International dry bulk freight will stay oversupplied
Friday, August 28, 2015
Significance
The market remains oversupplied, with daily rates for Capesize vessels (the largest dry-cargo ships) falling by 97% since 2008, from over 200,000 dollars to around 11,000. This is underpinned by record expansion in the global fleet over the past five years.
Impacts
- In the Pacific, daily rates will rise on the back of Indonesia's exports of bauxite and nickel ore.
- India's self-sufficiency target in urea production by 2019 will have limited effect on dry bulk vessels, given high inland logistics costs.
- Dollar strength will limit the attractiveness of US bulk exports, with only potash and petcoke likely to keep market share.
- Recent sales by Vale of several VLOCs (the largest bulk carriers) to China have iron-ore freight arrangements spanning until 2040.
- Banks' withdrawal from traditional trade financing will trigger moves to fill the gap, including e-shipping and cloud financing platforms.