x Abu Dhabi, UAESaturday 22 July 2017

Marine sector fears more vessels will extend slump

Middle East shipping companies are worried that the numbers of container ships and tankers being launched this year and next will prolong a downturn in the global maritime industry.

Middle Eastern shipping companies are worried that the numbers of container ships and tankers being launched this year and next will prolong a downturn in the global maritime industry.

Many are worried that the new capacity - ordered last year when the global recovery seemed on track - will mean the industry is oversupplied at a time of weakening demand.

There are 130 VLCCs (very large crude carriers) on order versus a global fleet of 500, said Ahmed Al Falahi, the chief executive of Gulf Energy Maritime, a shipping company based in Dubai.

"This will have an impact on rates and delay the recovery in the industry," he said.

He was speaking on the sidelines of the Middle East Money & Ships conference in Dubai yesterday.

Gulf Energy is adding two ships in 2013 to the 17it uses to transport petroleum products, chemicals and other hydrocarbons.

Trade in commodities such as oil, iron ore and steel has not picked up at the same rate as maritime companies have added to their fleets.

Globally, imports of crude and related products have risen 2.7 per cent this year compared with last year, trailing tanker supply growth of 5.1 per cent.

A similar trend exists in dry bulk cargo, which includes goods such as coal, ore and grain.

Shipping firms are expanding their fleets by 13.9 per cent this year compared with last year, nearly twice the rate of import growth.

As a result, many global martime companies are forecast to end the year in the red.

"Supply in the short term is expected to outpace demand in the East-West trade corridors," said Jørn Hinge, the president and chief executive of United Arab Shipping, an Egyptian company.

An additional challenge for many maritime companies is the increasing unwillingness of banks to supply finance for new orders as the global economy darkens.

"A lot of local UAE banks are not in sync with international banks or the shipping industry as there's an unreasonable hike in margins," said Mr Al Falahi.

At the same time, shipping companies are also likely to struggle to restructure existing bank loans, said Jasmine Fichte, a maritime lawyer and managing partner of Fichte & Co, a Dubai law firm.

"The finance situation is very tight at the moment and I don't see the light at the end of the tunnel," said Ms Fichte.

 

tarnold@thenational.ae