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Clipper: Project ships have been a learning process for us

Clipper believes that the important project market will return in 2012. The shipping company has learned its lesson and is now working on a major expansion of its fleet. Drewry agrees that multipurpose is at a turning point.

“Sometimes you have to face the truth,” says Clipper partner and CEO of Clipper Projects, Kristian Mørch, about the shipping company’s commitments to the project market, and he goes on:

“To us, the project segment has been a learning process. We started in the segment in the mid-nineties without any expertise in the field. But the ships we ordered in China turned out to be less than ideal for projects. That is why we have suffered from a generally poor market these last years, along with the fact that we haven’t had the right tonnage,” says Mørch.

He stresses, however, that the last 15 years have provided Clipper with valuable experience, which the company is now using to renew its fleet in the current newbuilding program. The shipping company has added seven new project ships within the last ten months, ships that are significantly more flexible, and thus more stable, than the previous fleet.

On the old project ships, whenever the crew wanted to switch from ordinary lifts of 35 or 40 tons to, say, 150 tons, they would have to re-rig the ship. This could take as much as six hours. On the new ships, this change can be made by pushing a button, which obviously saves a lot of port time.

The arrival of modern tonnage

In addition to the newbuilding program, Clipper’s ambitions include an expansion – and rejuvenation – of its fleet, meaning that Clipper, over the next 12-24 months, expects to get rid of the old tonnage while acquiring the equivalent in modern tonnage. “It is absolutely essential for us to have a homogenous, modern, and economic fleet,” says Kristian Mørch, adding that Clipper is currently looking into several possible options.

The project market, or multipurpose market, was also hit hard by the financial crisis in 2008 and 2009. In addition to lower activity in general, the project ships were under pressure from the container fleet, which was able to transport increasing amounts of the “awkward commodities” that the project ships had been created for. And many of the infrastructure projects vital to the project ships, such as windmill projects or power plants were halted. The rule-of-thumb in the business is that once an investment is halted, it will take 18-24 months for it to get going again. In 2008/2009, the crisis was so serious that the waiting period for multipurpose shipping companies reached 24-36 months.

Now Clipper feels that the market, after having been frozen for 2-3 years, is on its way back. One, investments are again being made in big infrastructure projects, and secondly, the skyrocketing oil price is sweet music to the ears of employees in the project segment at Clipper.

“Oil prices and projects are historically tied up. When the price of oil goes up, the project market usually follows close behind, as we are typically in countries directly related to the oil industry. The high price of oil these years is also pushing the green wave, giving us a big increase in the transportation of windmills. The volumes we have seen have been massive,” says Kristian Mørch.

Stable market in 2012

Clipper predicts a stable market in 2012, but expects that it will take another year for the revenues of the project segment to become satisfying.

Clipper has taken a new look at the segment in 2011, and have decided that Project will be one of two focus areas for Clipper, alongside Bulk.

“We have defined our main focus as tonnage of 7-20.000 dwt with a minimum of 100 tons of cranes, because these segments will provide the most flexibility for customers, and because these ships are very flexible to operate.”

“What we are good at is to employ the ships at what they were designed for, which is not just the project market. Multi purpose means that the ships can transport project cargo, break bulk, bulk, and containers, and as owners our job of course is to optimize the ships’ profits across all these commodities.”

Drewry

“We have learned our lesson: we have gotten better at finding out what the market wants, but not least at optimizing the operational side of the project market: it is very important to have the right ships and the right equipment, because the port time decides whether you can optimize your product,” concludes Kristian Mørch.

The rates of the multipurpose segment are improving, and demand in both break bulk and project cargo has strengthened, while fleet capacity is under control, says analyst company Drewry in new Multipurpose Shipping Market Review & Forecast 2012.

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