Asia/Pacific News
Changing Chinese Economy Could Hurt Dry Bulk Sector
A shift in the Chinese economy toward the service sector and away from industries dependent on imports and exports could hurt the bulk carrier sector beginning in 2015-2016, Christopher Rex, head of research at Danish Ship Finance told industry news site ShippingWatch.
Rex said many industry players and observers may be too optimistic about demand for bulk carriers because they fail to adequately account for the shifting nature of economic growth in China.
"When we look at the Chinese growth rate of around seven percent, which used to be around ten percent, then of course that represents a lower growth target for the Chinese economy, though still a high growth," he said.
"The question is whether this growth is as dry bulk intensive as it has been in the past, and my point is just that we're currently seeing a rebalanced growth in China that's about to be driven by different factors than we're used to."
Rex said Chinese demand for iron ore imports, in particular, is likely to grow more slowly, while the production of services for private consumption rises.
The dry bulk fleet grew by 84 percent between 2008 and 2013, while demand for dry bulk grew 33 percent.
"This means that the supply has grown two-three times more than the demand in this period, so you can't compare growth in supply and demand one-to-one if trying to predict the market going forward," Rex said.
In April, some analysts pointed to a drop in dry bulk rates as a possible sign that a shipping recovery in 2014 was less likely than they had previously thought.
