- Are we looking at the next dry bulk supercycle?
- Commodity prices have staged a comeback and are hovering around or above 2007 and 2008 levels
Throughout the first half of the year, talk of a new dry bulk super cycle has been on many lips as commodity prices have soared to multi-year highs.
Freight rates and ship values have also risen but although they exceed prices seen during most of the 2010s, they are still far below super cycle levels says an article on Marine Link.
Dry bulk Supercycle?
Commodity prices have staged a comeback and are hovering around or above 2007 and 2008 levels. This has fuelled talk of a commodity supercycle.
However, while dry bulk freight rates and ship values are currently high compared to the past 10 years they are very far from earnings seen during 2007-2008
Freight rates high but not supercycle high
Compared to the past 20 years, freight rates have been high during the first seven months of 2021, with all ship sizes averaging earnings that exceed USD 20,000 per day. However, compared to the first seven months of 2007 and 2008, the current rates are still far below.
Higher valuation, higher volume? Not quite so fast
Higher commodity prices are not the key to a super cycle in dry bulk shipping. In fact, no super cycle without the volumes. Although volumes have grown in the first half of this year, the growth hasn’t been enough to justify the talk of a supercycle.
Ship values are also far from supercycle levels
The value of dry bulk ships is also far below the last supercycle levels. A comparison of the value of a 5-year-old Capesize ship today with August 2008 shows how big the difference is. In August 2008, the ship could be traded for around USD 153 million. Today it could yield just USD 38 million.
Commodity prices are in line with the last supercycle
High commodity prices have offered the strongest evidence of a supercycle, driven by massive fiscal stimulus packages, and fuelling a recovery in demand as global economies claw their way back from the challenges of the COVID-19 pandemic.
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Source: Marine link
