• ITVI.USA
    13,888.570
    -404.890
    -2.8%
  • OTRI.USA
    22.100
    -0.490
    -2.2%
  • OTVI.USA
    13,862.590
    -418.870
    -2.9%
  • TLT.USA
    2.800
    0.020
    0.7%
  • TSTOPVRPM.ATLPHL
    2.480
    -0.170
    -6.4%
  • TSTOPVRPM.CHIATL
    3.070
    -0.210
    -6.4%
  • TSTOPVRPM.DALLAX
    1.370
    -0.090
    -6.2%
  • TSTOPVRPM.LAXDAL
    2.280
    -0.210
    -8.4%
  • TSTOPVRPM.PHLCHI
    1.900
    -0.070
    -3.6%
  • TSTOPVRPM.LAXSEA
    2.720
    -0.270
    -9%
  • WAIT.USA
    127.000
    0.000
    0%
  • ITVI.USA
    13,888.570
    -404.890
    -2.8%
  • OTRI.USA
    22.100
    -0.490
    -2.2%
  • OTVI.USA
    13,862.590
    -418.870
    -2.9%
  • TLT.USA
    2.800
    0.020
    0.7%
  • TSTOPVRPM.ATLPHL
    2.480
    -0.170
    -6.4%
  • TSTOPVRPM.CHIATL
    3.070
    -0.210
    -6.4%
  • TSTOPVRPM.DALLAX
    1.370
    -0.090
    -6.2%
  • TSTOPVRPM.LAXDAL
    2.280
    -0.210
    -8.4%
  • TSTOPVRPM.PHLCHI
    1.900
    -0.070
    -3.6%
  • TSTOPVRPM.LAXSEA
    2.720
    -0.270
    -9%
  • WAIT.USA
    127.000
    0.000
    0%
American Shipper

Drewry warns about dry bulk shipping outlook

Drewry warns about dry bulk shipping outlook

   “Dry bulk shipping will have to dig itself in for a long recession,” said Drewry Shipping Consultants.

   In a report released a year after the Baltic Dry Index (BDI) hit a record 11,793 on May 20, 2008, the London based consultant said “The few signs of recovery are mostly temporary while the heavy order book will weigh the sector down for several years to come.” The BDI is an index based on the cost of moving a variety of dry bulk commodities on different routes around the world.

   The BDI index fell for most of the second half of 2008, hitting 663 on Dec. 5. It has since rebounded, and was at 2,707 Thursday.

   'There are encouraging signs in the market, but these are offering temporary relief rather than the promise of sustainable recovery,' said Jaya Banik, editor of Drewry’s quarterly Dry Bulk Forecaster. She said the order book still needs to be trimmed.

   'Orders are being deferred or postponed, but not canceled in sufficient numbers. Scrapping in 2009 will exceed the last five years put together, but deliveries will still be double that figure. Even though new ordering has come to a near-complete halt, the present order book promises fleet growth at an average annual 8.7 percent for the next five years. Clearly that needs to be reduced significantly if we are to see any serious recovery prior to 2012.'

   Government stimulus packages targeting infrastructure projects are expected to increase steel demand, and there are some suggestions that this could mean as much as 200 million tons of extra demand worldwide.

   But Drewry said it has calculated that the market would need five times that amount — or an extra billion ton of dry bulk demand per year — to service all the new ships that are being built. It noted the initiatives are concentrated in Asia and in developing countries. In Europe and the United States, the focus of government aid is on projects to encourage consumer spending.

   “We expect seaborne trade in 2009 to be 6 percent lower than in 2008, as global GDP is expected to fall by 1.6 percent,” Drewry said. “This suggests that the economic effect on the global economy is multiplied four-fold in the dry bulk trade. This 'multiplier effect' is felt even more strongly when it comes to freight rates, which are down by more than 50 percent in nearly every segment of the dry bulk sector.

   “Optimism in the first quarter was encouraged by the unexpectedly high volumes of iron ore being imported by China, which imported a record 130 million tons after smaller steelmakers concluded their supply contracts,” Drewry said. “The result has been a stockpile that is approaching the record of 73.88 million tons set in September last year.

   “A similar story has happened in the case of coal, but neither increase is sustainable until China's overseas markets recover — and there is no sign of that for the time being,” the company added.

   Drewry predicts that demand levels this year would drop 11 percent, while the fleet will grow 4 percent.

   It said the difference between supply and demand would grow from 105 million dwt in 2009 to 140 million dwt in 2010 and 200 million in 2011.

   “The balance is not expected to narrow until 2014,” Drewry said. “If the still-widening balance is to be restored by reducing tonnage, the fleet would theoretically need to lose an average 35 percent per year to 2014. Unfortunately, the rate of confirmed cancellations has slowed in recent months. We fear that this is ship owners taking a very short-term view of the market after recent rises in the Baltic Dry Index.' ' Chris Dupin