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BIMCO market analysis

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World Cement,

Back in May, BIMCO disclosed a projected ‘road to recovery’ for the dry bulk shipping industry.

BIMCO market analysis

The main message back then on what the dry bulk sector must do to return to profitability was, and still is: “Scrapping ships and no new builds is the fastest road to recovery for the dry bulk market”.

As promised, BIMCO will monitor and report back to the dry bulk shipping industry on the progress made towards a recovery. 2016 must be the turning point in addressing the fundamental imbalance of the dry bulk market. Despite better demand side conditions recently, we cannot expect positive demand side surprises, coming to rescue eternally. The enormous overcapacity of ships must be addressed – starting now – and continued over the next three years at least.

Strong demand side growth helps as demolition interest has cooled

As ship owners’ interest in demolition has cooled, the supply side is worse off today than earlier estimates projected for 2016. Stronger demand side growth is the only reason for the improved market conditions in the dry bulk shipping sector.

In short, the fundamental balance of the market has improved, and freight rates can still reach profitable levels in 2019. But bringing profits back remains in the hands of shipowners themselves. But staying on the road to recovery requires a series of extremely tough and sustained measures to be taken, year on year.

BIMCO Chief Shipping Analyst, Peter Sand, said:
“The dry bulk market is still in a terrible condition. Regardless of a significant improvement in the BDI from its all-time low back in February 2016, the freight market remains lossmaking and in a very bad state.”

“The market has risen only from ‘catastrophic’ to ‘gloomy’ - so the need for shipowners to take decisive action remains.”

“When you claw your way back from the worst market ever – the road is long, rocky and tough. It requires stamina, adaptation and determination from all shipowners. The market has improved based on growing demand, but the sector cannot rely on this alone – which is out of its own hands.”

“The industry must act decisively to reduce the enormous overcapacity of tonnage by keeping demolition activity high, even as freight rates go up – to make the recovery a sustainable one.”

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