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David K Jordan, regional director of Asia MSI

Heavily ‘front-loaded’ newbuild bulker deliveries see rebalancing from COVID-19 outbreak

Heavily ‘front-loaded’ deliveries of dry bulk newbuilds will have a chance for rebalancing to avert an oversupply market in light of the escalating outbreak of the coronavirus (COVID-19), according to Maritime Strategies International (MSI).

David K Jordan, regional director of Asia MSI, has noted the risk of surplus new ships hitting the waters particularly over the first half of this year.

“We are not talking about the newbuilds being overly large (in capacity) as they are only about 83m dwt or 10% of the existing fleet. But 70% of that are due to be delivered in 2020,” Jordan told the Seatrade Maritime News webinar on Wednesday, discussing the impact of COVID-19 on shipping.

The COVID-19 has impacted the scheduled deliveries due to severe disruptions to operations at many Chinese yards with some declaring force majeure and temporary closures.

“This is effectively rebalancing the orderbook,” Jordan said, even as Japanese and South Korean yards have not been as severely impacted as Chinese yards.

With around three quarters of the orderbook for vessels of 120,000 dwt or above at Chinese shipyards, significant slippage for capesize orderbook is inevitable with an estimated 700,000 dwt to be delivered on average per month over the next three months.

In the handysize segment, Chinese shipbuilders account for 54% by tonnage for 2020 orderbook with deliveries also heavily front-loaded, suggesting that significant slippage is also expected.

MSI revealed in its recent report that only one dry bulk vessel was delivered from China in February, out of a scheduled total of 24.

The deferred deliveries of newbuild can be good news for dry bulk as the sector should brace itself for a slump in seaborne trade.

“Prior to the global escalation of the COVID-19 outbreak, we were relatively optimistic about demand side growth over the next two years,” Jordan said.

MSI had earlier forecast a recovery in iron ore trade in 2020 and further expansion in 2021 to support cargo growth of 3.7% and 3.4% year-on-year, respectively.

This year has begun with a precipitous drop for dry bulk carrier spot earnings, with the slide that started in December 2019 accelerating through January with the COVID-19 outbreak towards the end of January.

Jordan said there is still uncertainty ahead as no one really knows when the pandemic will be over, thought it is clear that the COVID-19 outbreak will continue to disrupt both the demand and supply side of the dry bulk market this year.

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