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With just 12.8m dwt scrapped this year dry bulk shipowners 'not helping their own cause'

Dry bulk shipowners are not helping their own cause by a failure to scrap vessels, which will lead to an “extremely volatile” market recovery warns Precious Shipping.

In its third quarter results Precious Shipping noted that demand had grown, as could be seen from the cargo numbers from China, with the Baltic Dry Index (BDI) rising to 1,356 points on 29 September. However, when it comes to vessel supply Precious Shipping md Khalid Hashim warned: “net increase in supply has exceeded our most pessimistic expectations at 21.64m dwt easily surpassing the entire net supply increase of 18.51m dwt in all of 2016!”

On the scrapping front, which along with newbuilding orders has been seen as key to the health of the dry bulk market by Bimco, just 12.8m dwt had been scrapped by the end of Q3 this year compared to 25.98m dwt a year earlier. Overall net fleet growth in the first nine months of this year has been 2.7%.

“If scrapping doesn’t accelerate, the BDI will continue to fluctuate sharply, solely dependent on what the demand side does. In other words, shipowners are not helping their cause by not scrapping ships, making the recovery in 2018 to 2020 slower, extremely volatile, and totally dependent on demand continuing to outperform,” Hashim warned.

Although the market improved in Q3 this year with the BDI averaged 1,137 points in Q3 this year Precious Shipping remained in the red, although losses narrowed. The shipowner reported a net loss of $5.23m in Q3 2017 compared to a net loss of $24.75m in the same period a year earlier.

“Overall, despite challenging market conditions, the dry bulk market is in better shape than it was in 2016 and there is reason for optimism,” Hashim added.

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