The first issue of 2022 is upon us, and with this are the first signs of spring - the pink hues in the dusky skies and glimmers of new life trying to creep up through the soil – at least these are the visuals in the Northern Hemisphere. A new year brings many predictions and expectations for the year ahead, and the dry bulk industry has a mixed bag of routes available for the coming months.
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2021 was a remarkable year for the industry, and there is concern that the peaks reached just cannot be matched again in 2022. Throwback to 1Q21, and these months were record-breaking when considering the volume of bulk commodities. In 2021, volumes for the opening months of the year were up 6.1% on the same period in 2020, and whether 2022 can continue this upward trajectory is to be confirmed. Some shipping experts suggest that the demand for commodities (such as iron ore and coal) has almost reached, if not already surpassed, its peak. Evidently, the world is in a different situation to this time last year, when the dry bulk market was able to take advantage of the improving global economy following the COVID-19 induced market downturn, with infrastructure-heavy stimulus in numerous countries creating a surge in commodity demand.
The best thing about the dry bulk industry, when considering the future, is all the elements – specifically commodities – at play. Whilst experts indicate that iron ore and coal have likely peaked, transfer your attention to grains, minor bulks and bauxite, and positive signs are all around. With low-carbon, zero carbon, and general green desires the constant talk across all corners of the globe, these products are predicted to witness demand growth due to their use in lower carbon applications.
However, coal, irrespective of the rumours that its demand has peaked and that it is facing decline across the world, will still exert a significant influence on the dry bulk freight markets, according to Simpson Spence Young’s 2022 outlook. Trade flows can be distorted in a flash when countries implement bans and intervene in the movement of commodities. For example, Indonesia’s recent coal export ban, India’s rebounding coal imports, China’s fluctuating demand – countless factors are keeping coal a talked-about commodity, but one who’s future is impossible to detail with any accuracy.
The current logic for the lack of confidence in another booming year is the role that decarbonisation has to play in the shipping industry. Detailed much more thoroughly in my Winter 2021 comment, shipowners are increasingly cautious of ordering new dry bulk vessels because thought still needs to be cast on the environmental regulations planned and the economic impacts. For example, shipping contributes nearly 3% of global carbon dioxide emissions, and the International Maritime Organization (IMO) aims to reduce emissions from ships by 50% by 2050 compared to 2008 levels. Consequently, analysts have reported that the dry bulk fleet will only grow approximately 2%, in comparison with 2021’s 4% growth.
The best suggestion to keep on track with the market movements is to continue being an avid supporter of Dry Bulk Magazine. Similarly, if your company has a fascinating project to share with our readers, or a genius new technology, then please get in touch with the Dry Bulk team. Here’s to a positive year ahead in the industry.