Page 12: of Maritime Reporter Magazine (December 2014)

12 Maritime Reporter & Engineering News • DECEMBER 2014 “A fundamental and sustainable dry bulk market recovery is expected in the second half of 2015 and throughout 2016, when the total dry bulk mar- ket balance could peak at 88%, with peaks during the fourth quarter close to 92%. Improved tonnage balance in 2015/2016 should drive up bulk rates.”

Harald Lone, Group Chairman,

Newport Shipping Group

T he supply/demand imbalance that drove dry bulk markets down to 2009 levels during the fi rst half of the year is set for adjustment, with

Newport Shipping Group predicting an improved tonnage balance over the next couple of years, resulting in a freight rate peak in the 2016/2017 period. “The dry bulk markets during the fi rst half of 2014, especially Panamax, Su- pramax and Handysize, have not been at these low levels since the fi nancial crisis in early 2009,” said Harald Lone,

Chairman of Newport Shipping Group. “Strong supply growth combined with a decline in most of the major coal trades pushed spot earnings for Panamaxes to just above $3,000 per day in Q1 2014, well below operating costs. The markets are still soft, with average spot earnings in 2014 down by 10% on 2013, with

Panamax rates down as much as 22%.” “A fundamental and sustainable dry bulk market re- covery is expect- ed in the second half of 2015 and throughout 2016, when the total dry bulk market balance could peak at 88%, with peaks during the fourth quarter close to 92%,”

Lone said. “Improved tonnage balance in 2015/2016 should drive up bulk freight rates.”

Referring to Newport Shipping

Group’s latest Dry Bulk Market Out- look report, Lone said that less ordering combined with an increase in scrapping is expected to result in a signifi cant shift in the pace of fl eet expansion as scrap- ping eats into new deliveries.

Dry Bulk Expansion

He noted dry bulk supply expansion has gone from 15% in 2011 and 14% in 2012 to 7.4% in 2013 and 5.3% in 2014.

It is expected to be about 4.9% in 2015, although this in itself will not be suffi - cient to initiate a major dry bulk recov- ery during the next 12 months.

Dry Bulk Scrapping

Scrapping could eat further into the supply/demand balance, given that 28% of all vessels in the Handy segment, the main contender for demolition, will be 20 years old or more by 2017. Deliver- ies of new Handy vessels between 2015 and 2016 period will add 13 Mdwt per quarter to the fl eet, of which 80-90% will be in the larger 30-40,000 dwt seg- ment.

Dry Bulk Drivers

Key drivers remain the steel indus- try and Chinese imports of iron ore and steam coal. Iron ore imports to China are expected to increase from the 824 mt registered in 2013 to 1,080 mt in 2016, which correlates to an annual growth rate of about 9.5%. This, supported by increases in iron ore to the EU, Ja- pan and other parts of Asia, is forecast to result in an 8% increase in the seaborne trade of iron ore during the 2013-2016 period, of which 89% will be imports to China, mainly from Australia and Brazil.

Besides iron ore, steam coal imports to China will be drive future dry bulk demand. However, this year global trade was down by almost 40 mt and

Chinese imports were more than 100 mt shy of projections due to falling coal prices, low demand and increased hydro power production – fundamentals that are attributed to the fi rst half weakness of the Panamax, Supramax and Handy- size segments.

NEWS & ANALYSIS

Baker Marine Solutions ? DP Assurance - FMEA Studies, Proving and Annual trials attendance, DP Operations Manuals ? Vessel Inspections - OCIMF-OVID, IMCA, and AWO - RCP ? Marine Representation - Offshore and Onshore ? Marine Warranty Surveys - load/off load supervision, as well as marine operations oversight ? SIMOPS - Plan Development and Execution

Now with 24 hour support IN Port Fourchon

Baker Marine Solutions

Marine consulting, survey, and

Assurance Solutions 638 Village Lane N., Ste E.

Mandeville, La. 70471 985-845-9439 www.bakermarinesolutions.com

Providing Solutions for the Marine & Energy Industries

Got Your Asset Covered?

Harald Lone Prediction on Bulk Carrier Market

Freight Rates to Peak in 2016

Lone

MR #12 (10-17).indd 12 12/8/2014 9:03:48 AM