In its Q3 2023 Shipping Market Overview & Outlook, BIMCO sees a stronger dry bulk market outlook but believes that the recovery is fragile.
BIMCO’s chief shipping analyst, Niels Rasmussen finds in his report that average haul is expected to increase between 0.5% and 1.5% in 2023, driven by sanctions on Russian coal and higher iron ore and grain shipments from Brazil.
In our base case scenario, we expect global dry bulk cargo volume to grow between 1.5% and 2.5% in 2023 and between 1% and 2% in 2024.
…Niels Rasmussen stated.
In July, the IMF forecast the global economy to grow by 3% in both 2023 and 2024. This is a slight improvement over their previous forecast, but still well below the 3.7% average annual growth seen in the 2010s. Inflation remains a key challenge in several economies, forcing central banks to increase interest rates, slowing down economic growth.
The IMF forecast GDP in China to grow by 5.2% in 2023 and 4.5% in 2024, above the Chinese government’s target of 5% for 2023. Since June economic conditions in China, however, began to deteriorate, giving rise to concerns. Several banks have cut their forecasts to below the government target, Barclays going as low as 4.5%.
The dry bulk fleet is expected to grow by 2.8% in 2023 and by 2.1% in 2024. However, supply might grow by only 1-2% in 2023 and 2024 due to lower sailing speeds.
Between January and July, bulk carrier newbuilding contracting fell 10.7% y/y, which caused the orderbook to slip to 7.7% of the dry bulk fleet. Uncertainty concerning alternative fuels and weaker freight rates contributed to the lower investment in newbuilds.
Deliveries are expected to reach 34.4 million Deadweight Tonnes (DWT) in 2023 and 32.3 million DWT in 2024, slightly above 2022 levels. Since BIMCO’s last update, expected deliveries for 2024 have increased by 3.9 million DWT to include handysize and supramax ships that were previously unaccounted for. As a result, supramax deliveries are estimated at 13.3 million DWT in 2024, making it the fastest growing segment that year.
Overall, we expect a marginal tightening of the supply/demand balance until the end of 2024. Supply is expected to increase by 1-2% in 2023 and in 2024, while demand growth is predicted at 1.5-2.5% in 2023 and 1-2% in 2024. Under our low demand scenario, the supply/demand balance could weaken, particularly in 2024.
……Niels Rasmussen stated.
Average dry bulk freight rates have weakened since the second half of 2022. In August, capesize was the only segment where freight rates improved compared to a year ago. These were supported by stronger iron ore and bauxite shipments, both in volume and average haul, and by a low 2.2% y/y growth in the capesize fleet. Across all other smaller segments, rates slipped due to a decline in grain volumes, low growth in minor bulk volumes and an average 3.5% y/y fleet growth.