Drewry‘s latest Dry Bulk Forecaster report suggest that strapped shipowners will scrap younger and younger ships this year as the dry bulk market wallows in the doldrums. A ship as young as 15 years has already been sold for scrap in recent months, and the average scrapping age of Chinese-built Capesizes was 21 years in 2012.

Drewry does not expect any improvement in the freight market in 2013 and foresees a growing number of dry bulk shipping companies getting into financial difficulty. Demolitions in 2013 are expected to be above 36 million dwt, more than what was seen in 2012, and the average scrapping age will fall even further as middle-aged vessels struggle to find employment.

The average scrapping age of the smallest segment, Handysize, will fall below the 30-year mark in 2013, having dropped from 32.4 to 30.1 years last year. This sector lost a bigger proportion of its fleet to the scrapper’s torch in 2012, driven by increasing obsolescence as ports expand. Similarly, demolitions in the Panamax segment were also relatively high, given its older age profile and the increasing popularity of the larger and younger post-Panamax design.

Demolition reached record levels in 2012 as freight rates slumped to their lowest level for a quarter of a century. Preliminary data suggests that as much as 32.7 million dwt of dry bulk tonnage was sold for demolition, with the fourth quarter amounting to 6.8 million dwt: more than double what it was in the last quarter of 2011. Nearly 11mt of Capesize tonnage was sent for scrap, which was more than all the dry bulk tonnage scrapped in 2009.

But even this frantic level of scrapping will not push freight rates up because the dry bulk fleet is growing even faster. It added 35 million dwt last year to reach 679 million dwt (9,490 vessels), which was a 12.3% expansion, following 15.2% in 2011. While ‘only’ 28 million dwt is due for delivery this year, two- thirds of that increase will come in the post-Panamax and VLOC segments. These fleets are already very young, so there is very little chance that scrapping will ease the pressure on freight rates. 


Drewry‘s latest Dry Bulk Insight report shows that the Drewry Hire Index suffered a further decline in the first month of the New Year. The main culprit was the Capesize segment, where lower demand eventually led to a decline in their freight rates.

The outlook for 2013 remains bleak, with unpromising demand projections keeping the bridge between supply and demand wide enough and delaying the freight market recovery. Dry bulk shipping, for now and at least a couple of years to come, is desperately dependent on growth in commodity trade since ship supply is growing at an unstoppable pace.

Activity languished in the Asian market ahead of New Year holidays in China. To add to the problems, weather disruptions in Queensland in Australia put a further dent on demand in the segment. The ex-tropical cyclone Oswald has disrupted coal shipments from Hay Point, Dalrymple Bay and Gladstone. Major railroads that transport coal from the mines to the ports have been closed by severe weather. Many producers including Xstrata, Rio Tinto and Anglo American have suffered from the bad weather. This caused Capesize freight rates to dip further, which filtered through to the Drewry Hire Index. Prospects look promising for the iron ore market after the Lunar New Year prospects. Restocking after the holiday will create demand for Capesizes.

Harsh drought conditions spread through key US farm states in the Midwest over the first week of February. The prognoses for the US — the biggest exporter of grain — have been slashed by a sizeable extent, but the IGC has raised its grain trade forecast for 2012/13, owing largely to better export prospects from South America and India. Compared with the previous forecast of 62.4mt (million tonnes), the US is now expected to export only 56.9mt of grain in 2012/13. In 2011/12, the US had exported 72.5mt of grain.

The Drewry Hire Index takes 18 different trade routes, covering all the sectors of dry bulk market. Each sector is weighted within its market to produce a time charter earning index. These are averaged into the overall Drewry Hire Index. January 2002 is designated as the point where all indices equal 100.


Drewry Maritime Research is the research arm of the Drewry group. Drewry also includes two advisory brands, Drewry Maritime Advisors and Drewry Supply Chain Advisors and specialist investment research brand Drewry Maritime Equity Research.

Drewry has over 40 years’ experience within the maritime sector, employing over 90 specialists across its international offices in London, Delhi, Singapore and Shanghai.

Offering research reports and advisory services, it is in the position to assess the market and give its clients the required knowledge to make critical decisions.