Overview
The well documented trough in Dry Bulk earnings in 2020 are
forecast to reverse. VesselsValue’s new Forecast Earnings module in partnership
with ViaMar AS shows an optimistic outlook from mid 2020 across the Dry Bulk
sector. Capesize earnings, in particular, are predicted to increase sixfold in
the next 6 months, from USD 5,000 per day to USD 30,000 pd by October 2020.
Where are we now?
The past 12 months have seen weak Dry Bulk, and especially
Capesize, fundamentals.
On the demand side, the Brazilian dam collapse of April 2019 combined with a reduction in infrastructure and energy consumption due to Chinese New Year and COVID-19, has resulted in a sustained slump. The below chart shows the past 12 months of Capesize supply and demand growth. As can be seen, in 2019 and 2020 so far, fleet growth exceeded demand growth, leading to an excess of vessel supply and the recent poor markets.
Some good news is that removals from the Capesize fleet
peaked in early 2020.
Year to date, 25 Capesize vessels were sold for demolition
compared to only 10 units in YTD 2019 and 7 units in YTD 2018. High levels of
recycling has reduced tonnage supply but current closures of breaking yards in
the Indian subcontinent due to COVID-19 will temporarily freeze further
removals. We expect to see a significant surge of removals on reopening of
breaking yards in June – July 2020.
What do we forecast?
VesselsValue now offers Forecast Earnings, in addition to
Forecast Values, for the Bulker, Tanker, Container and LPG sectors.
In the Capesize sector we predict earnings of USD 30,000 pd
in Q3 of this year and earnings in a range of USD 20,000 – 35,000 pd over the
next 3 years. These predictions are based on modelled analysis of VesselsValue
AIS Trade, Fleet and Vessel utilization data.
In terms of current demand trends, the chart below shows the cargo miles of Capesize in red, clearly showing the recent recovery in Capesize cargo miles to near levels seen in the previous year and continued upwards trajectory (for reference the Capesize TCE is also shown in green).
We expect a continuation of this global demand growth. At
the end of February the Chinese provincial governments rolled out investment
projects worth 24.7tr yuan, roughly 25% of their 2019 GDP. This stimulus
package will lead to increasingly strong demand for steel and energy and a
tightening dry bulk supply demand balance. The stimulus package will continue
to support dry bulk demand growth sufficiently to outpace supply growth over
the next three years, and the dry bulk market and freight rates will continue
to rise during 2021 and 2022.
Additionally, uncertainties surrounding the COVID-19
pandemic, the trade war and volatility in oil prices are governing business
decisions being made in the first half of 2020 and caution will be taken.
Shipyard demand, already facing challenges from upcoming regulations and
geopolitics, will likely encounter a further blow given the vast current
disruptions to economic growth and trade globally. As a result, the global
orderbook has moved even lower, and we foresee a continuation of that
development.
(Source: VesselsValue)
Sea News, April 3
