Key indicators

There is encouraging development of BDI (Baltic Dry Index), reaching 1200+ as per webpage https://www.bloomberg.com/quote/BDIY:IND.

Many would ask whether it is on a path of steady recovery. In the past few years, reported elements, such as:
• falling demand from China,
• low commodity prices,
• over supply of ships and
• geopolitical uncertainties

all are depressing the market of dry cargo shipping industry. People are waiting for reversing development of those factors to bring up the confidence.

Recently there were reports of positive development:
• a coal deficit in China and elsewhere, increasing commodity prices combined with restocking,
• all time high US grain shipments, underlying seasonality and
• low fleet growth plus high scrapping units.

The equilibrium of supply and demand on tonnage may be achieved with confidence push up by following aspects:
• Commodity prices of last few year have been sliding steadily, which has led to destocking of inventories as purchasers asked themselves: Why should I buy the raw materials today if I can get it cheaper tomorrow. When shipping got a sense of commodity price increase, it would trigger an increasing path of demand. This would lead to destocking and global trade of raw materials would be higher than the underlying demand.
• High activity in petcoke, bauxite and coal came to occupy more tonnage and pushing up rates.
• lowest fleet growth in the last five years contributes to match the demand growth together with supply growth.

Economy side, there were more positive reports recently such as:
• Euro-Area Unemployment at 7-Year Low as Recovery Proceeds (http://www.hellenicshippingnews.com/euro-area-unemployment-at-7-year-low-as-recovery-proceeds/).

14 Jun 2016:-

Indicators of market conditions faced by bulk carrier sector

1) The Baltic Exchange’s main sea freight index – Baltic Dry Index shows tracking rates for ships carrying dry bulk commodities including iron ore, cement, grain, coal and fertiliser:

• Highest at 11793 in May 2008
• Lowest at 290 on 10 Feb 2016 marking the lowest level since records began in 1985, representing 2.5% the level in May 2008

2) The Baltic dry indexes for other ship sizes in 2016

BDI: Overall dry index

BCI: Capesize index (all-time low of 161 points on March 7, 2016)

BPI: Panamax index

BSI: Supramax index

BHI: Handysize index

5 Apr 2016:-

Key driving forces to re-balance the equilibrium of tonnage demand and supply

1) Scrapping as one of the main “pressure release leavers” for excess tonnage in the market:

• In Jan 2016, 61 bulkers were sold for demolition, while in Feb 2015, 62 bulkers were scrapped.

• In 2015, total of 860 ships of a combined 23m GT were reported sold for demolition. This is equivalent to 2% of the start year fleet. Bulkers accounted for 73% of tonnage recycled.

• Chinese and Greek owners accounted for 40% of global recycling in 2015, 9.6m GT in 2015.

• In 2015 Chinese owners demolished a reported 5.1m GT, 4% of their start year fleet. The Chinese government’s ‘scrap and buy’ subsidy has encouraged domestic demolition.

• Greece recycled 4.5m GT, 3% of their start year fleet in 2015. Greek owners have a bulker fleet of 89m GT, the second largest behind that of Japanese owners, and bulkers accounted for 85% of Greek demolition in 2015.

• South Korea and Japan, recycled 1.8m GT and 1m GT respectively in 2015.

• In 2015, the average age of ships demolished fell to 28 years, and 23 years in the dry bulk sector.

• With around 20% of the fleet over 15 years old this could present a large volume of demolition candidates.

2) Newbuilding cancellation:

• In Jan 2016, around 49.5% of the originally scheduled tonnage for delivery having been pushed back for later delivery dates or cancelled as an order all together. Originally there were 202 vessels schedule to be delivered during the same period.

• The current orderbook schedule dictates an average of 72 newbuildings entering service every month. But due to likely cancellation, in 2016, average final delivery rate of between 51 and 36 vessels every month.