Dry Bulk Recovering but Caution Needed Still

The dry bulk market was deemed to be in recovery but caution was still needed going forward especially in terms of newbuilding orders. This seemed to be the consensus of a panel of experts in the dry bulk industry at the Marine Money 10th Hong Kong Ship Finance Forum.

News ID: 73324

Date: 08 April 2017 - 15:59

"We have passed the worst but we came from such an incredibly low level," said Pacific Basin Shipping ceo Mats Berglund, reported by MANA correspondent.

"It's time to let the market come to us this time," he reiterated, noting that while freight rates have been at break-even levels for about a week, owners really need these rates to be sustained over the 25-year life of a ship to reasonably consider buying a new ship.

"So please have some soberness and consider that there's lingering surplus capacity out there," he implored. Berglund added that this extra capacity can come in various forms, such as a reduction of slow steaming, which is already starting to take place as rates improve.

Berglund emphasised that while there is a positive outlook on demand, the fleet is still growing and scrapping has almost stopped with the higher rates. "So we have stronger fleet growth now than we did a year ago, so be cautious; we need more patience before a sustainable recovery," he warned.

Asia Maritime Pacific ceo Mark Young concurred with Berglund on the current state of the market but also noted that it was recovering from a low base. He suggested that it would be "very, very unlikely" to see last year's market bottom of around 290 points on the BDI but did not discount falling back for some period to the around 600 points level seen at the beginning of 2017. Young however warned that it is equally uncertain whether the market will stay at current levels around 1,200 points, and ended tentatively: "Probably not."

Cargill head of ocean transport for China Lei Yang also agreed the market is on a recovery curve and as such has been taking on more long-term charters. But he expressed surprise at the pace of the recovery. Citing the widening gap in growth between China's producer price index (PPI) and consumer price index (CPI), he noted that in February the gap had widened, signalling that the domestic commodities are in short supply.