February 2016 saw the dry bulk index set record daily lows for the cost of transporting cargo such as coal and ore by sea. Rates fell below the cost of operating vessels and nowhere near enough to make payments on ship debt, while an increasing number of vessels ended up in scrap yards and the major overcapacity caused investors to hesitate in the financing of newbuildings.
From these record lows, the dry bulk index started to slowly rise over the course of 2016 and by November it had risen to four times higher than in February. The 1.257 points that was achieved was its highest level in over two years. At face value this is great news for the sector but the levels achieved in November 2016 are far below the levels scored three years previously.
2017 will be an important year for the Bulk sector. The industry hopes that the pattern of incremental recovery can continue this year; there are many signs that this should happen including:
- A rise in demolition activity of vessels - reducing the supply and demand imbalance that has plagued the sector.
- China’s decision to boost its stocks of iron ore and continued (although much lower than previous decades) consumption of raw materials.
- Increase demand for grain – especially in emerging economies.
- Peak season activity rising from previous years.
- The US infrastructure plan – being fed by the bulk commodity market.
However, 2017 is a year that could be marked by the 'multiple risks to recovery'. The worldwide economy remains extremely fragile and growth rate forecasts are constantly being altered and continue to paint a bleak picture for the next few years. Politically speaking, across the world, we have seen the results of referendums and presidential results and many fear that there is now a movement towards trade protection measures which will affect the worldwide cargo flow.
In its outlook for 2017, Drewry stated that 'the dry bulk shipping market has bottomed out and recovery is underway'. The big question is how long will this take until it reaches the levels seen five years ago and is there anything that can be done to speed this process up.
Expert speakers including Peel Ports Group, BIMCO, BASF and mega shipper Vale will join the Bulk seminar programme at TOC Europe to discuss the current and future business challenges facing ports, shipping and logistics companies operating in the dry bulk sector.
27 – 29 June 2017 RAI Amsterdam The Netherlands
Read the article online at: https://www.drybulkmagazine.com/dry-bulk/28032017/2017-will-be-an-important-year-for-the-bulk-sector/