The dry bulk market is tipping towards owners as continuing healthy demand is set against slowing fleet supply, according to Precious Shipping. While tonne-mile demand is expected to grow by almost 2.1% this year, and 1.9% in 2023, supply growth is forecast at 2.2% and 0.4% over the respective periods, the Thai operator said in a newsletter. “With the inefficiencies in the net supply of ships due to Covid-19 related disruptions, this gap between supply-demand in 2022 and 2023 should widen in favor of the shipowners and we should see similar years as we had in 2021,” said chief executive Khalid Hashim.

Freight rates sky-rocketed in the past year as supply and demand was in perfect balance, with tonne-mile demand growth at 3.9% versus net supply growth of almost 3.6%, as estimated by Clarksons, he said.

Given the balanced supply-demand picture, rates will “react with extreme volatility with the slightest change in demand,” he said, adding that volatility was “here to stay”.

The dry bulk market was further tightened by lockdown-related congestion, deviations for crew changes, and delays due to ship quarantines. “We expect more fleet inefficiencies for 2022 as we do not see Covid-19 fading anytime soon, especially with China’s zero-Covid policy,” Mr Hashim said. “This factor will tighten net effective supply of ships, aided by the very low ordering activity in 2021. The fact that supply and demand have been in perfect balance since the middle of 2021, supply growth appears to be benign for the next few years, and growth in demand seems to be robust enough, that should lead to a reasonably good year in 2022.”

If net supply growth is affected by inefficiencies and slow speeds, then 2023 should also be a good year, given that world GDP growth is projected at 3.6% by the International Monetary Fund, he said. For the minor bulks, demand growth of 2.7% this year is met with net supply of 2.4% in the smaller geared segments in which the company operates. Higher levels of recycling are expected next year as new International Maritime Organization rules kick in. About 7.6% of the existing dry bulk fleet is more than 20 years old, which would make ideal scrapping candidates.