By Wasana Nadeeshani Sellahewa
(Commonwealth) _ According to Drewry’s latest estimates, while multifunctional vessel rates are likely to soften through 2023, the rate of fall will be less than in rival sectors such as containerships and handysize dry bulk carriers. Charter rates in all three major dry cargo sectors began 2022 at unprecedentedly high levels, culminating in the first quarter. At the time, containership prices were 900 percent higher than in 2Q20 (the lowest point in the market in recent years), bulk carrier charter rates were 200 percent higher, and multipurpose rates were about 150 percent higher.
However, since that high, charter rates in the container shipping industry have lost about 80% of their value through the end of November 2022, while handysize prices have fallen by 50%. With long-term charter prices down just 10% from their high, the multipurpose sector is in a far healthier position, particularly for the most competent ships.
For much of the year, the multipurpose industry benefited from spillover freight as a result of extensive supply chain disruption, according to Drewry. As those concerns have unraveled, project shipments (from both the renewables and oil and gas sectors) have helped to offset the decline in demand. This year’s peak charter rates meant that demolition rates in the multipurpose sector were, predictably, exceptionally low. The overall multifunctional fleet increased for the first time in years in year and is expected to do so again in 2023. “But, given the imminent IMO emissions and carbon reduction requirements, we had expected a few more vessels to travel to the beaches,” Drewry added.
The analyst anticipates demolition rates to increase back to pre-pandemic levels until 2023, owing to lower incomes and the rising costs of upcoming pollution requirements. Yet, the majority of vessel candidates will be tiny ships weighing less than 10,000 dwt and incapable of substantial load. Drewry, a global shipping consultancy, has predicted that the majority of new shipbuilding orders in the near future will be for larger, heavy-lift vessels. As a result, the overall fleet growth is expected to increase by 1.2 percent in 2023. However, this growth will be mostly driven by the heavy-lift capable vessels, which are projected to see a 2.5 percent increase in deadweight terms. In contrast, the non-heavy lift fleet will experience a significant slowdown in its growth.
Drewry also expects that the global economic slowdown and increased competition for breakbulk and project cargo will result in lower charter prices for multifunctional vessels until 2023. Despite this, the rate decrease is predicted to be less significant than that of other competitive sectors, such as container ships and dry bulk carriers. This trend towards larger, heavy-lift vessels can be attributed to the increasing demand for project cargo transportation and the need for vessels capable of transporting oversized and heavy cargoes. These types of cargoes require specialized equipment, such as cranes and ramps, and the ability to handle them safely and efficiently. Therefore, the demand for heavy-lift capable vessels is expected to continue to grow in the future.
The projected slowdown in the growth of the non-heavy lift fleet, however, may present some challenges for shipping companies that specialize in this type of vessel. With fewer new vessels being ordered, competition for cargoes may become more intense, and companies may need to seek new ways to remain competitive and profitable. Nevertheless, the shipping industry as a whole is expected to continue to grow, albeit at a slower pace, and specialized vessels such as heavy-lift capable vessels are expected to play an increasingly important role in meeting the demand for project cargo transportation.
In December 2022, the Drewry Multipurpose Time Charter Index remained unchanged at USD9,946 per day. This was slightly higher than expected, notwithstanding the recent downward trend in day rates. Drewry feels that the rate fall will be slow in the future since project freight demand will give support in the background. Wind turbine components, for example, are highly suited for multifunctional vessels and will generate employment prospects in the area. Yet, the charter market will be under pressure in early 2023, with the index falling by 0.5 percent in January to USD9,896 per day.
