Dry Bulk Trade Volumes Improve, But Prospects Diminish

Positive Volumes for Dry Bulk Trade, but Prospects Set to Dampen, mentions a Marine Link news source.

Dampening deadweight demand in the dry bulk market

The unwinding of supply chain inefficiencies and rising vessel orders are set to dampen positive deadweight demand in the dry bulk market, according to Maritime Strategies International (MSI).

COVID-related supply chain inefficiencies and associated port congestion have almost fully unwound and while the MSI outlook on the prospects for trade volumes this year is considered positive, growth in actual dwt demand is limited to only 0.25% year on year.

MSI’s Q3 Dry Bulk market report notes that while this quarter’s demand forecasts for 2023 is higher by one million dwt, its fleet supply estimates climb by 2.2 million dwt, leading to slight downward revisions in utilisation rates and earnings.

In line with MSI’s forecast for the relative strength in trade volumes to continue into next year, it expects vessel demand to increase by 14 million dwt in 2024. This represents an increase of 7.3 million dwt in required tonnage from the previous MSI Base Case forecast and reflects the higher trade volumes anticipated as an expected eventual recovery in both China’s and Europe’s industrial activity comes to fruition.

However, the impact on the market will be muted as MSI raises its forecast for available fleet supply by 14 million dwt year-on-year on the back of increased contracting and lower-than-expected scrapping activity.

The improved outlook expected over the medium term in MSI’s Base Case is also underpinned by a low orderbook and relatively low contracting activity, both of which are now coming under threat.

Contracting for new vessels picked up in Q2 2023 as owners continued to upgrade their fleets with modern tonnage in anticipation of increasingly stringent environmental regulations ahead. Newbuilding orders totalled 6.5 million dwt in Q2 2023, bringing total contracting in the first half of 2023 to an aggregate 14.1 million dwt.

“Given the positive direction of trade volumes in 2023, owners could be excused for feeling disappointed in the evolution of the freight market, where vessel earnings have languished,” said Plamen Natzkoff, Associate Director, Dry Bulk Commodities, MSI. “With trade volumes forecast to expand, the fact that freight rates have not responded accordingly is highly instructive to the state of underlying market balances.”

Did you subscribe to our daily newsletter?

It’s Free! Click here to Subscribe!

Source- Marine Link

• 
• 
• 
• 
• 
• 
• 
•