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Brighter signs for multipurpose shipping

The outlook for multipurpose shipping, comprising both breakbulk and heavy lift vessels, is brightening despite rising geopolitical risks and economic uncertainty, according to maritime consultancy Drewry.

The market and its drivers have shifted, said Drewry, causing the analyst to revise its outlook upwards. Although the pace of global economic activity slowed in 2019, it is expected to recover this year and next.

“Expectations for steel production and trade are positive and, although investment in traditional projects remains weak, the momentum behind renewable energy appears unstoppable,” added Drewry.

One of the biggest disruptors for this sector is competition from container and bulk fleets. The preliminary trade deal announced between the USA and China could spur on renewed confidence in these competing sectors, which is good news for multipurpose operators. Drewry explained: “Our expectations for the multipurpose share of general and project cargo is based on assessments of the modal split of that cargo between the three main vessel types. When the competing markets are weak, they not only drive rates down in this sector but they also take a large share of the cargo volumes.”

The US position on the potential trade deal is not the only outside influence on the market. Recent events in the Middle East have caused a jump in the price of crude oil. For a sector already struggling with the introduction of low-sulphur fuel oil (LSFO) and high bunker prices associated with that, Drewry said it would expect that profit margins to weaken further over the first quarter of 2020, as any recovery is delayed.

However, Drewry expects average vessel time charter rates to rise 6 percent in 2020, on the back of stronger demand across the entire dry cargo sector. Increases will vary by vessel size, with those below 15,000 dwt attaining marginal improvements while larger ships are expected to achieve gains approaching double-digit percentage increases.

Looking further ahead earnings are expected to continue recovering, albeit modestly and subject to some minor correction in 2021 due to higher competition from bulk and container markets. But the ongoing trend for the multipurpose sector remains positive and is more upbeat than previously envisaged.

www.drewry.co.uk

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