Dry bulk shipping: strong demand improves market as it exceeds high fleet growth.
Since early July, the capesize rates have gone up and up. By mid-August, they had reached a breakeven level to become profitable. BIMCO estimates that a capesize ship on average fleet financing and operational cost levels, turns profitable when rates are above US$15 300 per day.
But the improvements are unfortunately not seen in any of the other segments. This reflects the development in cargo demand, and highlights the fact that overcapacity remains a challenge.
With improving shipping markets comes faster deliveries of ships from global shipyards. BIMCO sees this in all the main shipping segments that we analyse.
This is to put it simply, how participants in the shipping industry and associated industries react, and is the reason why should demolition fall short by 5 m DWT, fleet growth will jump to 3.4%. For the recovery to stay on track, the supply side must be handled extremely carefully as the demand growth is expected to be around 3.5%.
It is comforting that the demand growth this year has been broad, in terms of commodities and importing nations. Nevertheless, China is still the importer that matters but China is changing.
Tanker shipping: All eyes on oil market rebalancing – is it happening or not?
The one key factor to watch is the one thing that’s impossible to measure accurately on a global scale - oil stocks. Global stocks for both crude oil and oil products rose significantly following the sharp fall in crude oil prices in the second half of 2014. But while this may seem to be in the past, it is still haunting the oil market and the oil tanker market. Demand in the tanker market is below normal levels and will only increase once the global oil stocks have been reduced.
BIMCO believes that some rebalancing has taken place over recent months, but much more is needed. Data regarding OECD-stocks only provides an indication of how the market is developing in one part of the world. Likewise, any draw down on stocks in the US should not be used as a global proxy, as the US only holds 1/6 of OECD stocks.
The tanker fleet is growing strongly. By mid-August, the crude oil tanker fleet had grown 4.3% year-to-date, and the oil product tanker fleet had grown by 3.6%.
Deliveries into the crude oil tanker fleet, include 36 VLCC, 41 suezmax and 23 aframax plus some panamax and smaller units. The crude oil tanker fleet expansion remains on course for a six-year-high, measured in DWT, however, the fleet growth percentage is down from last years’ 5.9%, to 4.7% for the full year of 2017.
Meanwhile, 23 LR2, equal to 45% of the total added oil product tanker capacity overshadowed the recent years’ favourite: MR, as ‘only’ 38 new ships were delivered during the first seven and a half months.
Not a day goes by without a story about global oil stock levels. Many of them trying to be the messenger of positive news for the oil market and the tanker shipping market. However, sometimes business interests and wishful thinking are not supported by facts. Money managers and financial traders run businesses which are very different from the shipping industry.
As OECD compliance with the extended output cut falls to hit 78% in July (IEA), US shale oil production is rising, and Nigeria and Libya have some export potential left. So, oil supply seems to rise alongside oil demand.
Read the article online at: https://www.drybulkmagazine.com/shipping/29082017/strong-demand-bolstering-dry-bulk-shipping-market/
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