BIMCO has released its latest market outlook report for April 2014, with selected extracts from the reports focusing on both macro economics and the dry bulk shipping sector. Macro economics: The recovery continues, new issues attract attention
As the recovery continues to move forward, BIMCO remains concerned with the lack of inflation in both the United States and the Eurozone as production capacity far exceeds demand.
Although current US data is a possible cause for concern going forward, as fiscal policy tightening fades and consumer confidence remains healthy, the fundamentals should be in place for a self-sustained expansion of the economy, said the shipping analyst.
In Japan, inflation is still lagging behind the long run target of two per cent, coming in at 1.5 per cent in February. Following the 18 per cent depreciation of the Japanese Yen against the US dollar, corporate earnings improved considerably.
“Now it is time for that to spill over into wage growth to spur private consumption and keep the recovery on track,” said BIMCO. “Going forward, the key downside risk remains the unlikely event of a hard landing in China, supplemented by the growing tensions between East and West related to the developments taking place in Ukraine.”
Dry bulk shipping: bulk market improves across the board
While freight rates for Capesize ships have fended off the talk of a slowdown in China in an impressive fashion, rates finally took a minor hit on the final trading days of March, said BIMCO's report.
Despite the year-on-year improvements, the complete lack of volatility outside the Capesize segment means that spot operators’ trading possibilities have been scarce. Time charter rates are steadily moving up, while spot rates are moving sideways. In the anticipation of an improving freight market going forward, owners and operator have increased their spot market exposure to take advantage of this.
Ordering activity went up by 258 per cent in 2013 as compared to the year before. During the fourth quarter of 2013, more tonnage (31.7 million DWT) was ordered than in the full year of 2012 (24 million DWT). The stronger demand for new contracts also meant the newbuilding prices from all Far Eastern shipyards have gone up by 12-23 per cent since the beginning of 2013.
“The larger the ship, the higher the increase,” said BIMCO.
Following some frantic delivery years, the pulse of shipyard output is significantly down from the one-Capesize-ship-a-day of the peak years (2010-2012) to more normal levels, going forward at 2.5 ships per week in any given dry bulk sub-segment, BIMCO concluded.