Monday, November 17, 2008
Janet Porter and Craig Eason - Monday 17 November 2008
UP TO a quarter of the world’s fleet of pure car and truck carriers could be heading for the scrapyard as shipowners take action to slash capacity in line with factory production cuts.
Many of the ships used to transport vehicles were built between 1978-1988, and may soon be removed from service as the specialist lines that operate PCTC tonnage move fast to respond to rapidly changing market conditions.
The unprecedented slump in new car sales is forcing motor manufacturers around the world to shut down for an extended period over Christmas and scale back output wherever they can.
The handful of lines engaged in the ocean transportation of cars and trucks are scrambling to react to their customers’ plight.
Ship speeds are being reduced where possible, but more drastic measures are now also on the drawing board.
NYK Line, the world’s largest PCTC operator with a fleet of 120 ships, was preparing to get rid of older tonnage, vice-president Svein Steimler told Lloyd’s List.
The Japanese line has a number of vessels aged between 25-35 years, and with capacities ranging in size from around 700-5,000 car equivalent units, that could be for eligible for demolition.
“We are proactively looking to scrap ships,” Mr Steimler said.
This will be a commercial decision, and not driven by prices offered by breakers.
Norway’s Hoegh Autoliners and Wallenius Wilhelmsen logistics, the joint venture between the two Scandinavian owners, Wallenius Lines and Wilh. Wilhelmsen, also expect to demolish older tonnage.
Each have large vessels on order, while Hoegh, in which AP Moller-Maersk has a shareholding, has five ships that will be lengthened next year. But all are considering scrapping of older tonnage.
In total, around 200 ships built in the decade to the late-1980s could be broken up as older, fuel-hungry units are eliminated, experts said.
Ships have remained full to date, as car makers had already organised ocean transport before consumer spending nosedived with little advance warning.
While operators said they predicted a downturn, all had been taken by surprise by the speed of events. In the summer, lines were reporting a shortage of tonnage available to meet shippers requirements.
“We had a 20% under-capacity in WWL,” said the chief operating officer Kai Kraas. “So some correction will not be negative. No operator should be surprised at what has happened. What we are surprised with, though, is how fast it has happened.”
Hoegh Autoliners is evaluating its options regarding the redelivery of chartered tonnage and scrapping.
“A portion of older vessels in the world fleet represents a considerable buffer which may be subject to recycling when the time is due,” said vice-president Olav Sollie.
What lines are now seeing is a cancellation of contracts by importers, often when vehicles are already on the high seas.
NYK has reduced PCTC speeds from 18-20 to 12-15 knots, but is aware that slow steaming has to fit with contractual obligations to customers.
“These are extremely turbulent times and the name of the game is to be flexible,” Mr Steimler said.
In total, world car carrier fleet capacity is due to expand by almost 50% over the next four years after a revival of ordering activity that kicked off in 2003 and then gathered pace over the past couple of years.
Despite the credit squeeze and well-publicised financial difficulties of the some of the car giants, payments were being made on time with no defaults experienced yet.
But this is an area where vigalance was needed, Mr Steimler said.
“If they don’t pay, we won’t lift.”
As adapted from Lloyds List