In its latest shipping sector report DNB Bank, focuses on how ship speed optimization has changed fundamental supply/demand balances.
The DNB Bank report expounds:
Speed optimisation has completely changed the fundamental supply/demand balances. Over the past year we have pointed out how high bunker prices and speed optimisation have completely changed the fundamental supply/demand balances in the shipping industry. We calculate that utilisation in commodity shipping (dry bulk, tankers, container), is relatively high – around 84% – when reflecting the reported reduced sailing speeds, but 15% lower at 69% when assuming full speed.
For those sceptical on our market views, just look at the car carriers. Our above- consensus rate forecasts are based on vessel speeds remaining low, although rising somewhat, even if rates increase, as long as the oil price stays relatively high. We are often met by those sceptical on our market view, who state that every increase in utilisation is met by higher speed, taking the wind out of every upswing in demand. Apart from pure mathematics and fluid mechanics, the answer to the sceptics is to look at the car carrier segment.
The largest operator WWASA saves in excess of US$100-million annually from having slowed average speed from 21 to 17 knots and would rather order new vessels and/or charter in tonnage at higher rates than speed up its fleet, since the cost savings are enormous. We believe that smaller than expected demand improvements can lift rates from current depressed levels and that the other segments will follow the car carriers.