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Photo: Joachim Sjöström
Growing demand for an ageing fleet
Growing demand, an ageing fleet and the entry of private equity investors are signs indicating a positive future for the ro-ro industry and an accelerated newbuilding activity as soon as opportunities arrive, that is when there are shipyard slots available at affordable costs.
2007 became a year when ro-ro owners experienced continuously rising time-charter rates. This was true also for the smaller ro-ros of less than 1,200 lane metres.
AAccording to shipbrokers BRS in Paris, the average time charter rate for a 900-lane metre, 14-knots ro-ro reached around EUR 6,500 per day last year, while the average rate for the largest vessels, above 3,000 lane metres and with a speed of 21 knots, reached circa EUR 19,500 per day.
ARates are at historically high levels and so are ship prices, which can be seen in the table supplied by shipbrokers Brax Shipping in Göteborg. The activity on the second-hand market was intense for the second consecutive year with 44 sale and purchase deals registered in 2007, or 40 per cent up on 2006. According to BRS, there are mainly two causes behind this activity; the high newbuilding prices and the late delivery times for those vessels already ordered.
Ageing fleet
The ro-ro fleet is ageing. After the first years of the 1980s, there was a sharp drop in newbuilding orders, and new ordering did not gather speed again until the middle of the 1990s. BRS statistics show that 33 per cent of the existing fleet of 557 vessels will be 30 years or older by the end of 2009.
AA glance at the current order book shows that owners are focusing at larger units, which is not surprising bearing in mind the current newbuilding prices, and there are very few orders for vessels of less than 1,800 lane metres.
AThe current upswing in rates for smaller vessels is likely caused by the general increase in demand and the lack of supply of larger units. The few orders for small ro-ros show that this segment in the long run faces extinction, with the exception for tailor-made vessels built for routes where port capacities and fairways puts restrictions on vessels sizes.
AWith few exceptions, as Epic Shipping’s orders last year for three ro-paxes and six ro-ros, the current order book consists of vessels ordered by liner operators.
Consolidation
Last year was a year of consolidation in the ro-ro industry. In Northern/North-western Europe, Rederiaktiebolaget Eckerö took control of Birka Line, Cobelfret acquired Ferryways and a consortia bought Scandlines. In the latter deal, a new type of player emerged in the ro-ro market as the private equity groups Allianz Capital Partners and 3i Group bought 40 per cent each of the former Danish/German state-owned ferry operator, with the remaining 20 per cent acquired by Deutsche Seereederei. Other private equity players entering the ro-ro market were Kohlberg Kravis Roberts & Co and Marfin Investment Group.
AThe interest in ro-ro from these groups indicates a positive outlook for the industry. Demand is growing, but this has to be met by increased capacity at the same time as the replacement need in an ageing fleet is growing. BRS warns that if newbuilding prices do not fall or charter rates increase substantially there might be a critical shortage of mid-sized tonnage. This could threaten the existence and development of routes and even lead to changes to alternative transport modes.
AWith the exception of ro-ro specialist shipyards as Flensburger Schiffbau, J. J. Sietas, Aker Yards and Jinling, the interest for building ro-ros has been lukewarm in the shipbuilding industry.
AA potential ordering spree may also lead to an increased interest for scrapping and recycling of old ro-ro vessels, a business that has been rather rare in recent history.
A”We know that this is coming, the question is when”, says Martin Kärrhage at Brax Shipping.
Intense ordering
2007 was an intense ordering year in the car carrier business. According to shipbrokers Plateau 120 PCTS were ordered, up by 80 compared to 2006. The current order book stands at 50 per cent of the existing fleet. The fleet grew by 10 per cent last year, with demand growing by 11–12 per cent. Plateau estimates that the coming two years will see capacity increases by 13 per cent and 16 per cent respectively.
//Rolf P Nilsson
Latest update 15-04-2008 10:30
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2008
