Despite a modest recovery in earnings anticipated over the next two years, the dry bulk shipping market is not expected to return to profitability until 2017, says the latest edition of the Dry Bulk Forecaster, published by global shipping consultancy Drewry.
The dry bulk market has always been sensitive to demand fluctuations and seven years ago a demand-driven peak in the market made many owners cash-rich, helping them survive the weak market that has persisted since.
While this market trough has been supply-driven, with the industry suffering several years of unprecedented oversupply, the more recent demand slow-down has added to market woes, demonstrated by the conversion of some dry bulk vessels to tankers in a desperate attempt by owners to return to profitability.
“Anaemic demand growth is here to stay, especially as the trade development in coal and iron ore into China is expected to decline further,” commented Rahul Sharan
, Drewry’s dry bulk shipping lead analyst.
“We do not expect any noticeable recovery in bulk shipping freight rates this year as the market remains severely over-tonnaged,” added Sharan.
“While we expect some improvement in earnings through 2016, this is unlikely to be sufficient for freight rates to reach breakeven. However, we anticipate that the sector will return to profitability by 2017, provided current rates of demolitions persist and ship owners refrain from placing new orders,” he said.