Clarksons expects dry bulk trade to increase by 3.8% year on year in 2017, building on the sector recovery from late last year amid an unexpected rise in Chinese demand for coal and iron ore. However, the trade growth projection was tempered by expectations for fleet growth of about 2.7% to 3.8% this year, which signals that scrapping will have to kick in to aid the recovery.

A relative recovery is expected in the dry bulk market, said Clarksons dry cargo analyst John d’Ancona while addressing the Mare forum in Singapore on Wednesday, but he cautioned that “this is still a difficult market. The forward freight curve has started to gain confidence but it is still very cautious. This gives us a message that the dry bulk market is still going to struggle for a while.”

Despite the caution, he noted that quite a few positive factors had emerged in the market in 2017. He highlighted the improved sentiment as reflected in the macro economy, in terms of freight rates and in the supply-demand balance in general, which is coming back in line. Another factor was the improvement in commodity prices and higher bunker prices, which are likely to keep freight supported as well. Mr d’Ancona said that demand worldwide was improving, which would focus on big infrastructure, boosting minor bulk demand.

Iron ore expansions from Brazil and Australia, and the rocketing coal trade in Southeast Asia, made dry bulk trade a safe bet, he said, adding that people tended to look to China and India for coal trades, but he believed the requirement for coal comes from many other countries in Southeast Asia, such as the Philippines, Malaysia and Vietnam.

On a less optimistic note, one of the major concerns remains the fleet growth in the first half of 2017. Mr d’Ancona said: “This is not just normal slippage into the beginning part of the year, but ships that were completed a year or two ago but were never delivered [as they were deferred].”

He said that scrapping seemed to have reduced from January last year, but added: “Interestingly, more vessels were sent for recycling in January 2017 as compared to the rate of scrapping in the second half of last year.”

A more immediate worry was the growing number of open shipments that have just completed their voyages in the fourth quarter. Also, there was a possibility for coal trade to wane on the back of the slowdown in Chinese enquiries as domestic production increased, he said.