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New building cancellations to top 40% of current dry bulk orderbook says National Bank of Greece |
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Friday, 18 September 2009 |
 An aggressive policy regarding ship demolitions and cancellations of new building contracts could allow for a new balance in the shipping market and the return of freight rates to acceptable levels in a relatively short period of time, said National Bank of Greece (NBG) in its latest report about the shipping industry. The report highlighted the great volatility of the freight market,
which affected by the world economical crisis, slumped from the
all-time highs of June 2008, to 12-year lows by December of 2008. This
development came as a result of the drop of international demand for
shipping services – with the exception of China – as well as the
uncertainty regarding the exceptionally high number of new building
deliveries.
According to the report the size of the global
orderbook for the period 2009-2011 reached an unprecedented 63% of the
current global fleet by the end of 2008. Still, during the first
quarter of 2009, the market recovered, driven by China’s dynamic
increase in demand for raw materials and commodities, which are the
main cargoes transported by dry bulk carriers. As a result, freight
rates were increased by 600% compared to December 2008 lows, reaching
the 4,000 points mark. This meant that seaborne trade was reduced by
4.7% during the first half of the year, as opposed to initial estimates
of almost 7% on an annual basis.
During the same period (H1 2009)
new building deliveries were scarce, as a result of ship owners’
requests to delay scheduled arrivals, but also because of shipyards’
difficulty in fulfilling part of their orderbook, because of financing
problems. This development helped ease the tonnage supply pressures,
since it is estimated that only 14% of the expected deliveries during
the first six months of the year actually came through. Also, freights
rates managed to recover because the world tonnage availability dropped
by about 5%, aided by port congestions in China and the use of tankers
for storing oil at sea.
But, these factos aren’t enough to sustain
freight rates in the immediate future says NBG. It’s highly unlikely
that demand from China will be as strong as it was in first half of the
year, while a pick up in demand from other countries should their
economies begin to recover, is expected to be moderate. NBG estimated
that it will take another two years before demand for dry bulk cargoes
will stabilize, and the same applies for the tanker market as well,
while the fact that a large number of newbuildings will hit the market,
is expected to make matters even worse. This means that the dry bulk
market could end up lower than 1,500 points in the future.
But,
new building cancellations will reach about 40% of the total orderbook
sayd NBG, which means that 100 million dwt will never reach the water.
This, coupled with an estimated 70 million dwt of scrapping of older
tonnage, could allow for a gradual recovery of dry bulk usage, close to
the ten year average of 87% of available hiring days. Should this
scenario materialize, dry bulk rates will drop below 2,000 points
during 2010 and recover higher than 3,000 points during 2011, which
could be deemed as very satisfactory, should one consider the current
imbalance in the market.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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