After a strong start to the year, seasonality has caught up with the dry bulk market. Along with a slow recovery in global economic activity, it looks set to be another challenging year, BIMCO reports.
The dry bulk industry has experienced an unseasonably robust start to 2021m says BIMCO, with average earnings in January being much higher than in recent years. However, at the start of February, the Capesize market saw average earnings fall steeply.
In addition, Panamax and Supramax ships have found support in agricultural exports in recent months. US soya bean exports had a very strong start to their season. Specifically, exports in the first four months reached a record high of 39.6 million tonnes.
As for the container market, it has also brought some positives for dry bulk shipping. Some commodities often transported in containers are temporarily being transported as bulk cargoes, as boxes are becoming hard to secure and expensive.
However, while tensions between the US and China have eased from the height of the trade war, a new spat between China and Australia is now affecting dry bulk shipping.
Moreover, BIMCO now expects growth in the dry bulk fleet in 2021 to be the lowest for many years, at around 2%.
Lower growth will be as a result of fewer new deliveries; some 27m DWT are expected to arrive – around half of the 48.9m DWT delivered in 2020. Last year, the dry bulk fleet grew by 3.8%. The falling number of deliveries reflects the lower orderbook which, at 51.4m DWT, is almost half that at the start of 2019
BIMCO also expects 9m DWT to be demolished this year, down from 15m DWT in 2020. So far this year, 1.7m DWT have been scrapped.
Nevertheless, in order for demolition to see a meaningful rise, the scrap value of a ship must be higher than its secondhand value.
Continuing, BIMCOA reports that stimulus packages in the rest of the world have focused more on securing the demand side of the economy – policies that benefit container shipping more than dry bulk. With the crisis still continuing and governments still focused on supporting individual consumers, infrastructure-heavy stimulus projects in many countries still appear a long way off.
Finally, BIMCO expects any recovery to be slow and vary by sector. Demands will increase at different paces, which leaves dry bulk shipping facing another tough year, despite the strong start in the opening months.
Overcapacity could once again hamper shipowners’ and operators’ ability to make a profit, especially as currently low bunker prices, which supported profits in 2020, are rising again
