ISSUE 1 2010
Ulster overcapacity threat looms
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better than central and southern routes. Certainly this was the case for Stena Line, whose overall Irish Sea freight volumes fell by 18% in 2009. The company brought the refurbished 850 lane-metre Stena Navigator on to the Belfast-Stranraer route and by combining two conventional ro-pax ships and one high- speed vessel has added an extra round trip each day, effectively increasing capacity by more than 30%. “A choice of sailing times, better spread out throughout the day and night, means that time is made up through frequency, cutting out dead time from the through journey,” says Nieuwenhuys. But he admits to
a “significant risk” of overcapacity to and from Northern Ireland. “Low revenues and subdued trading conditions won’t cover the enormous costs of new tonnage and this raises questions about the future,” he says.
“The maths doesn’t work. Volumes are down throughout the network, and the diagonals (services from north-west England to Ulster) are no different. Our own services remain in demand, but it remains to be seen how quickly we climb out of recession.” Stena Line has still to
decide how it will play the route when the Loch Ryan terminal near Stranraer opens in 2011, a “huge investment” complementing its new VT4 facility in Belfast. “However, we will take every advantage of the shorter crossing and efficiencies the new port and ships will permit,” Nieuwenhuys says. Eugene Carron, Irish
Ferries’ freight manager, says: “Growth in the Irish Sea ro-ro business ceased in 2007. Anyone adding capacity in 2008/09 was dropping ships into a market that was declining rapidly. Customers used the opportunity to knock suppliers down on price.”
High fuel prices are still a danger to shipping
Low consumer confidence saw import volumes plummet last year, particularly in cheap high volume consumables originating in Asia. Further suppressing domestic demand, the Irish Maritime Development Office (IMDO) notes that many large industrial importers and
wholesalers ran inventory levels way down from previous levels in the search for liquidity and cash flow. With recession continuing in Ireland’s two largest trading partners, the US and UK, through most of 2009, exports also came under pressure. IMDO reports severe volume
corrections across all five key market segments: lo-lo, ro- ro, liquid, dry and breakbulk. Each segment recorded a 36- month volume low at some point between January and October 2009. “The most exposed was breakbulk, which is heavily weighted towards
the construction industry,” says IMDO director Glenn Murphy IMDO estimates that 12 lo-
lo vessels were taken out of the market, with additional capacity reduction through vessel- sharing deals. “Around 500- 600,000teu has been lost in the last 18 months. It’s been a very
substantial volume correction. We’re back to 2003 levels,” Murphy says. “Yet all the companies in the
market at the end of 2008 are still here in early 2010, and there have even been new entrants. It’s not what you’d expect. The entry barriers are quite low in an
open market, especially in lo-lo. You find a vessel at a reasonable rate and have a go. “In ro-ro, capacity is a bit more fixed with specific vessels for specific purposes. And if you give up capacity you can yield market share. People watch this closely and price is still a big problem.”
Irish Ferries estimates that the overall ro-ro market, including passenger traffic, fell 14% last year year. Its own freight volumes were down 18.7%, with yield lagging even further. The decline is shrinking,
with April likely to be the first month in the last 18 months where business was level with a year earlier, but solid growth has not yet returned. Carron believes 2010 could see a further 1-2% shrinkage. “In lo-lo you can charter and match more easily to volumes,” he says. “We’re stuck with the capacity we have. But we’re debt free. We’re at the right end of the investment cycle.” Seatruck added a third
vessel to its Warrenpoint- Heysham service in October. The 65-unit Arrow increases midweek capacity, which has attracted new traffic. In October, Norfolkline completed replacement of three older vessels on Belfast- Heysham and increased frequency.
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