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Dry bulk shipping to stay in the red until 2017

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World Coal,

The dry bulk shipping market is not expected to return to profitability before 2017, according to the latest Dry Bulk Forecaster report from global shipping consultancy, Drewry, as commodity demand remains soft and supply in the dry bulk fleets continues to grow – albeit at a much slower rate.

“Dry bulk freight rates are expected to improve from the fourth quarter [of 2015] onwards,” said Rahul Sharan, Lead Research Analyst for Dry Bulk at Drewry’s. “Drewry’s view of a more stable supply-demand balance hinges largely on the expected improvement on the demand outlook and an anticipated moderate growth in the supply perspective.”

The global dry bulk fleet grew by just 2% in the first nine months of 2015 to 773 million DWT. Meanwhile, figures from shipping association BIMCO, showed a significant decline in dry bulk carrier orders received this year by the three big shipbuilding nations (China, South Korea and Japan).

New orders totaled just 11.3 million DWT compared to 58 million DWT over the same period in 2014, despite the lowest new-build prices since 2003.

“The fact that ship owners have refrained from ordering new dry bulk ships despite the low new-building prices is positive for the future of the dry bulk market,” said Peter Sand, Chief Shipping Analyst at BIMCO.

However, demand will remain weak with coal imports to India one of the few bright spots. The iron ore trade is only expected to grow moderately over the next few years, while coal imports to China have slumped and are not expected to recover soon, according to Drewry.

In October, BIMCO reported that Chinese coal imports had fallen by 51 million t this year, while Indian imports only partially offset this, recording a 16 million t growth. Average sailing distances were also down as South African exports of coal to Asia have all but dried.

As a result, “a recovery to the point that shipowners start earning profits will remain elusive for at least another year,” concluded Sharan.

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