Maritime Strategies International is bearish on the prospects for the dry bulk market looking ahead into next year. Market dynamics have shifted to negative over the past few months, driven by weakness in China’s steel industry, the London-based consultancy said in a monthly review. That is the biggest concern for the bulker markets in 2022.

Iron ore trade has not yet been affected by the downturn in steel output due to stockpiling efforts as prices dropped by half to $100 per tonne, it said. Inventories are at multi-year highs of more than 155m tonnes. While steel production cuts have been attributed to improving air quality ahead of the winter Olympics in Beijing in February, as was the case with the summer games in 2008, the dynamics are very different this time round, it added.

First, the sharp drop in steel output in China has occurred far ahead of the event and at a time of “severe pressure” on the country’s property sector. In 2008, there was a massive stimulus package amid the global credit crisis. Second, China is looking to limit 2022 steel production to this year’s level, which is heading for a five-year low. Congestion, which had added positivity to the market this year, is meanwhile expected to continue to unwind, MSI said, adding that there will be volatility given periods of weak demand.  While the above will be more acute for the capesize market, other segments will not be immune to the downturn, MSI said.

Based on its expectations on congestion and trade, MSI forecasts the demand for bulkers in deadweight tonne terms to remain flat next year versus 2021. “Bearing this in mind, an orderbook equivalent to 7% of the fleet starts to look much larger than many analysts like to point out,” MSI said, adding that the orderbook is front-loaded. It expects about 29m dwt to be delivered next year. In a year of no growth in demand, this is negative for earnings.”