Dry Bulk Market Could Be Heading Towards a Recovery

Wars and other geopolitical factors aside, the dry bulk market’s seasonality, is taking its toll in the freight market. However, it seems that from the second quarter of the year and onwards, a recovery could begin to take shape.

In its recent weekly report, shipbroker Allied said that “the dry bulk sector is undergoing a fairly difficult period in terms of freight earnings and overall momentum. On the other hand, how concerned about the current conditions can we be given that we are well within a typical seasonal slump of the market? After such an overwhelming rally the year prior, it is only logical to understand that downside risks are still present in the market, especially when coupled with seasonal effects such as that of the Chinese New Year”. At this point, we have noted that the Capesize market has taken the main brunt of this, hitting bottom levels below the US$ 10,000/day mark, while all other main size segments have remained closer to the US$ 20,000/day mark. With some small signs of a downward resistance already being noted in the spot market, what can we expect next?”

According to Allied’s Research Analyst, Mr. Thomas Chasapis, “in earlier market views we discussed the main challenges that will be faced while moving forward within a bullish market regime. At the early part of the year, after the fair tumble that was noted in the market, the spotlight for most was once again directed towards the downside risk currently present in the market. The below graph depicts this in a very clear way, especially when noting the downward resistance present during the last couple of months. Having used the Relative Strength Index (RSI) as a technical indicator for both 1-yr period charter market and 5-yr asset price levels, each being equally weighted indices from all the different dry bulk size segments, the forward sentiment in the market still shows a fair amount of durability despite the hefty pressure coming from the spot freight market”.

Allied’s analyst added that “having drawn the typical momentum signal lines (green and red), the period market remains slightly above “undervalued” territory, with a small indication of a bullish divergence being noted during the latest part of the previous month. At the same time, asset prices have moved above “overbought” levels, while holding a fairly flat curve over the past couple of months or so. The above analysis does not argue the bearish attitude of late or the potential risks in the market of a further drop in sight. It is more of an indication as to any potential of clear and strong shifts underway in the market while also understanding the different periodical ceiling and floor conditions within these”, Chasapis concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide