Dry bulk owners enjoying a welcome bounce in earnings and asset values
its latest monthly HORIZON report, Maritime Strategies International reports a
relatively positive short-term outlook but adds that belief in a post-COVID,
stimulus-led dry bulk trade recovery only partly explains the strength of the
The retreat of COVID-related disruptions will
restore market efficiency and freight rates to better reflect underlying supply
and demand fundamentals.
bulk owners enjoying a welcome bounce in earnings and asset values should be
prepared for pressure in the second half of the year as the impact of China
stimulus wanes and port efficiency improves.
bulk markets are exhibiting significant ‘froth’ with port congestion at very
high levels and sub-cape benchmark spot earnings at levels not seen since 2010.
According to data from broker Howe Robinson, in mid-March 159 vessels were
anchored at the main grain and soybean loading ports in Brazil waiting to load
cargo for example, four times higher than the five-year average.
vessels have also been significantly impacted by port inefficiencies, as they
spend a higher proportion of their time loading and unloading cargoes via less
automated and labour-intensive means than larger vessels. Discussions with a
Handysize owner reveal a 35% increase in the number of days waiting for berth
in the Pacific for their vessels since the onset of COVID.
uptick in congestion can quickly absorb tonnage and remains a major underlying reason
behind rapid earnings growth this year, yet there have also been other
important supports to sentiment and earnings, including changing trade
patterns, large bunker price increases, strong commodity price rises and a firm
container market which has driven breakbulk cargoes from container ships into
handy bulkers,” says MSI Dry Bulk Analyst Alex-Stuart-Grumbar.
an improvement in industrial production around the world now established, the
impact of China’s stimulus-driven demand is a critical factor in the outlook
for bulker earnings. So far this year Chinese steel production is up 13% and
infrastructure investment up as much as 37%. However, the Chinese government
has started to restrict money supply to stop overheating in the construction
the first quarter bounce is a dry bulk orderbook at its lowest for decades and
marginal fleet growth will increasingly support market balances. This is
particularly true for the Handysize segment with just 86 vessels scheduled to
be delivered this year, 30% lower than five-year average.