Clarkson projects that the supply of dry bulk cargo ships, measured in cargo-carrying capacity, will increase 4.7% between 2021 and 2023.
Specifically, in the period from 2010 to 2020, the size of the fleet in terms of deadweight tons grew at an annual average of around 6.0%, while the corresponding growth in demand for bulk carriers was 3.1%, which resulted on a drop of around 61% in the value of the Baltic Dry Index (BDI, an indicator of ship brokers) in the period.
In addition, according to the company Globus Maritime, the total size of the dry bulk fleet increased by around 3.6% in 2021, compared to a growth in demand of 4.1%, which resulted in a 176% increase in BDI.
Bulk cargo
Globus Maritime’s operating results depend mainly on the charter rates earned by its vessels.
Over the course of 2021, the BDI recorded a low of 1,303 on February 10, 2021 and a high of 5,650 on October 7, 2021.
Since the start of the financial crisis in 2008, the performance of the BDI has been characterized by high volatility, as growth in dry bulk fleet size outpaced growth in vessel demand for an extended period.
Charter (or rental) rates paid for dry bulk vessels are generally a function of the underlying balance between supply and demand for vessels.
Over the last 25 years dry bulk charter rates have gone through cyclical phases and changes in ship supply and demand have created a pattern of “peaks” and “troughs” in rates.
In general, short-term or spot/trip charter rates will be more volatile than time charter rates, as they reflect short-term movements in demand and market sentiment.
Global environment
At the beginning of 2022, world GDP was expected to increase by 4.4% by the year 2022 and 3.8% by the year 2023; however, many analysts now predict a negative effect of 0.2 to 1% due to hostilities between Russia and Ukraine.
The Black Sea region is an important area for dry bulk shipping, as the main cargoes of grain are loaded and transported in the Black Sea for unloading around the world.
As hostilities continue to escalate, Globus Maritime is aware that these volumes of grain can be sourced elsewhere.
This means increased ton miles for dry bulk fleets, as these products will likely need to be sourced from USG or ECSA areas, and travel to the Far East.
As a result, according to the company, coal trade flows may be significantly affected, especially in the event that countries and regions decide to move away from energy products of Russian origin; these will have to be sourced from elsewhere, possibly via far-flung overseas routes.
For the company, there is no doubt that if hostilities continue there will be significant volatility and increased uncertainty with a major impact on the dry bulk market, and whether that impact will be negative remains to be seen.
So far, the dry bulk order book stands at 63.4 million dwt, or 6.7% as a percentage of the total world dry bulk fleet.
Specifically, it is 6.7% for the Capesize segment, 8.3% for the Panamax (Kamsarmax) segment and 6% for the Handymax segment.
The fleet order book comprises deliveries of 25.2 million dwt, or 2.7%, by 2022 and 26.9 million dwt, or 2.8%, by 2023.
