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BREAKBULK MIDDLE EAST

13 - 14 February 2023 | Dubai

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DREWRY: MPV MARKET TO STAY RESILIENT

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Feb 05 | 2023


MARITIME CONSULTANCY EXPECTS HEAVY-LIFT FLEET GROWTH IN 2023


By Dr. Ferenc Pasztor

For the first time in some years, the total multipurpose vessel fleet recorded
growth over the 12 months of 2022 and is likely to do so again this year. This
is due to the extremely low demolition sales reported over 2022, which was one
of the worst in terms of demolition candidates.

This was fairly unsurprising given charter rates were reported at peak levels.

However, even with those rates, and the impending IMO regulations on emissions
and carbon reductions, we had expected a few more vessels to head for the
beaches.

As the charter market continues to decline over 2023, scrapyards empty and
emission regulations become clearer, Drewry’s expectations for demolition
candidates start to rise again to at least parity with 2019, even if most of
these vessels are less than 10,000 deadweight-tonnes and not heavy-lift capable.

That said, the MPV and heavy-lift fleet has two distinct halves. Demolition
candidates are expected to rise much more quickly for the non-heavy-lift capable
fleet, whereas the majority of newbuilding orders are for larger heavy-lift
vessels. This leads to fleet growth of 1.2 percent for 2023 compared with 2022.
The non-heavy-lift fleet, however, effectively stagnates, while heavy-lift
capable vessels are expected to see a rise of 2.5 percent in deadweight terms.

Even with this positive outlook for fleet growth as 2022 drew to a close, the
outlook for the multipurpose and heavy-lift fleet was significantly less
positive than it had been at the same time in 2021. At that point the first
reports of the Omicron variant of Covid-19 were in the news but the global
economy was on a positive growth trajectory and our outlook was cautiously
optimistic.


FAST FORWARD

What a difference a year makes. The conflict in Ukraine coupled with continued
(or recurrent) Covid-19 infections, particularly in China, increasing
inflationary pressures and a rising debt burden in many developing countries
have produced a much more subdued outlook for the maritime sector.

Last year started with charter rates in all three main dry cargo sectors at
unprecedently high levels, peaking over the first quarter of 2022. At that point
container rates were 900 percent higher than the second quarter of 2020 (the
lowest point in the market over recent years), bulk carrier rates were 200
percent higher and MPV rates were almost 150 percent up. But from that point
there was only one way for them to go.

From the peak at the beginning of the year charter rates in the container sector
had lost almost 80 percent of their value by the end of November 2022, while
handy bulk carriers had lost 50 percent. The MPV sector, however, did better –
at least for the heavy-lift-capable sector – with long-term charter rates down
just 10 percent from the peak.

The reasons behind this are largely to do with the demand for these vessels and
the particular mix of cargoes that they can lift. The MPV sector benefitted for
much of the year from the spill over cargo that was a by-product of supply chain
issues.

As those issues have been unwound, project cargoes – from both the renewables
and oil and gas sectors – have underpinned the loss in demand. Going forward in
2023, Drewry expects rates to continue this deteriorating trend as the
competition for breakbulk and project cargo increases in an ever-weakening
global economy.

Dr Ferenc Pasztor is deputy head of research at Drewry Shipping Consultants with
more than 12 years' experience in academic research and shipping. On joining
Drewry in 2022, he took responsibility for assisting the development of research
products covering the multi-purpose vessel market, ports and terminals,
container equipment and ship operating costs. Pasztor will be presenting a
special MPV Outlook session on the main stage at Breakbulk Middle East 2023 in
Dubai. Click here for the full event programme.

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