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Limited Supply Throughout 2022 Bodes Well for the Dry Bulk Market’s Prospects

The dry bulk market’s fundamentals remain strongly in favor of shipowners moving forward. In its latest report, shipbroker Intermodal said that “COP26, 77 countries pledged to phase out coal by 2050 but the world’s biggest names in coal including China, India, the US and Australia were not amongst them as they refused to sign on to the plan. What we have seen so far this year is the result of the inability of global seaborne supplies to respond amid several disruptions that have been key behind the surge of coal prices to record high levels, further enhanced by record high natural gas prices and strong European demand. International thermal coal prices rallied to record high levels in mid-October, before declining heavily over the past two weeks on the back of China’s policy measures. However, although China putting a cap on domestic prices creates volatility in the market by putting traders on the sidelines, it should not be confused with demand for imports. Our analyst expects China and India to continue restocking well into Q4, and as their coal inventories are picking up albeit at a slow pace – still well below their average – possibly into Q1 2022”.

Source: Intermodal

According to Intermodal’s SnP Broker, Mr. Theodore Ntalakos, “on the supply side, the dry bulk fleet (above 20kdwt) has increased by about 330 vessels year-on-year corresponding to a growth of about 3.0% in dwt terms, while in 2020 and 2019 growth run at 3.4% and 2.5% respectively. However real fleet expansion factoring in for congestion that has tied up a significant share of the dry bulk fleet this year has been less than 2.5% and explains the supply’s contribution to the surge in freight rates so far in 2021. We expect such limited supply to sustain well into 2022, since the orderbook scheduled to be delivered for the remaining of 2021 and the next year is about 400 vessels which is less than the respective number delivered in 2020 i.e. about 500 vessels; this number does not include slippage which is expected to increase considering full shipyard slots particularly with containers. The current dry bulk orderbook remains at about 7% of the world fleet as there has been some order replenishment in 2021 with a little over than 350 vessels during this year and now there are over 300 bulk carriers expected to be delivered 2023 onwards. On the other hand, compared to the same time last year we have a little over 7% of the fleet being above 20Y old in dwt terms, compared to 6% during the same period last year”, Ntalakos said.

He added that “on the tanker segment, amid a mediocre market, the fleet grew by just over 100 vessels or below 2% almost evenly split between MR, Aframax, Suezmax and VLCC sized tankers; the LR1/Panamax sector the fleet has contracted by four vessels. Following two years of shrinking, the orderbook is currently marginally higher in dwt terms. Still the orderbook to fleet ratio is about 8.0%, while the overaged fleet of vessels over 20years old has remained stable in absolute terms representing 6.7% of the fleet in dwt terms”.

The shipbroker added that “so, in both dry and tanker segments all eyes are on demand and how the energy shortage will play out this winter; it may be easing for the time being from the measures taken by China, but consumption will definitely pick up during the next months, and with 87% chances of La Nina taking place for the 2nd winter in a raw (developing for 15 consecutive months now since August 2020 and expected to last until early Spring 2022) chances are that the energy inventories across the northern hemisphere will definitely be tested”, Ntalakos concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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