Multiple shipowners warn that the dry bulk market situation will be severe in the coming year!

Recently, several well-known dry bulk carrier owners have been pessimistic about the short-term forecast of the dry bulk shipping market. However, in the long run, there are still positive factors.

As mentioned above, the BDI index has experienced a surge since September, reaching 2105 points at one point, followed by a decline. After entering November, the BDI index has shown a continuous increase in recent times. Yesterday (November 19th), the BDI index rose significantly by 62 points to 1820 points, reaching a high of over 7 months. However, recently, several senior leaders of well-known shipowners have expressed that the dry bulk market is expected to be pessimistic in the short term.

Short term market expectations are pessimistic

Lauritzen Bulkers expects the market to be severe in the coming months.

Lauritzen Bulkers, a well-known Danish dry bulk shipping company, stated that the dry bulk shipping market will face a severe test from the next period of this year to the first quarter of 2024. According to Danish financial media Shipping Watch, the CEO of the company, Niels Josefsen, said, "In the coming years of this year, freight rates will experience a significant decline, and as we enter the first quarter of 2024, freight rates will continue to do so."

For why such a judgment was made, it was stated that we predict that the main reason for the sluggish dry bulk market is due to China, which has been in a historic real estate crisis in recent times. And such a crisis has greatly affected the freight rates of shipping goods such as coal, grain, and iron ore.

Josefsen also stated that high interest rates and inflation in the United States and Europe will be an important factor affecting the dry bulk shipping market. In addition, led by Europe and America, central banks around the world are currently using interest rate hikes as an effective tool to curb high inflation. It stated, "Weak demand and interest rate hikes will also have a decisive impact on the cost and freight of building new ships."

Norden predicts an overall pessimism in 2024.

Norden, another well-known shipping company from Denmark that operates both oil tankers and dry bulk vessels, also holds a relatively pessimistic view on the dry bulk shipping market for the entire year of 2024.

As Xinde Maritime Network introduced in its article "Shipowners: The Dry Bulk Shipping Market Outlook is Optimistic, but Next Year Will Be Difficult", its CEO Jan Rindbo recently stated in a media interview that the dry bulk shipping market next year (2024) looks to be full of difficulties and challenges.

Consistent with Niels Josefsen's view, Jan Rindbo also believes that the current high interest rates in the US dollar and China factors are two important reasons for bearish dry bulk markets. Jan Rindbo said, "We now hope that 2024 can pass quickly because it looks like next year will be very difficult. High interest rates will suppress demand, and China's economic data currently looks worrying. The market will face both macroeconomic and geopolitical challenges.".

Ultrabulk believes that the dry bulk market has not yet bottomed out.

Similarly, Ultrabulk holds a similar view on the short-term dry bulk shipping market.

The company predicts that dry bulk shipping companies have already overcome a relatively difficult year of 2023, but the situation may become even worse in the future. Hans Christian Olesen, CEO of the company, said, "The current market cannot be said to be very good. In the short term, I believe that the market in the first quarter of 2024 may further decline compared to the first quarter of 2023. I also believe that 2024 may be very unstable. We only have one way to go. That is to ensure that we do not take too much risk."

In May of this year, the BDI index hovered around 1500 points, and Hans Christian Olesen had previously stated that the BDI index should have already bottomed out.

However, recently he changed his previous view and stated that 1500 points is not likely to be the lowest BDI value for some time in the future.

Greek female ship king: Black clouds are closed ahead of the shipping industry.

Coincidentally. Greek shipping company Navios Group, the actual controller of Navios Maritime Partners, a New York listed company, and Greek ship king Angeliki Francou, recently warned that the shipping industry is facing dark clouds ahead, and it is recommended that everyone be cautious and do a good job in risk prevention and control.

At a recent analyst conference call, the female ship king stated that the shipping industry is currently facing a series of ominous signs, including rising government debt, unprecedented monetary policy, geopolitical differences, and China's economic difficulties.

There are also different opinions.

During a recent press conference held by Yumin Shipping, a bulk carrier shipping company in Taiwan, Vice President Zhang Zongliang stated that the peak season of iron ore production is expected to be postponed to the fourth quarter, driving demand for cape type ships. The cape type index in October increased by 30% compared to January to September. Currently, Yumin's revenue in November is expected to be comparable to October, and the fourth quarter's operations will be better than the third quarter. Additionally, due to tight supply of bulk ships, the supply of ship tonnage is insufficient, Helping to boost future freight rates, it is estimated that the average daily rent next year will be higher than this year, and we are optimistic that next year's operation will be better than this year. Zhang Zongliang also revealed that the dividend distribution ratio of Yumin next year will be higher than this year, about 60-80%.

In addition, Zhang Zongliang also said that China's domestic demand is strong, with imports of major raw materials increasing by 18% to 1.4 billion tons compared to the same period last year in the first 10 months. Major miners are optimistic that iron ore production next year will be better than this year. The World Steel Association also estimates that global steel demand will grow by 1.8% this year and 1.9% next year, and the demand for cape type ships will steadily increase.

From the second half of 2024 to 2025, the market may improve

Although the executives of the aforementioned shipping companies are pessimistic about the dry bulk market in the short term. However, they also generally believe that in the long run, the dry bulk shipping market remains positive.

The CEO of Norden mentioned above, Jan Rindbo, stated that although the dry bulk cargo market in 2024 will be full of difficulties and challenges, after 2025, all elements of the dry bulk shipping market will be ready, and we will see an improvement in the market.

The above judgment is mainly based on two reasons.

The CEO said, "Looking ahead, we can see that the current volume of new ship orders is at a very low level, while at the same time, market demand is still growing. Despite facing macroeconomic headwinds, we still see an increase in freight volume." Rindbo also introduced his second reason for being optimistic about the dry bulk shipping market in 2025. It stated that "increasingly strict environmental regulations may further phase out old ships, which is also a good thing for the supply side of the market's transportation capacity. Therefore, in the long run, we believe this is positive for the market."

In fact, Tan Zijian, Deputy General Manager of Hong Kong Minghua Shipping Co., Ltd., a dry bulk shipping business unit under China Merchants Shipping, recently stated in his acceptance of the Xinde Maritime Network Transfer Method that from a supply and demand perspective, the dry bulk market is currently in a period of adjustment with a high level of decline. While demand is weak, he also sees a slowdown in the speed of capacity growth.

Many shipowners are optimistic about the future of the scattered market, but there is uncertainty in the choice of clean energy for ships, which has led many shipowners to be particularly cautious in new shipbuilding. Such concerns have reduced speculative shipbuilding behavior in the market.

It further cites data indicating that currently, the on hand orders of global bulk carriers account for only 8.1% of the existing fleet capacity, which is far lower than 78.2% in 2009 and 12.2% in 2019 before the pandemic, based on deadweight tons. The industry is undergoing supply side reforms, which will ensure the healthy and orderly development of the market in the coming years. "Hans Christian Olesen also stated, 'Although the short-term market may not look optimistic, we are actually in a very good position because we will not see many new ships entering the market in 2024.'"

Niels Josefsen also said, "Due to limited new ship orders, there is not a large number of flexible ships entering the market. Therefore, we expect the market to be positive in the second half of 2024 and 2025."

Zhang Zongliang from Yumin Shipping also stated that currently, shipyards mainly focus on building container ships, and the order rate for new dry bulk ships is relatively low. In addition, shipyards have reduced production capacity and delayed delivery due to human factors, which will help curb the supply of bulk ships. It is estimated that bulk ships will only be delivered gradually after 2027.

There are other positive factors in the market

In addition to the positive factors brought about by the supply side of market transportation capacity mentioned above. The leaders of these shipping companies also introduced some other positive factors within the market.

For example, although Josefsen predicts that the dry bulk market may go through a long and difficult journey in the next six months, he also sees some bright spots in the market that are expected to turn the tide. It said, "For example, as we may see a slowdown in inflation, this may lead us to see European and American countries begin to lower interest rates in the second quarter of 2024, which will help improve the economy."

As the head of a US listed company, Angeliki Francou stated that although the horizon is shrouded in dark clouds, the macro environment is "not bad". One key positive factor she pointed out is the strength of the US economy, which she described as generally healthy. However, she also pointed out that the US treasury bond is currently at the highest level in peacetime, which is a risk that needs attention.

In addition, the restricted passage of the Panama Canal may also offset some of the negative factors in the market.

As Sindh Maritime Network recently introduced in the article "Panama Canal is not allowed to pass! Ships are forced to detour 10000 nautical miles", due to severe drought in Panama, the number of ships that can pass through the Panama Canal has significantly decreased, resulting in a large number of ships having to detour to reach their destinations, which has to some extent absorbed some of the transportation capacity and helped the market restore balance.

Josefsen said, "There are many ships waiting in the Panama Canal, and they can choose to sail longer distances to bypass the canal, or stay and wait. Regardless, this means that transporting each batch of goods requires longer sailing times and more ships to transport the same goods. So this is a favorable aspect for the market." Josefsen also mentioned, The Amazon River is currently experiencing a similar drought situation This means that the ship cannot transport at full capacity, so it must reduce the cargo on board. Similarly, this means that more ships are needed to transport the same amount of goods

Chinese factors are crucial

Hans Christian Olesen stated that the Chinese factor is crucial when discussing the dry bulk shipping market. It indicates that 35% of global dry cargo transportation ultimately arrives in China, which is also the main reason why evaluating the dry bulk shipping market must first consider the Chinese factor.

Josefsen believes that the economic stimulus plan planned by the Chinese authorities may have a positive impact on the market. He also said that some media reported that China would raise its budget deficit target for 2024 so that it could issue more treasury bond to revive the economy. But these stimulus plans often take some time to take effect.