Consider that more than 100 shipping vessels will probably be scrapped this year – a record – as owners will demolish the equivalent of about 6 per cent of all capesize vessels in 2015. This on May 15 from GMS Inc, a Cumberland, MD-based company that purchases obsolete carriers.
Even so, earnings per vessel will still slump by about 20 per cent this year based on a May Bloomberg survey of 10 shipping analysts.
A drop in shipping rates amid the collapse in demand for coal, ore and other commodities has sparked a sharp rise in the number of ships yanked from the service and sold for scrap. Almost 6 per cent of the world’s fleet of ships that carry bulk commodities will be beached and sliced up for scrap metal this year, up from 2 per cent last year and topping the recent high of 2012’s 4.3 per cent, according to Clarksons PLC, a London-based ship broker.
Shipping and Transportation Update
“All the older vessels are not going out so because the rates are so poor it doesn’t make sense to run them,” said Erik Nikolai Stavseth, an analyst with Norway’s Arctic Securities AS, to the Globe and Mail Wednesday.
Shipping companies that are taking deliveries of new vessels purchased many months ago in expectations that Chinese demand for raw materials would remain strong are now getting rid of their older freighters and downsizing their fleets. The net fleet size of dry bulk carriers is expected to grow by 2.5 per cent this year, compared with 2.2 per cent in 2014 and 3.3 per cent in 2013.
Latest US Freight Data
The Bureau of Transportation Statistics (BTS), a branch of the US Department of Transportation, released data Monday on North American freight activity for June.
The figures show that the US-NAFTA freight value amounted to US$99 billion in June. All modes of transportation except for trucks carried less US-NAFTA freight than in June 2014, with year-over-year US-NAFTA freight value down 3.8 per cent. This has been attributed to the overall lower value of NAFTA trade via vessel and pipeline in June from decreased unit prices of fuel shipments.
When comparing June 2015 to June 2014, the overall value of commodities that were transported by truck rose by 5.1 per cent. In contrast, rail transportation decreased by 4.5 per cent, and air by 8.9 per cent. The value of vessel freight fell by 24.4, and pipeline freight fell by 40 per cent, mostly because of the lower unit price for fuel shipments.
Trucks transported 65 per cent of US-NAFTA freight. This is the most heavily used transportation mode for moving goods to and from US-NAFTA partners. Trucks are responsible for US$33.2 billion out of the US$53.8 billion in imports, as well as US$31.2 billion out of the US$45.2 billion in exports.
Asia-Europe Container Freight Rates
Shipping freight rates for transporting containers from ports in Asia to Northern Europe jumped 29 per cent to US$763 per 20-foot container (TEU) this week data from the Shanghai Shipping Exchange showed, according to Hellenic Shipping News Worldwide Friday. It was the second consecutive week with rises of more than 25 per cent for spot rates on the world’s busiest route but with a combined increase of US$294 it is far from the earlier announced hike by all major container shipping companies of US$1,000.
Freight rates on the route have tanked this year due to overcapacity in vessels and sluggish demand for goods to be transported. Spot rates generally deemed profitable for shipping companies on the route are at about US$800-US$1,000 per TEU.
In the week to Wednesday, container freight rates rose 24.1 per cent from Asia to ports in the Mediterranean, fell 1.7 per cent to ports on the US West Coast and were down 2.2 per cent to ports on the US East Coast.
Average rates for 2015 are so far US$666 per TEU compared with US$1,172 last year.
Transportation and Employment
US demand for transportation, warehouse, and utility workers dropped in June from May, but the number of transport-related job openings at was still substantially higher than a year ago, according to the data from the US Labor Department’s Bureau of Labor Statistics released August 31. In addition, more of those transportation and warehouse job openings in June were filled, at 193,000 hires the largest number in any month since last November, a sign that stronger growth in the second quarter finally helped transport operators boost payroll at a better rate.
At the end of June, there were 240,000 transportation job openings, compared with a revised 263,000 at the end of May and 173,000 at the end of June 2014. That’s an 8.7 per cent sequential monthly decline but a 38.7 per cent annualized increase in open transportation jobs.
June was the fourth straight month that saw transportation job openings top 200,000, a record monthly number. For the first six months of 2015, the number of transportation job openings rose 45 per cent year-over-year. The BLS reported a pre-recession peak of 183,000 job openings in January 2007.