The value of bulk carriers has seen a significant decline, with prices dropping by up to 18% since their peak in mid-2024. This downturn is particularly evident in the Capesize segment, which had previously demonstrated strong market performance, reports Lloyd’s List.
Drop in Value
Values of most bulk carrier classes have dropped significantly from their mid-2024 highs, with declines of up to 20%. Even Capesize units, which maintained strong values throughout most of last year, are now experiencing a downward trend.
Eirini Diamantara, an analyst at Xclusiv Shipbrokers, attributed this decline to the significant drop in dry bulk freight rates across all vessel segments since late September 2024.
Diamantara highlighted that while the Capesize 5TC Average decreased by 56%, the Kamsarmax 5TC Average lost 41%, and the Ultramax 11 TC Average declined by 39% since the beginning of the fourth quarter.
She noted that smaller segments, such as Handysize vessels, which operate on shorter routes and handle a broader variety of cargoes, have experienced more stable demand and consequently, their asset values have remained relatively firmer compared to larger tonnage. The decline in vessel values is expected to lead to an increase in the sale of older tonnage for recycling, which has been minimal in the past two years.
Eirini Diamantara explained that prolonged periods of low freight rates significantly impact the profitability of older vessels. Faced with declining revenues, owners may find it more economically viable to scrap these vessels rather than continue operating at a loss.
Diamantara also noted that the aging of the bulk carrier fleet, a consequence of low recycling volumes since 2022, exacerbates this trend. Currently, approximately 16% of the active bulk carrier fleet is 20 years or older, a significant increase from 14% in the previous year. This growing segment of older vessels is increasingly susceptible to scrapping due to declining profitability.
Market Sentiment
In 2024, 540 new bulk carrier vessels were added to the fleet, while only 70 were recycled. This year, an estimated 590 new buildings are expected to enter the market. With dry bulk freight rates expected to remain subdued until after the Chinese New Year, vessel values are likely to remain under pressure. Despite the challenging market conditions, brokers anticipate an increase in secondhand bulker purchases during the first quarter.
Recent sales include the 2012-built Kamsarmax Pan Clover, sold by Pan Ocean to undisclosed buyers for circa $16 million. The 2002-built panamax Alpha Melody was sold bythe Kanellakis Group to Chinese buyers for $6.6 million, reflecting the impact of required special surveys on vessel value. In the supramax segment, DryLog sold the 2012-built Jasmine to Indonesian buyers for $17.5 million. The 2011-built ice-class Hongsheng 7 was sold to undisclosed buyers for $6.4 million.
Diamantara noted that while the outlook for the Capesize bulk carrier market after the Chinese New Year remains uncertain, market sentiment for China’s iron ore and coal imports is generally positive.
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Source: Lloyd’s List
