Dry bulk fleet growth and utilisation forecasts offer positive insights

 

Deliveries delayed

1H20 was expected to be heavy on deliveries: we had braced ourselves for the highest gross deliveries within six months since the first half of 2016. However, the virus had other plans. Reduced labour force caused construction delays in newbuilding vessels. Many shipyards in China shut down, with some even declaring force majeure. Other yards in the region were also affected as they do too use parts from China which they did not have access to due to the lockdown. This means that we have avoided to some extent a significant influx of fresh tonnage supply during the first months of 2020 and we will likely see these deliveries scatter during the balance of the year.

Aversion to newbuilding contracting

What is clear is the aversion to newbuilding contracting. Only 1.6 million bulk carriers’ dwt was ordered during 1Q20. This number becomes more interesting when compared to the 6.9 million dwt of 1Q19. The steep drop of newbuild orders can be attributed to a number of factors. Indicatively, the already high fleet growth we saw last year and the overall market uncertainty over the hot topics of coronavirus, future regulations and technological challenges. Liquidity issues that potential buyers might face in the aftermath of the COVID-19 pandemic also suggest that newbuilding activity shall decline. The current low orderbook and the approximate two years needed for a new vessel to be built, set the scene for a long fleet expansionary cycle being ahead of us.