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Live from Sea Asia

Shipping leaders split over industry outlook

Shipping leaders split over industry outlook
Shipowners are split over the outlook of the global shipping market as there are clearly pockets of optimism, but the fundamental problem of overcapacity continues to cast a long shadow over the industry.

The outlook for shipping was one of the topics debated by industry leaders at the Sea Asia Global Forum on Tuesday.

With crude oil prices falling to unexpected levels at $50-60 per barrel today, the one clear benefactor is the tanker shipping market. However, the recent rush by owners to order more new tankers is a cause for concern, according to Andreas Sohmen-Pao, chairman of BW Group.

Even as freight rates have recovered to profitable levels for oil tankers, Sohmen-Pao warned of an easy return to excessive tonnage as the issue of “too many ships” has been repeating itself and the problem never seems to go away.

Teo Siong Seng, managing director of Singapore-based Pacific International Lines (PIL), told delegates at the Sea Asia Global Forum of Sea Asia 2015: “The challenge now is still the huge amount of newbuildings that are coming out. In the last few years, some lines who should not be ordering ships are still ordering due to some ‘imaginative financing’.

“Hopefully shipowners will be a bit more responsible when it comes to ordering new ships,” Teo said.

The container shipping market is teetering on the brink with vessel supply anticipated to slightly outpace demand, and the cascading impact of bigger ships into the fragmented intra-Asia region, where most ports do not yet have the right infrastructure to accommodate mega-sized boxships.

Claus V Hemmingsen, member of AP Moller-Maersk Group’s executive board and ceo of Maersk Drilling, pointed out that the short term imbalance of supply-demand would deter optimism but the long term efficiency and lower costs from operating those larger containerships would provide a more sustainable growth to world trade.

Boxship owners have been racing to operate larger and larger vessels of more than 10,000 teu in a bid to lower operating costs and increase fuel efficiency.

The dry bulk shipping segment, on the other hand, has been battered by low freight rates. But bulker owners can look forward to more active demand in the long run, noted Khalid Hashim, managing director of Precious Shipping.

“I hope oil prices will remain low for the world economy to pick up,” Hashim said. He explained that commodity prices are linked to the price of oil, and with commodity prices coming down by around 25% following the oil price dip, higher import/export activities are expected to bode well for bulk carriers.

Hashim shared that in order for bulker owners to survive over the next few years, they would need to start scrapping older vessels, get rid of non-core assets, raise financing through various available means, and reduce cost while increasing efficiency.