The Roll-on
Roll-off ship market in 1998
Come hell or high water
In contrast to the other dry cargo sectors, the roll-on/ roll-off ship
market showed an incredible capacity to withstand the devastating gale that blew through
both the containership and dry bulk carrier markets. The world financial crisis that
started in 1997 was gradually transformed into an economic crisis in the most
severely-affected countries. It is one of the factors that led to the slump in charter
rates in some markets, but it would be unreasonable to think that it was the main
triggering factor. One of the main strengths of the ro-ro ship market is certainly its
modest size, but another, perhaps more important, is the fact that it is run by
protagonists whose only vocation is shipping. They are therefore more pragmatic compared
to certain investors who, in the containerized market for example, seem to have succumbed
to something like a collective hypnosis which apparently pushed them to place an enormous
number of orders, dragging down their own business and forgetting that "trees do not
grow to the sky". 1998 was also marked by quite a large number of mergers and
acquisitions by the largest operators, some wanting to face up to the drop in freight
rates while others were motivated by a policy of external growth to acquire rapidly a
larger market share.
The pure ro-ro fleet has remained fairly stable over many years, partly
as a consequence of the container concept development. All categories combined, the fleet
represents about 4 to 5% of the world container transport capacity. The ships of the new
generation are, very judiciously, not designed to rival the containerships, marked by a
trend to gigantism, but rather built to meet the specific and more profitable needs of the
services on which they are operated. A large majority of the recent orders have been
placed with European shipyards for trailer carriers of 2,200 to 2,800 lane meters, capable
of speeds between 21 and 25 knots and intended for operation on short sea trade.
Nevertheless, the two largest operators, Wilhelmsen and Grimaldi, have continued their
investments in large ships, meeting the needs of deep-sea routes and capable of being
integrated into a fleet of PCCs or PCTCs, which both companies also operate. In contrast,
few ships were ordered in the intermediate sizes (1,200 to 1,800 lane meters), even though
some have started to take advantage of the attractive prices proposed by the Chinese and
Korean shipyards in particular. We estimate that the next wave of orders will concern this
segment, which has been relatively ignored to date. In general, the new orders during 1998
were associated with long-term charters for operations heavily oriented towards Northern
Europe and the Baltic.
The gap between the small ships on the one hand and the medium-size and
large ships on the other grew further throughout the year. The smallest and slowest units
found themselves in the front line to absorb this de facto degradation. As most of these
ships were built during the boom of the mid-1970s, and thus fully depreciated long ago,
few shipowners have so far been inclined to scrap them, hoping still to get a few more
profits from them. The build quality of these ships, mostly from European shipyards, gives
them lifetimes sometimes approaching 30 years. However, given their growing difficulties
in finding employment, we should see a gradual increase in scrapping. It should be noted
that 57% of the existing transport capacity is 15 or more years old, and that the average
age of the fleet exceeds 16 years. Unless there is a very severe deterioration of the
economy and of trade on a world-wide scale, the ingredients therefore seem to be in place
for the fleet renewal process to continue, and logically scrapping of obsolete ships
should enable the shipowners to invest in sufficiently speedy (19 knots and more)
medium-size ships.

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Large ro-ro units By
nature dedicated to deep-sea traffic, these ships have been replaced by containerships,
usually geared, on many services. However, they are still deployed on certain routes where
the demand seems especially buoyant, providing ideal conditions for their owners or
operators. The US MarAd and the Military Sealift Command have strongly supported this very
narrow market by acquiring a large number of units over the last few years in order to
recondition them according to specifications better suited to their needs. They have
constituted an imposing reserve fleet, necessary for military maneuvers and deployments.
Of some 80 existing ships in this category, 35 are now under the control of the US Navy.
Consequently, and despite the replacement of some large ships by containerships, the
market had to deal with a genuine shortage in these sizes, particularly at the beginning
of the year. In contrast, and in the absence of new factors, it is quite probable that
this situation will be reversed in the first months of 1999, helped by the arrival of
large numbers of PCTCs and PCCs currently on order. At the end of 1998, the orderbook for
PCCs and PCTCs still represented some 15% of the existing capacity. There is a real
interaction between these markets, since the largest shipping lines chartered large ro-ro
ships instead of car and heavy rolling stock carriers, pending the deliveries of newbuild
ships. Note however that these con-ro type carriers are no longer at all fashionable,
having too little "rolling" capacity, and, often rendered obsolete by a severely
depressed containership market, they cannot provide an alternative to the most modern
ships.
Wilhelmsen Lines, with Grimaldi and NYK, was once again among the most
active in this sector. Wallenius surprisingly chartered the last two ships that CGM was
still operating on its round-the-world service, the "CGM Racine" and the
"CGM Rimbaud" (5,200 lane meters, 20 knots), for one year. This marked the
disengagement, this time total, of CGM from this transport concept. Messina, for its part,
strengthened its containership fleet, letting the "Alyona" (5,200 lane meters,
18 knots) go for a period of one year to Wilhelmsen, only too happy to be able to add a
sister ship to the other two already on charter for 3-year periods. The genuine interest
shown in the four "Kapitan Smirnov" class ships (20,000 dwt, 5,500 lane meters)
is quite revealing about the trend observed in this market. These ships, capable of nearly
25 knots, which slipped through almost unnoticed two years ago, finally found work with
the largest operators in the market, despite their very high fuel consumption.
On services of the West African coast, it is interesting to note that
Delmas has strengthened its fleet by chartering the "Rosa Blanca" and the
"Rosa Tucano" (3,500 lane meters) for a period of 5 years each, proof that in
this region also the ro-ro concept seems to have plenty of life still left in it. There
remains a lot of rolling cargo loaded on MAFI trailers, and ro-ro ships combined with pure
containerships enable shipowners to offer their customers better-quality service.
Elsewhere, OTAL and Nile Dutch extended the ships already on charter, while Grimaldi had
to compromise in order to optimize the phasing into service of its new ships.
As far as new orders are concerned, and as if to mark more strongly its
upcoming entry into the new millennium, Wilhelmsen concluded a contract with the Korean
shipyard Daewoo at the beginning of the year involving three ships of a new design,
similar to its most recent ship, the "Taronga" (40,000 to 45,000 dwt),
optimizing the loading combinations for large quantities of heavy machinery and cars. The
reported price of US$80 million per unit proves, if proof were needed, that the freight
rates obtained for targeted cargoes bear no relation to those of containerships of
equivalent container carrying capacity, but which cost half as much to build.
Just-in-time and trailer transport
Here, we discuss the area of the market in which new generation ships
attracted interest from a large number of operators. In geographical terms, these ships
are deployed mainly in Northern Europe, the Baltic Sea and the Mediterranean basin. Demand
remained very firm throughout the year, enabling the shipowners to obtain good rates and
relatively long charter periods. Remember that the large majority of these ships fall
within the size range 2,200 to 2,600 lane meters and the speed range 20 to 24 knots.
This sector was the scene of several notable maneuvers between some of
the principal shipowners. The merging of the cross-Channel activities of P&O and
Stena, announced in the middle of the year, seemed to correspond, as in other sectors, to
a need for rationalization of their respective services, but also to the double
preoccupation of obtaining economies of scale in terms of operation and reaching a
critical size to better preserve the continuity of each of the groups. The Danish group
DFDS showed an incredible level of activity throughout the year through the Tor Line
subsidiary, accepting delivery of three new units built in Italy. After having already
bought the "Boracay" (2,200 lane meters) from Fred Olsen, DFDS was slated to buy
the line activity of Fred Olsen, together with two other ships, which when consolidated
now gives it control of the majority of services linking Scandinavia to the rest of
Europe. This announcement was all the more surprising in that, a few months previously,
Fred Olsen had reinforced its services with the arrival of two new 2,600-lane-meter ships,
sold on to the Spanish company Trasmed one month before the acquisition of the group by
DFDS.
Following this Trasmed, which had remained relatively discreet until
then, and probably motivated by government subsidy proposals, took another step by buying
two more new units from Stena. Furthermore, this acquisition program is probably not yet
completed, and it will be interesting to monitor any developments in 1999. The trend
initiated more than two years ago towards the operation of larger and faster ships has
continued, with the long-term commitment taken by North Sea Ferries with the Finnish
shipowner Bore involving two new 2,600-lane-meter ships. In a fairly similar scheme,
Finncarriers concluded an agreement with the Swedish Owner Nordic Forest, on four new
ships built in China (1,900 lane meters, 19 knots) chartered for a period of 5 years.
In the Mediterranean, the Turkish company EGE surprisingly chartered the
two new ships of the Italian Owner Visentini (a conventional ro-ro of 2,500 lane meters
and a con-ro carrier of 2,300 lane meters) for 24 months. These two ships will be
deployed, like the previous ones, on the service linking Turkey to Italy. Its competitors
UND have focused on the possible acquisition of new units. These two factors are
particularly revealing about the constant increase in traffic in this region, which has
now lasted for about 5 years.
In any case, and parallel to the trend already observed in containerized
traffic, the speed criteria is becoming increasingly dominant on these routes. For reasons
of efficient scheduling, smaller ships nevertheless capable of meeting delivery deadlines
consistent with the other ships in operation will often be preferred. In this respect, we
mentioned last year our conviction that ships capable of 30 knots and more would arrive;
some yards have developed such designs this year, while some owners such as Grimaldi are
also thinking of attaining such speeds with car carrier ships. It is worth wagering that
it will not be necessary to wait much longer for these projects to materialize. The slump
in crude oil prices, if it lasts, should further encourage the building of ships of this
type, which will inevitably have higher consumption.
The construction of the European Union will without contest be a driving
force in the growth of intra-European trade, and the existing flows will probably
increase. The Europe-wide organization of truck driver strikes and the desire of Brussels
politicians to take action in favor of reducing highway congestion and fighting pollution
are all factors that should enable the opening of new just-in-time shipping links. These
could per-haps form the basis for genuine "shipping highways" which would then
provide strong support for this market segment.

Dolores - 13,480 dwt, 2,350 lm, blt 1992, chartered
to Unishipping
Small and medium-size ro-ro ships
We would be tempted to add an element to this brief description, since
the large majority of the ships that were available for charter were rarely capable of
good speeds, and consequently were of interest to few charterers. In this category we can
place ships with capacities of up to about 100 trailers, and a speed of 16 knots can still
be considered the threshold above which the ships begin to attract interest on the market.
In geographical terms, there are not really any visible areas of growth in these sizes.
Conversely, the severe crisis in the Russian economy at the end of the summer dealt a
heavy blow to trade with many countries on the links in the Baltic Sea, and yet more so in
the Black Sea, where Turkish shi powners seem to have been the hardest hit. The effect of
this situation was to make a large number of ships available immediately, which this
market sector could have done without.
Activity remained relatively moderate in the Caribbean and in the
Western Mediterranean and once again consisted mainly of charter extensions, in the
absence of alternative tonnage. In fact, in these regions, where many lines are operated
at speeds of 16 to 18 knots and over distances that are often longer than in North Europe,
new-generation ships are too expensive to operate. However, as we have previously
reported, very few ships of intermediate size and speed (1,200 to 1,800 lane meters, 17 to
19 knots) have been built recently. As a consequence, some operators were waiting for the
"ideal" ship to become available. But often they were not able to put into
effect this willingness to charter, because the only units available were practically all
judged to be too slow or to have too limited a capacity. |
Meanwhile in France... Fortunately the French domestic market shows signs of expansion, through the
dynamism of several operators and shipowners. First, Viking bought the "Nebhana"
and the "Mejerda" from Cotunav for subsequent operation on a new service in the
West Indies. At the end of the year, the owner Delom chartered a ship (1,100 lane meters,
17 knots) from Estonian Shipping and assigned it to its service to Tunisia. At the same
time its "Cap Afrique" was going to be deployed on a newly-established line
between Dunkirk and Ramsgate. Sudcargos for its part is continuing to expand its
activities from the South of France, Italy and Spain to Algeria, and at the end of the
year was examining various means of modernizing its fleet operating to Tunisia and
Morocco. Gulf Stream Roro, after having abandoned its Lorient-Casablanca service, could
re-launch it in 1999 in association with Marfret, using the "Fran'oise", which
should be joined by another ship of the same size. On the other side of the Atlantic, but
still under French control, at the beginning of the year Unishipping launched a service
between Mobile and Tuxpan in Mexico with the "Dolores" (2,200 lane meters, 15
knots), which seems to be crowned with success. The same company has also launched a
Mexican coastal shipping service, operating two smaller ships (35 and 50 trailers) in
association with a local operator.
In conclusion, we would like to emphasize once again the great stability
of rates in this market, all sizes combined. Of course here and there a few disparities
can be observed from one year to another, but these do not allow a genuine upward or
downward trend to be identified. Some containership Owners are now thinking of converting
optional orders into ro-ro ships, and this type of behaviour, should it be put into
practice, could have the merit of helping to renew the fleet in the sizes that obviously
need it. However, given the low volatility of this market, much restraint and moderate
numbers will be necessary to avoid excess optimism pushing some to cut the branch on which
others are already sitting.d In |
The second-hand roll-on/roll-off
market - Ships of 2,000 lane meters and above
Again in 1998 this market segment was very active, with firm prices
for the "good" ships, since potential buyers did not have several candidates to
choose between given the narrowness of this market.
In the middle of the year Stena bought the "American Falcon"
and the "American Condor", 3,200 lane meters, 18 knots, built in 1981, for about
$33-35 million and subsequently chartered them to Tor Line. At the end of December we
learned that, as they were perfectly suited to their line, Tor Line had been able to
persuade Stena to sell them these ships for an as-yet undisclosed price.
Such investments prove that for this type of ship age is not an
insurmountable handicap, if their technical condition allows them to operate until they
are 30 years old. In the category of more recent ships, Stena, once again one of the only
owners able to offer ro-ros without passenger accommodation, agreed a block sale of two of
its Stena 4 runner class ships (2,700 lane meters, 22 knots) to Trasmed for a reported
price of $104 million. It seems that these two units are the ones that last year had been
reported sold to UND (Turkey), but that the sale had been canceled because of the delay in
the building of the ships.
To these two ro-ro ships Trasmed added the "Brabant" and the
"Bayard", built in 1998, 2,600 lane meters, which were bought for a reported en
bloc price of $98 million.
To illustrate what we have stated previously about the importance of
speed, it should be noted that the two 4,000-lane-meter ro-ro ships "Saudi
Qasim" and "Saudi Hail", built in 1980-1981, and having a service speed of
only 15 knots, are still available for sale. In fact, MarAd has not confirmed the
employment that would have allowed their en bloc sale at a reported $21 million.
- Ships of 1,000 to 2,000 lane meters
Prices remained firm in this segment also, and even "old"
ships with good characteristics succeeded in fetching good prices. The shipowners were
probably fed up with having to regularly extend the charters of these vessels at rates
offering no reason for downward revision.
- The "Boracay", 2,000 lane meters, built in 1978, approximately
17 knots, was thus sold for $12 million to DFDS. As a reminder, similar ships only
obtained comparable prices in 1994.
- The "Vega", 1,700 lane meters, built in 1978, 16 knots, was
sold for $11 million to Cobelfret.
- The "Villars", 1,200 lane meters, 16 knots, was sold for $6.1
million for subsequent conversion to a cable layer.
Ro-ro ships with car decks benefited from a market in which the demand
was very strong and difficult to cover. So:
- the "Fleur de lys", 1,300 lane meters, 1,000 cars, was sold for
$7.2 million to Spanish interests;
- the "Belvaux", 1,200 lane meters, 500 cars, built in 1979, was
sold to Ugland for $4.1 million, a price comparable to that obtained by her sister ship in
1992.
- Ships of less than 1,000 lane meters
If there is one category in which shipowners have few reasons for being
delighted about, it is that of small ro-ro ships. On one hand few ships in this category
offer the required speed, and on the other their small size means that there is only a
small margin between their operating cost and their time-charter rate to amortize any
acquisition.
So it was only at the cost of sacrificial terms of sale that a few
transactions were concluded in a market lacking flexibility and where demand is rare.
For example, a ship with a capacity of 60 trailers, built at the end of
the 1970s, was negotiated in the region of $2.5-3 million. an |
Shipping and Shipbuilding Markets 1999
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