Newport Shipping forecasts revival in dry bulk segment
Ship management company Newport Shipping has predicted rising freight rates across all dry bulk carrier segments as the global economic recovery gains momentum, ending the sector’s most bearish run since the onset of the economic crisis six years ago.
According to the latest edition of Newport Shipping’s Dry Bulk Market Outlook, seaborne trade in bulk commodities is expected to pick up after almost two years of slow to moderate economic growth to almost nine percent this year, after which it will ease off slightly to an annual growth rate of about seven percent.
Harald Lone, Newport Shipping’s chairman and CEO, said: “The dry bulk markets, especially the Panamax, Supramax and Handy-size segments, have not been at the current low levels since the financial crisis in 2009.
"Strong supply growth, up 10.5 percent year-on-year for Panamax, combined with a decline in most of the major coal trades have pushed spot earnings for Panamax bulkers to about $3,000 per day, well below operating costs.
“Due to correlation and the substitution effect, falling spot rates for Panamax and declining soybean, cement, nickel ore and bauxite trades have driven down spot earrings for both Supramax and Handy-size vessels.”
However, the turning economic tide, together with a significant shift in the pace of fleet expansion, as scrapping eats into new deliveries, is driving a market rebound, said Lone.
“Percentage-wise, dry bulk supply expansion goes from 15 percent in 2011 and 14 percent in 2012 to 7.4 percent in 2013 and a mere average of 5.3 percent in 2014 and 2015, setting the stage for a dry bulk market revival.
Handy supply growth during the 2014 to 2017 period will be 20 percent, less than the total dry bulk fleet growth which is expected to be close to 30 percent,” he commented.
“Despite a slow start to the year, total dry bulk demand should rise faster in 2014 than in the past two years.”
In the latest edition of the market outlook report, Lone also spoke about the psychology of bearish sentiment as an important factor influencing freight rates and fluctuations, and stated that “crowd mentality” can trigger large scale volatility.