This article was first published in the Spring/Summer 2017 issue of International Cruise & Ferry Review. All information was correct at the time of printing, but may since have changed.
For much of the shipping industry 2016 was about the worst in living memory owing to a spectacular destruction of ship values right across the board. Recovery, it is said, is conditional upon a huge increase in scrapping and aligning ship supply more realistically with demand. Owners are being urged to abstain from plunging into the newbuilding market, despite the attractive prices offered by desperate shipbuilders.
At the end of the year came the confirmation that a seven-year-old container ship had been sold for demolition, while 10 or 12-year-old vessels going the same way caused no surprise whatsoever. These ships, built in the first decade of the 21st century, and in some respects barely run-in, had seen their prospects and their value reduced to that of their dismantled components.
Why does the ferry market largely stand out from this trail of gloom and value destruction that has wreaked such havoc in the container and offshore world? A quick glance at any list of ferries operating in the European market will reveal plenty of large vessels over 30 years old that are trading successfully, including some that were first commissioned in the 1970s. How can it be worthwhile keeping these old ladies, which in comparative terms must be considered technically redundant, running?
The most obvious answer is that there remains live demand for these ships, which have retained reasonable book values throughout their long lives. If one owner declares a vessel surplus to requirements, it probably will not be on the layup berth for long before another operator will take it aboard. By and large, ferry operators are about as far from the speculative ship owner as it is possible to be, and they tend not to be pushed into ordering tonnage for which there is no immediate demand. A lively charter market allows demand to be economically tested and with ferries of all types being non-standard and thus more expensive, the decision to build anew is not taken lightly.
Owners’ willingness to hang on to what they have probably amortised may also be encouraged by the levelling out of fuel prices, which has helped to maintain ship values in the ferry sector. In addition, there are several major uncertainties about the ferry future, which tend to encourage caution and the husbanding of existing assets. Even disregarding the implications of Brexit (which ferry operators in north Europe are not) the effect of emission and other regulations makes any replacement decision doubly difficult. At the same time, a sector that has previously been able to withstand the removal of its duty-free advantages, the appearance of fixed links and other regulatory burdens, tends to demonstrate robust resilience.
While there might be questions about whether a 30-year-old container ship or bulker could make it to the scrapyard under her own steam, old freight and ro-pax ferries will have been well maintained and regularly updated to maintain their attractiveness to customers or charterers alike.
Ferries might be among the hardest worked ships afloat, but tend to operate with quality staff and shoreside assistance near at hand. Unlike many types of ships where every effort is made to extend periods between repair and out-of-service maintenance, ferries have regular scheduled refit times. Passenger ships have their public rooms regularly refreshed by specialist firms and thus provide no real indication of their age to the uninformed public. The use of multi-engine, medium-speed machinery also makes onboard maintenance perfectly feasible and ensures a high level of reliability. If you have a 30-year-old ferry that does not look her age and performs well, why would you need to prematurely replace her?
It is also evident that ferries tend to lend themselves to structural updating and conversion in a way that is rarely seen in other ship types. This enables them to trade on into mature years. A classic example was the Hyundai Searunner ro-ro, an extensive class of which was built by the South Korean shipyard in the late 1970s and 1980s.
Regarded at the time as cheap and cheerful, the Searunner ships have lasted and several of the class are still operating today with North European lines. During their long lives their roles and routes have changed and they have been lengthened, internally reconfigured, and been fitted with new access equipment, additional decks, and passenger and driver accommodation. Most ferries seem to be able to require work to facilitate interchangeability, as there is yet no standard terminal and ramp configuration. A number of ship repair yards have built up a reputation with quite dramatic conversion projects that have changed ships out of all recognition for a new service.
It could be, however, that the writing is on the wall for many of these older ladies of the ferry world. Some of the strategic uncertainties that keep old ships in operation may soon be resolved. The competitive situation may be seriously altered by environmental pressures, which act in favour of road haulage and the fixed links, to the detriment of ferry operators.
It is unlikely that fuel prices will remain at present levels, while a regulatory squeeze will come from increasing environmental demands. And while the price of scrubbers and other mitigation equipment may reduce with volume production, major investments to maintain the value of a 25-plus year ship may soon become non-viable. Then the sort of attractions like sustainability, fuel consumption and other efficiencies will surely bring these well travelled vessels to the ends of their long lives.
It is possible that like their predecessors, some will find their way to the developing world. However, sentiment, along with concerns about the unsuitability of sophisticated ships to people without the necessary skills to operate them safely, may act against them and encourage final voyages directly to demolition yards.