Freight rates will continue to improve in the coming months, however the containership market still faces a challenging second half of the year, according to a leading market analyst.
James Frew, Senior Analyst at Maritime Strategies International, and a key speaker at this week’s Global Liner Shipping event in Hamburg, believes while there are some positive signs, the market needs to be prepared for more obstacles this year.
“We do expect to see some further improvements for freight rates over the summer. However, the still significant delivery schedule for 2017 poses a major threat to the second half of the year, particularly if trade growth slows,” Frew told MarineTraffic this week.
Frew believes there are challenges for all ship sizes. “We are already seeing significant consolidation in the tonnage provider sector and this is likely to continue, particularly for owners exposed to the larger ships. Many of the tax advantages allowing owners to access cheap equity have been removed, and in order for tonnage providers to be able to provide a compelling proposition to liner companies they need to reinstate relatively cheap access to equity. In order to do so they will require greater economies of scale. We do think though there will remain a role for niche charter owners supplying smaller/specialist tonnage.”
While giving us a quick update of the market, Frew said while last year was a record year for scrapping of containerships, he expects much lower numbers of boxships being sent for demo in 2017. “We expect scrapping to slow significantly as a result of the improved earnings environment and a lack of scrapping candidates.”
Frew also expects idle capacity to drop in the coming months, before spiking again towards the end of the year. “We expect a further small reduction over the summer, before seeing increases over the traditionally quieter northern hemisphere winter.”
Frew covers both the container shipping and offshore oil and gas markets for MSI. He is responsible for containership market forecasting, producing MSI’s regular containership publications and
updating the container shipping model, as well as being involved in bespoke consultancy and research projects. He has nearly eight years of experience forecasting the container shipping market and gives regular presentations both at conferences and internally to leading liner companies, ship owners and ship financiers.
Prior to joining MSI, James studied for an MSc in International Trade, Finance and Development at Barcelona Graduate School of Economics. Previously he worked as an analyst at Clarksons Research, and has undergraduate qualifications in History and Economics, respectively from Oxford University and Birkbeck College, London.
At this week’s Global Liner Shipping event in Hamburg his presentation will focus on balancing the markets, examining the outlook for freight earnings, asset values and time charter rates. He will tackle questions such as, what are the fundamentals driving the freight markets, will shipyard overcapacity drive down asset values, and how will idle capacity impact earnings on both the freight and charter markets.