Dry bulk shipping market outlook H2 2024

In a five-part series mid-year we take stock of shipping markets in the first six months of the year and look ahead to the remainder of the 2024 with experts Maritime Strategies International (MSI).

In this second part the Seatrade Maritime Podcast talks with Plamen Natzkoff, Associate Director for Dry Bulk Commodities and Freight with MSI about the performance and outlook for the dry bulk shipping market.

You can listen to the full interview as a podcast in the player above

What has driven an improved performance for dry bulk shipping in the first half of 2024?

“The dry bulk market has had a very good first half of the year in general, but we do have to differentiate between sectors,” Natzkoff tells the Seatrade Maritime Podcast.

Larger sized vessel segments have performed better than smaller sizes and at the smallest end of the spectrum the Handysize market is up around only 20% - 25%, while rates for Supramaxes are up around 30% - 35% compared to the first half of 2023.

“The real standout performer has been, has been the Cape market that has almost doubled on what it did in the first half of last year,” he says.

The difference in performance in sectors has been driven by underlying commodity flows. For Capesizes the iron ore trade was up around 20% in the first quarter of 2024 compared to the previous year with three quarters of the increase coming from Brazil.

“So that Brazil to China, long haul route is really helping. Similarly, supporting the Capes we've had the bauxite trade out of West Africa up around 10, 11 million tons this year to date. And that, of course, is a long-haul route going to China,” Natzkoff explains.

By contrast looking at the coal trade that ships primarily in panamaxes and supramaxes that trade is down around 15 – 20 millions tonnes on the previous year.

Where is the market headed in the second half of 2024?

Typically commodity market volumes pick up in Q3 and Q4 driven by iron ore and coal, as well as grains.

“We see no reason for a break in that seasonality this year. Now, assuming that clearly that would suggest further strength in the dry bulk market through the next six months,” he forecasts.

Disruption has been a factor that has impacted all shipping markets over the last year. The Panama Canal is returning to normal transit numbers after a severe drought which should take some of the heat out the Panamax sector. The bigger question though will be the Red Sea and attacks on shipping by the Houthi.

“Away from the seasonal strength that we see going forward in some of those commodities, so much will depend on what happens to the Red Sea, which has had a tremendous impact on the dry bulk market, and especially on the Capesize segment,” Natzkoff says.

If there is not relief to this disruption continuous strength in the market should be expected for the rest of the year, although it will also be characterised by volatility.

The picture for vessel supply going forward

The stronger market has discouraged scrapping of dry bulk vessels across all sectors, as a result the fleet is getting relatively older but given the freight rates owners are incentivised to keep vessels on the water.

Improved markets have also driven secondhand prices with the benchmark for a five-year Capesize reaching around $60 million.

Higher secondhand prices have encouraged some owners to enter the newbuilding market as well. “So, if we look several years ahead, we still see the orders that have been placed recently expanding the size of the fleet,” Natzkoff says.

At the same time yards have continued to perform with around 25 million tonnes of new deliveries expected this year. Given the new orders deliveries will continue in years to come but Natzkoff says much will depend on underlying trade flows and geopolitical conflicts.