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Growing Demand for Shipping Bodes Well for Future, As Tonnage Supply is Kept at Moderate Levels

Shipping’s future prospects seem to justify the current optimism, as it’s reflected in the freight rate market over the past couple of months. In its latest weekly report, shipbroker Intermodal said that “for yet another time, the market seems to have its own drivers. After a very disappointing first half, the recent recovery in the shipping market in the second half of this year has buoyed optimism amongst the people in the industry. Yet if you are to ask most shipowners if they are optimistic you will get a “yes…but…” reply”.

According to Theodore Ntalakos, Intermodal’s SnP Broker, “on the dry bulk ship supply side (>20,000dwt), the world fleet has increased by 241 vessels year-on-year corresponding to a growth of about 2,4%, while one year earlier it was below 2%. Nonetheless, it’s still a moderate fleet increase versus 4.4% percent real GDP growth of the emerging market and developing economies. For example, Bangladesh has 7.3% GDP Growth in 2019 and has also secured the top position in the world in achieving the highest GDP during the last 10 years. The current dry bulk orderbook – not including slippage/cancellations – stands at 8.7% of the world fleet. Whilst there has been little order replenishment of bulk carriers in 2019, the orderbook is today merely bigger than what it was a year ago by about 50 vessels. Furthermore, we are amidst of environmental regulations coming into force, with water ballast management systems being retrofitted (or not) and the bunkers already transitioning to comply with the 2020 sulphur cap. Compared to the same time last year we have about 80 more vessels over 20years old, and all the bulk carriers older than 20 years represent 9,5% of the dry bulk fleet”.

Ntalakos added that “on the tanker segment, things aren’t less complicated. So far in 2019 there is less demolition activity, but also less new orders, while more ships have been delivered from the builders. The tanker fleet (>25,000dwt) has increased by about 3.5% led by MR tankers which increased by about 70 vessels, VLCCs followed with 55 vessels, 37 Aframaxes and just 15 Suezmaxes. The orderbook has not been replenished and is actually about 25% smaller than before, it represents about 7.7% of the trading fleet down from 10% same time last year. This rationalization of the orderbook, lays the foundation for a better future for the segment from the supply side alone”.

Meanwhile, “on the other side of the equation for both dry and wet segments, there still is a growing demand for seaborne transportation. And while previously there were production disruptions, economic concerns, as well as political reasons that combined were suppressing the market, now there seems to be another combination that allows the freight rates to improve and drive the real demand for seaborne trade. The population continues to expand, emerging countries continue to absorb shipping goods and raw materials, so – still being the most fuel efficient and environmental friendly form of commercial transport – seaborne trade will continue to grow”, Intermodal’s analyst noted.

He added that “although nobody can foresee if the current freight market is sustainable or not, the fundamentals suggest so, at least for the short term. We will continue to have supply disruptions, limited ordering and fleet expansion on the one side, and solid growth from the developing and emerging economies on the other. So, as we have many times argued that shipping is an infinite game and the objective of the players is to perpetuate the game, as we enter a new era with higher environmental awareness, it’s a good entry point for investments and the upside is there as long as shipowners are patient and avoid overreactions”, Ntalakos concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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