Commentary Breakbulk & Project Cargo
Projecting a shortage
By Susan Oatway
Optimism for project cargo demand , combined with the tight capacity caused by the rerouting of ships away from the Red Sea , has led to modest but real increases in long-term period rates in the multipurpose / heavy-lift ( MPV / HL ) sector . Yet even though this optimism seems to be percolating throughout the market , investment in new vessels remains perishingly scant .
Shipbroker Toepfer Transport expects rates for a 12,500-deadweight ton ( dwt ) “ F-type ” vessel on a six- to 12-month time charter , as measured by the Toepfer Multipurpose Index , to reach $ 13,135 per day in August , up 2 % from July and 12.7 % since January . Toepfer expects the carriers ’ “ unbroken faith ” in the market — based primarily on the gap between forecast breakbulk and project cargo demand and tonnage — to continue to move rates higher through third quarter 2024 .
Wind components fill vessel capacity out of China and South-East Asia , while oil and gas projects show no signs of slowing down in the US and Middle East . Add to this infrastructure projects in the Middle East and Europe and it ’ s no wonder that project cargo carriers expect rates to continue at current levels , which while about 40 % below the peak of 2022 are at least twice what they were before the COVID-19 pandemic .
At the same time , there are reasons investors in the sector are hard to find . The few who have shown an interest are “ unable to make
MPV / HL Fleet growth to average 5 % per year
Multipurpose and heavy-lift vessel capacity delivered vs . demolished , in ' 000 deadweight tons ( dwt ), with net fleet loss / gain
' 000 dwt
3,694 3,000
2,000 4,000 1,000
0
-1,000 2005 2008 2011 2014 2017 L 2020 2023 202626 2027 ( f
) ( f )
MPV delivered MPV demolished HL capable delivered HL capable demolished Net fleet loss / gain
Notes : Heavy-lift Capable vessels have a maximum combinable lift > 240mt SWL Data as of August 2024
Source : Journal of Commerce , S & P Global
© 2024 S & P Global
L the numbers work yet ,” Yorck Niclas Prem , head of research at Toepfer Transport , told the Journal of Commerce . Shipowners looking to diversify are more likely to build container or bulk carriers because they can ’ t get the longterm cargo commitments they would need from project cargo shippers , he said .
Newbuildings ordered by MPV / HL carriers — AAL ’ s Super B class and SAL ’ s Orca vessels , for example — are assumed to have at least some cargo commitments on board .
Some 48 open-hatch vessels were added to the order book over the last year . All those
Shippers ’ fears that a shortfall of available capacity will translate to rising prices are justified .
ships are over 60,000 dwt , 17 have heavy-lift capability , meaning combined lift capacities of more than 240 metric tons safe working load , and all are expected to have cargo commitments in place for at least their fronthaul legs , mainly forest products from South America to Asia .
According to a Journal of Commerce analysis of the current order book and likely slippage and demolition rates , the global MPV / HL fleet is poised to grow 4.3 % annually through 2028 , with 63 % of those vessels having heavy-lift capability .
Even though average fleet age is fast approaching 20 years , as almost 12 % of vessels are 25 or older , there are still very few demolition candidates because owners are still making money on aging ships . Over the next five years , ships with a combined 2 million dwt of capacity will cross the 20-years line , with another 4 million dwt coming in the five years after that .
The current forecast only covers replacing these older ships , adding little — if any — new tonnage to carry the project cargo of the future . As such , shippers ’ fears that a shortfall of available capacity will translate to rising prices are justified .
email : susan . oatway @ spglobal . com
18 Journal of Commerce | September 2024 www . joc . com