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FEATURE: China’s shipbuilders in rough water-Part 2

The link to the Feature P1: https://www.mysteel.net/article/5012052/FEATURE--Chinas-shipbuilders-in-rough-water-Part-1.html

Is the global shipping market at the dawn of reviving?

The global shipping market bid goodbye to its glory days in 2008 and since then has been largely mired in recession, when the financial crisis hit the world economy and global seaborne markets both for raw materials and finished goods received the hard blow and found itself in a huge surplus of shipping tonnage.

Since then, the global freight market has experienced slumps in freight charges with the Baltic Dry Index (BDI) – where Capesize is the paramount component – hovering low at 1,599 as of December 4, only just about 14% of the pre-crisis peak of 11,793 on May 20, 2008.

After over a decade of running low, freight market sources, however, expected the downward trend to ease if not to bottom out in the coming few years.

“Most of the vessels ordered and signed for in 2016 and 2017 will be delivered in 2020 as planned, and new vessel orders in 2018 and 2019 have been at relatively low levels, which should moderately ease the oversupply and freight rates might recover as a result,” the first Singapore source said, though he admitted that shipbuilding industry will probably take longer to feel the warm-up.

Besides, another supportive factor is the lower sulphur emission in the ship fuel, the second Singapore source added, as the International Maritime Organization requests sulphur emission from ocean ships to decrease to 0.05% from the original 0.25% by 2020, which will force more shipowners to scrap their old ships for new ones to meet the requirement.

“We can add filters in our engines to lower sulphur emission, but there is no guarantee, and we may run the risk of having our ships banned from entering many countries’ water territories, we can’t afford to do so, so building new vessels is costly but the best solution,” an official from a shipping company in Singapore said.

As of December 5, the BDI hovered low at 1,575, though some recovery occurred in the July-September quarter because of seasonable factors, the Shanghai-based analyst noted.

Source: Baltic Exchange

Written by Anna Wu, wub@mysteel.com, Victoria Zou, zyongjia@mysteel.com, and Hongmei Li, li.hongmei@mysteel.com

Edited by Russ McCulloch, russ/mcculloch@mysteel.com