Dry Bulk Set to Reach Profitability

 17 Mar 2017     Global Economy/Trade

BIMCO has reported that the dry bulk industry remains well on target for profitable freight rates in 2019 as long as the projected fleet supply growth rate of 0% in 2017 continues.

The international shipping association also reported in a statement to the industry that the handymax segment "may even see profits in 2018 as demand may go beyond 2% in 2017 - before reverting to 2% in 2018 onwards".

In 2016, the supply side grew by 3% and the demand side grew by 2.4% - measured on a tonne-mile basis.

This resulted in a worsening of the fundamental market balance, but BIMCO believes the bulk industry is in a relatively better position than anticipated nine months ago.

Peter Sand, BIMCO’s Chief Shipping Analyst, said: “Estimating a return to profitability in the dry bulk industry remains a moving target, and one that differs from one company to the next. But by projecting a course for profitability, everyone in the industry can use it as a reference.

"The fact that the first half of February 2017 was a troublesome period came as no surprise and it makes the strong comeback in the following month stand out as even more remarkable. During that time, the BDI went from 688 to 1,147.

"This lift in freight rates is certainly positive, but there is still work to be done on the supply side. A significant level of demolition activity must be maintained, and increasing focus must also be on keeping slow steaming around."

BIMCO recently reported that the lowest level of new steel deliveries in the containership sector since 2004 and record levels of ship scrapping has meant that growth in capacity amounted to just 246,000 TEU or 1.2% in 2016.