Issue link: https://jocdigital.uberflip.com/i/1488405
32 Journal of Commerce | January 2, 2023 www.joc.com Maritime [we] went to the MPV sector. But then we run the risk of port conges- tion, which brings with it the risk of detention charges." A look ahead: Although MPV/HL rates have softened, carriers and analysts expect steady demand to keep pricing above pre-pandemic levels into 2023. MPV/HL carriers anticipate some competition from container lines for cargoes that can easily switch between breakbulk and box modes, but they also expect growing freight volumes for renew - ables like wind, oil and gas, and other types of project cargo that cannot change modes. The energy sector will be catching up on maintenance and capital investments that were slowed during the pandemic, boosted by new projects related to the global energy transition and countries looking to improve their energy security in the wake of Russia's invasion of Ukraine. A lack of investment in the already-niche MPV/HL fleet will also help to keep capacity tight and rates above pre-pandemic levels, provided demand endures. Many ships are aging, and carriers are reluctant to order new vessels because shipyard slots and financing are scarce, costs are up, and there is no larger consen- sus within the industry regarding the alternative fuels that will replace traditional marine bunkers. A new normal: As in the container shipping sector, breakbulk shippers have been forced to accept a combina- tion of higher transport logistics costs and unpredictable service over the past two years. The major difference is that a return to the pre-pandemic status quo appears highly unlikely in the MPV/HL sector in 2023. JOC email: janet.nodar@spglobal.com twitter: @janet_nodar according to ship broker Toepfer Transport's Multipurpose Index (TMI). These increased costs pushed shippers that had been using break- bulk transport as a "spillover" release valve to search for alternatives, but there were no easy answers. "We find a solution, and then it all changes," a project shipper told the Journal of Commerce. "In the spillover market, A look back: Skyrocketing breakbulk and project transport costs, including MPV/HL detention charges that rose "at least" 40 percent in some trade lanes, according to one project ship - per, blasted through shippers' budgets in 2022. Detention, also called demurrage in the breakbulk shipping sector, can be assessed when MPV ships are delayed in port, something that happened frequently last year. From an average of about $15,000 per day prior to the COVID-19 pandemic, detention charges jumped to as much as $30,000 to $50,000 per day — sometimes dwarfing freight charges — as carriers sought to cover rising operating costs and recoup oppor- tunity costs. Daily MPV/HL charter rates also continued to rise in the first half, peaking at $23,099 before declining to $17,827 in December, Keeping busy Plenty of work in the pipeline for breakbulk carriers, but rates uncertain By Janet Nodar Shutterstock.com "We find a solution, and then it all changes." Toepfer predicts rate deceleration in December Daily rate for a 12,500-dwt MPV HL "F-Type" vessel on a six- to 12-month time charter USD per FEU $10,000 $10,000 $20,000 $15,000 $5,000 L L 2019 2020 2021 2022 Rate per day Note: Toepfer's Multipurpose Index (TMI) is compiled from operators, owners, and brokers. Rate per day: Nov, 2022: $18,915 Y-o-Y: 8.7% Nov, 2022 022 $15,050 $10,000 $10,000 $10,000 $10,000 Source: Toepfer Transport © 2022 S&P Global The big picture: Despite recession fears and geopolitical uncertainty — and in some ways because of that uncertainty — project and breakbulk carriers, and logistics service providers have a healthy pipeline of cargo related to renew - able energy, oil and gas, liquefied natural gas (LNG), infrastructure, and other projects that will keep them busy through 2023 and into 2024. As the frantic pace of the pandemic market dissipates, the question for shippers is whether multipurpose and heavy-li (MPV/HL) vessel availability and rates will return to pre-pandemic levels. ANNUAL REVIEW & OUTLOOK 2023