In terms of the dry bulk market’s full recovery, a lot hinges on the pace of newbuilding ordering activity, with many analysts fearing that a boom in fleet growth will set the industry on the wrong foot again. Is this the case though? In its latest weekly report, shipbroker Allied Shipbroking noted that “there has been considerable amount of concern expressed over the past couple of weeks with regards to the increasing level of new ordering being seen, with many now fearful of a repeat of what was witnessed back in the periods 2013-2015 and 2010-2011 which led to the extensive swelling in the orderbook and the eventual glut in supply. Yet despite the recent increases in new ordering activity, the levels are still holding fairly low.
According to Allied’s George Lazaridis, Head of Research & Valuations, “it’s indicative to point out that during the second half of 2017, the total orderbook was still in decline, with the total number of vessels on order having decreased by 2.9% in that six-month period. At the same time, during the month of January we have seen a further decrease in the overall orderbook of dry bulkers by 4.52%, with the only exception amongst the different size segment being that of Capes, which witnessed a increase of 1.13%. What further boost confidence, is that the current developments in both the orderbook and in-service fleet are still holding at manageable levels which are in tune with market requirements, given that even if we were to see all of the 340 vessels scheduled for delivery during the next 11 months being delivered on time and we were to see no vessels being scrapped of other removals, we would still be looking at a total fleet increase of 3.8% for the whole of 2018”.
Lazaridis added that “when taking this against the 2.18% increase noted last year, an absolute maximum fleet growth of 3.8% seems to be a figure that we can fairly comfortably cope with. Of course, one would argue that the real issue being brought on by the new ordering splurge will be an inflated delivery schedule for 2H2019 and 2020. Yet, even this seems to be missing the mark for now, with the delivery schedule for both these years still looking to be relatively “light” compared to the total deliveries of 2017 and the scheduled deliveries for 2018”.
Allied’s analyst added that “what makes for even more promising prospects moving forward is when placing these figures against the latest commodities cycle and the accelerating global growth being noted. It is no secret that all the top mining executives and investors will be in the best of moods during the industry’s biggest annual gathering this week in Cape Town. The recent rally in the price of raw materials, driven by an increase in global appetite, has pushed prices to their highest level in over three years, while this has le& for a considerable improvement in both cash position and profitability for most of these companies”.
“What is more of interest is however their confidence in the markets forward growth prospects, with most feeling that we have started to ride this upward cycle and 2018 should easily outperform last year’s figures. When taking in the resulting potential freight market balance that may result from both these two sides, it is easy to see why most Dry Bulk shipowners have gained in confidence over the past 12 months and why we have seen new order ac!vity resume even when most have a clear memory of the harm excesses in the newbuilding market could bring. That is not to say that a word of caution is misplaced and that we should once again exceed what can be considered reasonable and logical in terms of new ordering activity. There is a sense however that they days of new vessel design marketing gimmicks and a heavy bias towards the newbuilding route by large financiers are now well behind us. Let’s hope that this stays the case as we slowly move forward into better markets and earnings”, Lazaridis concluded.
Source: Hellenic Shipping News.