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Good editorial by HSNHome / Shipping News / Hellenic Shipping News / Dry bulk shipping market recovery will be a long, hard-fought battle Dry bulk shipping market recovery will be a long, hard-fought battle in Hellenic Shipping News 13/05/2016 Anyone who expects a strong rally in dry bulk market rates to end the industry’s downturn will be bitterly disappointed. By contrast – and that’s a good thing by the way – the freight market’s recovery will take time and will come in small steps, which means it will be more sustainable in the long run, claim shipbrokers. According to the latest weekly report from shipbroker Allied Shipbroking, there was “a sudden change in market sentiment this week in the dry bulker space, as the speculative rally that was driving up commodities prices over the past month started to lose steam over growing worries yet again as to the health of the Chinese economy. Over the past month we have seen a strong growth in production levels and a build-up of inventories within China (the world’s largest consumer of commodities). However as imports started to ease within April compared to those noted in March, many traders are now ever more concerned as to the levels of real demand and if it is capable of supporting the most recent price hikes”. According to Allied’s George Lazaridis, Head of Market Research & Asset Valuations, “that’s not to say that everybody see this as a turn towards ever softer demand levels, but more so a case of a slower paced recovery that is considered healthier and more maintainable than the fast paced frenzy that was noted in March. Prices for iron ore fell sharply today, dropping once again below the US$ 60 per tonne, while futures in Shanghai fell the most since trading began in 2009, all on the back of fresh figures point towards ever increasing port inventories in China. These big increases in imported volumes were the prime driver for much of the price hikes noted during the past 2 months, though as it seems now the market fundamentals are not there at the moment to quickly absorb these imports, while it looks all the more likely that the stockpiling served other purposes as noted previously on past reports rather than real demand. Lazaridis noted that “this has been greatly reflected in the dry bulk freight market these past two weeks, with the dry bulk indices losing their upward momentum in its entirety and now looking to correct back to softer figures. As things stand now it looks as though many rushed to get their hopes up as to how well the market will be able to hold for the remainder of the year, feeding off their sentiment from the recent rally and looking optimistically as to the prospect that the worst was now behind us and there was nothing but improvement in sight. The reality is far from this and it is more evident now that there is still a lot of work to be done to bring a better balance to the market”. Meanwhile, he added that “the fleet is still increasing even at an only marginal amount, while demand is still lagging behind and will take several more months before it can catch up to the current carrying capacity of the fleet and this only if it keeps on track with its current performance. Though many fear that there are still a lot of factors which could dampen global trade demand, there are still signs that under the right conditions and economic policies we might be able to bump up economic growth in key economics and in turn help provide additional boost to trade (though its important to note that even under the best case scenario we are not talking about any spectacular boost to say the least). It now looks as though there is a possibility the same market trend, as that noted during the same period last year, will characterise the May-June period, while there is still hope that we may see another small rally appear at some point during the summer months. It’s not all that bad though, as if we take the optimistic scenario that trade will continue to grow at its current annual rate, it becomes more and more unlikely that we will hit another low similar to that noted back in February”, Allied’s analyst concluded. Nikos Roussanoglou, Hellenic Shipping News Worldwide |
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