Seatrade Maritime is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Oversupply still a major challenge warns ICS

Photo: Sevim TARHAN ATASOY
The International Chamber of Shipping has warned that avoiding overcapacity and unsustainably low freight rates is still a major challenge 10 years after the massive downturn of 2008.

“In that time shipping companies needed to show restraint when ordering new ships, to prevent stifling recovery,” said ICS deputy secretary Simon Bennett at the conference of the Expomaritt Exposhipping event, organised by UBM in conjunction with the Turkish Chamber of Shipping, in Istanbul yesterday.

Today, “the dark clouds of protectionism and slowing growth in key economies mean that the avoidance of over-ordering is now more important than ever,” Bennett added, while acknowledging that individual operators are perfectly entitled to make their own business decisions regarding new tonnage. 

sadan“Opinion is still divided on whether the rapid globalisation that has been experienced in the last thirty years may have run its course, and whether the slower rate of trade growth seen since the 2008 crisis represents some kind of permanent structural change,” Bennett told the opening conference session chaired by the Turkish Shipping Chamber’s Sadan Kaptanoglu, also president designate of Bimco.

Bimco president designate Sadan Kaptanoglu will be speaking at the Parliamentary Debate on day two of Sea Asia 2019 in Singapore

“Ship ordering (in deadweight tonnage) fell 14% in 2018, about 17% below the average since the 2008 downturn. This suggests that many shipowners may indeed be resisting the temptation to over order and in early 2019, the worldwide shipping order book appeared to be stable at around 10% of the fleet,” Bennett continued. “However, the reluctance of governments in Asia, where the vast majority of ships are built, to address overcapacity in the shipbuilding sector remains a serious issue.”

Nevertheless the ICS deputy general secretary took comfort from the fact that “ a number of important regulatory uncertainties which have complicated decisions about when best to dispose of older ships are finally being resolved,” 

In particular he referred to the implementation dates of the IMO Ballast Water Management Convention and ‘irrevocable” 2020 start date for the global 0.5% sulphur limit.  

ICS says it is also encouraged by the decision in 2018 by the Organization for Economic Co-operation and Development (OECD) to resume negotiations on an agreement to remove market distorting measures from shipbuilding that contribute to overcapacity, but points out that it remains to be seen whether China (which is not an OECD member) will take an active part.       

“Notwithstanding the risks of uncertainty in the immediate years ahead, in the long term there is always cause to remain optimistic,” concluded Bennett. “The UN has revised its projections for population growth upwards to an incredible 8.6bn in 2030 from 7.7bn in 2018.  Combined with seemingly unstoppable demand for higher living standards in emerging economies, this indicates that long term demand for international shipping should continue to increase significantly.”