Bulker orders still declining

PUBLISHED : Wednesday, 07 July, 1999, 12:00am
UPDATED : Wednesday, 07 July, 1999, 12:00am

Bulk-carrier fleet developments are critically important this year as the trend indicates a steady decline in orders, a Simpson Spence & Young's (SSY) report says.

In its annual shipping outlook, SSY Consultancy and Research said the scrapping of bulk carriers was at double the pace of last year although a slowdown was expected in the second quarter due to strikes and the monsoon season.

'Dry-bulk and combined carrier scrappings are together expected to exceed deliveries,' SSY said.

In contrast, shipyards building tankers and container vessels have full orders.

SSY said the decline in the dry-bulk market since 1995 had continued into the first quarter of this year.

'Weak demand prospects combined with an oversupply of tonnage mean that the market still has some way to go before it recovers,' it said.

SSY said this year would undoubtedly remain a tough one for shipowners as there were a number of developing features that had to emerge to produce the first signs of a sustainable recovery.

It predicted that the market should start to show signs of a sustainable recovery sometime in the fourth quarter, with the start of the new millennium more likely to prove the catalyst for a sustainable recovery in the dry-bulk market.

SSY said the overall outlook in the steel sector remained weak and predicted a downturn of 1 to 2 per cent in global steel production.

Demand for iron ore remained depressed, particularly in Japan, where steel output was forecast to decline by a further three to four million tonnes after last year's 10 per cent decline.

'However, the slump in demand for iron ore is believed to have been particularly pronounced in the first quarter this year and we predict that there will be some upturn in activity probably in the second quarter this year,' SSY said.

It said that while a decline in steel output would lead to a contraction in coking coal demand this year, continued expansion of coal-fired capacity and full utilisation of units that came on stream last year, mostly in Asia, should lead to a greater demand for thermal coal.

It added that tonne-mile demand could rise as Australian exporters continued to diversify their market base with a particular eye on Europe, which would be to the detriment of US-based suppliers.

SSY predicted that this would be a tough year for tanker owners as they faced a deluge of newbuilding deliveries and production cutbacks.

Effects of the cutbacks had been felt in April as freight rates for very large crude carriers and ultra-large crude carriers collapsed.

Orders received by shipbuilders worldwide suggest that the tanker fleet would grow by six to seven million deadweight tonnes this year and was likely to outweigh the number of scrappings.

'Earnings are projected to decline by 5 to 15 per cent, depending upon size and trade,' SSY said.

Prospects for next year were not much different, except that global oil demand was projected to rise, it said.