Commodities fall sinks commercial vessels industry

Declining demand for coal and iron ore is hurting the commercial vessels industry and has seen owners taking drastic steps to keep afloat, including demolishing their ships.

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This is according to Henrietta van Niekerk, the global head of dry bulk freight analysis and director at Clarksons Platou, a London Stock Exchange listed international integrated shipping services provider.

Viability of Operation Phakisa called into question

Van Niekerk, who was one of the speakers at eThekwini Maritime Cluster's first annual summit this week, also said that ships as young as 15 were being laid-up as owners feel the pinch from China's slowdown. This raises questions about the viability of the government's Operation Phakisa, premised on unlocking the country's oceans economy with ship and boatbuilding a key pillar. The state wants to create one million jobs and contribute an estimated R177bn to gross domestic product through the programme.

But Van Niekerk said "If one looks at the commercial ships now, it is not viable to build new ones because the market is so weak. There might be an opportunity in building smaller craft such as fishing fleets and smaller boats."

Ships laid-up

Ships can be laid-up in various ways, including on a shortterm basis during which a vessel is berthed when not being used, but can be brought back into service quickly. There is also lukewarm ship lay-up, which involves medium-term stretches while the cold variant of the practice entails taking vessels out of service because there are no goods to be transported.

Van Niekerk said most dry-bulk ships had taken the "lukewarm" option, an indication of hopes among operators that the commodities rout might stabilise in the future.

The commercial vessels market specialising in dry-bulk commodities transportation was still two to three years away from a recovery in a cycle, she said. Coal and iron ore are the key drivers of the dry-bulk market.

However, tankers are proving more resilient in the difficult operating environment compared to dry-bulk and container ships. SA's ports could benefit from the increase in the number of vessels on the PacificAtlantic route, she said.

Source: Business Day