Industry must plot course around four key challenges, top analyst says

Shipyard overcapacity in China and South Korea, changing trade patterns, higher energy prices and tougher environmental controls are the key challenges facing shipowners, a leading analyst said yesterday.

On a brighter note, Martin Stopford - head of research at Clarkson, the world's biggest shipbroker - said the global economy grew by an average of 3.9 per cent between 1950 and 2010, while the volume of seaborne trade was 16 times bigger over the same 60 years. 'I don't see why it should not carry on' at this level, he told guests at a Hong Kong Shipowners Association lunch.

Pointing to overcapacity, Stopford said delivery of new ships peaked in 2010, when new ships totalling about 116 million deadweight tonnes hit the water. A further 99 million dwt was delivered last year.

This increase in new tonnage - mainly tankers, container ships and dry cargo vessels - outpaced the increase in cargo volumes to depress charter rates. With the number of new vessels on order already falling and around 15 months lead time needed to build a new ship, Stopford said that by the end of this year mainland and South Korean shipyards would 'see lots of gaps opening' in their production schedules in 2013.

The concern was that shipbuilders would cut the price of new ships to encourage shipowners to order even more vessels in an effort to keep yards viable and workers employed. But the impact of these vessels could be to reduce charter rates and ship values still further.

Stopford pointed out that average daily earnings for the four main ship types - tankers, container ships, dry cargo ships and gas carriers - were down to US$10,800 last week, near the daily average of US$8,500 in the 1980s. By comparison, average earnings hit US$22,800 per day during the boom between 2001 and 2008.