Why Handysize shipping?
Shipping is the pillar of global trade and remains the most efficient mode of transportation for mass bulk commodities
Shipping continues to be the most cost-effective means of transporting essential commodities and accounts for 90% of all international trade by volume.
Attractive market dynamics
The Handysize Market is characterised by constrained world fleet growth and strong demand for shipping capacity due to generally improving global economic conditions and due to the nature of Handysize cargoes which serve basic population needs.
Demand is resilient and diversified
The group of cargoes which primarily make up Handysize vessel cargoes are called ‘Minor Bulks’ with demand largely driven by GDP and population growth. There is a favourable demand picture with 2.1% minor bulk growth forecast for 2022 and 2.7% for 2023 (compounding strong growth of 5.4% in 2021).
Handysize vessels are relatively small in dimension and carrying capacity amongst dry bulk vessels (a typical Handysize vessel ranges from 28,000 to 39,000 dead-weight tonnes). They are ‘Geared’ meaning that they have on-board cranes to self-load and discharge, which is particularly attractive where shoreside infrastructure is not as developed. Due to these features and their shallow draughts, Handysize vessels are able to access a far greater number of ports around the world than larger ships.
The characteristics of flexibility, versatility and port accessibility, coupled with resilient underlying demand that is typically less dependent on discretionary spending, result in a natural diversification of risk, barrier to entry and downside protection for the Handysize segment.
Supply growth at historically low levels
There is minimal net supply growth forecast at only 0.1% for 2022 for the Handysize fleet. The Handysize order book remains at a multi-decade low of 5.6% of the current fleet, with 1.4 % delivering in 2022 and 2.7% in 2023, 1.6% from 2024 onwards. This compares to 7.1% for the overall dry bulk fleet. With shipyard order books essentially full until 2024, this is expected to support charter rates.
New Handysize ordering is at its lowest in almost 20 years with an uptick in orders unlikely mainly due to reduced yard capacity, low margins for small ships, lack of financing, increase in newbuild price quotes, and lack of future-proofed designs. We believe that the industry-wide focus on environmental concerns has also led to a pull-back in capital investment in newbuild vessels.
Environmental regulations reducing supply and discouraging new ship ordering
In terms of future environmental operating parameters, the marine transportation industry is in the early developmental stages for future propulsion systems (which may include a variety of fuels) with uncertainty over future ship design to meet lower carbon emission standards. Given the long expected operating life of a vessel, we believe that regulatory and technological change may continue to constrain newbuild orders until there is a technological breakthrough which is widely applicable and commercially viable for our vessel type.