Dry bulk: can the boom resume?
Looking for what to expect in the dry bulk markets? The thermometer generally used to gauge the health of the dry bulk market is the Baltic Dry Index, and in the first week of October last year it saw enough surges to persuade some pious thinkers to predict a ” super cycle” to come as he reached a high level. of 5,650 points. At the time this was written, shortly before the end of the year, it was around 2,217 points.
So what awaits us? The Athens-based Signal Group notes that “the big challenge for the evolution of maritime demand for dry vessels is still the performance of the Chinese economy”. The Signal Ocean platform relies on artificial intelligence and cloud computing to analyze the shipping market.
“We have estimated the growth in demand in ton-days for this  by main dry bulk carrier size and we saw a clear upward trend of growth for the Capesize segment, which boosted Capesize freight rate sentiment in October to the highest level since 2009,” Signal said. “The question now is what about 2022? There are some early indications pointing to a weaker expansion of growth in China, the world’s second largest economy, which will influence the evolution of transport demand. shipping for Capesize vessels.
According to Signal, the market consensus is that the growth of the Chinese economy will range from 5% to 5.5% in 2022. “The Chinese Academy of Social Sciences and the People’s Bank of China estimate that the potential growth rate of China will be around 5.5% for 2022. Chinese growth slowed in the second half of this year, and the figure is expected to be below 4% for the last quarter. However, official growth estimates for the full year will be released in mid-January.
LARGEST MARITIME SECTOR
Many people will be watching this Chinese forecast closely, as the dry bulk market accounts for about 54% of total maritime trade, which equates to more than 5 billion tons per year or 70,000 trips per year, according to statistics cited by a leading operator, Eagle Bulk Shipping, based in Stamford, Connecticut, with 60% of dry bulk trade represented by three commodities: coal (24%), iron ore (27%) and grain (9%). By the way, soybeans and various cereals are counted as cereals.
Even though bulk carriers make up a large part of the global fleet, they haven’t represented much of a market for shipbuilders in recent years. According to a third quarter investor presentation by another leading player, Golden Ocean Group, “the net growth of the dry bulk fleet [has been at its] lowest in 30 years” and “the backlog is expected to remain muted due to limited slot availability ahead of 2024 due to price increases, availability of financing and new issuance regulations”.
Golden Ocean Group (GOGL), meanwhile, in February last year, refreshed the age profile of its fleet by acquiring 18 scrubber-equipped bulk carriers for a total of $752 million from Hemen subsidiaries. Holding Limited, a company indirectly controlled by John Fredriksen, the company’s major shareholder.
The 18 vessels consisted of 10 Newcastlemaxes built in 2019-21 and 8 Kamsarmaxes built in 2020-21, GOGL said, adding that the move was in line with the company’s fleet renewal strategy.
ENTER THE HIMALAYAS EXPEDITION
One of the most interesting new players in the dry bulk market is Himalaya Shipping Limited (HSHIP), which started trading on the Oslo Stock Exchange under the symbol HSHIP in December 2021. The company is the brainchild of the tycoon Norwegian sailor Tor Olaf Trøim who, before setting out on his own, was often referred to as John Fredriksen’s right-hand man. His HSHIP business currently has 12 Newcastlemax 210,000 DWT LNG dual-fuel bulk carriers under construction at New Times Shipbuilding Co. Ltd. in China.
The average purchase price for the vessels is $69.3 million and deliveries are expected between April 2023 and September 2024.
The vessels can run on LNG or low sulfur fuel oil with enlarged 4,800 cubic meter VLSFO tanks providing round-trip flexibility. They are also ammonia ready, with Himalaya Shipping citing a “small cost” for upgrading to potential future fuels.
The company says it is ordering bulk carriers because orders are at a 30-year low and because much of the current fleet will not comply with new EEXI regulations which come into effect on January 1, 2023. ‘EEXI describes the CO2 emissions per tonne and mile of cargo. It determines the normalized CO2 emissions related to the installed engine power, the transport capacity and the speed of the vessel.
In short, notes Himalaya, “this means that all commercial vessels over 5,000 tons must meet a set level of CO2 emissions. Less fuel-efficient vessels will either have to carry out major renovations, reduce their speed or be upgraded. All of this, he says, could lead to an estimated 20% reduction in supply of dry bulk tonnage.
Does this mean a boom in shipyard orders? Not necessarily. According to HSHIP, shipyard capacity is down, with 166 shipyards closed in China. And if you can find a shipyard, finding financing could be another issue, HSHIP notes that the top 40 shipping banks have reduced their lending exposure to around $290 billion from around $360 billion despite a 25% increase. the size of the fleet over the last five years.
FIRST LNG BULK
The new HSHIP builds will not be the first LNG-powered bulk carriers in the world. That honor goes to two vessels built to serve South Korean steel producer POSCO and introduced in response to the IMO 2020 cap on sulfur emissions. The first of the pair, the Green HL, arrived at POSCO
Gwanyang Works on January 20, 2021, with a shipment of iron ore from Australia.
The 180,000 dwt Green HL is operated by Korean-based H-Line Shipping Co. under a long-term POSCO charter, and was designed and built, along with a sister vessel, by Hyundai Samho Heavy Industries Co. Ltd. POSCO supplied steel plates for the bodies of the ships and, in a first for a Korean steelmaker, 9% nickel steel as the cryogenic material for the fuel tanks.
End-user long-term charter support may well be the key to determining which bulk carriers will actually be built in the next few years. Interestingly, an ammonia-fueled bulk carrier project involving Sumitomo Corporation, one of Japan’s giant and versatile general trading companies – sogo sosha – will see the vessel owned and operated by Sumitomo itself, and powered by ammonia. ammonia supplied by Sumitomo, which is implementing initiatives for the entire maritime ammonia supply chain which includes plans to launch an ammonia supply business to supply ships in Singapore.
The vessel itself will be designed and developed in cooperation with Oshima Shipbuilding, which has been manufacturing and selling dry bulk carriers in conjunction with Sumitomo since 1973. Measuring 229 meters (751 feet) by 32.26 meters (105.8 feet), it will have a port in heavy 80,000 -dwt range and is scheduled for 2025 completion.
Overall, this seems like a project that simultaneously delivers the chicken and the egg.