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Oversupply to affect bulker rates: 2011

36922 fcras 9/12 2010 06:37

PostTime:2010-12-09 08:11:24

An oversupply of vessels is expected to keep freight rates from flying as high as in recent years said a relative shipping report from BIMCO's analyst Peter Sand.

Still, there will be moments in 2011 where rates will spike due to inefficiencies in loading and discharge ports.

Steelmakers in China, the world's biggest iron ore buyer, need to raise prices to pass on higher raw-material costs as demand slows in Winter. But Winter is a slow season for steel consumption, as construction work in Northern China will normally be suspended. Steelmakers are therefore left with eroding profits and may slow down demand for imported ore resulting in lower freight rates, particularly in the Capesize segment.

"Thus BIMCO reiterates its forecast of increasingly volatile Capesize freight rates movements going forward. Meanwhile, the smaller segments are predicted to continue along the recent trend as being less correlated with Capesize rates but also remain in semi-depressed condition, with Handysize trading in the intervals between USD 10,000-15,000 per day with Supra and Panamax trading in USD 15,000-20,000 per day for the coming months.

An influx of new tonnage into all segments is expected to limit the upside in freight rates. Vale, the world's largest iron ore exporter, is scheduled to take delivery of the first nine 400,000 DWT Very Large Ore Carriers out of its total orderbook of 17 VLOC's during 2011.

In a falling freight rate environment for Capesize vessels this could turn out to be an expensive adventure into ship owning. But at the end of the day, Vale may receive from the markets what it wants most ? low charter rates ? due to massive oversupply of Capesize vessels and VLOC's" said Peter Sand.

Supply-wise, the number of ships and amount of deadweight in the orderbook has been stable throughout the last two months. This indicates that orders are placed at the same pace that ships are being delivered. In particular, dry bulk owners have not hesitated to rush back to the yards to order new vessels.

This happens only one year after owners rushed to the yards for cancellation inquiries and postponements request to do whatever it would take to avoid the once ordered vessels from being built or delivered on time.

According to the report, the active fleet has grown by 14.2% so far in 2010, caused by deliveries of 67 million DWT in the form of 818 new built vessels offset by just 5 million DWT being demolished. Year-to-date deliveries in Capesize segment amount to 168 ships comprising 30.2 million new DWT, resulting in an increased fleet size of 19.5% so far in 2010.

At the beginning of 2009, 823 Capesize vessels were active, less than two years later that number has grown to 1123 vessels ? a fleet increase in DWT of 42% in less than two years. Despite a large number of deliveries in 2010 the orderbook to active fleet ratio remained as high as 53% by end-November.



Dry Bulk Shipping - Oversupply of ships is bound to keep freight rates from flying high

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