Wisdom Marine Group (慧洋海運集團), one of the nation’s largest dry bulk shipping companies by fleet size, expects more stringent environmental regulations to accelerate vessel retirements and ease a supply glut that has hounded the global shipping industry.
New environmental regulations set by the International Maritime Organization that are soon to take effect include a nitrogen oxide emissions standard, which has been imposed on all vessels built since Jan. 1, as well as a ballast water management convention that is to enter into force on Sept. 8 next year, Wisdom Marine chief financial officer Bruce Hsueh (薛亦駿) told an investors’ conference yesterday.
Over the past two years, companies have been retiring vessels older than 20 years faster than capacity that can be replaced by new ship orders, he said.
New ship orders have declined by 70 to 80 percent over the past two years, in particular for larger-capacity vessels, he added.
Many shipping operators have turned conservative over the acquisition of new eco-friendly ships, while competitors in developing markets will no longer be able to expand their fleets by purchasing older vessels, Hsueh said.
“Due to the faster-than-expected capacity correction, we are upbeat about the company’s prospects next year,” he said, adding that improvements are expected to take hold in the third quarter.
Addressing concerns about US president-elect Donald Trump’s potentially protectionist trade policies, Hsueh said that the anticipated changes would hurt cargo shipping firms, but benefit Wisdom Marine’s primary market — dry bulk shipping.
In anticipation of improving market conditions, the company plans to add 12 vessels to its fleet, with 21 vessels slated to be delivered by 2020, he added.
It costs about US$500,000 to install a ballast water management system on an older vessel, a prohibitive amount for companies operating in the red, Wisdom Marine chairman James Lan (藍俊昇) said, adding that he expects more older vessels to be scrapped.
The company has targeted a fleet of about 120 vessels and will retire five to six ships that are older than 10 years, Lan said. Wisdom Marine has more than 55 eco-friendly vessels, one of the largest such fleets among its peers, he said.
The company reported that sales in the first 11 months of the year fell 4.72 percent annually to NT$9.75 billion (US$306 million) amid an industry downturn. Pre-tax earnings in the same period dropped 32.69 percent to NT$1.45 billion.
A number of time charter clients have been compelled to break their contracts with Wisdom Marine, Hsueh said, but added that penalty payments helped reduce the effects.
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