All are waiting for 4th quarter final results to know whether to celebrate a recovery or hunker down for a depressed dry bulk market.
Political turmoil across the world combined with shaky economic realities has produced a less than stellar year for the dry bulk shipping industry. However, several factors, if fully realized in this last quarter of the year, could help to turn things around.
A number of negative factors weighed heavily on the dry bulk shipping market this year. The US experienced an unusually harsh winter while Europe enjoyed a mild one, resulting in significantly reduced east-bound shipments of coal. Indonesia’s new ban on unprocessed minerals was implemented in January, affecting shipping performance throughout the year. China saw one of its wettest summers on record, which allowed it to increase hydropower production but at the cost of coal imports. And, to compound the Chinese situation, new taxes designed to protect domestic coal miners went into effect this month, depressing coal imports.
Nevertheless, there were some signs of improvement over this last week, which give cause for optimism among fleet owners and industry analysts. For instance, lower ore prices stemming from Chinese mills looking to build inventory from Brazil and Australia, resulted in soaring capesize rates. Overall, the capesize market experienced a significant jolt of life last week. Time charter average earnings rose by 86%. Panamax rates were also up in both basins, with time charge average earnings settling at $8,971.
Additional factors need to fall into place though, for the rosy picture to continue. Slowly the ratio of supply and demand is evening out which, if it holds, will bring about improvement in freight rates. Bulk and tanker fleets have slowed their expansion. If this continues, coupled with an increase in demand balancing out the supply market, dry bulk carriers should have a much better year in 2015 and may even end 2014 with some small recovery of losses made earlier this year. If Brazil’s iron ore production increases so that it can compete with Australia in the Chinese market, the shipping industry will benefit from increased ton miles. All depends, of course, on stability in the world markets, favorable regulatory environments and a balanced supply and demand equation.