Chart 4: Brazil Dry Bulk Port Congestion


Source: Reuters EIKON, Howe Robinson Partners Chart 5: Panamax Average Fleet Speed (in knots, incl anchored vessels)


11.5 12


10.5 11


9.5 10


8.5 9


7.5 8


7


So where does this leave us for the foreseeable future? Looking at the dry bulk fleet profile it becomes apparent that during the last few years fleet growth has slowed down considerably and even though freight rates are currently high and should induce new building, it might not happen in a meaningful enough way. Reasons are firstly that a lot of yard capacity has disappeared over the past few years and available capacity is likely to give preference to (relatively better paying) container tonnage. Secondly, with increasing pressure for the maritime industry to go green, the big question is which is going to be the maritime fuel of the future: methane, hydrogen, nuclear salt reactors, LNG, …. ? As long as there is legislative insecurity and these technologies are still extremely expensive most owners might not want to be first in making the (wrong) judgement call and hence hold back on making investment decisions (Chart 6).


Source: Bloomberg, Howe Robinson Partners Chart 6: EXISTING DRY BULK FLEET


On top of these pure economic drivers, we will also witness a reduction in capacity as a consequence of the new Energy Efficiency Design Index (EEXI) approved by the International Maritime Organisation in 2021 and which will come into effect in 2023. Although quite some ships will survive the initial introduction and get by with some affordable hard and software adjustments, it looks as if more and more vessels will no longer be able to comply over time as the EEXI tightens year by year and hence these may well disappear from the market. On top of IMO action decided upon, the probable inclusion of shipping in the European Union Emissions Trading System might further reduce available capacity in European waters as there will be owners that do not wish to be subject to a carbon trading obligation (or cannot open the required carbon accounts in EU National Carbon registers) and hence exclude EU waters in charter parties. Hence overall it appears that dry bulk shipping capacity might for the first time in decades stop growing. If this would become reality, even a modest 2-3% annual growth in seaborne trade would result in a fierce competition for carriage capacity and hence support dry bulk freight rates for the near future…


Source: IHS sea-web, Howe Robinson Research


A third factor that needs to be factored in is average sailing speed and while this has been going up for vessels actually moving, average speed across the entire fleet has in fact come off given the significant amount of tonnage tied up in congested ports (Chart 4/5).


Stefan Albertijn E: stefan.albertijn@oficon.be


15 | ADMISI - The Ghost In The Machine | Q3 Edition 2021


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