Home / Shipping News / Hellenic Shipping News / Dry bulk recovery will need demand growth to outpace supply, in order to materialize says shipbroker

Dry bulk recovery will need demand growth to outpace supply, in order to materialize says shipbroker

The reversal of the current balance between demand and supply will be the key for a shift of fortunes in the dry bulk shipping markets. It will take a significant change in the current equilibrium, in order for dry bulkers to return to profitability. In its latest weekly report, shipbroker Intermodal noted that “bulk carrier values are at historical low levels, therefore, painfully for many owners, we have replied to the question how deep this crisis is. It can’t go much deeper. The question now is how long this crisis will be and when should owners expect the bulk carriers to become profitable again and their assets to regain their value (or part thereof)”.

According to Mr. Theodore Ntalakos, Newbuilding / SnP Broker, “the answer to that question is ‘as soon as the demand for seaborne trade will consistently outpace the supply of vessels’. According to IMF data in 2015, global economic activity remained subdued. Growth in emerging market and developing economies (accounting for over 70 percent of global growth, and the main drivers of dry bulk shipping) declined for the fifth consecutive year, while a modest recovery continued in advanced economies. On top of that, the fleet has grown too much over the last decade and we need to see the fleet contract in order to meet the ailing demand growth”, Ntalakos noted.

He added that “looking at some data on the ship supply side, we can see that year-to-date 17.82mil tons of dwt have been delivered against 14.48mil tons of deadweight that have sent for demolition. In other words there have been fifty more deliveries than demolitions, these are mainly in the Handysize and Supramax/Ultramax segments. On paper, the fleet is still growing and the weak demand is bringing the utilization rate lower and lower. In reality, although this is temporary, the fleet has contracted since many of the new deliveries haven’t started trading yet and a number of a few hundreds of ships have been laid up”.

Ntalakos also noted that “another fact that we derive from the fleet data is how many vessels that were originally contracted for delivery in 2015 have actually been delivered and how many contracted for 2016 have been postponed to be delivered in 2017 and 2018. In January 2015 the orderbook stood at 1000 bulk carriers for delivery during 2015 whilst 617 ships have been actually delivered; an almost 40percent rate of slippage. That was obviously not enough to balance the market since the fleet grew by 2.3percent whereas the seaborne trade growth was negative. In January 2016, the orderbook for 2016 stood also at about 1000 vessels (including a number of vessels postponed from 2015) whilst today it’s about 700 vessels with only 211 deliveries so far; the difference being vessels pushed back in 2017 or 2018 where the respective orderbooks have increased accordingly, about 300 vessels”.

He concluded by noting that “looking forward, according to IMF, growth in emerging market and developing economies is projected to increase from 4 percent in 2015 — the lowest since the 2008–09 financial crisis—to 4.3 and 4.7 percent in 2016 and 2017, respectively. This means that demand will pick up over the next two years and if the supply keeps on its rationalization consistently, the answer to the “how long?” question could well be “earlier than the consensus”.

Meanwhile, in the demolition front this week, Intermodal said that “any excitement missing on the newbuilding front, the demolition market is definitely making up for. As prices continued climbing last week in the Indian subcontinent, sentiment started firming considerably, with buyers boosting competition and consequently prices even more. It is no wonder that activity levels also hit the roof, recording the best week in terms of dwt amount being reported sold for scrap since the beginning of the year. As far as bulkers alone, more than 1.5million dwt headed for scrap last week, with the Capesize segment getting the lion’s share. Owner’s of vessels of the worst hit dry bulk size so far, have certainly took advantage of firming demo prices. To put things into perspective, a Capesize owner can make $1.1-1.2mil more by selling a Cape for demo today compared to six weeks ago. Prices this week for wet tonnage were at around 150-290 $/ldt and dry units received about 130-280 $/ldt”.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

Leave a Reply

Your email address will not be published. Required fields are marked *

*

captcha

Please enter the CAPTCHA text

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping