THE latest edition of the Dry Bulk Forecaster, published by global shipping consultancy Drewry, expects increasing trade and contracting supply will support a recovery in charter rates on major dry bulk shipping routes, with the prospect of China importing more coal and iron ore.
Macroeconomic policy decisions by the Chinese authorities have had an impact on the overall dry bulk market, increasing vessel demand on key routes resulting in a steady recovery in charter rates.
China's efforts to revive its economy have helped the iron ore trade to revive and are expected to further boost tonne-mile demand, as Drewry expects more ore from Brazil.
On the investment side, tighter financing options and restrained new ordering have helped the dry bulk market to keep supply in check so far. A high number of slippages and cancellations will impede any substantial growth in deliveries over the next few years, reports the American Journal of Transportation.
Demolition of ever-younger vessels is expected to result in a slowdown in fleet growth this year and a similar rate of demolition and delivery in the next year will help deflate oversupply further. Demand growth, which seemed to be an unlikely prospect throughout last year and the early part of 2016, has been helping the dry bulk market come off the bottom.
India's coal imports increased eight per cent in 2015, but are expected to remain flat this year as domestic output will continue to be high. The impending La Nina might impact Australian cargo outflows if rain disrupts rail movement and port activities. This will result in increasing congestion at the country's ports, which in turn will squeeze available coal supply from other sources.
Drewry expects freight rates on the Brazil-China and Australia-China iron ore routes for capesize vessels to strengthen over the next two quarters, but the return of laid-up vessels to trading could disrupt improvement.