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Dry Bulk Market is Bound for a Sustainable Rebound

The dry bulk market’s fundamentals are edging towards an improvement, in favor of ship owners. In its latest weekly report, shipbroker Intermodal said that “while 2020 is finally behind us, its negative impacts are still hovering over the shipping market. That being said, it is still too early to even speculate that 2021 will be a better year, even if the bar is set too low given to “what went down” last year”.

According to Intermodal’s SnP broker, Mr. Timos Papadimitriou, “the reality is that positive signs especially for the dry bulk market were seen as early as last summer when the market was slowly showing signs of better days to come. It took some time for shipowners to assimilate the possibility that we are heading towards better days – and nobody can blame them for being sceptical – but the increase on second hand transactions is the most obvious vote of confidence”.

Papadimitriou added that ‘if we make a comparison between the number of transactions that materialized during the second half of 2019 and 2020, it is clear that despite the market challenges and uncertainty, investors’ confidence remained strong during 2H2020 with second hand deals being up by 18% compared to last year transactions with the most notable acceleration taking place during December. Of course, this is not the first time that the dry bulk transactions have experienced increased activity. What makes this period different compared to the previous time in my opinion is that it’s not only sentiment driven”.

“Dry Bulk commodity prices have recently experienced an inflection to multi-year highs, amid increased demand after the market got used to a COVID-19 reality. The weather played its part with record low temperatures which favoured coal demand but also created congestion at discharging ports, on top of China’s coal import restrictions from Australia. Adding to this mix the fact that we expect fleet growth to remain subdued in the next 2 years, it does not take much for the demand – supply balance to improve. So now we have a perfect storm and this time the storm is working for the market’s favor. It has been a while since the last time this has happened”, Papadimitriou said.

Source: Intermodal

He also mentioned that “it’s normal to expect that eventually new building contracting activity will increase but this will only start taking place once second hand values reach levels that are not sustainable. For now, second hand vessels make sense, and let’s hope that owners will not rush to NBs as they have done in the past. Not leaving sentiment out of the equation, we could also speculate that the positive effect expected by the Regional Comprehensive Economic Partnership which is expected to largely influence the container market will rub off to the dry market as well. Overall, things are looking up and if the order book stays in check the market will do more than just ok in the years to come”, Intermodal’s broker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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