Industry Players See Dry Bulk Making Strong Rebound (Businesstimes.com)

DRY bulk shipping is tipped to have the most potential within the broad maritime sector in the coming few years, with China and India highlighted as the bright sparks in the industry.

DRY bulk shipping is tipped to have the most potential within the broad maritime sector in the coming few years, with China and India highlighted as the bright sparks in the industry.

Industry players told The Business Times that opportunities also exist in other areas but

Peter Sand, chief shipping analyst with Bimco in Denmark, believes that the dry bulk sector has seen its worst and is teed up for a turnaround.

“Despite being awash with excess capacity, the dry bulk sector seems to have found a way to manage supply. This has proved well in the second half of 2013. Depending on how well the tools will be applied by the industry, going forward this may develop to improve earnings.”

Chris Faulkner, CEO of Breitling Energy in the US, agrees that dry bulk is the sub-sector with the most potential within the maritime industry.

“Dry bulk seaborne shipping is looking really strong, with Barclays Research forecasting 5.8 per cent growth in 2014 versus a 5.3 per cent increase in the global merchant fleet. Growth in commodity cargoes like iron ore and coal will be a driver in the dry bulk market, as countries in South-east Asia and Africa push to build out infrastructure.”

Others feel that fortunes of the dry bulk market hinge heavily on the ability of China and India to drive it forward.

“India and China put together may lead the recovery of dry bulk market,” said Jitesh Jaipuriyar, chief operating officer of Emerald Maritime.

Mr. Sand concurred, saying: “Not surprisingly I guess, Bimco continues to see China as the main driver of the dry bulk market.”

But China and India, as the bright sparks of the maritime sector, are expected to result in a positive impact on not just the dry bulk segment, but others too.

Mr. Faulkner said:

“China’s shipping market has great potential because of its determination to stimulate exports and expand trade through new free trade agreements with Indonesia, Iceland and Switzerland and its push to diversify crude oil supplies. In addition to strong trade between China and the US, with US manufacturing on the rebound, we’ll also see a lot of regional trade between China, South-east Asia and South America.”

Capt Jaipuriyar said: “I personally feel upbeat about both (China and India) and more so about India in the next five years. The fragile five – India, Indonesia, Brazil, Turkey and South Africa – are going through elections and a stable regime can bring lots of positive change.”

The spillover effect on other segments beyond dry bulk shipping is highly probable. Capt Jaipuriyar said that the growing scarcity of oil and related resources would prompt India and China, in general, and India in particular, to intensity their oil exploration projects.

“Vietnam has joined hands too and has offered seven oil blocks to India in the South China Sea. In the meantime, the Middle East, in general, and Iraq in particular, are in the process of renaissance,” he added.

These factors combined may make the offshore & marine segment another potential area to look out for within the maritime industry, he said.

Mr. Faulkner pointed instead in the direction of container and crude shipping, which may be buoyed by increased demand from the two large Asian economies.

“The very large crude carrier market has had a rough time, but it’s going to get better as companies seek to lower costs and countries like China and India push to increase their strategic petroleum reserves. China is looking to diversify its crude oil supplies, which could mean longer sea voyages and higher rates for tanker owners for routes to West Africa and South America.

“Overall, it looks like the container segment has the most promise this year, with demand for global containers set to grow 4-6 per cent.”

An unlikely area flagged by industry players as a sector that would receive more attention is carbon efficiency. But whether it becomes an opportunity or a challenge remains to be seen.

Capt Jaipuriyar said: “In spite of the fact that shipping may be perceived as the world’s most carbon-efficient mode of transporting goods, the idea of ‘carbon trading’ is in (an) infancy (stage). While ships’ engine manufacturers may be trying to leverage on technology to respond to concerns of high carbon dioxide emissions and making ships more fuel-efficient, I see an abundant opportunity in creating a ‘market-based mechanism’ to record, trade and purchase carbon offsets and utilise money elsewhere to sustain growth.”

He added that this can further give rise to “carbon derivatives” to be traded subsequently.

Mr. Faulkner, on the other hand, described carbon dioxide emissions from the shipping industry as the greatest challenge facing the maritime sector.

He revealed that although the sector accounts for some 3 per cent of global carbon dioxide emissions, and this seems relatively low, it is consistently growing while other sectors’ emissions are slowly decreasing. Moreover, it should be noted that this sector is a heavy polluter because impulsion technology and used fuels are not subject to environmental regulations, and the sector has a lack of incentives for emissions reduction.

“If companies don’t take any precautions for it, in a decade, shipping will be the biggest single emitter of air pollution even surpassing the emissions from all land-based sources together,” he warned. “Companies’ efforts should be directed in finding technologies and methods that are the most efficient to help (them) reduce energy use in the most cost-efficient way possible. There is one way to reduce energy – by simply lowering speed. Ship-owners and operators can consider this in order to decrease operating costs arising from fuel expenses.”

Article Author: Malminderjit Singh

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