A New Partnership and a New Forecast
I'm very happy to announce that Shipping Strategy Ltd has agreed a partnerhsip with Oceanbolt, data-as-a-service company delivering real-time intelligence for the dry bulk commodities trading and shipping market.
Oceanbolt leverages AIS data, geospatial analytics, third-party data, and machine learning to generate a comprehensive, real-time view of seaborne dry bulk commodities.
We are inputing Oceanbolt's data into our Dry Cargo Outlook reports, available from our website or by emailing me on firstname.lastname@example.org. Using Oceanbolt's data hugely improves our demand analysis and our forecasts.
Here's the Executive summary of our report:
Macro-Economic Outlook is Positive
The world’s political leaders are banking on a combination of public health measures and vaccination to overcome the Covid-19 pandemic and re-open their economies. But the world’s industrial and construction markets have survived the pandemic in fairly good shape. Central banks will continue loose monetary policies and governments will continue with generous fiscal policies to support activity. Global GDP prospects are positive; we estimate that a world 4.4% fall in GDP in 2020 will be followed by a 5.5% increase in 2021 and a 4.5% increase in 2022. This will be led by Emerging and Developing Asia which will follow a 1.7% fall in GDP in 2020 with a supercharged 8.2% increase in GDP this year. The dry bulk market follows Emerging markets GDP closely; we expect these GDP numbers to result in strong demand growth for bulkers in 2020.
Supply Outlook is Benign
Many of the usual factors influencing supply of tonnage indicate that 2020 will have marked the largest increase in supply growth for several years. Basis the orderbook published by IHS-Markit, around 24 Mn Dwt of bulkers is due for delivery in 2021. If 12 Mn Dwt is scrapped, as we expect basis fleet age and market prospects, then net fleet growth will be only around 12 Mn Dwt, less than half its 2020 level of 3.6%. Until owners feel more confident about the future consistency of fuel and emissions regulations, we don’t expect to see an uptick in contracting. How the yards will survive this remains to be seen. In the short-term, fleet growth for 2021 could well be under 2%.
Demand Outlook is Encouraging
Iron ore is the leading cargo for bulk carriers. Prices for the red ore are approaching their 2011 peaks and miners around the world are investing in new capacity. China would like to diversify its sources of supply, relying so heavily as it does on Australia and Brazil. If all of the iron ore expansion projects were to go ahead between now and the end of 2023, global iron ore output would increase by around 275 Mn T, more than BHP’s total output, requiring hundreds of extra bulk carriers to carry it to China. Demand for coal globally may have peaked and data from our partners Oceanbolt suggests that world-wide seaborne coal shipments fell in 2020, though there was in increase in coal shipments to China. But seaborne trade in grains, iron ore and related products, plus minor bulks, should all benefit from rising emerging market activity in 2021 and 2022.
A New Freight Market Cycle
The last two bulk carrier freight markets ran from 2012 to 2015, then from 2016 to the middle of 2020. We contend that a new cycle has begun which will drive freight markets on a rising trend for several years yet. The Base Case output of our model predicts 2021 to USD 23,864 for Capesizes, USD 17,774 for Panamaxes, USD 13,107 for Supramaxes and USD 9,327 for Handysizes. The model base case predicts further increases all the way to a market peak in 2024 of USD XXXXX for Capesizes, USD XXXX for Panamaxes, USD XXXXX for Supramaxes and USD XXXXX for Handysize bulkers. Our advice remains the same as it did last year: this is a good entry point for investing in dry bulk shipping.
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