The European Short Sea Market in Perspective

The trend of fleet increase has been broken, as the European short sea fleets now gradually show a decrease. Supply and demand however are still unbalanced, and overcapacity influences price levels in all segments. Although an equilibrium situation will probably not be reached before 2020, slowly price levels will restore and from 2016 onwards the fleet will probably slowly grow again. Meanwhile, the aging fleet of small dry bulkers and small tankers will give room for replacement newbuildings as soon as market prices restore.

These are some of the conclusions from the report ‘The European Short Sea market in Perspective.  According to author Johan Wagelaar, already for ten years a stable cargo supply can be seen. ‘Since two years the fleet is slowly shrinking, which implies that carefully the supply and demand gap will tighten. But there still is a considerable overcapacity, which has to disappear before real profits will come back. And cash flows will flow to banks in many cases because of delayed repayments and interests. It is too early to say the sun is going to shine again, but the clouds are becoming a little bit whiter.’

The European seaborne transport (deepsea and shortsea) shows a relatively stable, horizontal development, albeit interrupted by the financial crisis in 2008. Quarterly volumes are presently back at the pre-crisis level of 2005 and average at 908 million tons over the past ten years. Over the last decade, the European GDP and seaborne trade lag behind world indicators. Despite a small peak in the winter of 2013-2014, the short sea tanker market remains weak, with a staggering development of volumes at 20% under pre-crisis levels. Price levels are strongly influenced by seasonal developments, but do not significantly grow over the past five years.

The EU short sea industry performs more or less at the same level as deep sea, but both far below normal standards that will allow shipping companies to continue their activities and make use of equity and loans of commercial markets. The EU short sea industry tries to improve their profitability by consolidation and tight cost control. Some segments can be characterized as extremely fragmented and can achieve advantages of scale both on the cost side as on revenues.

The report can be ordered from NML for 149 Euro.

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