The dry bulk shipping industry remains well on target for profitable freight rates in 2019 if the projected fleet supply growth rate of 0% in 2017 continues, according to international shipping association BIMCO.
In 2016, the supply side grew by 3% and the demand side grew by 2.4%, which resulted in a worsening of the fundamental market balance.
The handymax segment may even see profits in 2018 as demand may go beyond 2% in 2017, before reverting to 2% in 2018 onwards.
However, as the original "Road to Recovery" in May 2016 projected an even worse fundamental deterioration in 2016 – we are today, in a relatively better position than anticipated nine months ago.
"Estimating a return to profitability in the dry bulk industry remains a moving target, and one that differs from one company to the next. But by projecting a course for profitability, everyone in the industry can use it as a reference," said Peter Sand, BIMCO's Chief Shipping Analyst.
"The fact that the first half of February 2017 was a troublesome period came as no surprise and it makes the strong comeback in the following month stand out as even more remarkable. During that time, the BDI went from 688 to 1,147," added Sand.
BIMCO said that this lift in freight rates is positive, but added that there is still work to be done on the supply side, coupled with a significant level of demolition activity.
"In total, freight rates will be slightly higher than originally projected for the coming years. Combining the relatively better freight market, with a 10-year-low OPEX level in 2016 – the dry bulk industry remains on the road to recovery," BIMCO informed.