In the third part of our shipping market outlook series we are focusing on the dry bulk sector with Plamen Natkoff, Associate Director for Dry Bulk Commodities and Freight with Maritime Strategies International (MSI). He tells the Seatrade Maritime Podcast that the dry bulk market had to contend with negative cargo volume growth in 2022 and this impacted freight especially in the second half of the year.
You can listen to the full interview as a podcast in the player above
Coming into 2023 Natzkoff notes that there are negative PMI surveys for manufacturing activity a leading activity for industrial production, which in turn drives demand for raw materials. As a result MSI is cautious about trade growth in the near term.
“This coming on the back of 2022 when cargo volume was actually negative. So, the dry bulk market had to contend with negative cargo volume growth. The last time we saw that other than 2020 was of course 2015, which itself was obviously very poor for the dry freight market,” he says.
Trade growth prospects
Natzkoff says it is difficult to see any positive signs for trade growth in the early months of 2023 but does see prospects for trade pick-up in the second half the of year with a positive outlook for iron ore and minor bulks.
“We're generally positive on iron ore demand, we forecast around 25 to 30 million tonnes growth in iron ore flows over the year. The other sector where more positive is minor bulks, that was a sector that with a declining economy saw significant pressure during 2022. We see we see upside here for steel and related materials, fertilisers, especially forest products as well,” he says.
Port congestion
Waiting times at ports in 2021 and early 2022 help to mask poor cargo volume growth by absorbing significant portions of the fleet, however, the latter half of 2022 saw this congestion starting to unwind.
“There is an unwinding some of those ports inefficiencies, especially as it relates to port waiting times, that has started to weigh on the dry bulk freight market certainly in the last couple of months, and we expect this to continue through 2023,” he says.
Utilisation, fleet growth and freight rates
MSI’s base case forecast suggests fleet utilisation will be lower in 2023 than 2022. Natzkoff says that the fleet is set to grow by around 20m dwt even factoring in a significant level of scrapping driven by low freight rates.
“Considering the growth in the fleet, and the loss in deadweight damage requirements, we'll have a swing to the negative side of about 25 - 30 million deadweight tonnes.” That will translate into lower utilisation and therefore a lower freight rate environment. “We certainly see on an average annual basis, dry freight rates around 25 to 30%, lower year on year in 2023 than they were in 2022,” he concludes.
