The shortsea dry cargo market in Europe continued to suffer throughout most of 2016 despite improved economic activity in the Eurozone. Freight levels today afford shipowners only thin margins at best. According to UK shortsea shipbroker HC Shipping & Chartering, the outlook right now is more of the same. HANSA talked to its chartering director
2016 was a very flat year in the shortsea dry cargo market though not as disastrous as in the[ds_preview] deepsea sector. Will 2017 turn out better?
Mark Harrison: It’s impossible to know how the market will fare but at this stage there’s nothing to indicate any imminent or significant change in trading conditions. The brief upturn through November/December has meant the market is starting 2017 in better shape than it did in 2016. Beyond that it’s hard to see a great deal of difference.
Political turmoil, war and sanctions (Russia, North Africa etc.) weighed down on shortsea trades in the past years. Have owners/operators come to terms with the new environment?
Harrison: Recent events in Ukraine, Libya and currently Syria naturally have an impact but it’s not necessarily ongoing in all of those areas or causing a complete block on trade. Furthermore they represent relatively small areas within the whole market which for the most part is trading normally, therefore I don’t see this as having a major impact.
Consolidation has picked up in earnest in other sectors. Do you expect more M&A or pool formations in the shortsea sector? Is there a need/opportunity for it? Do you see interesting new commercial solutions?
Harrison: Have seen some evidence of consolidation (Nova Marine/Carisbrooke) and banks losing patience (Flinter/Abis) but ultimately the same vessels remain, therefore so does supply. There’s scope and need for new commercial solutions but perhaps not a lot of joined up thinking. Things like pool formations are notoriously difficult to manage.
Some warn that shortsea shippers will face a capacity dilemma one day because of lack of newbuilding projects for coasters. Do you agree there’s reason to be concerned?
Harrison: There’s no doubting the lack of newbuildings over recent years, particularly below 4,000 mts so presumably if demand to move cargo in that size remains constant there has to be a problem at some point. Generally, charterers tend to be a bit more flexible on age, especially in the 2,000–3,000 mts size. There appears no real appetite for investment presently and it’s hard to see how that’s going to change. The current economic climate seems to be cultivating a mainly short term approach, I’m not sure how much focus or planning is being applied to a problem that’s still 10-15 years down the road.
How do you see the shortsea chartering evolving over the next 5 years? New requirements or logistics strategies owners have to adjust to?
Harrison: Potentially further consolidation amongst charterers leading to more extensive vetting/compliance procedures and counter party risk assessments which would impact even more on short sea for reasons mentioned above (ageing fleet etc.). Possibly increasing pressures on road infrastructure might make a political issue encouraging the movement of bigger volumes by sea, thus stimulating investment in this sector.
