The threat of a further growth in the dry bulk fleet’s numbers is posing challenges in the sustainability of the dry bulk market’s recent recovery. In fact, the market could use yet another rally until the end of the year, analysts say, just to fall in line with the performance recorded during 2017 and 2018. In its latest weekly report, shipbroker Allied Shipbroking said that “undoubtedly the dry bulk market has recovered with an emphatic way. As we have already mentioned in previous weeks, this rather “noisy” comeback has been many things but mere circumstantial. It is but a reflection of both the very good fundamentals being portrayed from the past 2 previous years and the fact that the aggressive downward spiral that was noted several months back was driven solely by a series of single shock events (tail risks). Now that sentiment is in a much better state and before the market becomes over-bullish given the recent trends, a more in-depth analysis may well be prudent”.

According to Mr. Thomas Chasapis, Research Analyst with Allied Shipbroking, “given this astonishing rebound of late, which, we may say, caught many by surprise, both in terms of timing and actual achieved levels, the thing of vital importance is what has changed throughout this period, and most importantly, what can we expect moving forward. Year to date average figures have been boosted significantly, despite the overall poor performance noted in the early part of this year in the freight market. We will however have to wait another 5 months or so to see if the market can manage to further narrow the gap between this year’s overall performance with those noted in both 2018 and 2017. This, of course, means that we would need to anticipate another impressive rally to be seen before the closing of this year”.

“On the other hand, if we witness the trends noted in the year prior, it means that we have seen an excessive boost in the market during the summer period, derived by an early summer buying spree. That in theory simultaneously points to the possibility of a relatively softer final quarter. So, among all other asymmetries, we may well be also facing a seasonality shift at the same time. Regardless of the above taking place or not, the market must function as “normal” as possible, given the almost double volatility being noted now (measured by standard deviation)”, Chasapis noted.

He added that “in an already uncertain environment, strong waves of further uncertainty, can only mean further exaggerations to be noted. After 2016, many market participants began taking a closer look at the supply side of things, monitoring from time to time the fleet development and all key indicators in respect to this. The past couple of years there were positive signs being noted in this regard and the market moved to a rather sustainable trajectory (orderbook-to-fleet ratios in the region of or below 10%, fleet growth attuned with the economic growth, etc.)”.

“However, regardless of how we translate these different statistical measures, the fact is that the global fleet is “always” growing. Given that we are amidst a sharp deterioration in core fundamentals, aspirations with regards to the market dynamics aren’t exactly at a stellar state. Iron ore is facing an overall decrease in seaborne trade for 2019 in the region of around 2%, with expectations for a complete recuperation of the gap left behind likely to be achieved well after 2020. With coal and grain trade growth also being at rather mediocre levels, the market is left hanging solely on the minor bulk trades, something which may well prove inadequate to turn things bullish in the long term. Despite the huge injection of optimism (and actual returns) these past few weeks, the market is still in relative disarray. At this point, at least, most are still focused in the overall pursuit of a further recovery, with the market trying to catch up to the initially estimated numbers for the year. Once this catchup “race” comes to an end, one may wonder what will be ultimately left in order to continue boosting the market”, Allied’s analyst concluded.