The Daily View: A dry bull with stamina

THE dry bulk sector’s recent successes may not match the $300,000 per day rates that very large crude carriers owners have pocketed, but on Thursday the Baltic Dry Index broke the 3,000-point mark for the first time in more than two years.

It’s only the second time the BDI has reached those heights since May 2022.

The future looks rosy for bulker owners, especially if you own a capesize or two, and it may well be a more sustainable high than the bull run being enjoyed by the tankers.

A vast oversimplification of any shipping market is that more things to move on less ships means better rates.

The same is true in bulk, although the number of ships available is being constrained for several reasons. Vessels are slowing down in response to elevated bunker prices, plus changes in trade routes mean they are being utilised for longer. The journey iron ore takes from Guinea to China, for example, is much longer than the one it takes from Australia to China. Along with relatively modest fleet growth, the second half of the equation is being taken care of.

As for the first half, Chinese imports of iron ore and bauxite have made a strong start to the year. While coal imports have been soft, fears of gas shortages will likely tempt some nations, including India, back to coal, including China if energy demand dictates. Beijing will not allow the energy shortages of 2021 to be reprised.

Owners are bullish for the rest of the year. The chief executive of one company that has just finished selling off its newcastlemax fleet for a tidy profit said he may even consider jumping back in, such was his confidence in the market.

A look at the stock prices of some listed bulk companies tells you investors share that confidence. Eight shipowner equities were up an average of 37% year to date recently, two, Seanergy and Himalaya, were up well over 50%.

Is there a catch? Well, there’s always the risk that global economies suffer so much as a result of the seemingly inevitable energy shock that they no longer need commodities in the same quantities. Some have ventured that price shocks might prevent buyers from buying for the time being.

But they will likely adjust. After all, if you need more coal, then you need more coal.

While the bulker owners at GenevaDry would love a rally akin to their tanker counterparts (“god-willing” was the response of one), you’re probably not going to see capesizes fetching $100,000 per day.

But it’s still been a good start to the year, and they may be smiling longer than their tanker-owning friends.

Joshua Minchin
Senior reporter, Lloyd’s List

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