The Relentless Law of Supply and Demand

Even China’s go-go shipbuilding industry is feeling the effects of the slowdown in international trade and shipping overcapacity, which shows no signs of easing in the short term. Shipping fleets will need to trim operating costs to survive in this environment.

You may have seen the news item in MarineLink.com dated July 29 that China’s shipyards suffered a 49 percent plunge in orders during the first 6 months of 2012. This is clearly the result of a glut of shipbuilding capacity trying to sell into a marketplace already sufferening from overcapacity and low freight rates. The surge in shipbuilding in China was fueled by the country’s appetite for raw materials and low-cost government financing for new ships. Many of the ships ordered during the binge of 2007 are still trickling out of the shipyards to face an uncertain employment. The Baltic Dry Index, according to the article, has dropped 26 percent in the past year to 958. In May 2008 it was 11,793.

The global fleet of capesize vessels has doubled in the last five years according to Clarkson, and three-year charter rates are around $10,000 per day, down from $55,000 five years ago.

In this economic climate, it becomes even more imperative for ship operators to reduce operating costs and improve efficiencies in ship operation. Fuel is the most immediate target, since it represents a huge percentage of operating costs, but fleets will need to put all aspects of operating costs under scrutiny.

That’s the idea behind the ShippingInsight Fleet Optimization Conference, which is scheduled to take place October 9-10 in Stamford, Connecticut. More than 30 speakers have been lined up to address their areas of expertise, including ship design, hull performance, alternative fuels, bunker management, regulatory compliance, voyage management, weather routing and KPIs. Registration is now open at www.shippinginsight.com.

Note: This post was originally written for the Maritime Professional blog.