ICS – Avoid overcapacity
The International Chamber of Shipping’s Simon Bennett warned his audience in Istanbul about the further erosion of margins if tonnage does not fall more heavily.
Shipowners and operators attending the Global Maritime Summit 2019 heard that the danger to maritime shipping has not yet been averted. For once Simon Bennett, deputy secretary general of the International Chamber of Shipping (ICS), did not identify the ecological and regulatory framework conditions as the central risks, but rather classic distortions in the market itself.
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Bennett believes that the biggest problems facing the shipping industry today are home-grown. In Istanbul he warned his audience that overcapacities and unsustainably low freight rates are still the biggest challenges for shipping lines today, ten years after 2008’s massive downturn.
Bennett has observed a trend in the market that he fundamentally approves of. “Ship ordering fell by 14% in 2018 (in deadweight tonnage), which is about 17% below the annual average since the downturn of 2008,” he said. This suggests to him that many shipowners may indeed be resisting the temptation to over-order. Early in 2019 the worldwide vessel order book appeared to be stable at around 10% of the global fleet, according to Bennett. From a regional perspective the bulk of new orders comes from Asian countries; this has the potential for an impact on all markets, however.
The resolution of “uncertainty surrounding regulatory and ecological requirements, such as the IMO Ballast Water Management Convention and the IMO’s regulations capping the sulphur content of ship fuel, has benefited the industry,” Bennett said. “Shipowners are now in a position to make decisions about when to recycle older ships.”
Bennett’s conclusion is that “there is cause for long-term optimism, with population growth and a seemingly unstoppable demand for higher living standards in emerging economies indicating that long-term demand for international shipping services should continue to increase significantly.”
