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Dry bulk market faces sharp dip in Q1 2017 if scrapping doesn't increase: Precious Shipping

Dry bulk market faces sharp dip in Q1 2017 if scrapping doesn't increase: Precious Shipping
Precious Shipping managing director Khalid Hashim has warned that if scrapping of bulkers does not pick-up in Q4 the market could dip sharply in the first quarter of 2017.

In the Bangkok-headquartered shipowner’s third quarter report Hashim said, “things had not gone as well as expected on the supply side” for dry bulk with a slowing up in scrapping.

While some 14.09m dwt of bulkers were scrapped in Q1, this dropped 8.65m dwt in Q2 and for the third quarter it dropped to 3.24m dwt which he described as “a truly disappointing number”.

The result has been that while zero fleet growth had been hoped for this year, for the first nine months of the year the fleet grew 13.88m dwt or 1.77%.

“If scrapping doesn’t pick up in Q4 we think that you may see the market dipping back sharply in Q1 2017 due to the January impact on the supply side (when more ships are delivered in this one month than any other month in the year) and the expected slowdown in demand due to the approaching Chinese New Year. This is not good news for the market,” Hashim warned.

Indeed it is a market that is still underwater, if improved on earlier this year, Baltic Dry Index (BDI) peaking at 941 points on 23 September. In February this year the BDI hit an all time low of 290 points.

Precious Shipping reported a third quarter net loss of $24.75m compared to $4.9m a year earlier.

The company has cancelled all 12 newbuildings it had on order at troubled Chinese yard Sainty Marine due to delivery delays. It has commenced arbitration proceedings over 11 shipbuilding contracts with the yard including for two newbuildings delivered in 2014 to recover warranty claims.