Despite weak economic growth across Europe, despite geopolitical tensions, sanctions against Russia, disorders in the Middle-East, commodity prices being at lowest levels, debt crisis in Greece, AESA Chartering once again succeeded to ship close to 600.000 tons of cargoes during 2015 with the support of our clients and partners in the shipping world. THANK YOU ALL!
We have been regularly pointing out the oversupply of tonnage against actual demand. Let’s underline this year that the fleet growth of bulk carriers has been the lowest since last 10 years which at about 2.5% is on course to reach parity with the trade growth. Unfortunately that does not settle the problem! Scrap prices and bunker prices being at lowest, Owners of older ships are keeping their rust buckets trading instead of scrapping. The situation is worse for containers. Total container fleet has grown by about 8.5% in 2015 while demand rose by some 2.5%, therewith widening the gap even more between supply and demand. We see more and more Container and MPP vessels hunting for dry bulk cargoes, seeking desperately alternative sources of revenue.
Capes & Panamaxes ended the year 2015 at lower levels then where they started back in January. The things had begun on an encouraging note for Owners with rates climbing during the first weeks but we saw the situation turning swiftly with rates slipping even below operating costs for Owners. The Handy bulkers also faced day-by-day reductions on freights, leaving Owners without negotiation power. By the end of the year Charterers were able to push rates ever lower as demand faded almost everywhere.
For our Short Sea trade, each passing year seems to be a new lesson. No matter the years of experience or the amount of business one can have, it is just impossible to predict anything. For Coasters, situation was rather better for owners during 2015 compared to larger bulkers. At 1st quarter we saw spot rates rebounded slightly, nothing to get excited about but nonetheless better than they were before. Unfortunately for owners, after April the business slowed down and rates faded till September, far from what Owners had hoped to see. Charterers sat back and let the market bring them increasingly better rates. We saw some recovery in September but it was too late to be significant. Shipping depends on demand for commodities, and 2015 saw that demand diminished in line with commodity prices which fell to their lowest levels. Major reasons of depressed demand are the geopolitical issues and the impact of falling oil/gas prices. Turkey, Syria, Egypt, Libya, Tunisia and Algeria are crucial for the demand to grow. Yet we have a new tension between Russia & Turkey, Syria & Libya are still in war and nothing has been settled in Egypt & Tunisia. Oil &Gas supplying countries such as Algeria saw their incomes reduced and strong US dollar made their currencies weaker. Algeria has been obliged to cut the state budget, stop investements & constuctions. Which resulted with less importation of construction steels, cement, timber, etc. I fear that this situation may even lead to further economic and political uncertainties in the country.
We have been questioned by our clients about the impact of lower bunker prices on freights. In short sea trades this depends on the distance. For a shipment of 3000 tons, if the sailing distance is only 1 day, the impact of USD 100/ton bunker price decrease will be only about USD 0.15/ton on the freight. But for longer voyages, with 10 days sailing, the impact will be USD 1.50/ton, one of the reasons why the freights in Short Sea coastal trade resisted better then those on large bulk carriers. Lower bunker prices are also giving an important advantage to Owners in choosing better paying cargoes even if they have to ballast their ship for 2, 3 or 4 days more instead of fixing cargoes where Charterers are continously & unreasonably trying to lower the rates.
Better days to come after all, but how? Being an incurable optimist, I can only wish ‘PEACE in 2016’ the only factor that can lead to an increased demand. The world is changing and new countries are oppening to business. The Vienna agreement and the lifting of sanctions expected in 2016 will change the economic & geopolitical scales in the Middle East as Iran will enter globalization. The political & economic normalization of this country of 80 million inhabitants, which has a huge potential in the fields of industry, energy and a geographical position at the confluence of Turkey, Asia, Russia and India can only be beneficial for its business partners. Same goes for Cuban economy. The American embargo was eased slightly in 2015. These lifting of sanctions can only bring positive tendences for the economy and growth. I can not see the political situation in the East Mediterranean being solved in 2016 though this would have provided a huge uplift to coastal shipping with so many ruined countries needing to be rebuilt. In my humble opinion, if the situation stays at least flat during 2016, it would be great for Owners but it is certain that they will find it extremely hard to convince Charterers that they need yet another premium on last done rates. 2016 may also be the last year of a long period of challenge for Owners. Let it be a peaceful and successful year for all of us!
Eren BEKTAS