By Alexander Whiteman

Automotive shipping is still on the up, having hit a low point in 2016, further gains are expected, thanks to improving utilization levels, according to Drewry. Shipping of finished vehicles grew 6 per cent last year, but there has been a dearth of orders for new car-carrying vessels, reports the analyst.

Head of car carriers at Drewry Tom Ossieur, said: “Despite improving utilisation, owners and operators are holding off acquiring capacity through ordering or chartered tonnage, as trade uncertainty weighs on the market.”

During the first half of this year, just four car-carriers were ordered, with charter activity focusing on short term contracts. Furthermore, Drewry’s Finished Vehicle Shipping Annual Review and Forecast 2018/19 report suggests localization and trade wars could negatively impact growth in the finished vehicle sector. “The recovery is being challenged by threats of higher auto tariffs, increasing localization of production and a shift in car sales from mature to more volatile emerging markets,” the report notes. “These developments mean shorter shipping distances and more frequent and lengthier port calls, often to less-efficient terminals.” The report also suggests higher bunker costs and low-sulphur fuel regulations coming into force in 2020 will increase costs – “all headwinds to recovery”.

Mr. Ossieur added that, overall, car-carrier efficiency had dropped 39 per cent over the past decade, with vessels running at slower speeds and spending more time in ports. And he added: “Drewry does not foresee significant improvements. Lower speeds, shorter routes and trade lane imbalances are here to stay. “Still, slow supply growth will provide support to the supply-demand balance, with car carrier utilization forecast to reach 86 per cent by 2022. But market uncertainty and downside risks will continue to weigh on chartering activity, charter periods and time charter rates.”

Reprinted courtesy of The Loadstar (