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January 6 2020

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Januar y 6 2020 | The Journal of Commerce 31 www.joc.com 2020 ANNUAL REVIEW & OUTLOOK Maritime LIKE A PATIENT continuing to relapse, a nascent shipping recovery in the multipurpose/heavy-lift (MPV/HL) sector has yet to fully take hold. Thanks to a busy renewable energy sector and reasonably stable oil and gas markets, interest is growing in the module carrier and super- heavy-lift sector, but even as carriers report more inquiries and forward contracts, rates remain too spongy to instill broad confidence. Virtually no carriers are ordering new vessels beyond replacement capacity, as investment is stymied by scarce financing, business uncertainty, and nerves about how IMO 2020 and further carbon reduction mandates will play out. Multipurpose and heavy-lift ships remain oversupplied globally, although thanks to the ongoing US-China trade war, new trade pat- terns are hindering vessel availabili- ty in the US Gulf, where it's increasingly difficult for the carriers the surcharge cost per container shippers can expect to be applied to their spot market cargo on the major trades finally is beginning to come into view. According to the low-sul- fur fuel tariff calculator provided by CMA CGM and surcharge levels announced by HMM, China-North Europe shipments will face the high- est additional cost as a percentage of the spot rate at around 16 percent, while the China-US trades range from 7 percent to 14 percent. The surcharges are based on the spread between the price of high-sulfur and low-sulfur fuel through October, so how they play out over the next few months will depend on whether that spread widens. However, while carriers prepare for the low-sulfur switch, and networks are adjusted and sailings canceled to try to match falling demand, their customers already are feeling the effects. Andrew Gillespie, director of global logistics at Ansell Healthcare Products, said even if rates remain at their low levels, Ansell's over- all transportation costs are being pushed up by carrier actions. "There are a lot of 20,000-TEU vessels being launched, and that means less services and bigger vessels, and that means I have more containers on each vessel," he said in a recent Journal of Commerce webinar. "That means I have more containers being received by a warehouse than in the past, and that is creating bottle- necks. I can have 35 containers on a single vessel and a single arrival, and that is a big increase from the past. We are seeing our total transit time increase, and because of this, the inventory costs, handling costs, and the storage costs have increased." Gillespie said there are only so many containers Ansell's ware- houses can handle in a day, and the company has been forced to increase its capacity to receive cargo or bear the brunt of the extra time required. "I don't think rates will change all that much," he said. "but our total costs will go up." JOC email: greg.knowler@ihsmarkit.com twitter: @greg_knowler to find repositioning cargoes. Soy- bean backhauls to Asia have disap- peared, for example. On the other hand, one engineering, procure- ment, and construction (EPC) exec- utive predicts that a reinvigorated US Export-Import Bank could goose US project-related exports, helping to fill that gap. Shipbroker Toepfer Transport reported stirrings in the second- hand MPV/HL market in the third quarter, but as more elderly vessels began coming on the market, prices softened, according to head research analyst Yorck Niclas Prehm. Toep- fer's multipurpose index, an average of timecharter rates for 12,500-ton MPV/HL ships, the workhorse ships of the sector, was up only 0.9 per- cent for the year as of November and continued to meander sideways in the $7,500 to $7,600/day range as 2019 ended. Consolidation in the higher end of the MPV/HL fleet — i.e., Stuck in the middle Despite an improving market, thin margins and tight budgets are the new normal By Janet Nodar

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