The outlook for dry-bulk shipping remains fragile as new deliveries of vessels are expected to flood the industry next year.
ABC News reported recently the global fleet of dry-bulk carriers was expected to outpace economic demand in 2011. It said this was the result of an industry buying spree two years ago before the financial crisis severely slashed sea trade.
The Baltic Dry Index (BDI), the barometer of commodity shipping, reached an historical high of 11,793 points on May 20, 2008 but six months later – on Dec 5 – it fell 94% to 663 points.
Year to date, the performance of the BDI has been satisfactory, averaging 2,823 points. It hit a high of 4,209 points on May 26 and a low of 1,700 on July 15. On Friday, the BDI was at 2,200 points.
According to a Bloomberg report, Capesize vessels, the largest of commodity ships, would drive the overall fleet expansion, estimated at 21%, while on average the global dry fleet is forecast to grow 15% this year, which might pull down the index.
Unless shipowners delay some of their new deliveries next year, the market outlook is seen uncertain.
Locally, the country’s largest dry-bulk shipping company, Malaysian Bulk Carriers Bhd (Maybulk), recently reported positive results for its third quarter ended Sept 30.
Its net profit jumped to RM87.7mil from RM69.5mil a year earlier. Maybulk’s nine-month net profit rose to RM170.7mil from RM155.3mil before.
The company said the dry-bulk sector had been quite robust this year with the BDI averaging 2,885 points for the first nine months this year, up 22% from the average 2,363 points a year earlier.
“The group’s average dry-bulk time charter equivalent (TCE) rates of US$26,908 per day this year was 49% higher than the US$17,996 per day average last year,” it said in a recent filing with Bursa Malaysia.
Going forward, Maybulk noted the International Monetary Fund’s revised world economic growth forecast to 4.8% this year and 4.2% next year and that the advanced economies continued to face challenges and their recoveries will remain fragile.
It also estimated the volume of global trade in goods and services will grow 11.4% this year and 7% in 2011. This compares with an 11% plunge in 2009 and a slow 2.9% growth in 2008.
China’s iron-ore imports are expected to increase for the rest of the year as steel mills start restocking.
“The continued strong Chinese demand for iron ore, coal, and grains, coupled with growing Indian demand, is good for shipping,” Maybulk said.
“However, this positive note will be tempered by the supply side of the shipping market. New tonnages will pressure the freight market and counteract the upside potential for shipping,” it added.