Rate rally to continue
Drewry predicts freight rates to keep recovery momentum, with a surge expected in 2019 and 2020.
Dry bulk freight rates are expected to continue to recover, bolstered by firming demand and stable fleet growth, according to Drewry’s latest Dry Bulk Forecaster.

This is despite the two-year setback of the implementation of the IMO’s Ballast Water Management Convention, which had prompted fears that anticipated ship recyclings would be postponed leaving the fleet potentially oversupplied.
However, Drewry is confident that freight rates will still continue to strengthen as demand rises faster than supply. That said, it does acknowledge that the rate recovery will become more pronounced in 2019 and 2020 when the BWM regulations kick-in in earnest.
In a breakdown of the analysis, the consultant expects tonne-mile demand to grow at a “healthy pace” of about 3% annually over the next five years while fleet supply is expected to expand at a rate of just 1% a year over the same period. The fleet slowdown is partially down to low deliveries because of a light orderbook and more recycling to meet other environmental regulations.
“The rate recovery will become more pronounced in 2019 and 2020 when the BWM regulations kick-in in earnest”
On the demand side, trade of iron ore, coal, grain and minor bulks are all expected to increase, with particular focus on rising imports of iron ore into China, supporting infrastructure developments.
Indian importance
Drewry highlights India re-emergence as a significant iron ore exporter as one of the “major events that will decide the future of the dry bulk market”. Indian iron ore exports have already risen from 4m tonnes in 2015 to more than 20m tonnes in 2016 and are expected to top 30m tonnes this year.
“We believe India’s return to the seaborne iron ore market will have wide implications for the dry bulk trade in the coming quarters. Iron ore exports from India to China that resumed at a fast pace, could reclaim a part of their lost share from Brazil and Australia,” said Rahul Sharan, Drewry’s lead analyst for dry bulk shipping.
This increase in Indian iron ore exports is good news for supramax and panamax operators, while capesize operators may benefit to a lesser degree. “Many Indian ports have been dredged further to accommodate capesizes, but a large part of the ore will still be carried on smaller vessels, providing employment and higher utilisation to smaller segments,” said Mr Sharan.
Yet, the optimism goes against downbeat research from Morgan Stanley on iron ore. The bank recently said it remains ‘neutral’ on iron ore and expected that prices will remain under pressure for the rest of this year as rising low-cost production and a continued worldwide surplus keeps them in check. Rio Tinto has also lowered its forecast for iron ore shipments by as much as 10m tonnes for 2017. The miner said it would export 330m tonnes in 2017, mainly to China.
Morgan Stanley forecasts an “expanding surplus” for seaborne trade of iron ore, rising from 34m tonnes this year to 81m in 2018, and reaching 185m by 2021.