Summertime and the living ain't easy .. (for dry shipping)

'Summertime and the living ain't easy .. (for dry shipping)'

By Michalis Voutsinas


Well into the third quarter of 2023 and the dry bulk market has yet to find the footing most of us had expected, or at least hoped. All eyes at the start were on China with it's post-covid opening meant to buoy the market back to health. Though China's reopening may not have been as vigorous the expectation of it's savior role was, it turns out , misplaced .

The dry bulk market is comprised of multiple forces and moving parts of which China is just one.

One major force unleashed on the global economy, and as a 'Black Swan' event, was Covid-19. When first appeared less than 4 years ago, shipping it was feared would be hard hit as people around the world were locking up to contain the spread of this deadly virus. Instead, with the monetary and fiscal stimuli of major economies gated global consumers changed their spending habits which had a profound effect on dry bulk shipping. The logistical bottlenecks compounded the squeeze with Containers leading the way and Bulkers following to provide 2 strong years of unexpected returns.

After a long absence inflation re-appeared and was then amplified by another 'Black Swan' event, the war in Ukraine. To address this run-away inflation, major economies embarked on a course of monetary and fiscal tightening. This led to increased cost of money, a slowdown in economic activity and a de-stocking of raw materials and manufactured goods which had been built up in the shipping frenzy of 2021-2022. As a result, international trade slowed and with the unwinding of bottlenecks freight rates strongly corrected south.

A further moving part in the dry cargo mix comes in from the supply side. Bulk carriers have a fairly tame delivery rate and orderbook (8-9%) however the opposite holds for Containers (28-30%). When demand exploded for Containers, as aforesaid, some cargoes migrated to bulk carriers to the tune of 4-5% incremental demand for the handy through to supra sector. With the sharp slowdown in container demand this cargo has reversed back to the container sector. We expect further cargo to be lost from bulkers to containers as the latter's heavy supply rate encroaches on the bulk carrier scene.

In the 2 strong years of the bulk sector (2021-2022) China was in semi lock down with stop-start in economic activity. So it was mostly the above factors that led the rally and the anticlimax which followed.

China is a relevant player, yes, but at each stage of the market we need to look closer at the cause-effect dynamics at play if we are to have a better reading.

With the taming of global inflation in process and China looking at ways to step up it's gear we sense better days for Bulkers are nigh.

Data source: Doric