Owners say worst is over for dry bulk as China-led demand rebounds
Core components of the dry bulk market are rapidly turning upwards, which means the fringe parts of the sector have yet to join the upturn
LEADING dry bulk shipping companies say the worst is over for the sector as earnings and asset values rapidly rebound from four-year lows seen a month ago.
Accelerating demand for iron ore from Brazil and Australia, as well as healthy grain shipments, are the main driver for lifting daily earnings on the largest capesize ships to their highest for 2020.
“Demand seems to be picking up fairly rapidly, particularly iron ore movements,” said Hamish Norton, president of Star Bulk Carriers Corp.
“We are not seeing as much pick-up in coal but grains are going well from South America and we expect the US grain season to be good … but basically spot movements of iron ore and grains seem to be doing a lot.
“We still do not have all these fringe dry bulk trades back in working order yet … such as Japan iron ore imports, coal shipments into India and Europe fully opened up.”
Executives from Star Bulk Carriers, along with Golden Ocean Management and Genco Shipping & Trading were speaking at a virtual Marine Money event today. The event replaced the usual New York-based conference held annually in June.
Between them, the companies own more than 200 bulk carriers.
Ulrik Andersen, chief executive of Golden Ocean Management, said that while demand was driving rates higher, there was a “very positive supply situation” with the orderbook diminishing over 2021 and 2022.
Question marks over future shipping technology and regulations were keeping newbuilding orders low, helping dry bulk fundamentals, he said.
“We are finally starting to see underlying demand increase, mostly led by China,” said Genco chief executive John Wobsensmith.
“We will have Brazil lagging from a supply standpoint and logistical issues. There is still more to occur, even with China trying to import as much as they can now.”
Average cpesize time charter rates gained nearly $1,500 today to reach $14,786 daily, according to the London-based Baltic Exchange.
Rates dipped to below operating costs, as low as $2,000 in mid-May, testing levels last seen four years ago.
Over June, rates have gained three-fold on rising industrial output, mainly in China, which is responsible for more than half of the world’s steel production, which drives iron ore trade.
Coal demand was shifting from Europe to Asia and there was more electricity growth from thermal coal right now than actual production, the panel agreed.
“Even in China, there are new coal-fired power plants coming on. Vietnam has shown extensive growth last year and is slated for more growth this year and in 2021,” Mr Wobensmith said.
“As we see the coal diminish from a usage standpoint in Europe, we are still seeing growth in India, Vietnam, Philippines, Taiwan, Pakistan and Turkey, China.”