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Back in May, BIMCO disclosed a projected “road to recovery” for the dry bulk shipping industry. The main message back then on what the dry bulk sector must do to return to profitability was, and still is: “Scrapping ships and no new builds is the fastest road to recovery for the dry bulk market”.
Throughout the first half of the year, talk of a new dry bulk super cycle has been on many lips as commodity prices have soared to multi-year highs.
Bulk is not only about China even though it is a key driver. In this section, we have taken a closer look at the European seaborne coal markets, which is going through some interesting times right now. European coal demand has been in a slump ever since early 2009,
The dry bulk market is under immense pressure, as the retreating weight of China as the driver of the market is extensively felt. At a time when supply growth simply breaks new mind-blowing delivery records, the demand situation is pitching in a bit too. Currently, there are reports of Chinese customers in the steel industry that are refusing to honour their contract as prices drop, and stock piles are fuller than normal at a time when steel mills take their foot off the throttle following a red-hot production period in recent months.
The BIMCO Dry Bulk Cargo Network held its first meeting, where members took the opportunity to network, share and get clarification about shipper’s cargo information and declaration under the International Maritime Solid Bulk Cargoes (IMSBC) Code.
The healthy demand picture of some 6% demand growth is what keeps the dry bulkers afloat. Despite the multiple disruptions that have already taken place, we see growing demand for almost all commodities. This has certainly prevented a meltdown of freight rates. Many people expected the current doldrums already last year, but extremely strong demand growth in 2010 postponed the hardship into 2011.
Demand: There is no doubt that the main drivers in dry bulk shipping are beginning to show some muscle; China and perhaps even more so, vessel oversupply in particular in the Capesize segment, is responsible for recent weakness in rates as well as adding doubt to the future.
The BIMCO Dry Bulk Cargo Network had its first successful meeting early this year. With issues ranging from the use of proper cargo names and identifying dangerous goods to the shipment of UN 3077 cargoes under the International Maritime Solid Bulk Cargoes (IMSBC) Code, the second meeting promises to be even more engaging for owner members.
This recent lift in freight rates is certainly positive, but there is still work to be done on the supply side. A significant level of demolition activity must be maintained, and increasing focus must also be on keeping slow steaming around. Estimating a return to profitability in the dry bulk industry remains a moving target, and one that differs from one company to the next. But by projecting a course for profitability, everyone in the industry can use it as a reference.
BIMCO has today published the next in its series of reports looking at the “road to recovery” for dry bulk shipping beyond the current market difficulties. The foundation for the new report follows the conclusion of BIMCO’s previous analysis – that due to the severity of the current crisis the sector can only return to profitability in 2019 if shipowners deliver “zero supply side growth”, year on year.
