BIMCO: Shipping Should "Brace Itself" for Another Challenging Year

by Ship & Bunker News Team
Thursday January 7, 2016

BIMCO says its hopes for an industry bounce-back in 2016 are waning, and has warned the shipping industry it should "brace itself" for another challenging year.

China's unpredictable and changing economy was a particular cause for concern, the organisation said, and that as the country "re-evaluates its future growth and direction, the shipping industry can expect an uncertain and lower level of support from one of the most important drivers of shipping demand growth in recent times."

"The dry bulk market experienced a troublesome 2015," BIMCO noted, and indeed as Ship & Bunker has previously reported the sector's main barometer, the Baltic Dry Index, recorded fresh all time lows on several occasions throughout 2015 and last year bottomed at 471 in mid-December.

It has fallen to a fresh all time low of 468 since then.

However, helped by an anticipated record high level of vessel scrapping in 2016, BIMCO says it expects dry bulk supply to only grow by about 2 percent this year, while demand remains level.

The container segment also had a tough 2015 thanks to the all too familiar story of market imbalance.

Last year he supply-side rose to a four-year high, while the demand-side growth rate hit a three-year low, BIMCO noted.

One positive for 2016 is that, while 2015 was said to have seen a record for new capacity entering the market, "2016 is set for a much lower influx at around 3.5%."

"What remains crucial for the industry is to improve the fundamental market balance in 2016. As the lower 'new normal' GDP-to-trade multiplier limits the potential upside of the demand-side, careful management of deployed capacity by the individual operators is still of utmost importance," BIMCO said.

Extraordinarily Strong

Tanker owners were some of the few who faired well last year, and BIMCO noted the sector experienced "extraordinarily strong freight market throughout 2015" thanks to the dramatic collapse in oil prices.

"It was the best year for all oil tankers since the market crashed in late 2008," said BIMCO.

However the organisation warns that a significant building of oil stocks in 2015 may slow tanker demand growth in 2016.

And while the eventual return to the crude oil export market for Iran this year is expectd to disrupt current trade patterns, BIMCO does not expect that to result in higher tanker demand.

On the supply side, the segment is expected to see fleet growth of around 4.5 percent in 2016, but BIMCO says this is unlikely to be matched by demand-side growth.

"We expect similar market conditions to develop for oil product tankers, with supply-side growth staying high while the demand-side is likely to soften after the winter market," the organisation said.

Last month BIMCO noted that newbulding activity in the dry bulk market remains extremely subdued, despite prices for new ships hitting their lowest level in over a decade.