The welcome surge in dry bulk market’s spot earnings at the end of 2016 is unlikely to last long into 2017, according to Maritime Strategies International (MSI), which predicts a depressed year for rates.
While iron ore trade undershot its expectations, coal trade overshot them with geographical imbalances playing a key role. However, MSI believes the short term support factors will have unwound in a matter of weeks.
Chartering of Capesize vessels for iron ore out of Brazil and Australia for January loading had slowed before year-end, dragging down spot rates. French nuclear power capacity is set to resume output in January, placing downwards pressure on Panamax coal demand, coinciding with a slowdown in grains trade from the US Gulf, MSI informs.
“In our Base Case there is little to suggest any significant changes to the market through the remainder of 2017 and it is MSI’s view that freight rates will remain depressed. Overall, we forecast deadweight demand growth will broadly match supply growth at around 3-3.5% year on year,” Will Fray, Senior Analyst at MSI, said.
“On this basis we see little reason for freight rates to move meaningfully, other than for short-lived or localised spikes,” he added.
In the longer-term, MSI forecasts for 2018 and beyond are still positive but have come down since the last update, mainly as a result of a slightly more bearish view of Chinese steel production, iron ore imports and European coal imports.