BIMCO Foresees Another Tough Year for Shipping in 2017, Including Tankers

BIMCO says 2017 will be another tough year for all major shipping sectors.

BIMCO, in a report published Tuesday, said 2017 will be another tough year for major shipping sectors, including tankers.

"The shipping industry has its work cut out going forward in 2017 as the International Monetary Fund (IMF) forecast the lowest level of global GDP growth since 2009. 2017 will see another year of die-hard competition, which now includes tankers," stated BIMCO.

Tanker Fortunes Reverse

While the tanker market had a strong 2015, BIMCO says "fortune faded" for crude oil and oil product tankers in 2016, as both segments saw a 6 percent fleet growth rate alongside contracted demand growth, resulting in unbalanced market fundamentals.

"BIMCO suggests that in coming years the end-consumption of oil will need to catch up – and bloated oil stocks must be drawn on – before the market can be rebalanced," said the organisation, noting that it expects the crude oil tanker segment to see net fleet growth of about 3 percent in 2017, while oil product tanker fleet will be around 2.5 percent.

Further, BIMCO says that, while it predicts tanker demolitions will reach a five-year high in 2017, it will not be enough to prevent the a loss-making freight market.

Container Market

BIMCO says it expects the container shipping segment to see a net fleet growth of around 3.1 percent in 2017, compared to the 1.1 percent seen in 2016, adding that "if the multiplier gets back to one, and the IMF forecast of 3.4 percent becomes reality, the market will neither improve or worsen in 2017."

Market conditions for the container segment improved in 2016 - for the first time since 2010 - as fleet growth was lower than demand growth, says BIMCO, crediting fewer newbuilding orders, an all-time high rate of demolition, and consolidation through mergers and alliances for supporting boxship market results.

Dry Bulk Shipping

"In 2016, the container shipping industry bit the bullet in terms of demolition and consolidation to help the market to recover. The dry bulk sector needs to copy that approach," said BIMCO.

As Ship & Bunker reported yesterday, volumes of scrapped dry bulk tonnage are reported to have fallen below expectations for 2016.

BIMCO says it is "vitally important" that shipowners tend to market supply "with great care," adding that, if the impacts from more newbuilds is to be adequately addressed, 30 million DWT must be scrapped annually.

"This is not a tall order in theory, but the slowdown in scrapping seen since June 2016 causes alarm bells to ring. BIMCO expects the supply-side to grow by around 1.6 percent in 2017," said BIMCO.

Overall Outlook

While the dry bulk sector is under particular stress, BIMCO stresses that overcapacity across all sectors must be reduced.

Further, BIMCO suggests that, while government support for the struggling industry may seem like a positive development, subsidies will more likely "undermine the level playing field for businesses," resulting in negative industry impacts.

"The full restoration of shipping markets will need several years of solid improvements to lift fleet utilisation rates," concluded BIMCO.