Economic uncertainty, the war in Iraq and the outbreak of Sars will in no way block 2003 from registering as a good year for liner shipping companies, a top maritime consultancy organisation has said.

The good prospects are largely due to strong growth in trade volumes, mainly to and from China, reported UK-based Drewry Shipping Consultants.  The report highlights that 2003 saw a further recovery in the liner shipping industry as cargo volumes surges in 2002 continued into first-half 2003.

“What’s more, these containers are being carried at significantly higher freight rates than last year, with Drewry Shipping Consultants projecting total gross carrier income of a record $106 billion in 2003, up more than 19 per cent on last year,” Drewry’s Annual Container Market Review & Forecast 2003/04 said.

“With world container trade expected to grow 11 per cent this year and 9 per cent in 2004 and the supply of new slots (effective capacity) rising by 10.3 per cent and 8.8 per cent, respectively, vessel utilisation levels are forecast to remain high over the next two years. This should enable further rate restoration programmes to be implemented, with carriers, potentially at least, entering a period of sustained profitability.”

Daily charter rates, which for ships of 1,500teu and above are more than 50 per cent up on the beginning of 2003, will also remain firm, while a pick-up in second-hand values is also expected, according to the report.
“It is not, however, all good news as the liner companies have faced rising box imbalances in the transpacific, Europe/Far East/Europe and transatlantic trades and this has raised their operating costs considerably. The shipment of empty equipment into Australia and East Coast South America has also grown sharply, with over 21 per cent of global container-handling activity comprising empty units,” Drewry said. “And despite the increase in freight rates, prices are still lower than they were in 2000 on most trade lanes.”

Despite that bleak patch, Drewry’s report indicates that the future does appear brighter with many ocean carriers having already seen a return to profitability and now in the midst of ambitious investment/expansion programmes.

“Given the optimism in the industry and the positive prospects for the future, newbuild contracting in the first six months of 2003 soared, with close to 700,000teu of slots newly ordered with the world’s shipyards,” says the report’s editor John Fossey. “By the end of September, this figure had increased to more than one million teu slots, an all-time record, with shipyard berthing availability for large post-Panamax ships full well into 2006.”

Another Drewry report, Annual Tanker Market Review and Forecast 2003-04, said the tanker industry, despite having enjoyed buoyant times of late, was now facing a period of uncertainty precipitated by the introduction of new legislation.

“The prognosis, unfortunately for owners, is that the best is behind us and the correction in the freight markets is here to stay. Global oil demand is expected to grow slowly as the economy struggles to find its feet again, the threat of terrorism continues to prevail and the tanker orderbook has once more started growing,” commented Capt. Saurabh Nakra, senior consultant at Drewry.

“The silver lining exists in the shape of increased pressure to accelerate single-hull tanker scrapping with the EU having passed its set of stringent requirements. It now remains to be seen whether other countries and the IMO will follow suit with either country-specific or industry-wide single-hull bans.”

In The 2003 LPG Market Review and Forecast, which was released around mid-August, Drewry revealed an optimistic outlook following a period of volatile market cycles, which caused a series of booms and busts over 24 months. The report suggested that a recovery was in sight with rate levels becoming sustainable.

“TCE earnings fell from $2.3 million per month in early 2001 to just $350,000 per month one year later. The second half of 2002 saw a gradual recovery that gathered pace in 2003. By June of this year, TCE earnings were back up to $1.4 million per month and the spot rate for AG-Japan had recovered to $35 per tonne,” said Drewry’s expert on the LPG market Andrew Buckland.