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Challenging outlook for containers, bulkers: HMM

Challenging outlook for containers, bulkers: HMM
Shipowners will have to continue to operate under challenging conditions in the global container and dry bulk markets in 2014 due largely to the lingering overhang of shipping tonnage, according to South Korean shipowner Hyundai Merchant Marine (HMM).

While global demand in 2014 for container shipping is set to outpace that of 2013, the orderbook backlog and deliveries of new and larger boxships are expected to prolong the oversupply troubles for shipowners.

“Particularly, the mega-class vessels with fuel efficient design would be attractive for shipping companies that are making an effort to reduce their unit costs,” a HMM spokesman told Seatrade Global.

The sluggish shipping market has resulted in HMM battling an ongoing financial problems as it is selling its LNG fleet to raise cash.

“The global shipping industry is facing a transition period with the deliveries of mega-sized containerships, causing the overcapacity problem. Recently it has been noted that the average capacity of each boxship in the Europe trade is over 10,000 teu, meaning that it has become an inevitable choice for each carrier to start using mega-sized containerships in order to stay competitive,” the HMM spokesman commented.

The spokesman, however, highlighted that the container alliances are trying to adjust their supply capacity especially in the transpacific and Asia-Europe lanes by reviewing their service network and rationalisation. “HMM is supposed to deliver five 13,000-teu vessels in 2014 and is reviewing the necessity of (ordering) newbuildings over 10,000 teu to follow the market trend,” the spokesman said.

“As the current rates are not sustainable level, we need to strengthen our communication with shippers so that they understand that rates need to be recovered to the proper level in which carriers are able to provide consistent services. We are also going to further rationalize our service portfolio to better serve our customers' needs, and continue to endeavor to hike rate level.”

On the dry bulk market, the same problem of excessive shipping tonnage is putting downward pressure on the Baltic Dry Index (BDI), but the decreasing supply of new tonnage into the market is a positive sign. In addition, the growing economies in Asia are expected to continue to create demand for dry bulk vessels, according to HMM.

“Under the current volatile market circumstance, having reliable long term contracts in placed would be the answer. Due to the overhang of vessel supply, the existing tonnage simply overwhelms demand in simple numerical comparison. Nevertheless, there is a tiny hopeful sign that the balance of supply and demand is starting to move in the right direction.” the HMM spokesman said.