The outlook in the car carrier sector appears to be brightening as slower fleet growth and rising demand have led to better vessel utilisation, according to shipping analysts at DNB Markets in Oslo.
“Based upon our proprietary car market model we expect only slightly increasing utilisation of the PCC fleet from 2015-2017, which should prove optimal for WWASA (Wilh. Wilhelmsen ASA) as this indicates still-healthy utilisation of its owned fleet combined with little rate pressure from tonnage providers,” said Nicolay Dyvik, Oyvind Berle and Petter Haugen, the DNB shipping analysts, in a report emailed to IHS Maritime.
Yesterday WWASA, the listed car carrier and logistics group in the Wilh. Wilhelmsen Holding group in Norway, said its net profit in 2Q15 rose to USD75 million from USD25 million a year earlier, despite a fall in revenues to USD596 million from USD682 million.
In 1H15 profit reached USD126 million compared with just USD56 million a year earlier, although revenues again decreased to USD1.21 billion from USD1.32 billion.
“The market for transportation of auto and high and heavy volumes remained competitive. The second quarter was characterised by a seasonal increase in ocean transportation volumes and improved underlying contribution from the logistics segment,” the company said.
The DNB analysts continued: “We prefer WWASA over Holding and estimate that WWASA should manage to maintain its 12% shipping margin in 2015-2017. The logistics division shows improvement and the risk of buying WWASA is reduced in our view as Glovis shares are down about 40% year to date.”
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In 2014 the global trade in cars increased by 5% after two consecutive years of decline. “On our estimates this translated into a 2% increase in transportation demand. Looking ahead and using LMCA [Automotive, the US based car industry research group] estimates for global car production, we estimate annual tonne-mile growth of 3% for the car segment for 2015-2017,” they said.
LMCA forecasts a 12% increase in car production to 10.5 million units from 2014 to 2017, of which two-thirds is expected to come from increased production in China (53% of total growth) and India (13%).
“Historically, there is a multiplier effect ranging from 1.2 to 1.6 from production growth to demand growth for seaborne transportation, but as we assume that most of the production increases from China and India is destined for the domestic markets, we choose to assume a one-to-one relationship between production growth and trade growth in our forecast horizon for 2015-2017,” the three analysts said.
“From 2015-2017, we expect steady tonne-mile demand from Korea while we expect Japan to decrease by 9%. We expect German car carrier tonne-mile demand growth of about 2% as China is becoming more and more important. German exports rose by 5% in 2014 and China was responsible for a quarter of this growth.”
“We argue that China is now the most likely destination for US car exports; in 2009 China imported 4% of US exports, but this had grown to 20% in 2014. According to UN Comtrade data, US vehicle exports increased by 24% in 2014, mostly driven by Canada and China, which together accounted for about half of the growth,” they continued, also forecasting the PCTC fleet to grow 4% this year, 2% in 2016, and 3% in 2017.
“The current orderbook is 11% of the fleet, predominantly larger vessels. We expect an average annual rate of scrapping in 2015-2017e of 1.5%. Year-to-date the PCC fleet has scrapped 16.8 k ceu or 1% on an annualised basis,” they concluded.
This post was sourced from IHS Maritime 360: View the original article here.
