Dry bulk recovery forecast by 2015

“We see a major shift in the sector next year, as demand growth once again outpaces fleet capacity additions and the oversupply in the market starts to shrink,” noted the US investment bank.

“Yet, due to the magnitude of excess supply over demand, we believe a sustained recovery in bulk freight prices will take longer to materialize,” it said.

The Baltic Dry Index (BDI) closed at 820 points on Wednesday, and it has not crossed 1,000 points since early December 2012. The index had soared to a record high of 11,793 in mid-2008 before the global financial meltdown.

“High domestic iron ore production costs in China will encourage imports, which are increasingly being sourced from farther away,” Bank of America Merrill Lynch continued. “Shipping demand should also find support on rising coal demand in China and India, improving harvests in Latin America and a cyclical recovery in minor bulks trade.”

Thailand-based investment broker Bualuang Securities projected demand for dry bulk shipping to expand by 4% this year, while net new supply of tonnage will rise by 5%. The broker is anticipating an upturn in 2014 driven by reduced capacity addition amid rising demand globally.

The net new supply of dry bulk ships is predicted to increase by 1% in 2014 compared to an average of 12% between 2009 to 2012.