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‘Troublesome’ outlook ahead for breakbulk shippers

‘Troublesome’ outlook ahead for breakbulk shippers
William B. Cassidy Apr 29, 2022

US shippers will face a tight breakbulk and project cargo market — and elevated shipping rates — for years, with fewer multipurpose vessels (MPVs) available for their cargo as older, less environmentally friendly ships are scrapped or shunted to secondary markets, speakers at the JOC Breakbulk & Project Cargo conference in New Orleans said.

“The market will remain strong in the MPV segment because of fleet renewal issues,” Ulrich Ulrichs, CEO of heavy lift and project cargo specialist BBC Chartering, said Wednesday. BBC has a fleet of more than 140 multipurpose cargo vessels, and “we don’t expect our fleet to grow in the next few years,” he said.

Instead, BBC will sell older ships that are approaching 20 years of service. “They’re done,” Ulrichs said.

In other words, demand will continue to exceed supply, or capacity, in the breakbulk and heavy-lift market, and that will keep upward pressure on pricing. A lack of external investment and insufficient internal capital over the past decade has stymied growth in the MPV fleet, and vessel production for multiple reasons will be slow going forward.

“Financing is not an issue, yard space is an issue,” Ulrichs said during a panel on the future of the MPV fleet. “All the shipyards are busy building container ships,” so MPV and heavy-lift operators find themselves waiting behind container lines, he said.

“We can’t find the yard space even if we were ready to build new ships,” said Dominik Stehle, chief commercial officer of United Heavy Lift (UHL). “You’ll see very few heavy lift vessels coming online in the next four years. This market may be closer to the new normal than we think.”
Long-term bull market

In the meantime, new demand is pouring in, setting up a multi-year favorable market for MPV operators. “I think we’re in a long-term bull market for carriers, unless something catastrophic comes along, like COVID-19 did,” said Justin Archard, managing director of One World Shipbrokers. “I think the outlook is positive for carriers and quite troublesome for some of the shippers.”

Demand slipped in 2020 as COVID spread, but climbed quickly in 2021, Stehle said.

“Wind power projects are being pushed by every Western government, and we see massive investment and demand from these guys,” he said. “They’re contracting on certain trade lanes for five years, something we’ve never seen before. We see oil and gas projects coming back.”

Capacity in the global MPV fleet also has been stretched by spillover demand from the container shipping industry. Many MPVs carry a small percentage of containers, but that percentage rose in 2021 as US importers failed to find space on container ships and turned to MPVs as an alternative.

There’s also been a shift of freight between the breakbulk and container markets, Stehle said. “In the past, the container lines took away about 20 percent of our market,” namely easier-to-ship project cargo. “Right now, they’re not even touching that,” he said.

Instead, MPV operators are carrying more containers, and that pushes freight that normally moves on MPVs to larger heavy-lift vessels.

“The container sector has taken many of the smaller multipurpose general cargo ships, leaving the cargo that would normally be shipped on those ships on the heavy-lift ships,” said Anders Hytup, president of Jumbo-SAL-Alliance (USA), a commercial joint venture between Jumbo Shipping and SAL Heavy Lift that operates 30 heavy-lift vessels.

The carrier executives noted that millions of TEU in container capacity are expected to come online in 2023 and 2024. “Then we’ll see more competition on less complex project cargo, and that may be a turning point again,” said Stehle.