This put RoRo operators under immense pressure.
When the financial crisis started in 2008, the shipping industry was moving from a four-year super-cycle towards slower, but still robust growth. The RoRo market was no exception - from 2003 to 2007, cargo volumes grew by around 12 percent per year, whilst the fleet expanded by just 6 percent annually.
“This put RoRo operators under immense pressure,” says Niklas Carlén, Vice President of Global Market Intelligence at WWL. “They had to build more vessels to close the gap between supply and demand. They also had to increase existing capacity by operating fleets at maximum speed, delay recycling of ageing tonnage through life extension programmes, increase transshipment and reduce the length of voyages.”
During this super-cycle, vessels of every type were in high demand and this put shipyard capacity under pressure, with RoRo vessels losing berth allocations as shipbuilders prioritized construction of tankers, bulkers and container ships.
“This pushed newbuilding prices to record highs,” says Carlén. “It also led to new shipbuilding entrants offering suboptimal vessel designs at very high prices, which were largely ignored by established RoRo operators.”
The impact of the global crisis on cargo volumes was dramatic, he admits. RoRo cargo declined by 40 percent in 2009 compared to 2008. However, by 2009, the RoRo fleet was well positioned to reduce capacity. “The preceding market cycle had restricted the flow of vessels to recycling yards to a trickle, and, as a result, more than 30 percent of existing RoRo tonnage was older than 20 years,” he explains. As market conditions deteriorated, tonnage began to be recycled. Around 148 vessels – or 20% of the 2008 global fleet – were removed in 2009 and 2010.
By mid-2009, approximately 15 percent of the global RoRo fleet – including 21 WWL vessels – was either laid up or idle; almost half of which were eventually recycled. In early 2011, only a handful of vessels remained in lay-up.
“Future capacity was also reduced during 2009 and 2010. Thirty to forty vessels were removed from the newbuilding order books and just over 100 vessels are expected to be delivered between 2011 and 2013,” says Carlén.
From 2008 to 2010, around 193 new vessels joined the RoRo fleet and 153 older vessels were recycled. “This means that the average vessel age dropped to under ten years in 2010, compared to a peak of over 14 years of age in 2005,” states Carlén.
Carlén believes that as market conditions continue to improve and the gap between supply and demand narrows, a mere 20 vessels will be recycled in 2011. “However, with 114 vessels in the fleet older than 20 years, there is still room for further downsizing if the need arises,” he predicts.