Bulker owners may not always see eye to eye, but many agree that their red-hot market will not cool down anytime soon.
Since August 2020, spot rates across the sector have skyrocketed amid a perfect pairing of soaring demand and low supply that has caused the Baltic Exchange Dry Index to more than double.
A number of them recently expressed confidence during their second-quarter earnings calls, telling analysts that they expect this rally to last amid a host of other fortunes.
Star Bulk Carriers, an owner of 128 bulkers, listed Brazilian iron-ore giant Vale's slow recovery from the disastrous 2019 dam breach at Brumadinho as an example.
"Vale reiterated the target of 400m to 450m tonnes of production capacity by the end of 2022," chief executive Petros Pappas told analysts.
He also said that coal tonne-miles should expand by 5.3% during 2021, backed by a strong recovery in global coal demand in Indonesia and India during the first half of this year.
At the same time, China's strong demand for grains and strong global GDP growth should boost tonne-miles by 4.3% this year, he said.
"Our outlook for the market remains positive," he said.
Dry bulk shipping also stands to benefit from strong GDP growth and higher seaborne cargo volumes, said Ioannis Zafirakis, chief operating officer of Diana Shipping.
'Pleasant scenario'
"This pleasant scenario could be ruined by an abrupt drop in demand due to factors unrelated to shipping or a sharp increase in newbuilding orders," he told analysts.
Eagle Bulk Shipping, which owns 25 ultramaxes and 28 supramaxes, expects dry bulk shipping to benefit from robust trading of grain, fertiliser and steel amid heavy stimulus.
"This positive demand picture, combined with a record low orderbook … supports our constructive view on market developments looking ahead," chief executive Gary Vogel said.
Eagle Bulk posted time-charter equivalent (TCE) rates of $21,580 per day — the highest in 11 years — in the second quarter.
It did even better in the current quarter with TCE of $28,300 per day as of Thursday last week, with 75% of available days booked.
Eagle, which generally prefers to use forward freight agreements (FFAs) as a hedge rather than physical time charters, has fixed a 58,000-dwt ultramax on a 11 to 13-month charter at $27,250 per day from October.
Vogel pointed out that the Atlantic market averaged $22,600 for the quarter, up 11%, while the Pacific was up 74%, averaging $26,100.
Benefiting from boxships
He attributed the Pacific outperformance to a higher number of backhaul trades, including cargoes that typically move in containers.
“We estimate up to 10% of all cargoes moving on bulk carriers from the Far East to places like west coast South America, Europe and the US was container cargo spilling into the conventional bulker market as a result of much higher container rates," he said.
“These cargoes include smaller semi-finished steel parcels, fertiliser in bags, bagged cement, chemicals in bags and lumber.
“Given the ongoing strength in the container market, which is due in part to supply-chain inefficiencies, we expect this dynamic to continue at least through the balance of the year."
He said supramax spot rates have averaged $22,600 per day so far this year, with the forward curve currently averaging around $31,000 for the balance of the year.
"If the forward curve plays out, 2021 would be the best year for the BSI [Baltic Supramax Index] since 2008," he said.
Capesizes are seeing their strongest market in a decade as a result of the optimal supply-demand balance across dry bulk shipping, according to Stamatis Tsantanis, chief executive of pureplay capesize owner Seanergy Maritime Holdings.
"After years of market imbalances, we seem to have entered a long-term period of strong demand and slow fleet growth," he told analysts.
His company has spent $160m this year on getting his pureplay fleet to 14 capesizes, while selling two assets.
He said demand is expected to rise 4% in 2021 and 2% in 2022 on a tonne-mile basis against fleet growth of 3.3% for this year and 1.2% for the next.
"These figures are very constructive for the dry bulk market, especially when viewed in the context of strong fiscal spending and infrastructure construction in many parts of the world," he said.
