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Dry bulk shipping looks bullish in Year of the Ox: MSI

Photo: Steve Halama - Unsplash Bull.jpg
A normally quiet time of the year for dry bulk shipping is seeing increased activity backed by slowing net fleet growth, signalling positive near-term earnings for the market, according to consultancy firm MSI.

Escalating recovery in demand for dry bulk commodities in countries on top of China, despite China currently celebrating Chinese New Year, has attributed to both rising consumption and restocking of raw materials. Earnings across all dry bulk segments have been firm in a period typically characterised by seasonal weakness, according to the latest MSI HORIZON Dry Bulk Monthly report.

“Aside from firming demand, dry bulk market balances continue to be supported by reduced productivity on the back of high port waiting times while anecdotally a surge in costs to ship via containers has also driven more breakbulk cargo to be moved in dry bulk carriers, box-shaped handysize tonnage in particular,” said MSI senior analyst Alex Stuart-Grumbar.

When assessed against pre-pandemic January 2020, capesize daily spot earnings in January this year were 186% higher year-on-year, panamax 104%, handymax 91% and handysize 71%. The report noted that the last time bulker freight rates increased from December to January was 2009-2010.

On the supply-side, data show that 5m dwt were delivered in January versus 1.7m dwt recycled. This compares with 6.9m dwt delivered and 1m dwt scrapped in January 2020, suggesting that the pace of fleet growth is slowing.

“MSI forecasts net fleet growth to slow by a third across the segments this year and strong demand growth bodes well for near-term earnings,” said Stuart-Grumbar.

“However, the direction will be different by segment; sub-capes will retain relatively strong levels through Q1 and Q2 before softening, whilst the capesize market will see more sustained support in the second half of this year, assuming the emerging downside risk related to Chinese steel markets is offset by the continued recovery in raw material demand by the rest of the world.”

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