Marine Link
Thursday, December 8, 2016

Miserable Start for Dry Bulk Shipping

January 23, 2016

  • Graphics: BIMCO
  • Graphics: BIMCO
  • Graphics: BIMCO Graphics: BIMCO
  • Graphics: BIMCO Graphics: BIMCO

 The global production of steel dropped in 2015 compared to 2014, to a larger extent outside China, as China exported its surplus of steel to destinations across the globe; it is too complex to single out whether this is positive or negative for the seaborne dry bulk transport demand, says BIMCO.

 
Going forward, the Chinese steel industry is set to grow its global market share, currently at 50%. Depending on domestic steel consumption in China, use of domestically mined iron ore and profitability in the steel industry, the dry bulk market will be impacted. 
 
Chinese steel prices have risen since mid-December and currently, sit at the highest level since October 2015. International iron ore prices could slide further during 2016 as supply exceeds demand.
 
Since August 2015, dry bulk freight rates have continuously been eroded by deteriorating market conditions. As of 11 January 2016, daily freight rates ranged from USD 3,361 per day for a panamax ship to USD 4,416 per day for a supramax.
 
Despite these record numbers of imported commodities, dry bulk freight rates remain very low. This demonstrates the serious problem of the current market conditions for dry bulk shipping.
 
For the coming months: January-April, BIMCO expects transported volumes to diminish as they traditionally do from the fourth quarter to the first. This increases a fundamental imbalance as the delivery of new ships in recent years has followed the opposite pattern. 
 
That is more new ships are being delivered early in a new year rather than late in the year just about to end, achieving the newest “year of built” for the record. As we move into the second quarter the downward pressure should ease somewhat. 
 
BIMCO remains worried about the sustainability of freight rates in 2016. The demand side seems unable to buoy profits as both Chinese and Indian growth cools off and the rest of the world is still importing smaller volumes than before the financial crisis of 2008. 
 
A new record of shipbreaking volumes in 2016 could limit fleet growth to just 10 million DWT, so in fact “all we need” is an increase in transported volumes to around 60 million tons to balance out the inflow. As little as this may seem, growing from a base of 4,700 million tons – it can prove to be a high bar to jump before we start eating into the significant oversupply of ships.
 


 
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