Maritime Trade and Transport - HWWI

Since the large capesize freighters (>100,000 dwt) concentrate on the transport of iron ore
and coal, the size of this class depends especially on expansion in world steel production and
energy demand. 26 The panamax class (60,000-100,000 dwt) is also used for transporting grain,
bauxite and phosphate. The small vessels (handymax and handy size) focus on less important
dry bulk goods, such as cement, agricultural products, or mineral raw materials. Although trade
in these products will increase more slowly in the long term than that with iron ore and coal,
container shipping still constitutes competition. Uses for the small bulk carriers are likely to decrease.
Opportunities are offered by the high average age, with nearly 70% of the small vessels
more than 15 years old. Should demand slump, an increase in scrappings is likely. Besides, a low
order volume of just under 7% has a positive effect on current fleet capacity. 27
As dry bulk goods are generally low-priced goods, the cost of marine transport accounts for
a high share of the delivery prices. During the past 50 years, these have risen by a mere 70%.
During the same period of time, for the sake of comparison, U.S. retail prices have increased
ten times as quickly. Investment costs for bulk freighters therefore play a decisive role. This
type of ship is simple in design and technology, and its appearance has changed very little in
the past 20 years. The distinct trend toward series production leads to high economies of scale.
This has two consequences:
1. China’s market share in new vessels (22%) is likely to surge in the future. Japan currently
leads, with a share of 64%. Although the more stringent laws in force since July 2006, also
requiring bulk freighters to be equipped with double hulls, would tend to increase the price
of new ships, keener competition is expected to result in lower prices.
2. Improvements in ship type are likely to be targeted toward a reduction in operating costs.
Since higher speeds mean rising fuel costs, bulk freighters remain relatively slow, traveling at
about 15 knots. Progress can be expected in automation. Integrated systems for automated loading
and unloading could lower personnel costs and reduce docking times.
Since raw materials trade flows in one direction only, pure bulk freighters often make the return
trip empty after delivering their cargo. Wider fluctuations in the demand for raw materials
also increase the risk that the ships will not be sailing with capacity loads. A greater flexibility
in use will be required in the future, favoring freighters that can carry several different types of
cargo. Multi-purpose freighters are considered flexible all-rounders since, in addition to dry
bulk goods, they can transport liquid bulk goods (OBO freighters), containers (OBC ships),
or oversized goods. Temporary bottlenecks in specific market segments can be exploited, and
empty runs can be avoided. Many smaller freighters are also able to navigate rivers. Reloading
goods in a seaport is then unnecessary, saving time and cost. This greater flexibility must be purchased
with higher construction costs, however.
26 Steel production is expected to expand by 5% annually until 2015, in Asia by 8% annually.
China and India have significant iron ore deposits, but China, especially, will continue to be
dependent upon rising imports. See Deutsche Bank Research (2005).
27 See Clarkson Research Services (2006).
Berenberg Bank · HWWI: Strategy 2030 · No. 4
99