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ANALYSIS | ON THE OCEAN: PART TWO


2009, there were some people who thought that the market would never change again.” Private equity, particularly from the European banking system, flowed readily into multipurpose shipping. “Te main cause for the overtonnage situation was the enthusiasm put into the further development of global markets and the ship capacities needed for trading before 2008,” said Andersen. “Most stakeholders had unfaltering belief in the boom


continuing. Today, we know that we were biased; tending to undervalue risk and overvalue opportunity, simply speaking.” Andre Grikitis, president and ceo of Intermarine,


suggested that the overtonnage situation was caused by the exuberance of the super-cycle in China, fuelled by the KG system in Europe. “Ships that were provided to the industry were, in many respects, not suitable for the trade as it existed. Te ships were built for people who themselves were not direct operators in the project/heavy lift/multipurpose sector.” Both Andersen and


Loesing drew attention to the increasing size of vessels entering the sector. Tese vessels, predominately built by the Chinese, were launched into service with a goal of reducing unit transportation costs. Loesing added: “I don't know the exact figures but in the


strong years, there was close to EUR1 billion (USD1.2 billion) invested every year by north European banks. Tat’s too much. Ships should be built for a trade where the owner has an idea why he needs that type of ship, that size, that specification, that convention and so on. Te owner thinks about an investment period of 10-15-20 years or longer, when to renew the fleet, and what are the trends for the future.”


TONNAGE SIZE MATTERS


AAL’s strategy to utilise higher-tonnage vessels in multipurpose tramp shipping has proven to be a success, according to managing director Kyriacos Panayides. “We were one of the first to introduce the bigger tonnage in


tramp shipping in the multipurpose sector.” In the past, “traditional tramp ships were smaller – up to 12,000-15,000 dwt.” AAL instead introduced larger vessels to the sector. “We have


proved that with the tonnage we provide we generate the economies of scale that benefit both cargo shippers as well as carriers. “We consolidate much more cargo. We have the flexibility for


Tis long-term strategic focus was ultimately ignored.


“People were just sending money into the system, beginning to earn good returns but in the end they got nothing,” said Loesing.


Overzealous investment Tis overzealous investment in newbuild capacity has effectively hamstrung the multipurpose and heavy lift shipping sector, as its traditional cargo base diminished. Kyriacos Panayides, managing director of AAL, said the issue was compounded by the more aggressive approach adopted by the banks that traditionally backed the sector. Subsequently, we have seen established lines fall into receivership and bankruptcy. Waves of consolidation have washed over the sector, as companies pool assets in a bid to survive. However, Andersen said the sector is far from consolidated: “We are still far away from having a concentrated industry. Nevertheless, I think that a higher degree of market concentration would help to improve service levels and create more powerful operators.” When tonnage supply


outstrips demand, ships do not simply disappear. Tere will always be a home for a


ship with cranes – even older tonnage can be mobilised to areas of the world where emission control standards are limited, or where there is limited financial vetting of carriers and their tonnage. Grikitis added: “One thing you can notice in the industry


today is its constantly deteriorating condition. My favorite term for the result of the KG system is that many operators are proxies for the banks, which basically means they are ‘zombies’.”


various stowage plans. We have also seen in certain sectors, like wind energy, the components are getting bigger and heavier. In that segment, which has been the one with healthy growth over the last several years, this has favoured our fleet.” This sentiment was echoed by Steve Blowers, senior country


manager for North America, at maritime services provider Bahri. The line commissioned six state-of-the-art 26,000 dwt multipurpose vessels with a crane capacity to lift up to 220 tonnes, a ramp capacity of 250 tonnes and one of the highest ramp height clearances in the market at 6.8 m. “The Bahri Class vessels, which were introduced in 2013, were designed and built with the future in mind.”


HLPFI10 | 57


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