Prospects for shipping in 2013 and beyond (dry bulk market)

Abstract

This paper explores the future trends of the dry bulk shipping industry within the next five years by evaluating the current market situation and driving forces. The market forces examined include developments in the world economy, trends of three major dry bulk commodities, impact on ton-miles, past and expected developments of the dry bulk demolition and deliveries, prices of newbuild and secondhand tonnages as well as ship financing.

China and India will continue to boost the future seaborne dry bulk demand. This is due to augmented raw material needs to feed the aspirations of emerging economies while facilitating the booming industrial production rates and infrastructure developments. In addition, dry bulk ton-miles will be affected by the slight interchange in importing and exporting regions. However, the prevailing oversupply has overshadowed the positive outlook for seaborne dry bulk demand.

Although demolition rates have reached record high values, it failed to overcome the heavy influx of newbuild deliveries, caused by over ordering during the boom years— this oversupply will continue to hinder market recovery for the next two years. However, shipowners can remain optimistic about outlook for the following years, which is expected to experience a sharp decline in deliveries. This is supported by the low activity in current newbuild ordering despite falling prices to pre-boom levels.

As many ship owners are operating below costs and also facing difficulties in financing ships, it is recommended for them to maintain high liquidity on hand in the current bad market. For shipowners who can afford, it is advisable to invest in newbuilds now or to acquire comparatively cheaper and smaller tonnages, which has been forecasted to possess faster recovery than bigger tonnages.