Speaking at the Marine Money London Ship Finance Forum, held 11 April 2022 at the JW Marriott Grosvenor House London, Park Lane, shipping consultancy MSI’s managing director Dr Adam Kent looked at the performance of various shipping sectors
Speaking to an audience of shipping finance specialists, Dr Kent noted the boom in the container ship sector has been mainly supported by inefficiencies such as port congestion. He said compared with the historical average between 2016-2019, some months in 2021 experienced port congestion of 1M TEU above the historical average. It has been a driving force in the container ship and to some extent, the dry bulk sectors.
Looking at trade, tonne-miles and quantifying this into shipping demand, Dr Kent was able to illustrate the differences between the tanker sector and the dry bulk sectors.
Dr Kent said, “(Oil tanker) trade was -7.5% in 2020 and tonne-miles -7% but in terms of actual shipping demand – how many ships you need to service global demand – that was a positive number.”
He explained this result was due to inefficiencies in fleet utilisation, such as tankers slow steaming and being used for storage.
Turning to the dry bulk sector, he said in 2022 there has been a positive increase in trade, a positive increase in tonne-miles, but a negative growth in shipping demand.
“We expect to see negative growth in 2022 as some of the inefficiencies (port congestion) start to unwind.”
Dr Kent also demonstrated MSI’s recent product launch which provides estimates of individual vessel efficiencies in terms of EEXI compliance, CII and a vessel’s historical estimated AER along with their alignment with the Poseidon Principals and zero by 2050 trajectories. This new MSI service provides financiers and owners with a way of measuring their shipping portfolios’ capability of meeting new and future environmental regulations.
Additionally, Dr Kent announced MSI’s recent partnership with ship technical and design consultancy BMT, bringing together BMT’s assessments of the potential advantages of fitting energy-saving technologies to specific ship designs and MSI’s economic assessments and forecasts of the implementation.
The key element for any vessel going forward will be the range of efficiency in any given market.
“Efficiency has been very important over the last two years,” said Dr Kent,” When the markets are good, the more you can trade, the more you can potentially earn. When markets are bad, (your vessel) is going to be at the front of the line for employment.”
In a now traditional MSI final slide which Dr Kent presents at Marine Money London Ship Finance Forum, he gave the MSI assessment based on the assumption of buying a 10-year old vessel and selling it in 2026 (estimated earnings based on annual average values including expected earnings and capital gains but excluding financing costs).
Which sector or vessel holds the best potential internal rate of return (IRR)?
“All the double-digit IRR returns are from the wet sectors,” he said. He added, “Where we do expect to see negative IRRs, if you are buying at today’s prices, is in the container ship sector.”
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