“Several elements of unpredictability” are affecting second-quarter
forecast, including elevated interest rates in Western economies raising the
risk of a serious downturn, possibly stalling growth; and the ongoing
geopolitical tensions such as the crisis in the Red Sea, Veson said. “Any
notable escalation or de-escalation in these conflicts could profoundly affect
the broader economic trajectory,” it added.
Finally, the potential for
disruption in the Suez Canal and the Panama Canal injects additional
instability into the economic landscape. For the former,
certain military groups can cause disruptions, while for the latter it is
natural occurrences which pose a potential threat.
Still and all, the container market is expected to grow at 2.4% this
year, Veson said. Over the 2024 to 2027 period demand is growth is seen at 3.1%
yearly on average, it added.
Rates have come down sharply and are expected to bottom out between the
second half of this year and the first half of 2025 in conjunction with
easing congestion. But expectations are
for a rise in rates “as the pains of returning to normal abate,” said
Veson.
The company’s analysis for the
container sector is that rates will come under pressure and continue to decline
in 2024. This, despite the non-fundamental increase in
freight rates in the past months.
A look at the orderbook shows that duel fuel vessels account for 45% in
terms of vessels and more in terms of TEUs “indicating liners are well underway
in the green transition” with LNG and methanol the preferred solution. Meanwhile, scrapping activity is still muted,
but this is expected. “We anticipate that operating elderly, non-eco vessels
will become increasingly costly,” said Veson.
It is not just the container sector that will have to face possible
headwinds. The tanker sector faces volatility in rates with expectations of
swings in oil prices. Among the factors that can affect this are developments
in Russia, OPEC+ decisions, member compliance, and China’s ability to maintain
economic growth. Sanctions imposed on
Russia because of its invasion of Ukraine are seen to influence tanker activity
in the foreseeable future.
For the bulkers sector, modest growth in demand is expected to exceed
low supply growth. This should pave the way for a strong market balance.
According to Veson, a low orderbook and hesitancy to invest in new
vessels due to fuel-related uncertainties has created a “favorable supply situation” because net fleet growth is limited.
For the gas sector, expect LPG production in the US to expand at a slower
pace than previous years, with growth of 2.1% expected. A correction in earnings can be expected
this year as US production growth will likely be modest and domestic
consumption likely to increase.
It has been the experience of
any industry that unpredictability is integral to any enterprise; for instance,
Russia-Ukraine war has not been thought of a few years back
and much less, the Red Sea Crisis.