Shipping not in sustained crisis

Jun 16 2017


A panel of experts concluded this week that shipping was not in a sustained crisis.

However, if the cycle extends to 2021 it will be longest on record.
 

The panel disputed conclusions made by industry leaders at the Danish Maritime Days (DMD) last year, arguing there was no need for either market based or regulatory intervention to break a period of sustained low freight rates, erosion of asset value and oversupply.
 
Speaking at a debate co-hosted by law firm Norton Rose Fullbright and PR consultants BLUE, they also disagreed with conclusions made last year that the market may never recover. However, they did warn that if the current downward cycle reached 2021 it would constitute the longest downturn that the industry had ever seen.
 
In 2016, the DMD group said that two general approaches could be taken to achieve a rapid reduction of the present cargo fleet capacity: a free market approach, where the book value of assets were realigned to reflect their real market value, and a more interventionist approach.
 
While admitting that there remained substantial oversupply in the market, the Norton Rose Fulbright/BLUE panel largely agreed that intervention in either incentivising the acceleration of scrapping, or in controlling newbuilding numbers, was both impractical to implement and unnecessary.
 
In terms of incentivising scrapping, recycling expert and consultant and non-executive director for vessel cash buyer GMS, Dr Nikos Mikelis, commented: “The market will sort itself out. I don’t see the need for governments to subsidise scrapping. I cannot see recycling intervention working. Ballast will get some ships, but it’s a moving feast [in terms of when].”
 
Martin Stopford, President of Clarksons, said that if the oversupply issues were not resolved, then the downturn could extend for many years, claiming that if market recovery did not commence before 2021, the industry would have been in the longest downward cycle dating back to the 19th Century.  



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