Dry bulk shipping rates headed south this year

As the world fleet of coal and iron ore carriers grows faster than the demand for these commodities, shipping rates are predicted to fall for the second year running.

According to London-based Drewry Shipping, revenue for the largest dry bulk vessels may average $32,000 a day this year while last year's average was $37,552 a day. Meanwhile, Exim News quoted Martin Stopford, who is the head of research at London-based Clarkson, the world's largest shipbroker, as saying, "Owners are in for a rough ride".

As shipbuilders deliver new vessels and create a worldwide glut of carriers, owners are counting the cost of their earlier fleet expansion spree.

Capacity data

Drewry's statistics suggest that the capacity in the global dry bulk carrier fleet may rise 6.9 per cent this year and outpace the 4.5 per cent increase in trade in commodities. However, according to a Drewry official in New Delhi, "The party may be over, but shipowners are still in for a good time this year, as rates stay above historical averages".

Drewry says global dry bulk trade might reach 2.76 billion tonnes, up from 2.64 billion tonnes last year and 2.48 billion tonnes in 2004 with the world fleet of dry bulk ships set to expand to 371 million deadweight (dwt) or 6,540 vessels. The 'capesize' fleet is predicted to expand by 7.2 per cent to 118 million dwt, or 696 vessels and daily rates are expected to average $37,000 during the first quarter of the year.

Exim News goes on to say China's economic growth may slow down to between eight per cent and nine per cent this year, down from 9.4 per cent for 2005, according to the National Bureau of Statistics. "This threatens to tip the balance into oversupply, leading to a softening in rates", said Nigel Prentis, head of research at HSBC Shipping Services, a unit of HSBC Holdings.

Last year, the Baltic Dry Index (which measures shipping costs for a range of dry bulk ships on the most common voyages) fell by 48 per cent from record highs due to the increase in numbers of new ships and the easing of port congestion. However, average rates were still high at 3,371 compared with the average over the previous five years of 2,224.

London shipbroker Simpson Spence and Young (SSY) said in its monthly report that old ships accounted for 31 per cent of the world fleet of dry bulk vessels last year. This was due to operators taking advantage of the high freight rates by keeping ageing carriers in service. Ageing ships taken out of service to be dismantled fell 70 per cent by capacity in the past two years, according to the broker.

SSY said vessels aged 20 years or more with a total capacity of 106.5 million DWT were still in service by the end of 2005. SSY's statistics also reveal ships of 1.9 million dwt were sent to scrap in the last two years, compared with an annual average of 6.4 million dwt over past 10 years.

In contrast for oil tankers, ships aged 20 years or more accounted for just 12 per cent of the fleet. However this does, of course, reflect the ongoing compliance of tanker owners in the phasing out of single hulled tonnage.

The National Shipping Company of Saudi Arabia (NSCSA) is to buy at least nine very large crude carriers (VLCCs) and eight chemical tankers according to UPI, under a five-year acquisition programme. All the vessels being acquired, whether new or used, will be double-hulled. National Shipping currently has nine double-hulled crude carriers, nine chemical tankers, and four multipurpose roll-on-roll-off ships in service.

Qatar Shipping Co recently took delivery of its fourth tanker from a series of six 105,000 dwt vessels that will be used to transport petroleum. Ranjit Singh, technical manager, Q-Ship, accepted the MT Umlma at a ceremony held at the Hyundai Shipyard at Busan, South Korea.

Busiest port

The port of Singapore handled the most containers of any port city in the world during 2005 beating Hong Kong for the first time in seven years.

According to figures from the Maritime and Port Authority of Singapore (MPA) last year's throughput totalled 23.19 million TEU, an 8.7 per cent increase from 2004's 21.33 million TEU while Hong Kong's nine container terminals handled a total of 22.43 million TEUs in 2005, a two per cent rise over 2004, according to provisional figures released by the Hong Kong Port Development Council.

The writer is a Dubai-based marine consultant.