Dry Bulk Carriers’ Prices Up by 85% on Average Since the Start of 2021

Ship prices in the dry bulk segment seem to have inflated considerably over the past 12 months, with increases in the larger segments, in particular, not being supported by market fundamentals. In its latest weekly report, shipbroker Allied Shipbroking said that “over the past 12 months, the dry bulk market has witnessed some spectacular gains in terms of asset prices. Around this time last year, we noted that secondhand asset prices had already shown some gains but were lagging considerably compared to their respective freight rate earnings. This time around it looks as though the positive momentum noted in the secondhand market may well be getting ahead of itself”.

According to Allied’s Head of Research & Valuations , Mr. George Lazaridis, “there may well be some support for this when looking at the smaller size segments such as those of the Handysizes and Supramaxes, yet given what we have seen in the year so far in terms of freight rate performance for Capes and Panamaxes, there seems to be limited reasoning for the level of gains being made in asset prices of late, especially when taking into consideration that we have already surpassed asset price levels that were being noted during the peak in the market in 4Q21. We have seen average gains of around 85% noted in dry bulk secondhand asset prices since January 2021”.

While for the smaller size segments the gains noted have been more significant (averaging 104% for Supramaxes and 101% for Handysizes), Panamaxes and Capes have noted more modest gains (on average 74% for the former and 62% for the latter). A similar (albeit on a much much smaller scale) trend can be seen when comparing current asset prices for these size segments to those noted during the peak noted in mid-November 2021. Yet when comparing the performance in the freight market in the year thus far against what we witnessed during 2021, it would seem that the current momentum noted in the secondhand market for Panamaxes and Capesizes could be showing early signs of a market that is overheating under the excessive optimism that was generated over the past 18 months. This point may well be further supported when taking into consideration the overall uncertainty that has mounted in recent months over the state and health of the global economy and in turn global trade.

Yet despite all this, the expectation is for things to heat up further before any coolingoff period takes shape. All indications right now point towards a “hot summer” taking place (at least in its early part) for the dry bulk secondhand market. Given that in most cases and despite the fact that we are close to decade-high levels, the general consensus seems to be that we are still far away from any major excesses made and any bubble forming. Let’s hope that most will escape the hype and allow prices to remain within reason.
Nikos Roussanoglou, Hellenic Shipping News Worldwide