by John Konrad (gCaptain) Hamish Norton, the President of Star Bulk Carriers, provided insightful comments on the current state and future trends in the marine industry during Marine Money Week in New York. The industry has witnessed some struggles over the past decade, but Norton is confident of a positive shift underway, largely driven by decarbonization rules.
Norton believes that the push towards decarbonization will not only bring about environmental benefits, but will also contribute to economic gains for shipowners. His conviction is that these new environmental regulations will render the bottom third of the fleet – the least fuel-efficient – commercially impractical to operate, leading to their scrapping. This significant decrease in the number of operating ships will not be easily compensated by the rest of the fleet and could cause shipping rates to rise substantially.
He also suggested that if environmental policy causes oil prices to go higher, that also could be good for shipowners because it incentivizes slower steaming speeds which reduces overall fleet capacity.
Moreover, Norton says new ships can’t be built quickly enough to fill the gap. The industry still faces uncertainty about what kind of new ships to order, considering that it’s unclear what kind of fuel should be preferred. He also commented on the shipyards’ lack of incorporating several technical advances that are available and could enhance efficiency, increasing fleet sizes which would increase capacity and decrease rates.
He emphasized the need for shipyards to adapt and innovate to secure future orders. He remains hopeful that these advancements will soon be incorporated. Norton concluded with a prediction that a shortfall of new building capacity will persist for some time, preventing an oversupply that might threaten the market recovery. This, in turn, will likely contribute to sustained positive results for the industry in the coming decade.
Gary Vogel, CEO of Eagle Bulk, also shared his thoughts on the state of the industry, echoing many of Norton’s sentiments, but adding some of his own perspectives. He highlighted that part of the shifting away from newbuilds – which he called non-performing assets – is because inflation is not only increasing the price of building new ships but also increasing the cost of capital required to fund new ships.
Vogel sees new hurdles that the industry needs to surmount. He acknowledged the uncertainty surrounding decarbonisation regulations making newbuild projects difficult and the high costs of capital due to inflation. Moreover, he points out the lack of yard space and extended lead times as factors constraining the supply of ships.
Interestingly, he views these constraints not merely as challenges but as helpful measures that are aiding the industry’s attempts to manage oversupply. He suggests that these obstacles have naturally curbed the supply rather than relying on ship owners to exercise restraint voluntarily.
However, Vogel also raised concerns about the inflation environment, observing its potential negative impact on the rising rates, which could subsequently affect the global GDP and reduce the supply of available cargo. Nonetheless, Vogel’s overall tone reflected a cautious optimism about the industry’s future in light of the changing dynamics in global shipping and the new era of decarbonisation.
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