Dry bulk ship market ‘to stay weak into 2013’

Monday, 26 September 2011 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The global dry bulk freight market is expected to stay weak throughout 2012 and into 2013 due to an oversupply of ships, a senior executive of major ship brokerage Braemar Seascope said last week.

The industry has been struggling with a supply glut that has outpaced demand for commodities such as coal and iron ore.

Ship owners went on an ordering spree before economic turmoil in 2008 and have been hit this year by the pace of ship deliveries, which have stepped up in recent months.

Peter Malpas, head of research at Braemar, a unit of Braemar Shipping Services PLC, expected the freight market to see signs of recovery in 2013, with the extent of an upturn depending notably on how supply is adjusted.

“Scrapping (of ships) is really key for the recovery,” Malpas told Reuters on the sidelines of an industry conference.

The curbing of fleet capacity, whether through scrapping, delivery delays or order cancellations, would allow the market to recover more quickly in 2013 and benefit from industrial demand being driven by China, he said. “We see strong demand for shipping soaking up supply tonnage, returning the market to healthier levels in 2014.”

Scrapping had already increased significantly this year but an expected 30 million tonnes of scrapped capacity this year in the dry bulk sector would still be outstripped by forecast new capacity. “It’s what we scrap next year that will affect 2013,” he said.

Dry bulk shipping should be supported by continued industrial growth in China, which is the world’s leading steel producer but where per capita consumption of the metal is still well below levels in mature economies, he said.

Steel-related cargoes account for nearly half of global dry bulk shipments worldwide, while coal represents another quarter, he said.

Malpas said oversupply in the ship container and tanker markets were also a drag on the industry.

The surge in ship capacity that has weighed down freight rates over the past year was the legacy of an exceptional boom in the sector in the 2000s, he said.

“I doubt we will see another super cycle like we saw in the past decade,” Malpas said in an earlier presentation to the annual conference of shipping insurance association IUMI.