While hoping to recover from financial crises in Europe, though the wheels of the European economy are turning very slowly, let’s look forward with some wisdom of experience. There is no prophesy in what you are going to read but a bunch of thoughts about the facts which have, which are and which will affect the short sea freight markets during the year 2013.
I expect very difficult conditions for coaster fleet Owners for the first six months of 2013, perhaps the toughest we have seen yet. For the fourth consecutive year financial results of many companies in EU short sea industry are negative. Many Owners who have managed to make it out alive in 2012 may not be able to survive this period and I am especially worried that this may hold true for some German and Dutch fleets. Distressed Owners are continuing to sell out their fleet for some pennies and many new players, mainly cash buyers, are entering the coaster freight market. Most of the Owners are struggling not to lay up their ships and try to keep them trading as far as the ships can earn above the break even. The Dutch and German Owners are sending their fleets to areas with stronger economic growth and it increases their appearance not only in Black Sea and Mediterranean freight markets but also in South-East Asian markets and Caribbean markets, which gives them a low but a secure freight income and brings more efficient fleet to these markets.
The Black Sea grain crop for the second half 2012 was very low which was partly a cause of the falling freight rates and unfortunately it can be predicted by reading information provided by International Grains Council that it is quite obvious the grain crop situation will be the same for the first half of 2013 unless it is not becoming worse. The pressure on steel prices due to huge overcapacity of steel production gives multiple solutions to Charterers to ship their cargoes from different sources which also lead to low freight rates and hard negotiations where Charterers are generally ruling and controlling. Even with the extremely low interest rates applied across the Europe still nothing much is happening as far as the consumer confidence level is concerned, but the bankers operating with larger margins.
There are almost no new-buildings entering to the market in 2013 and with some optimism we can still expect a slight increase on the freight rates for the second half of the year and for those Owners, who can manage to make it out unscarred from the first six months the opportunity to recover in the second half of 2013. Actions taken by EU may help countries such as Greece, Italy, and Spain to stabilize their prevailing conditions and reduce their debt burdens. Job creation programs may show their result and improve the levels of consumer confidence and spending and consequently translate this into improved cargo volumes across the Mediterranean and within Europe. The situation in Syria may result in a sort of intervention and open up opportunities as massive rebuilding will be needed after the civil war. Turkey will have again a strong growth while Egypt will continue to see unrest.
In conclusion, I think 2013 will be a year not so different than 2012 and will be a year of survival by many ship owners. Freight rates will remain more or less stable with seasonal and segmental differences. On the long run the imbalanced freight market should find the way back to normal, but this will take time until the players finally realize that the faster the rise, the harder the fall !
As a Shipbroker for over 20 years, I do believe that especially at these kinds of moments we have to stay focused and to continue to serve our clients at the best of our ability.
I wish you all the very best in this New Year.
Eren BEKTAS