BIMCO: Dry Bulk Order Book Hits 13-Year Low. But for How Long?

The current order book for bulk carriers stands at 60.4 million DWT, which is the lowest in 13 years, based on the data from BIMCO shipowners’ association.

Despite the market turmoil stemming from hectic activity in the sales and purchase market, the ordering activity remained subdued for some time.

Nevertheless, during the first four months of the year, as owners rushed to avail of the attractive second-hand tonnage, prices for second-hand assets went up and down in sync with newbuild prices.

This made the ordering of newbuild an attractive alternative again, with April, May and June being particularly busy in this respect.

Orders for 9.6 million DWT have been placed, with Panamaxes being the popular choice, BIMCO said.

“The supply side is made up of three elements: deliveries, demolition and newbuild orders. Thus, with faster deliveries and slower demolitions, it is worrying to note that, what we expected to happen in relation to new orders is now taking place too,” BIMCO added.

The growth of the dry bulk fleet differs significantly in level and pace from Handysize to Capesize. Handysize fleet growth over the past year has been fairly steady at 2.1%. It has remained constant for Handymax/Supramax too but at a level of 5.3%.

In between, both the Panamax and Capesize segments have grown at an increasing pace and to higher levels since their recent low-points in 2016.

The monthly year-on-year fleet growth rate for Panamax went from -0.4% in October 2016 to 3.1% in July 2017. From January 2015 to January 2016, the Capesize fleet became marginally smaller. The first fleet size contraction since 1998/99. Since then 59 Capesizes have been delivered, lifting year-on-year growth rates in July 2017 to 3.9%.

Capesize bulk carriers have spearheaded the recovery in the dry bulk sector in the second-half of 2017.

“Since early July, the Capesize rates have gone up and … by mid-August, they had reached a breakeven level to become profitable,” BIMCO said.

“BIMCO estimates that a Capesize ship on average fleet financing and operational cost levels, turns profitable when rates are above USD 15,300 per day.”

However, the improvements are not seen in any of the other segments. According to BIMCO, this reflects the development in cargo demand, and highlights the fact that overcapacity remains a challenge.

BIMCO expects 40 million DWT to be delivered in 2017, offset by 19 million DWT of demolished capacity. Year to date, 30 million DWT has been supplied while 9 million DWT has left the fleet.

“We know that a higher BDI often means less demolition, but as the BDI has been lifted solely by the Capesizes in recent months, our estimates for supply side changes remain unaltered. The fleet is estimated to grow by 2.7%,” the association said.

“Should demolition fall short by 5 million DWT, fleet growth will jump to 3.4%. For the recovery to stay on track, the supply side must be handled extremely carefully as the demand growth is expected to be around 3.5%.”

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