Near-term prospects for the bulk sector appear to be positive but market correction has come at a price, delegates attending Bulk Terminals 2018 learned last week.
The bulk segment is slowly but steadily working its way out of the doldrums with a positive cash flow, Frachtcontor Director Frank Grone said at the annual conference of the Association of Bulk Terminal Operators.
The trigger for recovery, he said, has been a healthy growth in demand, which in 2017 was in order of 4% with 3% expected for this year. Fleet growth was moderate in 2017.
“Congestion and slow steaming have been two ingredients for recovery as it kept tonnage off the market. Slow steaming is still the flavour of the month, but a 3 to 4 knot increase in speed could kill the upturn,” Grone warned.
As far as bulk commodities are concerned, demand for iron ore has been the major driver and the iron ore market should increase by about 2% this year and continue upwards with suppliers in Brazil and Australia ramping up production. Demand from the Chinese market is still there he said, and locally produced product is nowhere near the quality of imports. Coal is also a market driver with a 7% increase in Chinese imports and Indian imports up 6%.
Growth looks positive and fleet growth manageable, however, there are a number of challenges, Grone said. These include the trade conflict between China, the US and EU, which would affect the shipping market negatively.
While the immediate impact of restrictions on soya bean trades may be positive in the short term for South American suppliers, ultimately China will have to turn to the US for supplies, Grone said, adding that trade barriers are generally negative in the longer term.
Another area of uncertainty is what will happen as a result of the global sulphur cap due to come into force in 2020.
Only 1200 owners have decided to retrofit scrubbers and there are 60,000 vessels that need to be dealt with. For the remainder of vessels needing to move to low sulphur products, delivery can be expected to be tight, Grone explained. The upside for tanker owners is that there is likely to be movement of gasoil from the Middle East, he said.
“The challenge for shipowners will be how to pass the costs on to charterers and to realise the competitive advantage of installing scrubbers. Another strategy may well prove to be partnerships between charterers and owners of ships with scrubbers.”