A combination of solid demolition activity and slow steaming will be the key for a sustainable recovery in the dry bulk market, from 2018 onwards. This was among the key conclusions from Mr. Peter Sand, BIMCO’s Chief Shipping Analyst, during his presentation in the recent INTERCEM Shipping Forum 2018, held in Athens, Greece. The Baltic Dry Index (BDI) has recovered well since the second half of 2017 and 2018 could be the most crucial year in the dry bulk market’s recovery.
According to BIMCO’s Chief Shipping Analyst the dry bulk shipping industry is in for an interesting year. During the fourth quarter of 2017, most of the shipping companies’ were profitable. Amid this positive trend, BIMCO has adopted a cautiously optimistic mood. The path to a full recovery can easily be ruined if owners act recklessly, as has been the case so many times in the past. “It all comes down to human nature. While every ship owner knows what’s good for the industry as a whole, the go on and do what’s good for them personally, because this serves their interests”, Sand noted.
He added that market fundamentals are now positive thanks to China’s demand in 2017, which is also expected to continue in 2018. We’re expecting a 1% net fleet growth this year or 8 million dwt of tonnage (if handled with care), but this will be valid only if 10 million dwt of tonnage is sold for demolition over the course of the year. In fact, if demolition feel short by 4 million dwt, fleet growth will jump to 1.5%.
From a demand point of view, according to BIMCO, China is all that matters for 2018, as the rest of the world will either import a steady amount of dry bulk commodities, or will slow down its imports. In fact, world trade growth is expected to drop from 4.2% in 2017, to 4% in 2017. The shipping industry’s challenge is to understand that this is as good as it gets, as for the years after 2018, world trade growth isn’t expected to be more than 2% on an annual basis.
As a result, “it’s important that the industry keeps slow steaming to safeguard the recovery process. If not, then fleet growth can easily rise from just 1% to closer to 5%. In fact, if ship owners adhere to this, then 2018 can be the year that the dry bulk industry returns to full profitability”, he said. However, Sand warned that the first half of the year will be bumpy, as demand growth can actually turn to be slower that the equivalent period of the year before.
According to BIMCO, 2019 will expectedly mark the balancing between demand and supply, meaning that freight rates are expected to be stable. Next year, net fleet growth is predicted to be at around 2%. utilization rate was 71% in 2017, before rising to 72% in 2018, where it’s expected to remain in 2019 as well.
INTERCEM Shipping Forum is the only dedicated event for the cement and clinker shipping community, where dedicated professionals meet, network and discuss the latest developments within the Dry Bulk Market and the cement trading.
Source: Hellenic Shipping News.