KUALA LUMPUR: The shipping industry is expected to see further merger and acquisition (M&A) activities next year, particularly among smaller fleets and owners who are generally trampers in nature.
Asia Pacific & Oceania at SAL Heavy Lift Singapore Pte Ltd managing director Justin Archard said cargo volume increases this year were seen by most owners due to better utilisation factors across multi-purpose vessel/project carrier fleets.
“Recent years have seen a marked increase in fleet size among the project carriers. When price and position are the key attributes to working spot markets, smaller fleets are particularly disadvantaged.
“Continuing low freight rates will eventually persuade some, either of their own volition or coerced by the banks, to find pooling partners to maximise the potential of their vessels,” he said.
However, he said that it is not all bad news as sentiment is slowly lifting.
Archard sees technical project work continuing as pure play heavy lift vessels extend their range of abilities, utilising their capacities and operating structures onshore to develop techniques in diversified markets.
“I think, next year, the fleets that remain focused on their core business, manage costs and remain flexible will ride out what I believe will be the last of the difficult years.”
He said the oil and gas industry is laying off people across the board.
“Downgrading of global growth by the various financial agencies of the world has in most of this year been a regular feature of their commentary.
“Today, they are saying that the oil price correction may be the fillip that has been needed to ignite growth,” he added.
According to Archard, oversupply has been a considerable factor in this segment for some time.
“Next year, with its uncertainties, is unlikely to be a catalyst for significant newbuild orders, which is a good thing.
“As cargo volumes have trended upwards, the fall in the oil price has meant lower bunker costs for owners, bringing a welcome margin against current market freight rates.
“However, unwelcome is the pressure to return this to charterers in the form of lower freight rates, and those in the chase for volume are ready to negotiate with it.”
He added that it is entirely possible that if bunker rates stayed in the same general area for a sustained period, freight rates would certainly flat-line, possibly even fall, as cargo volumes increase. Bernama