Dry Bulk Market’s Prospects Improving in Tamdem with Global Economy


The dry bulk market is looking for some positive news from the global trade growth, in order to buck the rising trend of this year, which has put the sector back on track for a rebound. In its latest weekly report, shipbroker Allied Shipbroking noted that “the International Monetary Fund recently issued its update on its World Economic Outlook. In this latest update, it has kept its growth forecast for the world economy unchanged for this year and next compared to the figures it had issued back in April, with a projection of 3.5 percent growth in global output for this year and 3.6 percent for 2018. However, at the same time it issued upward revisions for its projections on emerging and developing Asian economies including China, while notable improvements were also being noted for major developed economies such as Japan and Europe”, the shipbroker said.

According to Allied’s, Head of Market Research & Asset Valuations, Mr. George Lazaridis, “so where are the offsets for there to be no change in the overall forecast for global growth you may ask. The most significant downgrade was that of the United States for both 2017 and 2018 on the grounds of less expansionary oriented U.S. fiscal policy keeping the growth figure closer to its long-run potential growth rate. The other major offset was the downward revision for the United Kingdom, based on an overall poor performance in the year so far and the Brexit cloud which is still overshadowing its economy. Given that over the past couple of years the U.S. has already seen its role as the global growth engine diminish ever more, it is no surprise that this trend will likely continue over the next two years, while at the same time the improvements in supportive policy in China and more specifically the strong credit growth should push at least in the near term for an ever stronger boost out of China’s economy, which in turn should drive both demand for commodities once more but also establish China’s major role as one of the new and ever more important main engines of global growth”.

He added that “at the same time and despite China’s still insatiable appetite for commodities, there is still a looming glut in most of the major commodities and its no surprise that within the IMF’s update, major commodity exporting regions such as South America have seen a further reduction in their forecasts given the diminished terms of trade that we have noted over the past couple of years. With the demand side of the commodities’ trade however seeing an ever-improving positive momentum, the prospects for dry bulk shipping continue to improve. As mentioned in previous weeks, this recent improvement has been well reflected in the trends noted in the dry bulk freight market this year. The orderbook to active fleet ratio has dropped to around 6.71% and the forward delivery schedule leaves ever more room for an even better balance, especially under the case where the dry bulk commodity trade starts ramp up further. This positive demand growth is what has helped foster better rates against a growth in the active fleet of 1.68% in the first half of the year. At the same time the second half of the year is likely to be even better given that the current orderbook schedule has 294 vessels set for delivery (this is a reduction from the 310 vessels delivered in the first half) and even less when you take into consideration that we will still have a fair amount of delays in deliveries and some further cancellations in sight. The big risk presenting itself is the gradual come back in new ordering which could slowly bring back the orderbook and fleet growth to unsustainable levels once more. For the moment things are looking fairly positive and should hold for the next two years, while the gradual improvement in future prospects are set to make a further presence in the secondhand market through yet another rally in price levels in the near term”, he concluded.

Source from : Hellenic Shipping News Worldwide