Slowing dry bulk supply growth combined with a new China stimulus package are set to provide added impetus to vessel earnings, says a top shipbroker. The orderbook is “substantially smaller today” when compared to the beginning of the previous stimulus cycles in China, says Arrow Shipbroking. “The orderbook was 80% of the fleet in November 2008 when the Chinese government introduced its stimulus package to counter the effects of the global financial crisis,” it said.

“There were two other notable downturns over the last decade; one in 2011-12 and another in 2014-15. China’s response to those were the same; a stimulus was introduced in July 2012 and another in November 2015. At the time, the [dry bulk] orderbook was 26% and 12% of the fleet, respectively. Today, we are at the beginning of another stimulus cycle and the orderbook-to-fleet ratio is only 6.9%.”

Arrow said the number dry bulk newbuilding orders placed so far this year is the second lowest number of ships on record and is well below the average contracting per year over the last two decades. Lack of or expensive newbuilding financing, as well as regulatory and technological uncertainties have…put a cap on contracting activity. “With only 5.5% of the fleet on order, the supramax orderbook is at its lowest on record. The panamax orderbook stands at 6.4% of the current fleet, the smallest in two decades.”

Capesize newbuilding orders number just 10 for the year-to-date against an annual average over the past decade of over 90 ships per year. In the panamax/kamsarmax segment just 22 orders have been placed so far this year against the annual average between 2010 and 2019 of 155 ships.

In the smaller segments, orders for handysize and supramax/ultramaxes number just 20 and 64, according to Arrow figures, against annual averages of 208 and 155, respectively. Unlike the previous cycles, Arrow says improving vessel earnings are not expected to trigger another round of aggressive ordering. “Lack of or expensive newbuilding financing, as well as regulatory and technological uncertainties have been, and will continue to put a cap on future contracting activity,” it said. Arrow expects limited fleet growth over the next 18-24 months as a result.

The shipbroker adds that even if ordering picks up in the coming quarters, which it does not anticipate, it would not have any significant impact on fleet growth over the next 12-18 months as the earliest available delivery berths are currently in the first and second quarter of 2022.

Arrow said it expects dry bulk seaborne trade to shrink for the first time since 2009, but the drop in volumes are likely to be “smaller than previously expected”. However, the shipbroker said shipments are set to “rebound strongly” in 2021 as demand outside of China catches up.