What lies ahead of shipping and maritime in 2016?

By Marcus Hand from Singapore

As we sail into 2016 it is fair to say that 2015 is a year that many in shipping, excluding tanker owners, would be happy to forget. So dusting off our crystal ball Seatrade Maritime News looks at what lies ahead for the industry and are there any better prospects ahead in the coming year?

If one believes Junichero Ikeda, ceo of Mitsui OSK Lines, one of the world’s largest shipowners, the answer to that question is clearly no. He stated in his New Year message that there were “few prospects for recovery”. It is a less than cheery prospect for the coming 12 months.

One of the defining factors of 2015 was the sharp drop in the oil price falling to an almost 11 year low towards the end of the year. While the first day of trading this year political tensions in the Middle East saw Brent crude move up 1.9% to $37.99 per barrel, most commentators are not expecting a sustained rise in the oil price in 2016.

The low oil price has mixed blessing for shipowners. Certainly it means lower operating costs with the bunker fuel price currently at around $170 – $180 per tonne, a level not seen for nearly a decade.

It has also clearly benefitted the tanker sector, which in 2015 enjoyed its best year since 2008 and VLCC rates at the end of the year were just shy of $100,000 per day. How long the tanker boom can last is the question, with alarm bells ringing for some over the growing newbuilding orderbook. At present though the market remains strong even if there concerns that it may not last much beyond the first or second quarter of 2016.

While the tanker sector has become the current golden boy of the industry, offshore marine has been hit hard by the low oil price. Vessel and rig rates have plunged, contracts have been cancelled, and some companies have already bitten the dust. The year ahead promises very little in the way of cheer for the sector as oil companies slash E&P budgets for 2016 and beyond reducing further the demand for rigs and offshore vessels. Cashflow will be a key issue for companies in this sector and more casualties can be expected.

The picture does not look any brighter on the dry bulk commodities side of the equation. With the bursting of the commodities bubble and lower demand from China the dry bulk shipping market has taken a hammering. Last year saw records being broken that no-one wanted to see with repeated all time lows for the Baltic Dry Index, which ended the year at 478 points, just seven points above its lowest ever level registered in mid-December.

Looking into 2016 a combination of weak demand growth and a continued oversupply of vessels gives very little reason for optimism. It is symptomatic of the state of the sector Scorpio Bulkers, not so many moons ago aiming to be the largest dry bulk shipowner in the world, closed out 2015 by exiting the capesize sector selling five vessels for just $167m.

Container shipping having enjoyed a good first half to 2015 has again found itself in rough seas. Weaker than expected demand growth has combined with a surge in new tonnage, particularly in the ultra-large containership segment putting sharp pressure of freight rates which have become increasingly volatile. Scale is becoming a key feature of container shipping both in ship and company size and 2016 could see further consolidation following CMA CGM’s planned takeover of Neptune Orient Lines (NOL) and Cosco and China Shipping Container Line as part of a wider merger of the two Chinese shipowning giants.

Consolidation is also a feature that can be expected to continue across various different spaces in shipping in the coming year as companies battle with difficult markets and those with deep pockets see opportunities to grow.

On the operational front in the Mediterranean the issue of migrants pouring into Southern Europe, often onboard highly overcrowded and unseaworthy vessels, will remain an issue which shipping finds itself unhappily caught in the front line of. Last year saw a million migrants seeking refuge in Europe and with continued conflict in the Middle East the crisis is set to continue in 2016 even as European countries tighten their borders.

On the regulatory side of things the Ballast Water Management Convention could come into force by November 2016 if the threshold of ratification by the nations controlling 35% or more of the world’s fleet is confirmed. This would be very welcome news for equipment manufacturers in this sector with shipowners no longer able to put off the decision to install treatment systems.

All in all 2016 promises to be an interesting, if not an easy year ahead for shipping and maritime. 

Copyright 2017 Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.