©Michael Zapf

TradeWinds Digital Shipowners Forum: Booming container market, uncertain shipbuilding segment

The positive developments in the container shipping segment, the difficult situation of the German and European maritime clusters, and open technical questions as the industry navigates towards a zero-emission future were all topics discussed by the high-profile experts at the TradeWinds Shipowners Forum during SMM DIGITAL.

John D‘Ancona, Head of Containerships at the leading shipbroker Howe Robinson Partners, had good news for viewers of the TradeWinds Digital Shipowners Forum, moderated by editor-in-chief Julian Bray: The container market is experiencing a boom unlike anything seen in recent years, and there is no end in sight. D’Ancona underpinned his keynote with plenty of explanatory charts, most of which showed curves leading upwards. The expert spoke of a “new era not only in freight rates but also in charter rates.” The steady, fundamental market improvement benefits all size categories, he said, in part because few new ships have been on order: “In all segments we are very short on ships.”

A new situation indeed in an industry that has weathered many crises. Mark Frese, CFO at the containership operator Hapag-Lloyd, believes the positive development is not only attributable to the surprising demand increase but also to liner operators’ sensible capacity management. "At the present time, however, everything that floats is cruising the oceans." Limiting factors are a lack of containers and the impact of the coronavirus pandemic on port operations, said Frese.

High fleet availability is extremely important now, stressed Ulla Eithz Nielsen, Managing Director of the German office of V.Ships, one of the world's biggest ship managers. "In view of this strong demand, nobody can afford off-hire times." Ship operators need to be available to their customers 24/7, she continued, while keeping their customers' customers in mind, as well. Nielsen reminded the audience of the dramatic situation of crews on board which often cannot be exchanged due to the pandemic. While her company had been able to cope with the situation quite well, things could easily worsen again: "Seafarers play a key role in the global economy,” she said.

John Freydag, Chief Commercial Officer at MPC Capital, has been diagnosing a trend towards market recovery since 2017. But the introduction of new emission limits (IMO 2020) and the trade dispute between China and the USA cast shadows of uncertainty over these prospects – especially when they were followed by COVID-19, Freydag pointed out. None of the experts had predicted the economic boom caused primarily by consumer online orders in the wake of the first lockdown, said Simon Aust, joint managing director at the leading shipbroker Blue Net Chartering: “We haven't reached the peak yet.” The lack of ships is driving up charter rates, especially in short-term contracts, he said. Clemens Toepfer, CEO of the shipbroker Toepfer, agreed that rates had not reached their maximum yet: "The cash flow is enormous.” Considering the competition for transport capacity, the momentum will continue, he assured the audience, a fact that will even benefit less state-of-the-art tonnage thanks to relatively low bunker prices.

Freydag therefore expects newbuilding activities to pick up soon: "There is certainly a need for new ships." However, making investment decisions remains difficult for shipowners as long as it is unclear where the technological journey is headed. Aust pointed out that there are few companies in Germany that would be able to order new ships on a speculative basis. In general, shipbrokers are not overly optimistic regarding the future of Germany as a maritime stronghold. In recent years, the German fleet has shrunken considerably, a trend that may continue if liner operators look for buying opportunities because of high charter rates, and banks take advantage of the situation by disposing of assets, Toepfer said.

All in all, stakeholders would like the industry to cooperate more closely so as to make better use of the solid maritime and technological basis of the German cluster. The same very much applies to sustainability, commented Hapag-Lloyd CFO Frese: “This is an area where partnership is of enormous importance, and we have a global responsibility to assume leadership,” he said.

The search for the best way forward
Cooperation is the key to tackling the challenges of the future – a notion the second expert panel, which was focused on international shipbuilding, agreed on. But moderator Bray's question whether shipyards are well enough prepared to handle the trend towards decarbonisation met with a variety of answers from panellists. John McDonald from the US classification society ABS was optimistic, expecting a major breakthrough over the coming years, including in the field of alternative fuels. But the response from the customer side was more restrained. In the opinion of Dr Loukas Barmparis, President of the Monaco-based ship-owning company Safe Bulkers, major shipbuilders lack the necessary technological edge: "Shipyards are lagging behind, they should redouble their efforts towards achieving the next big goal." Few companies have designs in their portfolios that comply with the strict Tier III standards, he pointed out.
In the same context Dr Reinhard Lüken,General Manager of the German Shipbuilding and Ocean Industries Association (VSM), emphasised the special know-how the German and European shipbuilding and supply industries can offer. Their cruise and specialised ships cater to the high-end market segment, he said. Development departments have the skills and expertise to 'break the code’ for the fuel of the future. "We have the best shipyards in the world," he insisted. "Now is the time to transfer this technological know-how to other market segments." Lüken called for European governments to support the industry so the market will not be surrendered entirely to Asian countries. For years newbuilding prices in those countries have been below construction costs, and shipbuilding companies are surviving only thanks to massive government subsidies, he stressed, adding: “It is up to the EU to counter this trend.”

Erik Hanell, President and CEO of Stena Bulk, opined: “We still have a long way ahead of us until we are able to meet the IMO's 2050 targets." The Swedish tanker operator has been testing methanol as an alternative fuel for some time. Regulatory and technological uncertainties are inhibiting investments, Hanell noted. Shipping companies need partners as well as government support to innovate, he continued: "Shipping companies and customers must work together. No one can go it alone."
ABS spokesperson McDonald predicted "a fascinating decade full of novelties." During the transitional period the focus must be on optimising ships in service through retrofits, he said. Ship owner Loukas Barmparis agreed to that strategy, saying that for now he exercises caution regarding newbuilding orders: "There are no ships without carbon emissions at this time." Ordering now would be an unacceptable risk, he stressed. 


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Alexandra Neises
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