Concerns Mount Over Increased Fuel Costs
The seaborne trade of perishable products has grown every year since 2009 yet conventional carriers’ woes are set to continue whilst the containerization of major cargoes moves ahead. Supply-side dynamics have set the tone throughout the year and the focus on the fleets will likely remain well into 2020 following the entry into force of the IMO 2020 fuel regulations and the expected surge in scrapping, according to the latest edition of Dynamar’s Annual Reefer Analysis.
The year 2019 is expected to be the calm before the storm. Trade tensions, continued containerization and reduced rates remain the topics of conversation but a shakeup is surely on its way. The IMO 2020 regulations come into force imminently and the immediate concern for carriers remains the cost implications.
The worldwide trade in perishable cargoes continues to grow but it is not all plain sailing. The latest figures show that the international perishables trade reached a record of 163 million tons in 2018 with 119 million tons carried by sea. Yet trade tensions continue to cause concern amongst shippers and carriers, both containerized and conventional, and the slowing output in key economies has led to an erratic end to the year in terms of trade flows.
With demand for fresh produce remaining resolute, the focus is on the fleets, the fortunes and the futures of the conventional and containerized carriers. Major market movers, including global fruit traders Chiquita and Del Monte, continue to transfer their trade to boxes. Specialized conventional carriers, including this year’s market leaders Baltic Shipping and Seatrade, are being forced to focus on an increasingly tight number of trades and are likely to fall, victim, the coming volatility on the back of IMO 2020. The conventional fleet’s high average age, combined with fuel-hungry engines, has primed the conventional sector for a surge in scrapping due to rates remaining low and higher costs on the horizon.
On the whole, container carriers are expected to fare better. Increased fuel costs and the fitting of scrubbers have made cost recovery the main aim but the greater fuel efficiency and the capture of conventional cargoes make for a more optimistic outlook. A further fall in the market share of the conventional carriers is on the cards.
“While we are coming to the end of what has been a quiet year, a few important questions will be asked of both conventional and container carriers over the coming months. There are limits to the costs carriers can pass onto their customers and so we may see some, especially on the conventional side, exit the market. Containerships are expected to manage better although only time will tell. Overall, 2020 is likely to be an interesting year”.