Bulk carrier market set to improve

PUBLISHED : Wednesday, 04 August, 1993, 12:00am
UPDATED : Wednesday, 04 August, 1993, 12:00am

THE prospects for the bulk-carrier freight market will improve steadily after weakening through to the end of this year, according to a UK-based Ocean Shipping Consultants study.

The study says Panamax time charters will strengthen by 25 per cent and the market for Capesize bulkers would improve by at least 30 per cent.

The considerably more volatile spot market was set for even sharper gains, it adds.

The report says that the bulk-carrier demand is set to record a marginal decline for this year to about 6.76 trillion tonne-miles - an index figure based on the average shipping distance and tonnage involved.

''However, stronger demand in the steam coal sector and a recovery in steel raw material demand will result in some considerable increases in total demand beyond this date,'' it says.

It predicts that the demand increase would accelerate most sharply after next year, with a rise of 11.7 per cent between 1994 and 1998.

''It is forecast that demand will be running at some 7.64 trillion tonne-miles at the end of the period,'' the report says.

In the bulk and combined carrier fleet sector, the study says the emphasis on the dry bulk sector will continue.

''Renewed growth will see total fleet capacity reach 252.2 million deadweight tonnes (dwt) by 1998 - an increase of 6.9 per cent over 1992 levels,'' it says.

It forecasts that the 10,000 dwt to 25,000 dwt and 80,000 dwt to 100,000 dwt sectors would contract while both the Handysize and Panamax sectors would show prolonged - if somewhat uncertain - expansion.

Despite strong bulk carrier orders, the scrapping of older combined carriers would result in some limitation of fleet development in the Capesize sector in the medium term, ahead of significant renewed development after 1995, the study says.

In the Panamax fleet, the study says the outlook, which would remain the major market indicator for the dry bulk fleet as a whole over the period, was fairly positive.

It predicts that while the short term demand would expand at a rate considerably less than anticipated supply, productivity was expected to peak in late 1996 at some 4.7 per cent above current average levels.

Utilisation rates would reach a level of some 25,100 tonne mile/dwt at that time, which would be significantly lower than productivity recorded at the peak of the market in 1989.

In the Capesize bulk carriers sector, the study says although demand was set to progress strongly in the short term, the supply-demand balance would weaken.

''These effects are forecast to be concentrated over the period to mid-1994, and will be followed by a very rapid upturn in productivity to peak at the end of 1995,'' it says.

At that time 100,000 to 150,000 dwt productivity was set to reach 56,500 tonne miles/dwt - with this being significantly higher than noted at any time since 1986, it adds.

The study says in the Panamax bulk carrier sector, based on its anticipated structure of operating costs, capital costs and charter revenue in the period to 1994, only the cheapest second-hand purchases would be recording positive returns on investments.