• Mon
  • Apr 21, 2014
  • Updated: 3:21am

Multi-purpose vessels face greater competition and higher operating costs

PUBLISHED : Friday, 28 June, 1996, 12:00am
UPDATED : Friday, 28 June, 1996, 12:00am

The profitability of general cargo vessels is likely to be restricted and will be highly dependent on vessel capacity and capital cost structure, a report says.


British-based Ocean Shipping Consultants said the vessels faced rising costs and greater competition from other vessel types.


The 169-page report analysed demand and market competition for general cargo, or multi-purpose, vessels.


Forward demand would remain centred on Organisation for Economic Co-operation and Development (OECD) countries outside Japan - particularly China.


It said the general cargo - a relatively small, multi-cargo vessel of comparatively shallow draught and with a developed self-sustaining capacity - was in high demand for trade in many poorly equipped Asian ports.


The main competition was for container vessels of up to 1,000 teus and smaller handysize bulk vessels.


Overall general cargo demand in Asian trades was forecast to increase from 591.9 million tonnes in 1994 to about 625 million tonnes by 2000, the report said.


'For the period after 2000, the overall demand prospects are to be to some extent undermined by the increased employment of both specialist container and bulk vessels.' It said new orders for such vessels would not outweigh scrapping levels.


The report said it was predicted that the general cargo fleet capacity of 10,000 to 15,000 deadweight tonnes (dwt) vessels would decline.


This was because the present fleet was old and the vessels were perceived as too large for the smaller niche trades and were too small to compete adequately on a slot-cost basis with larger container vessels.


The report said overall costs associated with trading of general cargo vessels would rise relatively steeply.


'Operating costs are forecast to rise by 29.6 per cent over the 1995-2000 period.


'For a 10,000 to 15,000 dwt vessel, this implies a rise from around an annual US$960,000 to $1.25 million,' the report said.


The London report said smaller 5,000 to 10,000 dwt vessels purchased second-hand in 1990 would be profitable but newbuildings active in 1990 and 1995 were not forecast to become profitable before 2000.


The losses faced by slightly larger 10,000 to 15,000 dwt vessels would only stop in 1997, it said, adding that profitability would return by 1998 for second-hand vessels acquired in 1990 and be sustained to 2000.


The report said vessels of 15,000 dwt or more would not be profitable until 2000 and the lowest level of loss would be for such second-hand vessels purchased in 1995.


The report said only second-hand vessels and those acquired at low prices had any real hope of sustained trading profitability in the period to 2000.


Economic and trade growth in the OECD would continue to drive demand for general cargo vessels, the report said.


According to the 1995 OECD report released recently, average real gross domestic product (GDP) growth in the Dynamic Asian Economies (DAEs) is projected to moderate to about 6.5 per cent in 1996, with a marked slowdown in the export sector.


GDP growth in the DAEs remained strong at about 8 per cent last year.


'Growth is expected to accelerate moderately in 1997 as the effects of recent appreciation wane,' the OECD report said.


The OECD report said the deceleration in 1996 GDP growth was expected to be particularly pronounced in South Korea, Singapore and Taiwan.


It said for China that present projections were for continued strong growth, with a moderately high but relatively stable rate of inflation of 9 to 10 per cent.


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