, which currently sits below $40 per barrel. This has left huge numbers of offshore vessels and rigs stacked in various locations around the planet. Anyone looking for a graphic idea should take a look at this video taken using a drone over the shipyards in Batam Island, Indonesia, taken by Singapore-based brokers and consultants M3 Marine.

As a result of the state of the market the year started with a slew of restructurings and it is hard to believe there are not more to come. Meanwhile the more financially secure, with a strong parent like Bourbon decided diversifying was the way to go – in their case into ethane shipping.

As with dry bulk shipping many owners have been taking hefty writedowns and impairments on vessel values.

And there is container shipping….

The collapse in the Asia – Europe trade in the second half of 2015 and then into 2016 has been extremely steep. Spot rates from Asia to Europe according the Shanghai Containerised Freight Index (SCFI) at the end of last week were just $247 per teu. Just by way of comparison that is probably less than it costs to take a taxi from Narita Airport to downtown Tokyo, should you be so inclined to do so.

It is easy to blame this all on overcapacity and 20,000 teu boxships with nowhere else to go. Indeed we have seen Maersk’s flagship triple-E’s being idled on a short term basis. But port volumes also indicate a lack of trade growth, even a contraction. Why this has happened is an interesting question but as one senior shipping executive said to us Russian sanctions could be a factor – just because a box say goes into Hamburg does not mean that was its final destination and lines are not privy to what that might be. The annual results of Russian terminal operator Global Ports would seem to bear out this theory to at least an extent.

All things said and done Q1 could have been a lot better for many, lets hope we are not writing about the “July Fool” come 1 July….