Dry Bulk Market To Face More Obstacles Moving Forward

Despite the fact that overall, the dry bulk market’s performance this year has been positive, there are still enough underlying risks which could have a negative impact in the way the market swings in the future. In its latest weekly report, shipbroker Allied Shipbroking said that “a short breath before the close of the year and we still find that the dry bulk sector has seemingly held its high hopes for the near future. This may be but a mere reflection, as it seems, of the emphatic trajectory that has taken place since the onset of this year. However, could there be a slight undertone of stress in the market? How can we describe the current prevailing sentiment in the market? Positive or mixed? Is there a clear direction? or have the recent market shifts derailed the overall positive view?”

According to Allied’s Research Analyst, Mr. Thomas Chasapis, “the below graph is an attempt to explain some of the above ideas and trends noted in the market as of late. Having used a weighted Relative Strength Index (RSI) derived from all the separate size segments (Capesize, Panamax, Supramax & Handysize) for 5- year asset price levels, 1-year period TC rates and spot indices, we see different conclusions being drawn in terms of momentum. For the spot market, the hefty bearish reversal (below the red line) halfway in 4Q21 brought a strong shift in the market and confirmed the hidden downside risks that are always prevalent. More problematic though, has been the steep negative dive taken by the period charter market as well”.

Allied’s analyst says that “at first sight, it seems rather reasonable, given this link to the spot market’s momentum. However, it also re-affirms the lack of strong confidence in terms of the forward view and the perception that the current market levels are disproportionally weighted by temporary asymmetries rather than robust long-term fundamentals. This is also the case for asset price levels. A few months ago one would argue that asset price levels lag well behind the prevailing market conditions. As shown in the graph, it seems that asset price levels are already under pressure. This could just be an increasing spread between Buyer-Seller price ideas, but even so, it clearly shows how the bullish run of 2021 has lost a fair part of its confidence rather quickly. The scope of this view is not to argue whether we are on a bullish or bearish trajectory. It is to serve just as a reminder of the challenges to be faced moving forwards. The recent increased concerns over the omicron variant will likely push for increased uncertainty to continue through a little further. Moreover, there also many unknown factors over the global economy, with questions still looming over inflation and interest rates, as well as how all this could trigger further shifts in fiscal and monetary policies sooner rather than later”, Chasapis concluded.

In its report, Allied said that the Capesize market resumed this past week in a bullish momentum, with the BCI TCA climbing higher at levels above US$40,000/day (posting a w-o-w rise of 5.1%). Interest was intense in the Atlantic, albeit it lost some steam at the end of the week. At the same time, shorter tonnage lists in the Pacific boosted premiums for owners in the region. A slowdown may be witnessed as we are reaching the year’s end, with refreshed demand being expected for the beginning of 2022”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide