Shipping: "The dry bulk freight market: Just treading water?"

From Black Sea Grain:

A decade has passed since the 2008 dry bulk freight rates began a long downturn which coincided with the Financial Crisis and culminated with a historic low in January 2016. And while many are encouraged by the rebound since then, a cursory look at the Baltic Dry Bulk Index (BDI) indicates how serious the collapse was and how modest and fragile the recovery is.

Not only has the dry bulk market not returned to pre-collapse levels, it’s struggling to maintain freight rates last seen in the previous millennium. Consider that in 1999 the BDI averaged 1,338. While it managed to breach the 1,500 mark briefly in late-2017, it is, for the most part, hovering below 1999 levels.

Rather than a recovery then, this seems more like “a back to the future” scenario. Either way, dry bulk owners and operators are just happy to be able to operate their businesses profitably.

So how does the bulk sector in 2018 really measure up to conditions in 1999? The numbers tell all: while the total capacity of the global fleet of bulk ships has more than tripled from 264 million dwt to 817 million dwt by Q1 2018, bulkers haven’t been as productive, hauling less cargo. While they carried 8 to 9 tons of cargo per deadweight ton (dwt) in the 1999-2008 decade, they handled only 6 to 8 mt of cargo per dwt since 2009.

Of course seaborne bulk cargo has increased — from 2,185 million mt in 1999 to 5,096 million mt in 2017. It just hasn’t kept up with the growth in capacity.

The prognosis is reflected in the figures: there are way too many ships on the water.

Vastly improved technological efficiencies compounded by a significantly slower Chinese economy – not to mention the unlikelihood of another China-sized economy rising anytime soon – all mean one thing: capacity needs to disappear, lots of it. In fact, about 200 million dwt of capacity – 30% of the current operating fleet, equal to 5,000, 40,000 dwt ships! – needs to vanish before we can achieve a ratio of seaborne cargo to capacity last seen pre-2008....MORE