‘ Relentless pressure ’

Ro / ro market still sizzling despite added tonnage , tariff threats

By Keith Wallis

Car carrier and roll-on / roll-off ( ro / ro ) vessel operators see no signs of a cooling market despite repositioned tonnage , a growing order book and threats of a tariff standoff between Europe and China , according to executives .

Automobile shipments , especially electric vehicles from China , are strong , while high container rates and capacity shortages are pushing breakbulk , project cargo and equipment shippers toward the ro / ro sector .

However , “ the relentless pressure of the past 18 to 24 months is starting to ease in some areas of the world ,” Bryan McCausland , head of the car carrier business at Gold Star Lines , told the Journal of Commerce . “ We can see that , on several trade lanes , more tonnage has been provided by operators . But in general , there is still a need for more capacity .”

Although vessel charter rates have eased slightly thanks to the added capacity , they remain close to record highs . Shipbroker Clarksons said in a weekly report released July 5 that six- to 12-month charter rates for a 6,500-CEU ( car equivalent unit ) vessel slipped to $ 105,000 per day in July from $ 115,000 per day in March .

Echoing McCausland ’ s views , Andreas Enger , CEO of Höegh Autoliners , said in a June trading update , “ Capacity is still the limiting factor , and we continue to serve and prioritize long-term strategic customers .”

Cargo volumes increased in May compared with April and “ rates are stable at record-high levels ,” with an average prorated gross freight rate in May of $ 97.20 per cubic meter , Enger said . High and heavy and breakbulk cargoes were also stable at 25 % of total shipments in May for Höegh , similar to levels seen in the first quarter , he said .

‘ Aggressive ’ ordering

Several carriers , including Hyundai Glovis , part of both the Wallenius Wilhelmsen Group and the logistics division of Hyundai Kia Automotive Group , and Singapore-based tonnage provider Eastern Pacific Shipping , recently increased their vessel orders .

Hyundai Glovis ordered six 10,800-CEU LNG dual-fuel pure car and truck carriers from China ’ s Guangzhou Shipyard International ( GSI ) in May , shipbrokers said .

Eastern Pacific Shipping has placed orders for four 5,500-CEU ships from Fujian Mawei Shipbuilding and two similar vessels from China Merchants Jinling Shipyard , all for delivery in 2027 , with options for four further ships from Fujian Mawei and two more from Jinling .

Those new deals increased the total number of car carriers on order to 207 ships totaling 4.6 million deadweight tons , equal to 36 % of the operational fleet in tonnage terms , according to data from Clarksons . Most of the ships are scheduled for delivery from 2025 onwards .

Saudi Arabia-based Bahri Line will also be investing in ro / ro vessels to support major projects in the Middle East , particularly Saudi Arabia ’ s massive Neom project on the Gulf of Aqaba .

“ We have a very aggressive newbuilding plan coming up ... We are expecting in another two to three years 10 more vessels to join our fleet ,” Rajith Aykkara , vice president of Bahri Line ’ s ro / ro and breakbulk division , said at the Journal of Commerce ’ s Breakbulk and Project Cargo Conference in New Orleans in April .

However , the outstanding order book will not lead to the nearly 40 % increase in capacity that newbuilding orders may imply , according to Dan Cipolli , senior manager for breakbulk sales with Wallenius Wilhelmsen , also speaking at the conference .

Many of the vessels in the global ro / ro fleet are old , and those over 25 to 30 years old are scheduled to be recycled , Cipolli explained . “ We don ’ t see the number of ro / ro vessels in the world growing that much in the next couple of years ,” he said .

Unyielding demand

Cargo demand is also expected to remain high , shipping executives said . Both Höegh Autoliners and Wallenius Wilhelmsen signed multi-year shipping contracts at the end of June with car and equipment manufacturers . For Höegh , that includes a five-year deal with a leading car producer to ship automobiles from the US and Mexico to the Middle East .

Wilhelmsen said its contract with a top industrial equipment maker was worth $ 195 million based on expected volumes over the first three years , with an option to extend for a further two years .

In addition , there has been “ explosive growth in the www . joc . com July 29 , 2024 | Journal of Commerce 29

July 29, 2024 | Page 29

‘ Relentless pressure ’