Dry Bulk "At the Bottom of the Bottom"

No dry bulk business makes any remote sense, according to one respondant

Moore Stephens' latest Shipping Confidence Survey show overall confidence levels in the shipping industry have fallen to a record low in the three months to February 2016, with a rating of 5 recorded on a scale of 1 to 10.

Respondents were said to be calling for accelerated demolition in the dry bulk sector - which one respondent describes as "at the bottom of the bottom."

All main categories of respondent recorded a fall in confidence, including charterers, down from 5.5 to 3.9; and owners and managers, from 5.7 to 4.8 and from 5.8 to 5.5 respectively.

But the dry bulk sector was of particular concern to respondents; one remarked, "No dry bulk business makes any remote sense: there are too many players, too many operators, and too many vessels chasing too few cargoes."

Another respondent said, "Dry bulk is simply at the bottom of the bottom, and actually a little lower than that."

Survey participants said that scrapping activity is "far from sufficient to compensate for incoming new tonnage," while another complained that low scrapping prices "provide little motivation for owners to demolish ships" – even though increased scrapping would help improve the sector's fortunes.

Moore Stephens notes, however, that the Baltic Dry Index has gained over 100 points "within six weeks of plumbing the depths." 

Moreover, "there is a reasonable expectation that the approaching peak harvest season will bolster demand for ships to carry grain and other commodities on international trade routes: this should boost the BDI further."

Moore Stephens concludes that although new historic lows in dry bulk freight rates are being set daily, "Reports suggest that more and younger dry bulk vessels are being recycled in spite of weak demolition rates, and contrary to the trend with other categories of tonnage."

In January, Richard Grenier, partner and maritime specialist for Moore Stephens, noted that not only would the dry bulk sector have to increase its ship recycling this year, so too would the container ship sector.