Dry Bulk Shipping Market Overview & Outlook

Market uncertainty due to slowdown in China

Q3 2023
Dry Bulk Shipping Market Overview & Outlook Q3 2023
Highlights

Demand Supply Supply/demand

China’s GDP could grow by an The current orderbook stands at Supply is forecast to grow 1-2% in
average of 4.9% during 2023-2024, 7.7% of the dry bulk fleet. Weak rates both 2023 and 2024. Lower sailing
but the outlook remains uncertain and fuel uncertainty are keeping speed is expected to limit supply
amid a recent economic slowdown. investment in new builds low. growth.

Iron ore shipments are estimated to Amid low fleet growth and a stable Demand is forecast to grow 2-3% in
grow 4.5% from 2022 to 2024. In market, we estimate that only 14 2023 and 1-2% in 2024. Longer sailing
2024, growth may slow due to mill. DWT may be recycled during distances will add to tonne miles
weaker Chinese demand. 2023-2024. growth in 2023.

Coal shipments could be 2.4% higher Lower freight rates than in 2022 and The supply/demand balance may
in 2024 than in 2022. In 2024, lower climate regulations are expected to marginally tighten in 2023 and
demand in advanced economies and cause sailing speed to fall 2-3% from stabilise in 2024. As such, freight
high mining in India could drive a 1- 2022 to 2024. rates in 2024 could remain around
3% drop in volumes. 2023 levels.

In 2024, grain shipments could

recover by 3-4%, as supply improves.
Between 2022 and 2024, grain
shipments may increase by 1.8%.
Dry Bulk Shipping Market Overview & Outlook
Market uncertainty due to slowdown in China

Demand In July, the IMF forecast the global economy to economic conditions in China, however, began
grow by 3% in both 2023 and 2024. This is a to deteriorate, giving rise to concerns. Several
In our base case scenario, we expect global dry slight improvement over their previous banks have cut their forecasts to below the
bulk cargo volume to grow between 1.5% and forecast, but still well below the 3.7% average government target, Barclays going as low as
2.5% in 2023 and between 1% and 2% in 2024. annual growth seen in the 2010s. Inflation 4.5%.
remains a key challenge in several economies,
Average haul is expected to increase between forcing central banks to increase interest rates, China’s economy is plagued by a real estate
0.5% and 1.5% in 2023, driven by sanctions on slowing down economic growth. crisis, high youth unemployment, deflation, and
Russian coal and higher iron ore and grain low consumer spending. This, alongside weaker
shipments from Brazil. exports due to worse economic conditions
abroad, caused the Caixin manufacturing PMI
to fall into contraction territory in July. To aid
the Chinese economy, the government has
announced support measures and lowered
interest rates further. However, it is yet unclear
whether this stimulus will be enough to halt
the economic slowdown. In a low scenario
where the government’s stimulus is ineffective,
we forecast dry bulk demand to grow by 0.5
percentage points less than in our base case in
2023 and 1 percentage points less in 2024.

A more positive demand scenario could occur if

The IMF forecast GDP in China to grow by 5.2%
China were to substantially increase economic
in 2023 and 4.5% in 2024, above the Chinese
stimulus. However, given China’s high debt
government’s target of 5% for 2023. Since June
Dry Bulk Shipping Market Overview & Outlook
Market uncertainty due to slowdown in China

after years of boosting public spending, we volume of new real estate projects. Chinese demand.
consider such a scenario unlikely. domestic steel demand could fall further during
the rest of 2023 and in 2024 if construction
activity continues to weaken.

This year, iron ore import demand in China has

outpaced steel production. Between January
and July, Chinese iron ore imports grew 6.9%
but iron ore inventories in Chinese ports
declined. The production of new steel
increased, as the availability of scrap steel in
China diminished due to weaker construction
activity. Over the second half of 2023, some
iron ore inventory rebuilding may occur in
China, thus supporting capesize ships.
In our base case, we estimate coal shipments to
Global steel production excluding China fell
We estimate global iron ore shipments to grow grow between 4% and 5% in 2023 and to fall
3.3% y/y between January and July, limiting
between 2.5% and 3.5% in 2023 and between between 1% and 3% in 2024. According to the
growth in iron ore shipments. Production in
1% and 2% in 2024. So far this year, steel International Energy Agency, global coal
steel exporting countries such as Japan and
production has increased 3.5% in China, driven demand could rise 0.4% in 2023, reaching a
South Korea dropped amid lower import
by higher steel exports, and causing a small new peak, before falling 0.1% in 2024. For
demand from China and higher competition
build-up in steel inventories. Domestic steel advanced economies in 2024, the agency
from Chinese steel exports. Furthermore, steel
demand has remained weak, as an increase in expects coal demand to decline faster than it
production in Europe continued to struggle due
demand from manufacturing and infrastructure increases in China, India, and Southeast Asia
to high energy prices and low domestic
was not enough to make up for a dwindling combined. Up until now in 2023, China has
Dry Bulk Shipping Market Overview & Outlook
Market uncertainty due to slowdown in China

driven the increase in global coal shipments. shipments to fall between 1.5% and 2.5% in grain harvests in Ukraine decline. The
Strong economic growth at the start of the year 2023 and to recover between 3% and 4% in movement of Black Sea grains has also become
followed by heatwaves in the late spring and 2024. In 2023, maize exports are expected to more challenging since the end of the grain
summer have caused fossil fuel electricity drop 12.4% before growing 11.1% in 2024, as agreement, although negotiations for
production to rise 5.3% y/y. However, coal exports from Argentina and the United States alternative solutions are ongoing. In India,
inventories have increased amid both higher recover. Soybean exports are estimated to restrictions on rice exports, including a ban on
imports and mining. As such, coal shipments grow by 10.2% in 2023 and by 4.3% in 2024. non-basmati rice exports starting in July are
into China could grow at a slower rate in the further tightening global grain supplies.
second half of 2023. In 2024, China’s coal
imports may continue to grow, since prices for Lastly, we expect minor bulk shipments to grow
imported coal are lower than for domestically between 0.5% and 1.5% in 2023 and between
mined coal. Safety concerns in some coal mines 2% and 4% in 2024. Since the second half of
in China have also emerged, which could limit 2022, minor bulk shipments have come under
growth in domestic mining. pressure from weaker global economic
conditions. In recent months, however,
The outlook for India, the second largest coal volumes have started to strengthen.
importer, also remains uncertain. So far in
2023, higher coal mining has caused imports to Minor ore shipments have increased due to
fall, even as electricity demand has increased. If due to increased production of aluminium and
India continues to successfully boost domestic manufacturing of cars. Fertilizer prices have
supplies, it could accelerate the decline in gradually fallen since the start of the war in
global coal shipments in 2024. Ukraine and demand could start to recover. If
Volumes of wheat and other smaller grains are
China’s economy significantly weakens during
expected to marginally decline in both years
Based on estimates from the United States the second half of 2023, a more negative minor
amid limited supplies. The war in Ukraine will
Department of Agriculture, we estimate grain bulk demand outlook could ensue.
result in another year where yields from the
Dry Bulk Shipping Market Overview & Outlook
Market uncertainty due to slowdown in China

Supply the lower investment in newbuilds. Over 3.1 million DWT have been recycled since
the start of the year, a 47.5% y/y increase,
The dry bulk fleet is expected to grow by 2.8% however recycling remains a small fraction of
in 2023 and by 2.1% in 2024. However, supply the dry bulk fleet. We expect recycling to reach
might grow by only 1-2% in 2023 and 2024 due 6.1 million DWT in 2023 and 7.5 million DWT in
to lower sailing speeds. 2024. Ship recycling will most likely remain
limited to older ships that have been made less
competitive by environmental regulations.

Deliveries are expected to reach 34.4 million

Deadweight Tonnes (DWT) in 2023 and 32.3
million DWT in 2024, slightly above 2022 levels.
Since our last update, expected deliveries for
2024 have increased by 3.9 million DWT to
include handysize and supramax ships that
Between January and July, bulk carrier
were previously unaccounted for. As a result,
newbuilding contracting fell 10.7% y/y, which
supramax deliveries are estimated at 13.3
caused the orderbook to slip to 7.7% of the dry
million DWT in 2024, making it the fastest Due to lower sailing speeds, fleet productivity is
bulk fleet. Uncertainty concerning alternative
growing segment that year. estimated to decrease by 1-2% in 2023 and 0.5-
fuels and weaker freight rates contributed to
Dry Bulk Shipping Market Overview & Outlook
Market uncertainty due to slowdown in China

1.5% in 2024. Since the beginning of the year, Supply/demand balance capesize was the only segment where freight
laden and ballast sailing speeds are down 2.5% rates improved compared to a year ago. These
and 1.8%, respectively. Ships have been Overall, we expect a marginal tightening of the were supported by stronger iron ore and
gradually slowing down since the start of 2022 supply/demand balance until the end of 2024. bauxite shipments, both in volume and average
due to a mixture of high bunker prices, lower Supply is expected to increase by 1-2% in 2023 haul, and by a low 2.2% y/y growth in the
freight rates and climate regulations. and in 2024, while demand growth is predicted capesize fleet. Across all other smaller
at 1.5-2.5% in 2023 and 1-2% in 2024. Under segments, rates slipped due to a decline in
We estimate congestion to remain close to the our low demand scenario, the supply/demand grain volumes, low growth in minor bulk
2022 average in both 2023 and 2024. So far in balance could weaken, particularly in 2024. volumes and an average 3.5% y/y fleet growth.
2023, congestion has marginally eased, and it is
tying up 0.3% less of the dry bulk fleet.
However, low water levels in the Panama Canal
and typhoon season in the Pacific could slightly
increase congestion during the rest of 2023.

Average dry bulk freight rates have weakened Spot rates could marginally increase during the
since the second half of 2022. In August, rest of 2023, compared to August levels,
Dry Bulk Shipping Market Overview & Outlook
Market uncertainty due to slowdown in China

provided that the Chinese economy does not

weaken further. The forward freight
agreements point towards slightly higher rates
during the rest of the year across all segments.
However, it is possible that freight rates will
not rebound to the levels observed during
March and April 2023, particularly among
smaller segments. Cargo volume growth is
expected to weaken during the second half,
compared to the first half, limiting gains.

In 2024, freight rates could remain around

2023 levels or even weaken as demand growth
slows. We expect lower growth in iron ore
shipments, and we believe coal volumes could
begin to fall. However, unlike in 2023, grains
and minor bulks could drive demand,
supporting the smaller segments. Lastly, rates
for supramax ships may get pressured as a
significant number of new ships are due to be
delivered.