It is predicted that global seaborne dry bulk trade will witness around 2.6% growth in this year, Moreover, the tone mile growth will be 3.4 %.
During the recent years, the dry bulk market has experienced a tremendous forward leap. The strong iron ore and grain trade has brought about a growth in time charter rates. Due to the economic development in European and Asian countries, the steel production will be increased. Therefore, a firmer iron ore trade will be predicted.
On one hand, strong industrial production and the other hand the desirable weather for construction activities will result in an increase for steel demand as well.
Based on this, the demand for iron ore and coke coal will strengthen. As we approach to summer season, the demand for electricity in Asia will increased. High electricity consumption will be a main driver for importing thermal coal in China, South Korea and India. According to Clarcksons , Global seaborne coking coal trade is currently projected to grow 3% to 265mt in 2018, against a backdrop of improved global economic trends and industrial production in a number of key regions. Chinese seaborne steam coal imports are currently projected to expand by around 1% to around 176mt in full year 2018.
In the first three months of this year, importing iron ore reached 271 million tons, which showed a stable trend in comparison with the same period in the last year.
In 2018, China’s seaborne imports of iron ore are expected to amount to around 1.095 billion tons, which will indicate a 4-percent rise compared to the last year. In total, it is predicted that global seaborne iron ore trade will reach 1.520 billion tons in this year, which shows 3- percent ascent in comparison with the last year. In Q1-2018, China produced 5.4% more crude steel than in Q1-2017. Growing production by 10.8 million tonnes for the quarter.
This three-months growth compares to one month of production by the world’s second largest producer, India, at 9.3 million tonnes. There is also a positive and bright outlook towards the minor bulk trade commodities. Clarksons predicted that Global seaborne minor bulk trade is currently to expand by 3% to around 1,975mt in 2018. In March 2018, the delivery market remained relatively stable. It is prognosticated that lower level of newbuilt deliveries will continue.
The released statistics also show that the demolition market was not active. So that, just five vessels were sold for demolition in March, A figure which was one fifth in comparison with the same period in the last year.
A positive outlook of the dry bulk charter market kept scrapping activity scarce in April as well. In this month only one was Superamax was sold for scrapping. However, on the delivery side, total 20 vessels were joined the fleet in April. In the first quarter of this year, the average demolition age of bulkers has increased from 25 years in 2017 to 29 years. Supramax market witnessed the highest increase of average demolition age. So that, the average demolition age reached to 31 years in the first quarter, while the average was 22 years in the last year.
In addition, the average demolition age of Panamax bulkers represented a five-years increase. On one hand, the delivery was low and on the other hand, the fleet growth experienced a in many provinces in China, capsize time charter market continued a downward trend in March 2018, Baltic Capesize Index (BCI) fallen to 2.100, which was the lowest level since August 2017. However, it reached 2,251 by end-April. This rally continued in May too. Firm iron ore and coal trades will provide ample employment opportunities for these vessels.
In April 2018, Panamax charter rates moved in an opposite direction to Capesizes and remained under pressure throughout the month. The BPI (Baltic Panamax Index) declined by 15% in comparison with March. The strong grains trade will strengthen employment opportunities for Panamax vessels. Importing grains from Asian countries such as Indonesia and Bangladesh and Middle East countries such as Saudi Arabia will be remained in high level. Strong wheat harvest in Russia will increase employment opportunities for Panamax vessels as well.
Clarksons suggested that based on the initial studies the global wheat and coarse grain trade to grow by 1% toaround 366mt in the 2018/19 crop year, following projected growth of 2% in 2017/18. While the market of minor bulk commodities and grains is favorable, it is expected that Panamax time charter rate will be remained strong. Supramax bulkers represented a stable market in April 2018. The BSI (Baltic Supramax Index) moving in between1, 013 and 1,067 points.
Moreover in May, moderate trend. In a nutshell, it is expected that we will witness a positive outlook for dry bulk trade in the coming months. This positive outlook for dry bulk market has resulted in a downward trend in the demolition market, in other words, the ship owners are optimistic about an increase in freight rate, so, they prefer to be patient and do not send their vessels to the yards.
In the first three months of this year, 16 Capesize vessels with a combined capacity of 3.6Mdwt were joined to the global fleet. In the mention period, the newbuilding order of seven vessels and the demolition of 24 Capesize vessels were also recoded. From January–March 2018, 17 Panamax vessels with a combined capacity of 1.4Mdwt were delivered.
Moreover, the newbuilding order of nine vessels and the demolition of two Panamax vessels were reported in the mentioned period. In the first three months of this year, 35 Handymax vessels with a combined capacity of 2.1 Mdwt and 20 handysize vessels with a combined capacity of 0.7 Mdwt were joined to the global fleet.
In the mentioned period, the newbuilding order of six and the demolition of five Handysize vessels were reported, moreover, the newbuilding order of five and the demolition of five Handymax vessels were reported. Time charter rates Despite the end of Chinese New Year holiday and lifting the sanctions on steel production charter rates experience charter rates experienced a modest increase.
It is worth noting that High aluminium consumption in China will provide an impetus to bauxite trade. Increasing Chinese imports of barley and bauxite will increase employment opportunities for Supramaxes. In addition, strong Brazilian soybean supply will also benefit Supramaxes. On the supply side, it is expected that Supramax fleet to continue expanding moderately because of weak demolition activity. Due to a positive charter rate outlook, it is not predicted demolitions to increase much over the next couple of months. Fleet Continues to expanded In April, the dry bulk fleet reached 826 mdwt which indicated 0.3% increase compared to March. Inactive demolition market and relatively higher deliveries will increase the supply further.
However, supply growth will still be below growth in demand. Alongside the fleet, the orderbook also expanded moderately as newbuild activity improved. For the first four and a half months of 2018, the dry bulk fleet grew by 10.2 million DWT net, equal to 1.2%. 12.1 million DWT was delivered while as little as 1.7 million DWT was sold for breaker’s yards. As the outlook for dry bulk charter rates is optimistic, the second-hand market remained interesting for ship owners.
In April 2018, total 63 vessels exchanged hands, which is almost double the number compared with March 2018. Peter Sand, Chief Shipping Analyst at BIMCO says: the improved fundamentals during 2017 are clearly seen in the freight rate levels during the first four months of 2018. Freight rates for Handysize, Supramax and Panamax went up by 25-27% as compared to the same period of last year. All three sectors moved from lossmaking average earnings in the full year of 2017 to a profitable level in first four months of 2018. Meanwhile, capesize freight rates improved by only 5% as compared to the same period last year, and stayed within loss-making territory at USD 12,660 per day, needing at least USD 15,000 per day on industry average to cover all costs. Total seaborne iron ore exports were estimated down by 11%, a weak level.
That fact clearly affected the performance of capesize freight rates, that took a deep dive during March to hit USD 7,051 per day on 5 April, before bouncing back in the second half of April reaching USD 18,192 on the 25th. He added: Most interesting, only 9.2 million DWT of new capacity was ordered in the first four months.
This is an extraordinary and positive development – and one that was not expected either. The improving freight market conditions that we saw in 2017, meant that a higher level of ordering returned, after a year and a half of very low activity. As the freight market continues to improve, a continuance of ordering is expected. Whereas the low level of newbuilding orders is consistent with being on the road to recovery, the low level of demolition activity is not.
Dry bulk demolition during the first four months was down by 73% compared to last year. Peter Sand also predicted: the dry bulk shipping industry remains on the road to recovery, as demand continues to keep its nose just ahead of fleet growth, while scrapping and ordering remains subdued. What could upset the recovery is the looming trade war between the US and China that has caused a lot of commotion already, including within the dry bulk shipping industry. Soya beans are at the centre of attention as also covered by BIMCO, here. Even though, it isn’t officially a trade war yet – the uncertainty it creates amongst shipping industry participants is very real.