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  • Writer's pictureARI Media

Drybulk to Take Off in 2017

With Q1 2017 now well behind us, it is easy to conclude that the Dry Bulk shipping industry has delivered a substantially better market than previously expected. The end of last year showed considerable improvement from the previous quarters, and we were quietly confident the trend would continue through 2017, including the usual seasonal downturn during the first quarter. With the full facts at hand, however, we can firmly say Q1 overshot projections. Market expectations have now shifted from a gradual recovery to a substantially more optimistic scenario.

Although deliveries of newbuildings have been running high and scrapping is down, the continued push for raw materials into China (underpinned by investment in infrastructure), in addition to a more optimistic undertone for the world economy has pushed the market up. Vessel values have increased to levels where resales are now on par with newbuilding prices and timecharter rates are back to a level not seen in 18 months.

The question is whether the fundamental problems are actually now behind us, and if we are on a steady one-way track back to a healthy market? Again, this is largely up to Beijing, for as long as scrapping levels remain low it will be the demand side of the equation which dictates drybulk fortunes. However, all things considered, we are cautiously optimistic that the recent upturn can be described as the ‘green shoots’ of recovery.

This year’s average market rates may end up at, or close to, the present levels, yet we have to be prepared for potentially significant volatility driven by the demand side throughout the year. For example, over the last few weeks Chinese iron ore stocks have hit an all-time high, subsequently followed by a substantial drop in iron ore prices. Hence, we could easily see a quieter period for iron ore shipping in the near-to-medium term again.

For the mid-sized bulker market to stay firm we need the support of continued coal imports into China, and likely also a better than average grain season in the Atlantic. With the market for Supramax vessels in Pacific and Indian Ocean continuing to be strong, it should not take much for the grain season to kick-start the Atlantic market properly.

This all comes with a note of caution. There are a lot of moving parts in Dry Bulk shipping, and it is always important to be prepared for the unexpected!

via HSN

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