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Multipurpose market soft to 2010 but outlook positive 2011 and beyond

After a 19% drop in MPV demand in 2009, MPV owners and managers will experience uncertainty in 2010 but growth should start to pick up from next year, continuing steadily at least until 2014.

This is the summary of Drewry’s latest Briefing Report on the Multipurpose Shipping Market with the rest of the Report providing a comprehensive analysis of the current state and future prospects for this sector.

Scope of the Report:

• Strategic demand/supply forecasts projected to 2014
• Trade analysis for major commodities including steel, grains, coffee, sugar
• Fleet profile detailing age comparisons, updated orderbook, operator news and technical innovations
• Market dynamics with latest rates, competitive market trends and projections
• Economic analysis – operating costs, manning issues, insurance and much more
• Competitive pressures – the dependence on container and handysize bulk performances

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1.   Executive summary
     •   The market for the multipurpose vessel
     •   The multipurpose fleet
     •   Competitive threat
     •   Market prospects

2.  Trade
     •   Quantifying the general cargo market
     •   Steel
     •   Forest products
     •   Construction
     •   Fertilisers
     •   Agri-bulks
     •   Grain
     •   Coffee
     •   Cocoa
     •   Sugar
     •   Rice
     •   Project cargo
     •   Competitive threat to MPV demand
     •   Future development of MPV demand

3.  Fleet
     •   Defining the multipurpose fleet
     •   MPV demolition
     •   MPV orderbook
     •   MPV fleet development
     •   MPV operators
     •   Technical developments and innovations
     •   Project cargo fleet supply

4.  Market
     •   The market
     •   Period charters
     •   Trip charters
     •   Time charter rates
     •   Competitive market trends
     •   Supply demand balance
     •   Charter rate projections

5.  Economics and costs
     •   MPV operating costs
     •   Manning costs
     •   Insurance
     •   R&M
     •   Cost considerations
     •   Other
     •   MPV voyage costs
     •   Bunker costs
     •   Other voyage costs
     •   MPV ship acquisition costs
     •   MPV newbuilding costs
     •   MPV secondhand prices

Tables
     •   Development of MPV market share
     •   Dry cargo market segments
     •   World trade in steel products
     •   Major construction material exporters
     •   Major construction material importers
     •   Major grain trade flows
     •   Major coffee producers
     •   Major cocoa exporters
     •   Major sugar producers
     •   Major sugar exporters
     •   MPV fleet by main vessel type, at June 2009
     •   MPV fleet by size range, at June 2009
     •   MPV demolitions 2007 to 2009
     •   MPV orderbook delivery schedule as at June 2009
     •   Heavy-lift orderbook as at June 2009
     •   Major MPV operators as at June 2009
     •   Major MPV operators orderbook as at June 2009
     •   Specification development of the MPV fleet
     •   MPV fleet estimated split for project carriers
     •   Major charterers of MPV tonnage, 2008
     •   Major charterers of MPV tonnage, 2009
     •   MPV reported trips by route, 2008
     •   MPV reported trips by route, 2009
     •   Estimated development of time charter rates for container-orientated MPVs,
         2000-2009
     •   Estimated development of time charter rates for container-friendly MPVs, 
         2000-2009
     •   Estimated development of time charter rates for container-capable MPVs,
         2000-2009
     •   Forecast supply/demand balance for MPV to 2014
     •   MPV daily operating costs, 2009
     •   Estimated approximate R&M cost variations by vessel age
     •   Indicative MPV operating costs
     •   Estimated development of MPV newbuilding prices, 1996 to 2009

Figures
     •   Estimated development of general cargo market
     •   Major MPV seaborne trade routes
     •   MPV fleet and orderbook as at January 2010
     •   World economic growth
     •   Development of selected MPV period charter rates
     •   Development of dry cargo demand, 2000-2009
     •   Multipurpose fleet primary cargo market segments and competitive
         vessel types
     •   Multipurpose share of dry cargo market
     •   Crude steel production
     •   Major steel product exporters
     •   Major seaborne steel trade routes
     •   Major forest products exporters trade growth since 2005
     •   Major seaborne forest product trade routes
     •   Major importers of Chinese construction materials
     •   Major seaborne construction commodity trade flows
     •   Fertiliser production flow
     •   Major seaborne fertiliser trade flows
     •   Major seaborne grain trades for non bulk carrier cargoes
     •   Major coffee exporters
     •   Major sugar producers vs domestic consumption
     •   Dry bulk seaborne trade
     •   Forecast development in world container traffic
     •   Development of MPV cargo demand
     •   MPV fleet age profile as at January 2010
     •   Suggested MPV fleet development to 2014
     •   Container-orientated MPV deployment by region, 2009
     •   Estimated development of timecharter rates of container orientated MPVs
     •   Weighted East/West freight rates
     •   Estimated bulk carrier time charter rates
     •   Growth in effective fleet versus growth in effective demand
     •   Forecast development of timecharter rates
     •   Class survey requirements – intervals and conditions
     •   Repair costs: average of averages 2000-2008
     •   Bunker price trend 1996 to 2009
     •   Indicative Handysize newbuilding prices
     •   Trend in MPV secondhand prices    

Multipurpose Shipping Market in Focus

Key findings:

• Future prospects depend on MPV operators’ ability to compete with Container and Dry Bulk rivals.
• The Multipurpose fleet supply will grow but expansion probably manageable.
• Project cargo hopes for better utilisation dependent on Chinese export performance.
• Detailed trade analysis by major commodities – rates positive after 2011.

The market for the multipurpose vessel

Drewry defines MPV on a fleet rather than a cargo base. General cargo is whatever is left after the specialist ships – such as tankers, gas carriers and reefers – have taken their share. When bulk rates rise, certain commodities slip back into the general cargo pool. When rates move the other way, the cargo base dwindles. Meanwhile, containerships are always competing for the same cargoes, so the multipurpose sector is dependent on their fortunes too.

The multipurpose fleet

The MPV fleet, as defined by Drewry, numbers some 2,852 vessels with a total capacity of 24 million dwt. Of this number around 5-10% can be classed as project carriers, with the majority of these in the 10-15,000 dwt sector.

The main fleet news is that it has reversed its declining trend. Although it is still one of the older sectors of the whole maritime fleet, there have been significant numbers of newbuildings delivered over the past few years and the average age has decreased to nearer 17 years.

There is also a healthy orderbook, representing around 28% of the existing fleet. This suggests that not all of those orders are for simply replacement tonnage but there is some investment going into this sector. All of the major operators have significant numbers of newbuildings on order.

Competitive threat

While MPV vessels are the dominant force in the breakbulk, general cargo and project sectors (competing primarily with Ro-Ros and heavy-lift vessels), they command only minor positions in the other cargo markets that generate significant employment opportunities and cargo volumes. These positions have also generally been deteriorating, under pressure from specialist dry bulk and container vessels.

However, MPV vessels have seemingly experienced an upturn in their share of the minor bulk cargoes since 2005, when excess demand for dry bulk vessels provided additional cargo opportunities for MPVs, adding almost 2.5 percentage points of market share.

Further loss of share to containerships is inevitable but the minor bulk sector is expected to have a less consistent pattern, which will be primarily determined by the tonnage balances in the Handysize dry bulk fleet.

Market prospects

Cargo demand for the multipurpose sector is forecast to increase by an average annual rate of 3.3% between 2010 and 2014, compared with 6.4% for global container demand and dry bulk of 4.9%. Meanwhile, MPV fleet growth over the same period could well be no more than 1.5%.

With project cargo, there are areas of future growth in spite of the recession. Inevitably, China is the main area of hope to bring this sector back to full utilisation. Its appetite for steel has shored up the dry bulk market over 2009 and as exports improve it could well do the same for the project cargo sector. It is expected that 2010 will have a slow start but this sector should improve from 2011 onwards.

The overall conclusion is that the MPV market has some way to go. Indeed, having analysed the supply/demand balance for this sector, this market is not expected to pull out of recession until after 2011. Meanwhile, demand growth is positive but slow. Add this to the problems we anticipate in the surrounding market sectors and Drewry forecasts some growth in hire rates but with little pick-up before 2012.

For the full picture on the state of the MPV sector, order your copy of Drewry's Multipurpose Shipping Market in Focus