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Economic outlook threatens recovery

The global economic outlook is one of the biggest risks to the recovery of the multipurpose shipping sector, according to maritime consultancy Drewry. 

In a webinar on the outlook for the multipurpose and heavy lift shipping market, Drewry said that the global economy is one of the biggest drivers for the sector and as financial confidence falls, there will be fewer investments in projects or ships.

Furthermore: “The [multipurpose and heavy lift] sector is heavily influenced by the competing sectors – as the container market continues to be hammered by the US tariff war, this weakens optimism and increases competition,” said Susan Oatway, Drewry's senior analyst for multipurpose and breakbulk shipping.

For the remainder of 2019 and into 2020, Drewry forecasts strengthening freight rates for multipurpose and heavy lift operators, albeit at weaker levels than previously predicted. Unsurprisingly, there will be an increase in operating costs, with the IMO’s sulphur 2020 regulations coming into force.

With regard to the impact of the low-sulphur regulations on the multipurpose shipping fleet, Oatway said: “There are a few things to think about here; firstly when ships are being retrofitted for scrubbers, they are effectively taken out of supply equation for a period of time. This is mainly happening in the container and bulk carrier sector at the moment rather than [the] multipurpose sector (where only one major owner has declared they are fitting scrubbers) but this reduction in supply from the competition can lead to a positive improvement for the multipurpose fleet.

“For most multipurpose owners the low-sulphur fuel oil (LSFO) is the only option and there are already questions about the efficiencies of the vessels burning it. This fuel has been available – in a few parts of the world – since September and some of the major owners are doing trials. 

“Then there is the much higher fuel costs and how the carriers will pass those costs on. And finally if those costs prove too high, will this lead to an increase in demolition. Owners are currently adopting a wait-and-see policy and we do not expect the situation to become much clearer until at least the second quarter of 2020.”

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