A panel of dry bulk specialists shared their views at the Marine Money Singapore 2015 conference held on Tuesday, holding a consensus that amid the oversupply of tonnage, demand growth for coal and iron ore has slowed, at least for the time being.
“The dry bulk shipping market is not looking good over the next two to three years. Rates have gone down while fleet capacity has grown. After the ‘nett off’ in each equilibrium, the best performing sector is the panamax and the worse is supramax,” commented Adrian Economakis, strategi director at VesselsValue. “But the assets have long term value. Now would be a great buying opportunity.”
John Su, ceo of Erasmus Shipinvest BV, highlighted that China, the biggest boost factor for the dry bulk market, is encountering a bottleneck in its economic growth, putting brakes on commodity imports.
In 2015 so far, Chinese coal imports have been disappointing, according to John d’Ancona, director, dry analyst, at Clarksons Platou Asia. He shared that imports to China have crashed due to its import policy, environmental legislation, support for domestic coal industry and slower industrial growth.
India, another great emerging economy, will continue to expand its coal imports but it is at the same time producing its own coal.
Indeed, coal import for India is a potential uplifting factor for the dry bulk market, noted Khalid Hashim, managing director of Precious Shipping. “India has a majority of power stations running on coal, but they rely on imported coal because coal generated in India is poor in quality and has high ash content,” he said.
Hashim added that while domestic coal “appears” cheap, imported coal is in fact cheaper if one were to factor in cleaning up the domestic coal and the distribution costs.
In steel, China’s export market remains crucial to injecting activities into the dry bulk shipping market, even as steel consumption growth has slowed, according to d’Ancona. He said that there is also a new growing ‘south-south trade’ in China, as the country invests overseas to secure its raw material needs, triggering demand for vessel tonnage.
“The forward view for the next several years is very bleak, but yes, it is a good time to buy new vessels,” he believed, adding that elderly vessels would also need to be scrapped at the same time.
Arjun Batra, group managing director at Drewry, also agreed that new vessel values are attractive at the moment, but the danger remains that it is unclear when the market would move upwards even if it is cyclical.
Hashim from Precious Shipping said: “Yes I would buy (new ships) but I would also keep some cash to fund any needs for a long term recession.”
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