News / Carriers struggling to attract container traffic now attack the multipurpose sector

The continuing struggle by container lines to fill ships means the project and breakbulk shipping sector is in for more of the “worst market conditions for over 10 years”.

And according to Drewry, there will be no let up of the “dreadful” trading seen in 2015.

Following the recent publication of its Multipurpose Shipping Market and Forecast 2016 report, Drewry’s lead multipurpose analyst, Susan Oatway, described competition from container shipping as the “fly in the ointment” of the sector’s recovery.

She said project shippers in particular were “paying peanuts” to container lines to carry breakbulk and out-of-gauge cargo on flatracks, providing desperately needed freight for voyages.

Maersk Line in particular were “aggressively targeting project cargo” said Ms Oatway, while rivals such as Hapag-Lloyd are taking a fresh look at the sector in a bid to grab more cargo and revenue for their ships.

Ms Oatway said multipurpose vessels (MPVs) were estimated to be losing between 5% and 10% of their traditional business to containerships, which she thought could rise to as much as 20% if box lines became even more desperate.

She added that just the interest of container lines in the sector was having a “big psychological” impact on the MPV market, resulting in long-lasting damage to freight rates.

The multipurpose shipping market is “one of the most private sectors in shipping”, explained Ms Oatway. “You will rarely see reports in the shipping media on freight rates”, so container carriers were randomly quoting “close to zero rates” without any idea of the market, she added.

Notwithstanding the container attack, the MPV market has had to contend with weaker demand, coupled with falling commodity prices in 2015, resulting in a 3% decline in global demand and “untenable” conditions that have threatened the financial stability of a number of companies.

Describing 2016 as a year that the MPV market had “got to get through”, Ms Oatway expects growth to improve in 2017, with key regional drivers being the Middle East, specifically Iran.

There was also the potential growth of energy renewables into the US and some construction work around new ports in Africa and South America, she added.

And with an extremely low newbuild orderbook and a return to a positive trend of an estimated annual growth in demand of 2.7% to 2020, the MPV market has reason to be more optimistic longer-term.

But much will hinge on recovery in competing sectors, in particular the container industry, which Drewry believes might not return to “normal” until 2018.

When it does happen, however, shippers of breakbulk and out-of-gauge cargo could then find themselves discarded by the container lines, which generally prefer the much less complex business of carrying boxes, unless they pay for all the slots used.