Modifying to meet shipping’s new order

Malcolm Latarche
Malcolm Latarche

24 August 2016


As the summer holiday break draws to an end, there appears to be little respite for hard pressed shipowners across most segments with LPG carriers being the latest vessel type to see over tonnaging beginning to eat into freight levels. There does however appear to be one bright spot on the horizon as queues of bulkers once again start building at Australian coal terminals. According to latest reports the number of vessels has reached a 15-month high and stood at 29 ships at the weekend. Coal prices have surged recently leading to hopes that 2016 may be a record year for coal exports from Australia. The demand for coal comes as steel production in Asia recovers with rising output while European and US output is still falling. For the container sector, the third quarter is usually one of the busiest as western importers bring in their Christmas stock of consumer goods. However, the signs are that 2016 may not be profitable due mostly to the excess capacity on main liner routes but also due to reduced consumer spending in Europe. The few improvements in freight markets in different sectors that have occurred over the past 18 months or so have been short-lived and clearly unsustainable while the world fleet remains over-tonnaged. The answer of course is a combination of more scrapping and less newbuilding ordering. On the face of it that is not a prospect to gladden the hearts of equipment makers but perhaps there is a silver lining to the cloud. On the whole, new vessels tend to be more efficient than older ships but there are many modifications to ships that can dramatically improve efficiency without the long lead time or capital expense of a new ship. And from the shipowner’s point of view there is the advantage that many modifications do not require the ship to meet increasingly strict regulatory requirements. Perhaps a period of modifications coupled with some strategic scrapping is the answer to the problems currently besting shipping.