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Dry bulk shipping market conditions improving for owners, but hurdles remain: Bancosta

Market conditions for dry bulk shipowners have seen a slight improvement this summer due to a slowdown in the growth of the global dry bulk fleet in 2015 as well as an increase in demand since June for a number of dry commodities, Italian shipbroker Banchero Costa (Bancosta) said Thursday. While the dry bulk sector remains significantly oversupplied with vessels, an increase in vessel demolition seen in the first seven months of 2015, combined with limited ordering of new ships, “allows us to see some light at the end of the tunnel,” the broker said.

In the first seven months of the year, Bancosta said it recorded the demolition of 283 ships, totaling 21.8 million dwt, including 77 Capesize vessels, 52 Panamaxes, 49 Supramaxes and 100 Handysize vessels. Compared to the same period in 2014, this marked a 157% increase in scrapping, and was encouraged by low freight rates seen for most of the first half of 2015, the broker said.

At the same time, new vessel orders have slowed down considerably in 2015, with 183 new ships ordered by owners in January-July 2015, a 74% fall compared to the same period in 2014. However, dry bulk owners still have a couple of hurdles to overcome before they can see a balance between the supply of ships and dry bulk demand, as new vessel deliveries are still high and stronger freight rates may lead to a slowdown in demolitions, Bancosta said. In the first seven months of 2015, a total of 397 vessels were delivered to owners, including 155 Supramaxes and 77 Panamaxes, Bancosta data showed. As a result, the global dry bulk fleet is projected to grow by 2% this year, with an estimate of a 5% growth in 2016 and 2% in 2017. However, this will be well below recent years, with 2010, 2011 and 2012 having seen a year-on-year fleet growth of 17%, 14% and 11% respectively.

In terms of demand, freight rates this past summer saw an improvement, particularly for Supramaxes and Panamaxes, due in great part to a large South American grain harvest, Bancosta said. At the same time, bauxite trade bounced back as Australia, Malaysia and India ramped up production to fill a void left by an Indonesian bauxite export ban.

However, “improving rates and falling scrap prices may see the number of vessels sent for scrap decrease,” Bancosta said.
Source: Platts