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Dry-Bulk Shipping In Troubled Waters As Glut Of Vessels Soaks Up Demand
Business Monitor International, April 2011, Pages: 22
Strong Demand Still Can’t Soak Up Glut
BMI expects the dry bulk shipping sector’s woes to continue for some time to come, with overcapacity continuing to upset the supply demand equilibrium. Despite strong global demand for dry bulk commodities such as grains, coal and iron ore, the glut of vessels available keeps driving rates down. Dropping rates have already claimed their first scalp in the form of Korea Line, and this report believes that there could be more victims to follow if lines do not reduce capacity.
Drivers Key Views:
- Dry-bulk shipping to benefit from projected increase in iron ore and coal production
- Robust Asian demand for coal and iron ore to continue over medium term
- Global grain production is set to increase on last year Capacity Key Views
- Overcapacity to remain the single biggest concern for the sector
- Fear of further overcapacity with new-build orders equivalent to 20% of the current fleet due online in 2011
- Slow-steaming and idling likely to increase to bring overcapacity under control Rates Key Views
- Volatile outlook as the supply/demand imbalance remains
- Given rate plunges that have seen, another scenario similar to the collapse of dry-bulk shipper Korea Lines cannot be ruled out
- In the short term, lack of demand from Japan will exacerbate the existing imbalance between vessel supply and demand
- Rates will pick up over the longer term as Japan’s power plants and steelmakers recover and look to restock depleted and destroyed inventories.
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