US-listed Greek shipowners suggest near-term supply constraints due to geopolitical developments, coupled with the long-term effects of upcoming environmental regulations, paint a positive outlook for the dry bulk market.
Charter rates
Charter rates climbed during Q1 2024 – a seasonally weak period for the sector – driven by restrictions at the Panama and Suez Canals, which increased tonne-miles significantly, before cooling off in recent months. While the Panama Canal is gradually returning to normal, the situation in the Red Sea remains problematic, with no clear solution expected at least until the end of the year.
Safe Bulkers president Loukas Barmparis anticipates the restrictions in the Red Sea will persist, which he believes will support strong market levels for a bit longer, as noted during Safe Bulker’s Q2 earnings presentation.
According to SSY global head of research Roar Adland, Q1 saw an 8% year-over-year increase in the average laden distance of Capesize bulkers.
BIMCO’s latest dry bulk outlook analysis also indicated average sailing distances are expected to increase by 2.5-3.5% in 2024 but have the potential to become 1.5-2.5% shorter in 2025.
Regulatory boost
Environmental regulations are also “starting to bite”, Mr Pappas noted, highlighting the fleet is “basically slow steaming at around 11 knots” to comply with the EU ETS, as well as IMO’s EEXI and CII.
“This will boost demand in the Atlantic trade, a market traditionally served by older tonnage. These older bulkers may struggle to find business in the Atlantic and will likely seek opportunities in the Pacific. However, vessels over 15 years old are less welcome in the Pacific, especially in Australia. Consequently, some of these vessels may end up at demolition yards” Mr Barmparis explained.
Healthy fundamentals
Greeks are also optimistic based on both demand and supply indicators. Capesize specialist Seanergy Maritime Holdings head, Stamatis Tsantanis, highlighted during Seanergy’s Q2 earnings call, that Chinese imports of iron ore and coal have risen by 7% and 12% year-to-date, respectively. Additionally, the 8% increase in Brazilian iron ore exports has significantly boosted tonne-miles, he said.
On the supply side, EuroDry’s head noted any orders for newbuildings “will not affect the supply of vessels at least before 2027,” referring to the current tight situation in shipyards with prolonged delivery schedules.
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Source: Riviera
