The Baltic Dry Index, a measure for the price of shipping bulk commodities, has made a wavering comeback since plunging like a stone in the fourth quarter of 2008:
Broker Icap now makes the point that seaborne dry bulk trade has recouped almost all of its lost volume, drawing close to record highs from before the crisis on a demonstrable economic recovery in emerging markets, improved trade finance and cheap credit.
Yet the Baltic Dry Index hasn’t followed suit completely.
One factor contributing to the muted response is the big unknown related to vessel supply in 2010.
As Icap points out in its January shipping report, at the beginning of 2009 the dry bulk orderbook stood at 70 per cent of the fleet size. The financial situation inevitably meant a large number of these orders would be cancelled.
Market opinion, however, was divided over the rate of cancellations, with estimates ranging anywhere between 10 to 60 per cent of the total orderbook. Shipyards, meanwhile, were particularly unwilling to reveal the state of their orderbook cancellations. Only now, a year on, do we get some idea of the rate of cancellation that took place in 2009.
As Icap state deliveries appear to have turned out like this:
At the beginning of 2009, the number of dry bulk carriers (10,000 dwt+) which were contracted to be delivered from 2009 onwards (inclusive) stood at 3,450. During 2009, there were 339 dry bulk carriers reportedly contracted, lifting the total number of vessels for the period to 3,789. However, looking at the period again with the latest data shows, 3,601 vessels built or on order from 2009 onwards. Around 5% of the orderbook has disappeared, or 188 orders, which are believed to have been cancelled. Combined with the previous cancellations from pre-2009, we have now seen around 15% of the total orderbook removed, while some others are likely to have been indefinitely postponed.
Meanwhile, there are still record-high newbuilding deliveries set for 2010. The latest data, according to Icap, forecasts around 1,400 dry-bulk-carrier deliveries this year.
The outlook for freight rates will depend on the rate at which these are achieved.
According to the broker:
At no point during 2009 did the rate of delivery exceed 60 vessels in one month – but even if this rate of delivery were maintained throughout 2010 it would still equate to slippage of around 50 per cent. However, in light of the sheer size of the orderbook, and despite high levels of slippage, the market still faces the propsect of continued tonnage growth.
Here, for example, is how that dry bulk orderbook stacks up in graphic terms:
Related links:
And now weather-related shipping congestion – FT Alphaville
Prepare for a junk-bond deluge in shipping- FT Alphaville
Welcome to the sub-marine crisis - FT Alphaville