The dry bulk market is poised to retain its strength in the long term as demand growth will outpace fleet expansion, according to Drewry. In its base case most-likely scenario, the compound annual demand growth rate from 2020-2026 is expected at 3.8% compared with fleet growth of 2.6%, Drewry lead dry bulk analyst Rahul Sharan told the Association of Bulk Terminal Operators annual conference.

Demand growth will be led by minor bulks at 5.1%, followed by grains at 3.8%, iron ore at 2.7% and coal at 2.2%. Global steel production could rise by 3.9% over the forecast period. The base case assumes that global economic recovery will continue into next year, amid localized lockdowns related to the coronavirus, while the trade spat between China and Australia could remain. In addition, International Maritime Organization efficiency regulations should force a reduction in vessel speeds and discourage the use of non-eco engines from 2023.

As of the end of September, 61% of the fleet was non-eco, while about 10% was more than 25 years old, making the latter prime candidates for scrapping within the next two years, Mr Sharan said.

One-year time charter rates of about $30,000 per day could well be sustained, he said.

But China’s policies favoring scrap use and domestic iron ore production, combined with the drive for greener energy, especially in emerging economies, could provide risk factors. In addition, a deterioration in trading relations between Peru and the US could be a negative for the smaller-sized bulkers.

Inefficiencies have been providing support to the dry bulk market this year as has the de-containerization effect of grains and steel, but with container rates showing signs of softening, that may put pressure on bulker rates, said Mr Sharan.

Coal was proving to be an important trade this year with low inventories in China and India amid an energy crisis, he said, although high coal prices, above $200 per tonne may deter imports.

Grains have also been strong, with growth led by Australia, followed by Argentina and Canada. Cement trade gains have been led by Turkey, while clinker trade growth has been driven by Vietnam and Indonesia.

While he sees a decline in rates in the coming two to three months due to seasonality, the market could stay “high” through to 2023 or 2024 after which a gradual softening could be expected.