- Supply/demand balance in shipping is projected to strengthen in 2024 but weaken in 2025, with supply growth estimated at 3-4% in 2024.
- Freight rates are expected to remain strong for the remainder of 2024 but may weaken in 2025 if the Red Sea conflict and Panama Canal issues are resolved.
BIMCO’s Shipping Market Overview & Outlook reports provide insights into the current and future trends across different shipping sectors, according to an article published on their website.
Supply/Demand Balance
- 2024: The balance between supply and demand is expected to strengthen. Supply is projected to grow by 3-4%, while demand is anticipated to increase by 4.5-5.5%. This positive outlook is underpinned by ongoing strong demand and high freight rates.
- 2025: The situation is projected to weaken, with supply growth slowing to 1.5-2.5% and demand potentially declining by 1-2%. This shift is influenced by expected improvements in global shipping conditions and the resolution of current conflicts.
Freight Rates
- Freight rates are forecasted to remain strong for the rest of 2024, although there might be some easing due to high inventories among importers. In 2025, freight rates are expected to weaken if conditions in the Panama Canal stabilize and the Red Sea conflict is resolved. The assumption is that ships will return to the Red Sea in 2025, rather than during the latter half of 2024, due to ongoing safety concerns and unresolved military interventions.
Market Segments
- Dry Bulk: The dry bulk market is anticipated to remain robust, supported by high demand and strong performance in the Baltic Dry Index. The rerouting of ships from the Red Sea and Panama Canal via the Cape of Good Hope has boosted tonne-mile demand, particularly for segments smaller than Capesize. The value of five-year-old second-hand assets is approaching new building prices due to the strong market conditions.
- Capesize Ships: These vessels are expected to continue performing strongly, benefiting from high demand and low fleet growth. The performance of Capesize ships contrasts with smaller segments, which might face challenges due to weaker coal and grain shipments and anticipated fleet growth.
- Smaller Segments: Smaller dry bulk segments could be negatively impacted by reduced coal and grain shipments and higher fleet growth. The expected end of disruptions in the Red Sea and Panama Canal could further affect these segments.
Risks and Challenges
- China: There are ongoing risks related to China’s economic performance. Slower-than-expected economic growth in the second quarter of 2024 suggests weaker domestic demand. Should China’s GDP growth miss the 5% target for 2024, the outlook for dry bulk demand could be worse than currently forecast. Additionally, sharp increases in iron ore and coal inventories due to high import volumes could lead to future corrections, potentially impacting import volumes negatively.
Overall, while the dry bulk market shows strength and positive trends for 2024, careful monitoring of global economic conditions and supply chain disruptions will be crucial in shaping the outlook for 2025 and beyond.
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Source: Bimco
