Outlook 2006
At the beginning of 2006, the outlook for international shipping is not as firm as at the entry to 2005.
Even though a slightly higher economic activity and world trade is expected to support another strong year for international shipping, scheduled net deliveries of new capacity are likely to surpass the expected rise in demand leading to a downward pressure on freight rates.
Energy prices are expected to remain high throughout 2006.
Bulk carriers
Demand for bulk carriers is expected to continue growing but at a slower pace than during the past couple of years.
With deliveries of new vessels, estimated at about 7% of the current fleet, tonnage supply growth is forecast to outpace demand growth in 2006. Although the age profile of the fleet in general indicates a strong basis for scrapping, owners’ present financial strength combined with rate levels suggest another year of modest demolition.
Gas carriers
Employment for gas carriers is expected to remain healthy as demand for petrochemical gasses is forecast to benefit from global economic growth. Small gas carriers are also expected to be positively affected by stronger European growth and increased export availability in the Middle East.
In 2006, deliveries of new small gas carriers are expected to add about 6% to the existing capacity, and during most of 2006, trading conditions are expected to limit the incentive to scrap old tonnage. This implies a fleet growth that is expected to lead to a softening of the market balance during the second half of 2006.
Reefer vessels
Availability of modern reefer vessels is becoming ever more limited. With increased competition from container ships fitted with large numbers of reefer plugs for transportation of perishable commodities, employment prospects for older reefer vessels may deteriorate. This could lead to an increase in demolitions compared to 2005 and with the limited number of vessels on order, to a further decline in the global fleet of specialised reefer vessels.
Product tankers
Demand for product tankers started 2006 at a comparatively high level due to seasonality and the aftermath of the Hurricanes Katrina and Rita in the Gulf of Mexico. Underlying demand is expected to be supported by global economic growth and imbalances in the refining sector.
The deliveries of new product tankers will be high during 2006 and the product tanker market is expected to soften from current levels during the year, particularly during the summer since tonnage supply growth is forecast to outpace demand growth.
JL consolidated
Overall the market scenarios support yet another year of satisfactory earnings in 2006, albeit at a considerably lower level than in 2005 which also benefited from a profit from sale of vessels of USD 52.7m.
The result before tax is expected to be in the range of USD 90-95m. However, changes in activity levels, ener-gy prices and the world economic development may influence expected results.