The dry bulk shipping market is expected to see more modest levels of growth in the run-up to 2026, according to Rahul Sharan, lead research analyst for dry bulk shipping at Drewry.Speaking during a recent online event, Sharan said while modest growth was expected in all of its scenario assumptions, all indicators pointed to the likeliness of a ‘high-case’ scenario. In such a scenario a 4.2% compound annual growth rate was expected between now and 2026.“We are expecting global shipping demand for dry bulk to increase over the next five years. This has already been the case in the first few months of 2021. All indications point to shipping demand remaining strong in the dry bulk sector,” he said.One of the conditions of a high-case scenario is faster vaccination rollout to prevent further Covid-19 spread. “In such a case, global economic activity will increase unhampered from now, supported by these vaccine rollouts.”But, said Sharan, even with a subdued global economic recovery, with multiple Covid-waves persisting in the world, growth in demand was still expected, albeit somewhat lower at a projected 3.4%.Sharan said dry bulk growth was being driven by a growing iron ore trade and steel production as well as growth in coal and grain trades. “We are expecting growth in minor bulk commodities as well, which adds to the positive outlook.”Shipped iron ore volumes grew by 4.2% during the first half of 2021 compared to the same period in 2020.According to Sharan, there were some risks to consider in the outlook and he said it was important to keep a close watch on the Chinese. “The Chinese government’s policies favouring the use of scrap and domestic iron production could impact significantly on the iron trade.”The ongoing global drive for green energy expansion was also a risk as it had started to inf luence government decisions in emerging economies and it could result in reduced volumes of certain bulk commodities.Sharan said the ongoing China-Australia dispute was also impacting bulk volumes. China’s ban on Australian coal, for example, had seen an increase in Chinese imports from the US, Canada, Colombia, Russia and South Africa.Whilst many in the dry bulk sector have been talking about a new dry bulk supercycle, analysts are not so optimistic. “Commodity prices have staged a comeback and are hovering around or above 2007 and 2008 levels. This has fuelled talk of a commodity supercycle. However, while dry bulk freight rates and ship values are currently high compared to the past 10 years, they are very far from earnings seen during 2007-2008 – and there is little to suggest that they are heading that way,” said Bimco’s chief shipping analyst Peter Sand.Both he and Sharan point out that freight rates have been high during the first months of this year, and growth will be on the cards over the next few years, but it is still modest when compared to several years ago.“In the first seven months of this year, Capesize rates have averaged $24 970 per day. In the same period of 2008, Capesize rates averaged $147 475 per day,” said Sand. He said while dry bulk volumes were growing they were not nearly at a level to justify any talk of a supercycle. "The Chinese government’s policies favouring the use of scrap and domestic iron production could impact significantly on the iron trade.– Rahul Sharan
