The Ro-ro market
in 2000

The ro-ro ships are something of a niche market within the mainstream liner-shipping sector, and their special characteristics set them apart from the rest. Although the concept of ‘roll-on / roll-off’ is older than containerisation, within the regular liner routes, they have been largely replaced by the latter.

Competition from the containerships was first felt on the long-haul routes, and then spread itself to other areas where the time at sea was preponderant over the time in port. Although this is not a hard and fast rule, it underlines the sensitive ratio of the voyage cost to the transit cost. A large proportion of the core ro-ro traffic is protected from the competition of containers because of this criterion, but they nonetheless have to comply with the exacting requirements of shippers to whom the transit-time remains a predominant factor. In order to meet this condition, ships have to be increasingly fast, and this has resulted in a real split within the fleet.

However, while speed is a vital concern, it is not the only yardstick used, especially in the trailers sector, where the need is for vessels having a bigger loading capacity, but also being of the right configuration to allow quick turnaround times in port.

1999 and 2000 were both difficult years for many owners whose ships were not sufficiently specialised and who therefore had difficulty finding employment. The charter market severely suffered from the delivery of numerous newbuildings, ordered by liner-operators who proved to be some of the most active players in the market. Pooling and mergers among some of the large groups which led to fleet rationalisations, also contributed towards making the market well and truly depressed.

"Made to measure" seems to have been the guiding force prompting a number of companies to order new vessels which could fit precisely into their specific routing requirements, as for many years such units were rarely available on the tramp market.

Although this has resulted in a well-needed renewal of the fleet, at the same time it produced a considerable slowing-down of activity in the spot market. We therefore have been confronted in 2000 with a two-tier market - between modern vessels ordered by owners who had sufficient faith in their need, and older ones which for a large number of them have become commercially obsolete.

The chartering market thus became very quiet, far too quiet for many, and consequently very little long-term business was seen.

This sector of the market is extremely confined and fragile, given the small number of vessels and actors. The combination of several factors dealt a blow to these ships.

First, the delivery of several PCC and PCTC* have gradually replaced, with a domino effect, certain large ro-ro ships dedicated to cars and mixed cargoes. In addition, the consecutive mergers of Nosac and Wilhelmsen, then the new group (Nosac Wilhelmsen Lines) with Wallenius, have left their mark. This has resulted in no fewer than seven big ro-ro ships being put back on the market, which then remained, for the most part, idle for several months over the year. Elsewhere, NSCSA which is leaning more and more towards containerisation, took two of their vessels out of service, and have been unable to find either employment or a buyer. The first three months of the year therefore did not offer any option but to look for voyages covering the displacement needs of various international organisations and military authorities. However at year’s end, some operators, in view of the depressed state of the market, took the plunge to charter out on a rather long-term period, but at rates averaging 25-30 % less than those achieved a year ago. The vast majority of this tonnage is best suited to business on the West African coast, where the ro-ro concept is (still…) accepted. In this respect, Grimaldi, Delmas, and Setramar have signed new agreements starting in 2001 to form a partnership on the Mediterranean / West African routes, where both large combined ro-ros and mixed geared ro-ros will be used.

This type of vessel is rarely built nowadays, and outside of Nosac-Wilhelmsen or even more Grimaldi, the fleet is to all intents and purposes not being renewed. It should be pointed out that the large vessels ordered in the last three years have virtually nothing in common with the existing fleet, which has an average age of almost 16 years. The former are expensive ships, capable of more than 20 knots, and built for dedicated routes combining both forest products and heavy rolling material.

Others have a large car-carrying capacity but are also equipped with cranes to be able to handle situations in certain areas such as Africa which do not have the necessary port-handling facilities.
 

FINNMASTER 11,530 grt, blt 2000 by Jinling - Operated by Finncarriers

Over the course of the year, there has been a noticeable split in the market – based on the size and speed of the vessels. There has been a sustained demand for ships which can be classified as a ‘new generation’ (2,200 - 2,800 lane metres length, 20 knots or more), but on the other hand almost absent for older ships, which have lower loading capacities and speeds, which seem to interest nobody.

No one could foresee that vessels in the category 1,700 - 2,000 lane metres, capable of 17-19 knots, would have the dickens of a time to find employment throughout the year. Many of these, idle for weeks on end, did occasional trips transporting military equipment or as a last resort did temporary fill-in voyages for some line-ships. The rates that they were able to get were considerably below the previous year, in the order of 30-40 % less.

The undeniable tendency of the vast majority of the main liner-operators over the last two or three years has been to order new ships or to charter-out for long-term periods (often three to five years) against these newbuildings. Gradually the delivery of these new vessels has had the knock-on effect of putting back on the market units which had previously been chartered-out. Many people anticipated a revival in the chartering market as a direct consequence of seeing these ships come back onto the market. The market’s reaction was unfortunately quite the opposite and demand remained negligible.

Often when the market is at its depths for a long period, new line projects rear their head, and newcomers start to try their hands in view of the attractive rates. Nonetheless, the repeated attempts of such initiatives have frequently fallen flat, and unfortunately such was the case this year. One should however look carefully at the development of some liner business which is dreamed up to provide an alternative to the overloaded roads. The quality of service offered, the efficiency of the ships used, and the subsequent involvement of road-hauliers in the projects, are all elements that seem essential to us to ensure their success. But in time, such new developments should come about.

The big merger between Tranfennica and Finnlines finally collapsed at the end of the year, just as it seemed on the point of being concluded. This combined force would have resulted in the largest single owner, in terms of units, within the ro-ro fleet. It is highly probable that we shall see in the coming years, as in other parts of the shipping industry, a trend towards consolidation, enabling players to benefit from large economies of scale, which is becoming indispensable in today’s competitive climate.

In total contrast to the containership market, very few new generation ro-ro vessels can be found for tramping. On the other hand, as the graph on the age structure of the current fleet shows, it strikes us as of prime importance that the pace of scrapping should be accentuated in order to get to the root of the problem. Whilst there has been a successful renewing of the fleet at the top, there is a pressing need to balance this out by cutting back some of the oldest units, which apart from age are totally obsolete both technically and commercially.

Scrappings have in fact increased in 2000, with 28 ships demolished and four others sold for conversion, totalling 275,000 dwt, compared to 10 ships and 59,000 dwt in 1999. The cable-laying market is still interested in sturdy ro-ro ships with a forward superstructure, which are excellent bases for conversion. The sale of such ships over the last two years for this purpose has at least allowed them to obtain a better price than the traditional market would have offered at the same time - namely scarcely above the scrap value.

If we exclude ro-pax ships, among the 51 ro-ro ships delivered in 1999 and 2000 (respectively 32 and 19), around 40 units were employed by their owners, and 10 were placed on long-term charters. These figures illustrate what we have previously pointed out, namely that there are precious few vessels left purely for tramping.

We do not foresee a sudden revival in the chartering market in 2001, in terms of the volume of business. However, provided that scrapping levels remain sufficiently high, owners with good quality ships should logically be able to profit from an improvement in rates, especially as the number of newbuildings to be delivered in 2001 will be equivalent to 2000 (with around 20 vessels) but far below the 1999 level (of more than 30 units).