“The stars seem to be aligned in favor of the dry bulk market” one could argue, as the fundamentals seem to be favoring a further rebound in rates. In its latest weekly report, shipbroker Allied Shipbroking said that “the dry bulk market has shown a remarkable recovery this year with the average earnings having increased by around 63% this year so far compared to the average earnings noted back in 2016. This strong increase has been in part a reflection on the improvement witnessed in terms of trade flows and the much better economic growth figures given by most of the major trading economies. At the same time and thanks to a considerable effort made within the industry the growth of the trading fleet had managed to remain relatively flat during 2016 and has held at a rate of just above 2% up until the start of November 2017”.


According to Allied’s George Lazaridis, Head of Market Research & Asset Valuations, “both these factors helped to bring back a sense of balance in the market, allowing for freight rates achieved by owners to recover back to a sense of normality and away from the loss-making levels witnessed back in the Spring of 2016. It is no surprise therefore that we witnessed a large surge in the price of assets and the re-emergence of new order contracting. In terms of the latter and despite the fact that new orders placed during the year so far have accounted for roughly just under 11% of the starting orderbook in 2017, the total orderbook has still managed to drop by around 31.5% during the course of the year and now accounts for just under 7% of the total trading fleet in terms of number of vessels and 9.2% in terms of total dwt capacity”.

Lazaridis added that “with 404 vessels having been delivered into active service up until the start of November, the considerably diminished activity noted in terms of ship recycling volumes has still played a vital part in keeping the overall market balance in place, with 198 vessels either retired or removed from the fleet. Under the postulation that the rate of ship recycling noted this year will continue at a similar pace during the course of 2018, given that freight rates should continue to stay relatively firm and asset prices have improved by a considerable amount, the total growth rate expectation for the fleet is likely to remain at a similar rate to what we have witnessed this year. Taking a growth rate in the fleet of just over 2% and with most expectations holding for the growth in trade to continue to hold at higher levels, this should, in theory at least, lead to a further improvement in earnings in the coming year”.


Allied’s analyst added that “despite these overall positive trends however, the difference between the two growth figures is relatively small, leading to a slow and gradual improvement in the market for the time being. At the same time the threat of possible disruptions for global trade still hold. This risk becomes ever more worrisome the colossal role played by only one country, namely China, in this market and more so when considering that China is a centrally directed market with decisions made by the government there, having an immediate and impactful effect on how the overall trade goes. For the moment it seems as though the overall movement towards higher quality imports has benefited the industry. A shift away from this current model and any decisions such as those noted back in 2015 with regards to coal could just as easily send the market back into a momentary tail spin. For the moment it looks as though we are clear from such a scenario and on the prospects of ever bigger improvements to be seen out of the major OECD economies, we may well start to see trade openness and growth witness another bloom. With sentiment in the industry at a more than three year high, 2017 has likely proved to be the market turning point we have been looking for these past couple of years”, the shipbroker concluded.

Source: Hellenic Shipping News.