Drewry’s latest “Annual Dry Bulk Market Review and Forecast –2002” explains the reasons behind the expected recovery in 4Q02.
Although 2002 is unlikely to see a sustained recovery in freight rates before the last quarter of the year this report predicts that 2003 shows great promise. The projected level of new building deliveries around 14m dwt, shows a decrease compared to 2002 and 2001. Meanwhile the number of vessels heading for the demolition beaches will continue to rise to the 6 m dwt mark by the same year. Trade forecasts are also good with most commodities showing a healthy rise as the global economy picks up and confidence returns to the sector. This is generally led by crude steel production, which is widely expected to pick up by the end of this year, as the U.S. and Japan move back into positive production. It is worth noting that Chinese steel production has been one of the few lights on the dry bulk horizon. 2002 is expected to see further increases, currently over 10 percent forecast, with growth steadying in 2003 to a more sustainable 2 to 3 percent p.a.
Freight rates are expected to start rising firmly in 4Q02 and move upwards throughout 2003 and 2004. According to Drewry, “It is clear that the next cycle in the dry bulk market is about to begin, given the depths to which the market has fallen over the last 12 months, we can only hope that this time the peak is sustained for longer. If ship owners show
restraint from that momentary thrill of a new vessel then the ever-present threat of over tonnaging might be stalled for a period.”