Global dry bulk freight market to be tight for 2022

For the rest of 2021 and probably next year, the global dry bulk freight availability will stay stretched, unable to match the booming demand, Yu Guixun, general manager of Chun An Shipping Group Limited (Chun An Shipping), a major shipment service company, shared at Mysteel's 2021 Steel Semis Imports Training in Shanghai on May 28.

The backlog of orders at the shipbuilders globally, a key indicator of dry bulk freight capacity, has been declining in recent years, he said.

By the end of March, the backlog among the Chinese shipbuilders, for example, approximated 78.5 million deadweight tons (dwt), down 1.4% on year, 6.9% lower than March 2019 or 16.2% lower than that for March 2018, Mysteel Global noted from the data released by the China Association of National Shipbuilding Industry.

Usually the Chinese shipbuilders need to pocket an about 80 million dwt backlog for steady operations, Mysteel Global understands.

"Many shipbuilders in the world have not been eager to accept bookings for new dry bulk ships ever since 2013, and it is lossmaking for them to lock in new shipbuilding contracts despite that the global freight market has appeared robust recently, and chartering of all kinds of vessels has doubled or tripled in recent months," he added, partly as bulk commodities prices such as steel have been too high for the shipbuilders to fulfil their shipbuilding orders even at a breakeven level.

Chun An Shipping, established in 1998, is a subsidiary of Chun An Logistics with core businesses being steel and project cargoes between China, ASEAN countries and other Asian-ANZ, African, and the Middle East Regions, according to the company profile, and China's leading steelmakers including HBIS Group Co and Rizhao Steel Holding Group Co are among its long-time customers, according to Yu.

Under the circumstances, the world's dry bulk fleet capacity growth is 4.3% in 2020 and it is expected to be unchanged on year at 4.3% in 2021, but it down 1.6% on year in 2022, according to him.

Globally, the demand for dry bulk shipment capacity has been extremely robust and will remain so for the rest of the year with the restart of the various economies despite the ongoing COVID-19 outbreaks in many countries, according to Yu, and it will recover fully to the pre-COVID level by 2022.

Among all the major economies, China, as the world's second largest economy, has seen greater demand to ship wind power equipment to the offshore wind power stations in line with China's commitment to achieving carbon emission peak by 2030 and realizing carbon neutral, Yu highlighted.

The global dry bulk freight market, thus, "is unlikely to correct the mismatch in demand-supply in the short run," he predicted.

The world's Baltic Dry Index (BDI), the bellwether of the world's dry bulk freight market, has been hovering high above 2,000 points since mid-March, and once shot up to an 11-year of 3,266 points on May 5.

BDI has been hovering below 2,000 most of the time in the 21st century, though it had been volatile over 2005-2009, shooting up to historical highs over 2007-2008 before the financial crisis in the fourth quarter of 2008 because of the extremely robust demand from the series of dry bulk commodities during the period, Mysteel Global understands.

Written by Lea Li, liye@mysteel.com

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.