Can Bulk Carrier Supply Cuts Restore Some Balance?

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The simplified bulk carrier deliveries and faster steps of demolition in recent years, has observed slow fleet growth of 2% in 2015, comparing to the tremendous growth of 17% in 2010.  In the interim period the fleet expansion is to slow further and dry bulk trade in the coming years is the only probable limited growth.  Is it possible whether the supply growth would be back in line with expansion in demand?

The misery in the dry bulk market motivated by weak demand and the growth in firm supply in previous years, showed bulk owners scarp over close to the record achieved in 2012.  However the deliveries remained fairly steady.  Projected ‘non-delivery’ in last year rose to 43% up from 36% in 2014, regulating delivery volumes.  By and large, these situations show the pace of fleet growth shrink to 2.4%, the slowest rates in 1999.  This slow growth aggravated by oversupply, with seaborne dry bulk trade declining by 0.1% last year.

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Bulk carrier demolition is projected to remain firm this year and the market wore the weak outlook.  A sizable volume of bulk carrier tonnage remains over 20 years.  The owners have also shown increased willingness in younger units, with the average age of scrapped bulkers falling from 32 years in 2010 and 25 years in 2015.  In the commencement of 2016, substantial quantity were scrapped and enhanced up to 77% on an annual basis and demolition is currently projected to exceed this year.

In spite of depressed market conditions and expectations of slippage and cancellation affecting deliveries, a sizable quantity is to be delivered in this year.  Also the limited ordering volumes made the order book to decrease and deliveries are also anticipated to drop next year.

The gap between bulk carrier deliveries and demolition is currently expected to remain fairly steady this year.  Still with dry bulk trade growth expected to be very partial, to restrict fleet expansion would require equivalent of deliveries lower than the current projection or demolition higher than the current forecast.

Except there are drastic shifts in supply side drifts, rather it will be very difficult to limit the fleet expansion to a closer level to bulk trade growth.  More scope is anticipated for the next year with current expansion of only 0.7% in the fleet.  However due to bulk trade underperforming, the slow pace of fleet growth expected in the short term will struggle to return the balance.

Source: Clarksons

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