The prospects of dry bulk rates in the short to medium term are cause for optimism, with fleet supply ultimately lower than demand growth expectations, according to BIMCO. While fleet growth is expected at 2.7% this year, and 2.2% in 2023, capacity supply is expected to only grow by 1% for the rest of 2022 and by 0%-1% in 2023. That is due to lower speeds related to new efficiency regulations that come into effect from January 1, said Niels Rasmussen, chief shipping analyst at the world’s largest shipping association. He expects the Carbon Intensity Indicator and the Energy Efficiency for Existing Ships Index to cut supply by 2%-3%. New vessel contracting has reached the lowest level since 2016, with the orderbook at 7.5% of the fleet, while demolition is expected to pick up as owners find their vintage tonnage will no longer be competitive, he said.

Tonne-mile demand growth meanwhile is estimated in the range of 1%-2% this year, and 2%-3% for 2023, he told an outlook webinar, even as volume growth has been reduced due to growing global economic concerns. “Overall, we expect that demand will grow faster than capacity supply and improve market conditions.”

Year-to-date bulk volumes have increased by 1.9% compared with the year-earlier period, with minor bulks continuing to lead the way. While iron ore volumes have disappointed, dropping by 0.5%, grains trades have so far slumped 3% given Russia’s invasion of Ukraine in February, said Mr Rasmussen. He added that although grain shipments have started from Ukraine thanks to the safe corridor, they are unlikely to reach pre-invasion levels, with overall grains trades expected to see growth of 2.3% based on strong wheat harvests from Russia and Canada.

The European Union’s ban on Russian coal has boosted average hauls, with imports rising by 20%, while helping to support spot freight rates. Alternative supplies have mostly been sourced from South Africa, Colombia, the US, and Australia.

China’s economic growth is at its lowest since 1990, with bulk imports sliding by 5.5% in the year to date, he said, adding that stimulus measures by the government should see a recovery in iron ore demand later in the year. However, BIMCO expects a global contraction in steel demand for 2022 as key economies face weaker production, apart from India which is reporting stronger growth. “Compared to our last update, the global economy is facing stronger headwinds, and slower growth in China is of particular concern,” Mr Rasmussen said. “The risk of a global recession has increased as central banks combat high inflation rates through a combination of increased interest rates and a reduction in fiscal stimulus.”