The consequences of the global and domestic economic meltdown continued to make themselves felt during 2009 resulting in extremely harsh market and operating conditions for Irish shipping companies.  Domestically, the much lamented “soft landing” failed to materialise, instead the Irish economy had to endure a painful year in recession. Irish shipping firms were, like many other industries, forced to make critical cost and capacity adjustments in 2009 as the economic downturn substantially impacted on tonnage volume, shipping capacity and freight rates. Irish-based shipping companies operating in international charter markets also had to endure testing and volatile conditions during the year.  Global shipping markets were still reeling from the bursting of the biggest market bubble in its history, surpassing any of the previous boom to bust cycles of the past. 

There has been much discussion in the media recently about environment and global warming,  with a great deal of debate amongst scientists about the earth’s ability to warm up and cool down naturally. The global economy, it would appear, had also been warming up nicely since 2000, as more trade, driven by demand from rising giants in Asia, coupled with cheap money and abundant credit, added a little more fuel to the economic engine every year. While it is argued that it might take the earth thousands of years to heat up and cool down, it took the global economy a mere 18 months to go from boiling point to breaking point. During this time we witnessed market after market, followed by economy after economy appear to implode in the wake of cash and credit crisis. Shipping, as an industry that exists on the basis of derived demand, has paid a very heavy price globally for gambling that the heatwave was going to run and run. Most shipowners and operators will be happy to see the back of 2009

Against a very turbulent and difficult economic backdrop the IMDO continued to support and assist companies across our main program areas.

Focus on Irish shipping market

The change that occurred in the Irish economy last year was clearly reflected in the sharp downturn in volume activity through our ports. Underlying weakness in consumer confidence had seen import volumes plummet, particularly in cheap high volume consumables originating in Asia. The boom in the Irish economy and the surge in the housing market fuelled our appetite for foreign imports with unitised volumes doubling during the previous seven years. Our two largest trading partners, the USA and UK remained in recession for a large part of 2009, which put further pressure on our export volumes in an already challenging global market.

Our initial estimates for the full year in 2009 point to severe volume corrections across all five key market segments: lo/o , ro/ro ,liquid, dry and break bulk. After the record market highs in 2007 each market segment recorded a 36 month volume low at varying points in 2009. The lo/lo and ro/ro markets appear to have declined more or less in line with our forecast of approximately 23% and 15% respectively. The deterioration in bulk volumes was far more severe than projected, with dry bulk volumes down 29%, Tanker volumes declining by 22% and breakbulk by a staggering 48%, the latter being largely attributed to the demise of residential construction demand.  A noticeable element across most markets last year, which further suppressed domestic demand, was that many large industrial importers and wholesalers were running down inventory levels to: just enough, or sustainable levels. As trade finance and credit started to dissolve, many companies were clearly focused on reducing exposure to stock and creating as much liquidity and cashflow as possible, while also reducing their exposure to trade debtors. Small upward adjustments in import volumes were notable in the 3rd quarter which was partly attributed to some replenishment of stock inventories coupled with improved optimism in consumer confidence ahead of the Christmas period. Laden Irish export volumes also showed some signs of resilience during the 3rd and 4th quarters. Overall most markets appeared to bottom out during 2009 with some marginal volume recovery notable, however the overall correction in total volumes shipped has been quite severe.

Many Irish operators readjusted their routes and capacity in order to maintain their service levels for customers while at the same time reduce their operating overheads.  We estimate that about 12 lo/lo vessels were taken out of the market to cater for the fall off in demand. There was also a notable increase in vessel sharing arrangements. Despite the difficult market conditions, no operator exited the Irish market in 2008/2009, while in the ro/ro sector the number of vessels and operators actually increased. There was also some noticeable relocation of services between Irish ports by some operators in the latter part of the year.

The IMDO will publish a full analysis of 2009 trends and developments in the Irish and global shipping markets in April this year, with its 7th Annual Irish Maritime Transport Economist bulletin.

The office actively monitored developments in of the European Commission’s Marco Polo and Motorways programs throughout the year. The office has established extensive contacts with the DG Tren (Directorate for Transport and Energy) and with the EACI (Excutive Agency which administers the program) while also maintaining contact with the other European Member States respresentatives. In total the Office is currently supporting twelve Irish companies, ports and organisations with potential program applications.

Focus on Business Development.

Our focus from a development perspective in 2009 was to work closely with our Irish-based owners and to maintain regular dialogue on current issues of concern to them. Internationally we adapted a more passive approach to seeking inward investment as many owners struggled to deal with what lay ahead of them in their respective markets.

We estimate that there were 232 vessels owned managed and operated by Irish based shipping companies at the end of 2009. After previous record investments announced by Irish interests in 2007-2008 there was significantly less activity in the newbuilding market last year by Irish owners. We estimate that six new vessels, previously contracted, were delivered over the course of the year. However several other owners remained active in the market during the year with some notable disposals and acquisitions taking place. At the time of writing we are pleased to note that despite the carnage that had manifested itself globally, all Irish companies that began 2009 are continuing to trade and operate fleets in 2010.

It is estimated by Clarkson’ research that during the “000’s”, more than $690 billion in freight charter earnings were generated by 11,000 merchant ships in spot and time charter markets. Asset values soared, shipbuilding yards were bursting at the seams and order books full for 3 years in advance. However 2009 was the “annus horribulus” for many owners and operators, in particular container and dry bulk operators. Charter rates collapsed, assest values halved , capacity outstripped global demand, layups and scrapping were accelerated. Previously impervious container giants now find themselves in the peculiar situation of depending on government backed bail outs and bond schemes to simply survive. 2010 is likely to see more casualties with the less efficient companies being replaced by more efficient and less indebted companies.

The year ended with the announcement by US Nasdaq listed  TBS Group of its intention to establish operations in Ireland in 2010. We are also optimistic that while the global market looks to rebuild itself this year that further new foreign direct opportunities will continue to emerge. We are optimistic that these will provide Ireland with the opportunity to continue to expand its maritime cluster while also creating new higher calibre service-based employment.

Market Publications and Events

A core aspect of the Office’s day to day role is our fundamental/technical analysis of Irish ports and shipping traffic and reporting to the Department of Transport  The Office published comprehensive industry analysis by sector and segment last year. The data was widely published and used as a reference source in wider publications and media journals during 2009.  In April last year the office published its 6th annual Irish Maritime Transport Economist which was sponsored this year by Matheson Ormsby Prentice. We hosted two industry briefings in Dublin and Belfast on the 1st and 2nd April 2009, attended by 120 industry executives representing shipping owners, operators, foreign owners and operators, shipping law firms, ship finance, agents and freight forwarders.

We published 11 separate European shipping reviews between Ireland and its major foreign markets during the course of the year. The office regularly uses its market information to provide route and country information to companies seeking to establish or expand shipping services to or from Ireland.

In June we co-organised the 2nd European Shortsea Congress which was held in Liverpool and attended by over 150 key industry delegates.  We are delighted that the European Shortsea Congress returns to Ireland on the 29th and 30th of June to be held at Dublin Castle. The office hosted a Shipping Finance Industry briefing in December which was oversubscribed and plans to host a similar industry event during 2010.

The office continued our long standing support of the “Irish Exporters Shortsea Shipping Award”, which was won this year for the 2nd time by the Doyle Shipping Group. We also continued our strategic marketing support for Cruise Ireland. We made several key note presentations during the year, most notable the inaugural John De Courcy Ireland Paper for the Chartered Institute of Transport & Logistics.

Traffic via IMDO.ie increased by 15%. The shipping e-zine series continued to be popular with visitors to IMDO.ie.. As a result of our promotional and redevelopment efforts traffic through our web based e-platforms increased by more than 20% in 2008, with over 1.2 million hits and 150,000 unique visitors for the year.

Supporting Education Development.

The IMDO manages the government’s Irish Seafarer Educational Assistance Scheme (ISEAS). In 2009, more than 93 students and 11 companies benefited from seagoing training payments and company support. We also provided grant aid to 27 seafarers that enabled them to achieve higher certificates of professional competency and training. In 2009 we supported a pilot program run by the NMCI to train former fishermen to achieve conversation tickets to work in the merchant marine sector. We are also pleased to advise that based on the success of this scheme we will be supporting another larger program in 2010. We estimate that over the last five years 22% of all Irish seafarers benefited from training supports funded by the IMDO.   The office is currently engaged in a review of the current ISEAS scheme which we expect to complete during the 1st half of 2010.

The office continues to provide strategic funding to support the program, NMCI Services, which made some solid progress last year, has launched a full commercial program of new training in 2010.

The IMDO continued to provide funding and support to the Institute of Chartered Shipbrokers (ICS) lecture program which are held at DCU in Dublin. We are delighted that a record number of students sat and passed examinations in 2009. The office also sponsors the maritime student of the year awards with both the Institute of Chartered Shipbrokers and also the Chartered Institute of Transport and Logistics.

The Follow the Fleet program had its most successful year ever with just under 500 schools subscribed, with a potential outreach of 24,000 primary school children. In October we launched a FTF competition which we are delighted has been sponsored by Transas Ireland. The competition which is being judged by RTE’s Mr Tom McSweeney closes on the 5th February 2010.

Outlook

Our outlook for 2010 indicates another testing year for Irish based shipping operators. While we expect less volume erosion this year, underlying issues of capacity and intense price competition will continue to create tough market conditions.  There already appear to be some signs of more positive activity in the Global shipping market which we are optimistic will provide good opportunities for Irish companies while also creating additional potential new investments by foreign companies in Ireland.  An improvement in the wider global economy is likely to have a positive impact on the fortunes of the Irish economy this year.

On behalf of the office I would like to take this opportunity to wish you a successful 2010.

Yours sincerely

Glenn Murphy
Director
Irish Maritime Development Office.
IMDO,

www.imdo.ie

The Irish Maritime Development Office of the Marine Institute is the statutory development body for the Irish shipping services sector.

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