Has the in fl ection point come for the bulk cargo market?

By Xu Miaomiao

Has the in fl ection point come for the bulk cargo market?

By Xu Miaomiao

With the strong rebound of the BDI index, the Baltic Dry Index (BDI)closed at 1582 points on October 19, 2017, achieving rise in 12 consecutive trading days and creating a new high since March 26, 2014.At the same time, there appeared an optimistic atmosphere in the bulk carrier market which has been rare in recent years. In the second half of this year, the global bulk carrier market has set off a wave of orders, and over 100 bulk carriers have been ordered over the past three months.

The BDI index has continued to rise recently, and has broken 1500 points, the recovery trend of shipping industry has been further determined. Experts pointed out that the current round of BDI index rise is mainly driven by the rate of Cape-size ship transporting iron ore. The annual average rate of capacity utilization of dry bulk carriers is around 85%, and the utilization rate of transport capacity in peak season is expected to reach more than 95%, and the freight elasticity will increase substantially. Among them, the freight prices of coastal dry bulk transport market and coal transport market rose steadily due to coal price rise, and the coastal ore and grain transport market has both experienced a slight rise driven by coal price.In shipbuilding, the global new shipbuilding market has recovered significantly, according to Clarkson data statistics, from January to July in 2107, the global cumulative shipbuilding orders reached 31.43 million dwt, which has exceeded 30.68 million dwt in 2016.Among them, bulk carrier orders increased signi fi cantly,in the first 8 months of this year, 119 new orders for bulk carriers in the globe has been signed, up 158.7%compared with 46 ships in the same period of 2016.

With BDI index standing again at 1500 points, container freight experiencing increase and tanker freight rebounding, ship owners’ cash fl ow and con fi dence have increased further. According to the industry analysis and judging from the seasonal regularity, dry bulk market is about to enter the traditional peak season, the current steel prices remain high, and will support the iron ore demand, and the BDI index is expected to have some room to rise before November. The expert of Shanghai International Shipping Research Center predicted that in the second half of 2017, the coastal dry bulk shipping capacity supply is expected to continue to shrink, the demand side overall is still in low volatility, overcapacity situation will be eased. Under the background of the slow improvement of economic fundamentals, supply side reform and related policy factors are the main factors affecting the coastal bulk cargo transport market in the second half of this year. It is expected that the comprehensive freight index of coastal bulk cargo will continue to rise on the basis of the fi rst half of 2017.

Although most people in the industry are optimistic about the current and future shipping market, this optimism should be cautious. Zhang Yongfeng, expert of Shanghai International Shipping Research Center said, since the impact of the price factor on the market recovery in 2017 is big, and demand is still in the recovery phase, China’s stable demand for bulk cargo is an important support.However, with overcapacity being still serious, plus the slowdown in the pace of dismantling capacity caused by increase in market con fi dence and in new orders, market recovery will be further slowed down.